Internet Exercise

Costs and Business

As discussed in the chapter, costs take a variety of forms, and behave in different ways. While product costing often manifests itself in the cost of a consumer product that immediately goes home with a customer, other examples do exist. In the case of motion picture production, services and talents are incurred and accumulated until the product is released to theaters.

Visit Pixar’s corporate Web site. Download the SEC form 10-Q for the quarter ended October 2, 2004. Review the report, especially focusing on pages 22 and 29-30. How do you think most of Pixar’s costs behave? Are they mostly product or period costs?

Government Contracts

Government contracts have taken increasing prominence in today’s business environment as the federal government has negotiated several high-profile support contracts for overseas military operations. Firms like Halliburton have contracted with the government with mixed results.

Government contracts take a variety of forms. Visit the federal government’s Web site on procurement procedures, known as the Federal Acquisition Regulations. Specifically focus in on Part 16 - Types of Contracts. Review the different types of contracts. Why would cost management be important in these many different types of contracts?

Application Service Providers

Application service providers (ASPs) in the information technology industry change the cost structures of their clients. A common misconception involves the concept of cost reductions manifesting themselves purely as an invoice that is less expensive than it historically had been.

ASPs increasingly manifest themselves as a comprehensive cost containment partner that may influence a variety of aspects within a customer. Visit the Web site for Surebridge and review the life-cycle application flowchart. Consider each of the four dimensions. How would costs be reduced in each of the four dimensions? Click on the Value Proposition link on the right side of the page. How much of a cost reduction percentage does Surebridge list? Do you feel this attainable, given the current business environment?