1- I need to use "in-text" citations throughout the body of yourpaper to give credit to your sources.
2- here is my paper. help me out please:
This paper is going to talk about Ford motor company who becomeone of the largest automakers. For example, in this paper I willshow and outline some points of how Ford operates in the automobileindustry. However, Ford has some strong competitors in the U.Smarket and internationally. The implementation of new technologiesaffected a lot of the way vehicles were manufactured. In that casethe automobile industry is coordinated to be an industrialproduction system. This paper will start with a short descriptionof the history of Ford. This brief summary will include someinformation background of where Ford started in thebeginning.
Keywords: U.S market, automakers.
The company I have chosen to do my research paper is Ford. Here isa brief history of the company. The creator of that company isHenry Ford. One of America's foremost industrialists, Henry Fordrevolutionized assembly-line modes of production for theautomobile. Born on July 30,1863, near Dearborn, Michigan,at theage of 16, Ford left home to take an apprenticeship as a machinistin Detroit. In the years that followed, he would learn toskillfully operate and service steam engines, and would also studybookkeeping. In 1896, Henry Ford buildt the Quadricyle. In 1903,Henry Ford established the Ford Motor Company.
History of the company
Ford introduced the model T in October of 1908, and for severalyears, the company posted 100 percent gains. However, more than forhis profits, Ford became renowned for his revolutionary vision: themanufacture of an inexpensive automobile made by skilled workerswho earn steady wages. As a result, Ford sold millions of cars andbecame a world-famous company head. The company lost its marketdominance but had lasting impact on other technological developmentand U.S infrastructure. To end up, Henry Ford died of a cerebralhemorrhage on April 7, 1947, at the age of 83, near his Dearbornestate,Fair lane. Ford, considered one of America's leadingbusinessmen is credited today for helping to build America'seconomy during the nation's vulnerable early years. The Ford MotorCompany was founded by Henry Ford in the year 1903. It is theleader in the car manufacturing segment for a long time now. Fordhad introduced a unique manufacturing programs which werereplicated by many firms and the concept designed by Ford startedto be called as Fordism. The major competitions for Ford wereToyota, Honda and Hyundai. Especially Toyota which had taken therank of number 2 from Ford in the US market. Ford is renowned forits Operation Management techniques around the world.
The companyâs industry
The Ford company's fiscal year ending for the last two years; Fordgot $135.8 billion during the period of 2014-2013 in the area ofAutomotive Revenue. Ford company's sales has increased by $4.8billion the next year of 2015 compared to 2014. In general terms ofAutomotive sector in 2015 has an increase in operation margins from4.6% to 6.8%, also for operating ârelated cash flow goes from $ 1.9to $3.6 billion. The company's Annual report shows an increase inall sectors in 2015 compared to 2014. This incredible results isdue to Ford operates a revolution in term of production. Thoseproduction assembly lines became one of the largest automakers. Forexample, Ford has more than 65 plants worldwide.
The Ford company's industry is all about the cars and the enginemotors inside each car. The vision of the motor company is everyoneis working together to make people's lives better throughautomotive and mobility leadership. The Ford company's products aremade in USA and people are proud of it. The industry that Ford isin has a conduct of ethics to respect for their clients such asquality, safety, green sustainability and smart product. Forexample, in the automotive industry Ford is using 3D printing torevolution the automotive prototyping process. You can see a lot ofcars manufactured by Ford are on the road. For instance, body ofwork is the F-150 has been the best selling in the United Statesfor the last 32 years now .
The Ford company's primary source of revenue is sellingautomobiles in the US market and the secondary is selling in theWestern European countries. As I said previously an example of topsale for Ford is the F-150 who is the leader in the market about 32years now. Yes the F-150 has been for 32 years now the bulk ofFord's revenue in term of pick-up vehicle sold. Here are somecompetitors such as General Motors company and Toyota Motorcorporation. As the whole industry is profitable or not. It isdepend on manufacturing efficiency, product quality and effectivemarketing.
Accounting system
Ford uses a standard costing system that a manufacturer'sinventories and costs of goal sold will begin with amountsreflecting the standard costs, not the actual costs, of a product.Manufacturers of course, still have to pay the actual costs. As aresult there are almost always differences between the actual costsand the standard costs, and those differences are known asvariances.
