Mba 503 - Memo To Hr

Memo to HR

MEMO

Attn: HR Manager

From: James Bauernfeind

There is an understanding that HR is struggling with current budget discussions. In an attempt to help HR understand the terminology within the discussions, this memo has been compiled. Please read through this memo, and if there are further questions do not hesitate to ask in the budget meetings.

Our business deals with fuel, fuel pricing and management of the fuel for merchants and fleets. I would say that it is possible that each of the cost variables can be applied in some way to our business as it is a diverse business dependant on outside products. Fixed costs are normally costs that the business has that are normal every day; have to pay them whether you make money or not (Business Link, 2007). This could include the expense of electric, water, and phone to keep the business running. It is not that the amount does not change, it is that it is a given that it has to be paid or the business simply could not operate, or have a place to work should the rent not be paid. I don't know of a business that does not have a fixed cost.

FleetOne (FleetOne Inc, 2007) has many fixed costs. Variable costs can be seen as expenses that change as the business changes in sales or other activities of the business (Investorwords.com, 2007). These costs will be above and beyond the fixed costs should the company have activity that requires the use of more electricity (as an example) to sustain the raise in production. FleetOne does not have many variable costs, as we are not a production line, or a company that has a need to speed up and slow down production. The only thing I could see being a variable cost for our company is the extra cost of picnics, and company thrown parties on the company property that could be seen as this "above and beyond" fixed cost type nature.

Like many businesses that do have products, there is definably a direct cost. Direct cost is an expense that is directly related to a particular product (GSA, 2007). Our product is not something you go out and buy at the store, our company's product is the services that we provide. There are costs associated with providing these services... fuel card cost, equipment cost, permit cost. Indirect costs are expenses that cannot be directly related to a product or service. This could be anything along with fixed costs, costs of supporting the network, upgrades to servers that support the software that provides some of the services we offer, etc.

Our business has many sunk costs, in which should be similar to many businesses especially new businesses today. Sunk costs are expenses or purchases that the company makes where it cannot get the money back for that item (OECD, 2003). Expenses of this nature I see at our work are seen directly in our new database system that we are implementing. In hardware, software, and development of this new program over the past year, we have reached a point where if the program fails, we could