Kin Hubbard has been quoted as saying, "The safest way to double your money is to fold it over once and put it in your pocket." In a personal financial situation that may work well, but the truth of the matter is that organizations are forced to spend money to function. However, saving money is often also a top concern. With the bleak economic times, municipalities across the United States are scrambling to reduce costs. A number of them are turning to technology to replace paper costs. Initially it may seem that paper is relatively cheap and a capital investment of high technology may take years for a return on the investment. In reality, some city governments employing high tech cost saving measures are seeing a return in the very first year!A shocking $18,000 is spent by the Hampton, VA city council in paper costs. An investment of iPads for the city council cost just over $4,000. Redwood City, CA municipality expects to trim more than $30,000 in paper costs after investing $7,000 in iPads.
Whether or not the sleek Apple device will catch on and dramatically reduce traditional government paper usage may yet be confirmed. However, despite some critic's concerns over spending money on such a flashy device, at a quick glance the iPad purchases seem to meet the requirements of an ISM standard on cost control which include: 1) Taking advantage of technological changes, 2) Consider the environment, and 3) Employ job experience.
Sample Test Question Task 1-B-2
The purchasing director at Byberry Municipality is tasked with reducing the paper budget of $15,000 for the upcoming fiscal year by a whopping 50%. He concludes that over half of the paper and copying expenses are a direct result of printing agendas, reading, research and background material for council meetings. After careful consideration with department heads and after a test phase in the current fiscal year, the director goes forward with a standardization plan in the upcoming fiscal year. He purchases netbooks for the entire city council staff to replace all printed meeting agendas, reading, research, and background material for all council meetings. The netbook expenditure is expensed in that fiscal year and totals $4,300. This type of cost savings is considered:
A) Cost avoidance
B) Cost reduction
C) Value engineering
D) Consumption management
2 comments:
Answer:B
The expenses are reduced by going for an alternative product netbook instead of paper, this type of saving achieved either by reducing cost of product/service or by using less expensive alternative, is called Cost reduction.
Option-B, Cost avoidance: Pertains to preventing cost.
Option-C, Value engineering: Functional Analysis carried out for a new product at design stage.
Option-D, Consumption management: Deals with managing energy consumptions of the product.
Hope the descriptions above are correct.
Satyam,
You've got it exactly right! Well done.
Debbie
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