It is typically considered as Direct Labor if the cost of the workeffort physically converts to material to a product. The worker whoactually assembles the components (circuit board, buttons, screenand case) into a finished product such as a car model would be"direct labor"
Direct materials are tangible components of a product. They can beeasily, conveniently and economically traced directly to thefinished product. Some specific direct materials used by Ford inthe production of their vehicles will be the steel include in anautomobile. The circuit board included in a radio. The glassmaterials for the windows of their vehicles.
Overhead costs are considered fixed costs, that is, they do notrise or fall directly with the cost of goods sold. Overhead costsare important to monitor and control. Since they are not directlyrelated to revenues, they can become a larger share of the totalexpenses and burden a company, soaking up net income and profits.Here are some of the specific overhead costs that Ford has like theelectricity used to operate the factory equipment and the building.Also, overhead costs can be linked with all the expenses recordedon the income statement such as administrative overhead.
Variable costs; for Ford would be an increase in or continuedvolatility of fuel prices, or reduced availability of fuel. Anincrease in fuel prices, continued price volatility, or reducedavailability of fuel, particularly in the United States, couldresult in weakening of demand for relatively more-profitable largecars, utilities, and trucks, while increasing demand for relativelyless- profitable small vehicles. Continuation or acceleration ofsuch a trend beyond our the company's current planning assumption,or volatility in demand across segments, could have a substantialadverse effect on our financial condition and results ofoperations. Since the sales increased there will be an increase inthe direct materials to manufacture the vehicles. Based on thecosts of manufacturing my estimates of these variable costs arecommissions and production supplies. Due to the sale increase,salespeople are paid a commission only if they sell a car.Production supplies is based on the amount of machinery usage suchas the oil used by the machinery. Here the cost depends on theproduction volume of a machine.
Fixed costs; Substantial fixed costs for the company includesubstantial pension and postretirement health care and lifeinsurance liabilities impairing liquidity or financial condition.Ford defined benefit retirement plans in the United States thatcover many of the hourly and salaried employees. The companyprovides pension benefits to non-U.S. employees and retirees,primarily in Europe. In addition, the employer and certain of theirsubsidiaries sponsor plans to provide other postretirement benefits(âOPEBâ) for retired employees (primarily health care and lifeinsurance benefits). These benefit plans impose significantliabilities and additional cash contributions, which could impairin the liquidity. Based on this information my estimates of thesefixed costs are salaries, utilities and insurance. Let start withsalaries which is the amount paid to employees to theirs hoursworked. Secondly, utilities is the cost of electricity, gas, phonesspent by the company. Thirdly, insurance is a periodic charge underan insurance contract(eg. To protect the inventory)
Break-even point in units and in sales dollars
Estimate the companyâs break-even point in units and in salesdollars.
⢠Break-even points in units=Total fixedcosts/contribution margin per unit
⢠Break-even point in dollars=Total fixedcosts/contribution margin ratio
Revenues=$100,000
Variable expenses(non-manufacturing costs)= 30,000
Fixed expenses(manufacturing costs, restructuring e.g)=60,000
Net operating income $ 10,000
The contribution Margin (Sales-variable expenses)
$100,000 â 30,000= 70,000
The contribution Margin is 70%
60,000/70%=$85714
The break- even point in sales in dollars $85714
Estimating the companyâs operating leverage for Ford
Operating leverage measures is a companyâs fixed costs as apercentage of its total costs. It is used to evaluate the breakeven point of a business, as well as the likely profit levels onindividual sales.
To calculate operating leverage: contribution margin/net operatingincome
Ford has a contribution margin of 70% and net operating income of$10,000, which gives it a degree of operating leverage of 7.Fordsales then increase by 20%, resulting in the following financialresults:(based on the previous numbers A.)
Revenues
$120,000
Variable expenses
36,000
Fixed expenses
60,000
Net operating income
$24,000
The contribution margin of 70% has stayed the same, and fixedcosts have not changed. Because Fordâs high degree of operatingleverage, the 20% increase in sales translates into a greater thandoubling of its net operating income.
Where break-even and leverage information would be of value tothe company.
Management of Ford should constantly monitor the breakeven point,particularly in regard to the last item noted, in order to reducethe breakeven point whenever possible.
