Cost-volume-profit analyses (CVP)
Cost-volume-profit analyses (CVP) are managerial accounting systems that offer procedures for analyzing the ability and viability of growing a business. To understand the company’s future performance, they need to look at the effects the shift in volume has on the business cost structure. This narrows down to understanding the different types of costs incurred and knowing the implications they have on the business’s profitability. “Variable costs vary in direct proportion to the changes in the level of activities” within the industry (Albretch et al., 2010).
For example, sales commissions, direct labor, and natural materials costs will increase with each produced extra output unit. An example is, if a doughnut shop sells more doughnuts, the total cost of ingredients goes up, and this cost is what is referred to as the variable cost.
On the other hand, fixed costs are not affected by the change in volume and level of activity within the business. Costs such as property taxes, rents, and administrative salaries are examples of fixed costs (Albretch et al., 2010). For example, even if more doughnuts are sold in a food outlet, the cost of rent and property taxes will still remain constant. Most companies strive to reduce fixed costs so as to increase profitability. For example, airlines have higher fixed costs that include maintenance, reservation, and gate charges. During lean years, airlines struggle with the fixed costs, whereas during boom years, they reap huge profits from the high turnover of passengers.
ADR acronym
ADR acronym for Alternative dispute resolution refers to the informal processes of dispute resolution, where a meeting is arranged between the disputants and the third party, which helps in finding an amicable solution to the problem. Arbitration and mediation are the most commonly used forms of ADR. In arbitration, the third party holds hearings, and the disputants are given a chance to express their problems and concerns (Cohen, 2005).
After sufficiently listening to concerns raised by both sides, arbitrators deliver a decision that is deemed as appropriate and fair to both parties. Arbitrators set the amount of time that will be spent on the hearings and the decision-making process.
One of the advantages of arbitrating is that both parties are given a chance to air their grievances. Thus the judgment is perceived as just and fair. In organizations, managers acting as arbitrators demonstrate control by making decisions that conform to the organization’s objectives and goals (Cohen, 2005). The disadvantage of arbitration is that the arbitrator retains so much control, and the disputants will blame the arbitrator if they think the decision was unfair. The disputants might not also own the decision since they didn’t participate in formulating the solution.
Meditation brings the disputants together and assists the parties in the collaborative problem- solving procedure (Cohen, 2005). Disputants are allowed to raise their concerns, and only those solutions that are accepted by the disputing parties are adopted. The advantage of mediation is that disputants have more control over the process; thus, they are likely to find the decision more just and fair. Mediation also promotes collaborative and creative problem-solving skills that parties can use in future conflicts. However, mediators are sometimes forced to adopt the decisions made by the disputants even if they are not always viable (Cohen, 2005). Furthermore, mediation consumes a lot of time and involves a lot of work, and in some instances, some disputes are still left unsolved.
I would choose a hybrid approach to benefit from the merits of arbitration and mediation. I would use the mediation-arbitration procedure whereby the third party would facilitate meditation and set the timeline by which the solution must be found. If the parties fail to reach a resolution by the given timeline, then the mediator would turn into the arbitrator and find a solution to the problem.
Identifying the problem
I would advise a coworker who is unable to make a decision to follow the steps outlined below. According to Walker et al. (2009), the first step is identifying the problem that is accepting that the problem exists and a solution must be found. If it is a big problem, break it into smaller components that are easier to handle. The colleague should then analyze the situation by studying it closely and finding out the underlying causes. After that, they must set up the goals that they expect the solutions to fulfill, under the guidance of their priorities and values.
The next step is to outline the numerous practical alternatives that can solve the problem and analyze the viability and benefits of each solution (Walker et al., 2009). After a comprehensive analysis of the other options, they should select the most viable one and start using it immediately. The next step is accepting the responsibility and consequences that arise from the decision, and lastly, they should evaluate the outcomes of the decision so that they can determine its effectiveness.
References
Albretch, S., et al. (2010). Accounting: concepts and applications. Florence, KY: Cengage Learning.
Cohen, R. (2005). Students resolving conflict: peer mediation in schools. Glenview, Illinois: Good Year Books.
Walker, K., et al. (2009). Improving your decision-making skills. Web.