Assignment Essay Example | Topics and Well Written Essays - 1750 words - 9

Assignment - Essay Example For running a nursing home, a unit can be treated as cost of a bed, payment to employees and other such services. Therefore, operating expenses include: â€Å"Lean Cost Management is another approach to financial measurement that makes waste and the costs it creates visible, and hence actionable, wherever and whenever it occurs in an organization† (Hobbs, 2011). Following this approach, a business can very well eliminate excessive transaction costs, re-ordering costs; minimize inventories and all other unnecessary costs involved. The lean cost management technique brings into notice all excessive costs and helps the business to reduce it accordingly. It foregrounds the required agility with which the level of production can be increased as well as the cost that can be reduced without hampering quality of products. Its aim is to reduce seven forms of wastages in manufacturing made by any business, like, unsold inventory, which is considered as overproduction as per this method. Lean costing technique is a perfect example of costing in an agile environment. There are various expenses that are incurred by a business. These overheads expenses can be effortlessly allocated by using lean cost management and operating costing technique. Based on these techniques, expenses for each overhead incurred by a business can be noticed more prominently and allocation of funds can be done in an effective and methodological manner. These cost management techniques allow a business to forecast the cost and lessen it as per necessity. Therefore, the technique that Hugh Knock had decided for Pedro’s business was rightly the operating costing and lean cost management method (Gupta, 2009). According to Knock, this method will help Pedro to find out the unnecessary unit cost involved in his future business and curb it accordingly. Hugh also stated the necessity of bigger business to allocate the cost per unit of their service. He made the statement