⢠Outsourcing. If an activity involves afixed cost, consider outsourcing it in order to turn it into aper-unit variable cost, which reduces the breakeven point.
⢠Pricing. Reduce or eliminate the use ofcoupons or other price reductions, since it increases the breakevenpoint. Also, increase price points whenever this is acceptable tocustomers.
⢠Cost analysis. Continually review allfixed costs, to see if any can be eliminated. Also review variablecosts to see if they can be eliminated, since doing so increasesmargins and reduces the breakeven point.
⢠Margin analysis. Pay close attention toproduct margins, and push sales of the highest-margin items, toreduce the breakeven point.
When using the operating leverage measurement, constant monitoringof operating leverage is more important for a firm having highoperating leverage, since a small percentage change in sales canresult in a dramatic increase (or decrease) in profits. A firm mustbe especially careful to forecast its revenues carefully in suchsituations, since a small forecasting error translates into muchlarger errors in both net income and cash flows. Knowledge of thelevel of operating leverage can have a profound impact on pricingpolicy, since a company with a large amount of operating leveragemust be careful not to set its prices so low that it can nevergenerate enough contribution margin to fully offset its fixedcosts.( specially in other markets such as China)
Inventory system
Ford uses a perpetual inventory system. This is an approach whereinventory accounting is updated continuously as transactions aremade. The company uses that system because the computer system earntime and do the job by tracking every products get going into theinventory and his is very accurate and really close to the realinventory. Nowadays, big companies like Ford can afford to co-workwith computer systems to help them to earn time in their inventory.On the other hand small company business does not need to have anelectronic-tracking system because their using a periodic systeminventory which is the most common used in that case.
Basically, the company uses this sophisticated system because thetechnology evolved during time but before all companies rely on theperiodic system where you have physical count every product to havea track of your inventory. For example, cost assignment to cost ofgoods sold and ending inventory are designed in the end of anaccounting period. However, a perpetual inventory system includes apoint-of-sale system which drives changes in the inventory levels.For instance, you can have a decrease in window product, so cost ofsales is decreasing too but the sale is made increased.The resultthis systems will help to manage the inventory levels and if thecompany needs to purchase some additional inventory, they can.There is another advantage for the accountant. The accountant doesnot have to adjusted manually but the company is not protectedabout the loss( breakage or theft)
There areseveral methods used in accounting such as FIFO (first in, firstout) or LIFO (last in, first out).For example, consider Fordstocking the cars in the showroom, where a customer purchases theitem in front. The oldest car manufacturing will always be soldfirst. As the transactions is occured, the perpetual inventorysystem will automatically been updated too. Under the perpetualLIFO the daily interaction throughout a reporting period. The costcan change at any time because items are sold could vary throughoutthe period due to the set of cost layers.
An effective cost management system is one that aims at minimizingcost in such a manner that it allows for a sufficient margin perunit of product.Through curtailing unnecessary costs &incurring costs to such a level that anything below that seemsunviable and not feasible to the production process. By making thatcost almost indispensable to the production of the budgetedquantities. This will not only improve the profitability but alsoincrease the competitiveness of a company. Yes, Ford has aneffective cost management because in the domestic market Ford isstill the leader and in the internationally Ford is growingincrease each years.Also this company has some strengthstrong managerial accounting that make me think that.This company uses as a base for computing prospective cost andresultant price of a product.In terms of strength it is totallyflexible and hence, can be revised any number of times in keepingwith the ongoing economic scenario(fluctuations of the price of thedirect material e.g).
REFERENCES
Schmiedicke, R. E., & Nagy, C. F. (1978). Principles of costaccounting. Cincinnati: South-Western Pub.
!industry_name! - Industry Facts and Trends. (n.d.). RetrievedNovember 30, 2016, fromhttp://www.hoovers.com/industry-facts.automobile-manufacturing.1019.html
Ford, H. (2008). My life and work: An autobiography of Henry Ford.Place of publication not identified: BN Publishing.
Home. (n.d.). Retrieved November 30, 2016, fromhttp://corporate.ford.com/homepage.html
Build & Price. (n.d.). Retrieved November 30, 2016, fromhttp://www.ford.com/
