In the Monthly Management Meeting, Each Manager Was Asked to Come

question 38

Essay

In the monthly management meeting, each manager was asked to come up with suggestions for controlling costs.Some managers favoured a simple across-the-board cut in expenditures, with every department accepting the same percentage reduction in their budget.This was supported by several managers as the fairest means to save costs.Your assistant attended the meeting in your absence and suggested that the company consider switching to activity-based costing.Unfortunately, the more he explained, the less support he received, particularly when he mentioned that more information would have to be collected, there would be implementation costs, and that what really mattered were nonfinancial variables, called activities.The meeting ended with everyone wondering how such an idea could lead to cost savings.Required:Explain how an ABC system should be able to save money, even though it focuses on activities, rather than just costs.Compare your assistant's suggestion to an across-the-board cut as a means to save money.

Describe characteristics of individuals based on their valuation of lotteries.

Explain how adverse selection affects the functioning of insurance markets.

Identify measures to screen against adverse selection.

Understand potential solutions to mitigate the "lemons" problem in markets.

---

Definitions:

Sterile Gloves

Gloves that have been treated to be free from all living microorganisms, used in medical procedures to maintain aseptic conditions.

Tuberculosis

An infectious disease caused by the bacterium Mycobacterium tuberculosis, primarily affecting the lungs but can spread to other parts of the body.

Negative-Pressure Airflow

A ventilation system designed to create a flow of air into a space or room to prevent contaminants from escaping to adjacent areas, often used in healthcare settings.

N95 Respirator

A respiratory protective device designed to achieve a very close facial fit and very efficient filtration of airborne particles, offering significant protection against respiratory pathogens.