Custom essays on Principles of Accounting Activity Based Costs

In the contemporary business environment the allocation of fixed costs is very important because it helps to optimize the use of fixed costs and to plan the business development of organizations accurately. At the same time, the allocation of fixed costs depends on a variety of factors which may raise substantial barriers on allocation of fixed costs. In such a situation, companies need to develop effective strategies and approaches to allocation of fixed costs. In this respect, organizations need to allocate fixed costs accurately to be able to define how much financial resources are needed from the part of the organization to cover the existing expenses. In actuality, such organizations as Big Brothers Big Sisters agency need to allocated fixed costs to maintain the existing facilities and buildings and maintain the facilities and infrastructure respectively to the agency’s standards. In fact, BBBS is a non-profit agency that focuses on mentoring children to help them to get education and good job opportunities.
In this respect, it is possible to refer to the allocation of fixed costs in BBBS. In this respect, it is primarily necessary to dwell upon the definition of fixed costs, the BBBS spends on the maintenance of its facilities, including offices and facilities where they can mentor children. First of all, the BBBS has to maintain its facilities, including classrooms and surrounding infrastructure. The maintenance of an average classroom costs about $50 per month. The BBBS working in a community may have to maintain two – three classrooms, where volunteers of the agency can work with children and mentor them.

At the same time, the maintenance of classrooms implies the employment of professionals who will maintain them. However, the costs of the labor force may vary and these costs are not necessarily fixed but rather depend on the individual contract of each employee with the BBBS. Moreover, the BBBS relies heavily on volunteers, who do not receive salaries for their work, whereas the agency can use the work of volunteers and children to clean classrooms for instance.
Obviously, the maintenance of facilities and infrastructure involves cleaning, including the cleaning of classrooms but this problem cannot be solved through the involvement of volunteers and children solely. The agency will need to employ workers who provide the agency with the cleaning services. In such a way, the agency will keep classrooms clean but it will cost about $1,000 per month/classroom.
In addition, it is important to define fixed costs spent on the maintenance of security and safety of the building. Basically, the BBBS can focus on the improvement of the security and safety system to save costs. For this purpose the agency can develop the automation of its security and safety system. To put it more precisely, the agency should introduce the system of video surveillance and automate the fire alarm system to minimize the potential risk to the property and health of clients and employees in case of fire. However, the BBBS may not afford such consistent improvements to ensure safety of children and volunteers. Therefore, the agency will need to attract sponsors and donators to fund the development of the new safety system.
Basically, the allocation of fixed costs needed about a week. In the course of the week the information on the current situation in the BBBS was collected and analyzed. During the first and second day the information about the number of suits and the occupancy rate was calculated.
Eventually, the following recommendations were developed. First, the agency needs to optimize its suit maintenance costs focusing on the maintenance of the classrooms and the wider use of volunteers, involving children to help volunteers to maintain facilities. Furthermore, the agency can implement the automation of security and safety that decreases costs on the maintenance of these systems. Finally, the cleaning services can be outsourced and the agency will be able to save costs for it will not need to employ the personnel working in the field of cleaning services. However, the use of volunteer job and attraction of donators are more effective ways to optimize costs of the BBBS and maximize the effectiveness of their use.
Thus, in conclusion, it is important to stress the prospects of optimization of costs due to the allocation of fixed costs and their reconsideration. At the same time, it is important to remember that BBBS is a non-profit agency which relies heavily on donations and charity. Therefore, the agency needs to save costs and to attract sponsors to maintain its facilities and to expand its operations. In such a way, the BBBS can improve its performance through the allocation of fixed costs.