Help me about 1.2

[Zikria Yamin]

Dear Seniors,
Please provide some details about the followings.

1- Comparative Cost information
2- Analytical Cost information
3- Difference between them
4- Management of an enterprise may use the Predetermined Standards and Budgets for the measuring and controllong of departmental and Functional Activities, please explain the process.

5- What is Departmental Targets and who is responsible for their establishments.


Please contribute towards the help.

[ausmanpk2001]

What type of information you need?????

[Zikria Yamin]

The type should be such nature that i can understand these terms.

[Zikria Yamin]

My dear Seniors,
Please help me out.

[Zikria Yamin]

Seniors please give the answer, i am waiting for it

[accountskfm]

May be this can help you

David Ricardo and Comparative Advantage

The Theory of Comparative Advantage
David Ricardo, working in the early part of the 19th century, realised that absolute advantage was a limited case of a more general theory. Consider Table 1. It can be seen that Portugal can produce both wheat and wine more cheaply than England (ie it has an absolute advantage in both commodities). What David Ricardo saw was that it could still be mutually beneficial for both countries to specialise and trade.

Table 1


Country Wheat Wine
Cost Per Unit In Man Hours Cost Per Unit In Man Hours
England 15 30
Portugal 10 15

In Table 1, a unit of wine in England costs the same amount to produce as 2 units of wheat. Production of an extra unit of wine means foregoing production of 2 units of wheat (ie the opportunity cost of a unit of wine is 2 units of wheat). In Portugal, a unit of wine costs 1.5 units of wheat to produce (ie the opportunity cost of a unit of wine is 1.5 units of wheat in Portugal). Because relative or comparative costs differ, it will still be mutually advantageous for both countries to trade even though Portugal has an absolute advantage in both commodities.

Portugal is relatively better at producing wine than wheat so Portugal is said to have a COMPARATIVE ADVANTAGE in the production of wine. England is relatively better at producing wheat than wine so England is said to have a comparative advantage in the production of wheat.

Table 2 shows how trade might be advantageous. Costs of production are as set out in Table 1. England is assumed to have 270 man hours available for production. Before trade takes place it produces and consumes 8 units of wheat and 5 units of wine. Portugal has fewer labour resources with 180 man hours of labour available for production. Before trade takes place it produces and consumes 9 units of wheat and 6 units of wine. Total production between the two economies is 17 units of wheat and 11 units of wine.

Table 2

C o u n t r y Production
Before Trade After Trade
Wheat Wine Wheat Wine
E n g l a n d 8 5 18 0
P o r t u g a l 9 6 0 12
T o t a l 17 11 18 12

If both countries now specialise, Portugal producing only wine and England producing only wheat, total production is 18 units of wheat and 12 units of wine. Specialisation has enabled the world economy to increase production by 1 unit of wheat and 1 unit of wine.

The simple theory of comparative advantage outlined above makes a number of important assumptions

There are no transport costs.

Costs are constant and there are no economies of scale.

There are only two economies producing two goods.

The theory assumes that traded goods are homogeneous (ie identical).

Factors of production are assumed to be perfectly mobile.

There are no tariffs or other trade barriers.

There is perfect knowledge, so that all buyers and sellers know where the cheapest goods can be found internationally.

David Ricardo's Principles

[Abdur.Rehman]

Comparative cost information includes the cost information of previous years from which we can compare the cost info. of current year or it may also include the cost information of similar industry from which we can compare our company's performance.
Analytical cost information includes cost information from which we can analyse the cost components of our porducts or services. Comparative cost information can also be used as analytical cost information.
The difference is that analytical cost info. is a more wider term.
Standards are set by management.i.e. we will make ABC product in Rs. 10 in 1 labour hour. and then these standards are used as comparative cost information. in this way departmental performance can be measured and then controled.
ok the above given example was a departmental target of production department. we may add the quantity to be produced in one month say 350 units in a month. Similarly we may say that v have to sell 300 units i one month and that will be the target of marketing or sales department. and heads of those deptt are responsible for that

[Zikria Yamin]

Thanks for your help.