Company structure and its impact on costs

The general layout of an organization can fundamentally be influential in its parameters of costing variables. This is dependent on the levels of both the efficiencies and optimal costing models that define and describe the nature of the costing factors.

The interactive process of the various activities and departments within the organization is important in evaluating and determining the fundamental levels of both fixed and variables costs. For the Superior Living, Inc. however, the fundamentals of its corporate activities can perhaps be described as the fueling factor towards the cost of its luxury division. The elementary cost centers and cost allocation process of the different divisions follows suit in the general outlay of its structures (Zachariah, 2006, p.28).

However, the success of the corporate functionality is depended on the manner with which it is able to incorporate its resources optimally for the highest level of output and the most minimal cost factor. The internal structure of this company can be described as the influential element towards the high cost and the low levels of revenue returns. At one level, both labor and technology are persuasively important components that determine the scope of costs of the manufacturing system.

As important cost components, they determine the levels of overhead cost that is allotted to the various divisions and product lines within the corporation. The success towards the most functional model of costing factor is that which would provide optimal costing as an ideal precept within managerial costing process (Joan, 2006, p.13).

Importantly, the human resource capital is a factor in the productive process of the company. Its suboptimal process of recruitment of many employees adds more to the overhead costs of its luxury divisions than the relative revenue such labor inputs would bring. Generally, labor is an important component in the costing factor. As a costing element, its allocation and use should be devised in the most optimal manner.

However, the human resource department for this company is employing more workers than it is optimally required for the corporate functionality. To secure success in this inadequacy, the level of the workforce should be minimized to reflect the requirements of the corporate activities (Joan, 2004, p.51).

Either, the success of the currently competitive market requires strong models of information technology with which business processes and activities can be done adequately and in the most efficient manner. Efficiency in the corporate manufacturing and internal controls provided by the pursuit of strong models of technology would provide tools for high quality and quantity output in the luxury department which would create a strong competitive portfolio of its products.

Strong models of technology have been considered as implicit in creating efficiency which can consequently create parameters for optimal costing in both fixed and corporate overheads. Through the process of apportionment, the luxury division would get lower amount of overhead costs that are influenced by the efficiency models developed through pursuit of corporate information technology (Zachariah, 2006, p. 67).

The success of the Superior Living, Inc. therefore requires the address of the high overhead cost contributory factors. At one level, the labor input should be leveraged at the most optimal level through the incorporation and employment of the most adequate number of employees that meets the optimal costing demands of the organization. Since labor costs is an influential factor both to the direct and overhead costs, the correct number of such workforce would necessitate this success.

Either, the incorporation of the technological components and methods of corporate    manufacturing system would provide a condition for its success. Through strong models of information technology, the manufacturing process would be adequately monitored through strong controls of business process management. Additionally, information technology which concurs with the development demands of the organization would help to create models of communication and information transfer across the different departments of the company creating lower costs of information transfer costs and business manufacturing process controls (Joan, 2004, p. 93).


Joan Brian (2004) Principles of Managerial Accounting. New York, Prentice Hal, pp.13, 51, 93

Zachariah Austin (2006) Business Management. An Introduction. Oxford, Oxford, University Press, pp.28, 67