Memorandum
TO: Superior Living, CEO
FROM: Lela Keel
DATE: August 15, 2011
SUBJECT: Organizational Structure
Introduction
The common design of an organization can basically be inclined by its expenditure variable constraints. This is reliant on both the amounts of proficiency and most favorable costing styles that characterize and illustrate the environment of the costing aspects for an organization. Therefore, the process of collaborating the different departments and activities is imperative for evaluating and determining the primary amounts of fixed, variable, and mixed costs an organization. However, for Superior Living our essential business activities can possibly be illustrated as a stimulating aspect towards the costs associated with our luxury division. Therefore the organizational structure of the company will affect each division cost in different ways (Organizational Structure, n.d.).
Impact of Costing Factors
The success of the organization can functionally be dependent on the way in which we are capable of incorporating our resources favorably so that the maximum level of productivity can be achieved and we can still attain the minimal level of cost factors that would be necessary for operation of the business. How the business is internally formed can be a prominent factor in looking at the elevated costs and low return levels for the company. With that being said, the Human Resource (HR) and Information Technology (IT) Departments are both significant divisions in determining the extent of costs in the company’s production system. This is because these divisions will be significant in determining the amount of working costs that will be needed in order to achieve the company’s operational goals in relation to the products we manufacture (Globusz Publishing, 2011).
Human Resources (HR) Factors
The HR department will be an aspect for the process of production in regards to funds for the company. With that being said, the process of staffing of employees for the company will add more to the operating costs for the luxury division. In general, manual labor will be a significant element of cost within the luxury division for the company to continue to operate. As a costing component the utilization of employees for the luxury division should be developed in the most cost efficient manner feasible for the company to continue to operating successfully. However, if the HR department is employing more workers than is feasibly needed for the luxury division then steps need to be taken to decrease the personnel so that the requirements of the activities of the company are carried out (Mind Tools, 2011).
Information Technology Factors
In order to be successful in the competitive marketplace the company does require the use of the IT department to ensure that the activities of the business are adequately accomplished. Having effective IT personnel will permit the company to offer tools for great quality to our consumers and output can be calculated within the luxury division which will then allow for the creation of a competitive assortment of our products. Models of technology that are well-built can be reflected on as unconditional when creating efficiency in costs for the company. For instance, through the practice of allotment the luxury division will maintain a decreased amount of fixed costs which would be inclined by the models of efficiency utilized through the aspects that would be appropriate in determining which costing system would be more favorable to use for each division (Mind Tools, 2011).
Controlling Costs
The situation within the company in which the luxury division claims that the Human Resource (HR) Department and the Information Technology (IT) Department are driving up the costs for this department a solution is needed to manage the increasing overhead costs for these departments. In order to manage the increasing overhead costs a suggestion would be to identify and categorize each divisions operating cost independently. Doing this will permit the company to recognize the operating costs for each division and the profitability of that division can be truly reflected in regards to income being brought in. Also, in order for the company to determine whether a reduction in overhead costs needs to be realized for a certain department comparing the amount of overhead with gross profit per department will permit the company to establish if the gross profits exceed the overhead for that department (Globusz Publishing, 2011).
Conclusion
The fierce competition in the business world today has driven organizations to focus not on generating more revenue but also reducing the amount of overhead costs. With that being said, in the highly competitive marketplace environment today the company will be forced to come up with innovative ways of reducing overhead costs and at the same time we will not want to compromise the quality of products we present to consumers. Furthermore, the basic cost centers and cost allotment practice of the diverse divisions within the company will pursue suit in the common outlay of the organizations structures. Therefore, the structure of the organizations operations will have a long-lasting effect on the capability of the company to expand, compete, and maintain profitability (Organizational Structure, n.d).
References
Globusz Publishing. (2011). Breakeven analysis, (Ch. 3). Retrieved from http://www.globusz.com/ebooks/Costing/00000013.htm
Mind Tools. (2011). Organization design: Aligning organizational structure with business goals. Retrieved from http://www.mindtools.com/pages/article/newPPM_95.htm
Organizational Structure. (n.d). Retrieved from http://www.web-books.com/eLibrary/NC/B0/B58/044MB58.html