+1 862 207 3288 Contemporary Britain, Professional skills and ethics
Learning Outcomes
On the successful completion of the module you should be able to:
1. Demonstrate an understanding of the main changes which have shaped the nature of British Society since 1945
2. Identify the main trends in Britain’s economic, social and political evolution since 1945
3. Appreciate the main trends in debates about changes in class and identity in Britain
The 1960s are often seen as a period of great culture change: discuss the evidence for this viewpoint.
Learning Materials:
Key Text:
A. Marwick British Society since 1945 ( 4th edn. 2003)
Recommended Reading
The following books will provide you with historical background and can be used in conjunction with many of the topics listed below:
A.Marr A History of Modern Britain (2007)
D. Childs, Britain Since 1945, (2006 and earlier eds.)
P. Clarke, Hope and Glory: Britain 1900-1990, (1997)
There are two, on-going, series about post-war Britain which are worth consulting for the relevant periods. One is by David Kynaston and the other by Dominic Sandbrook. The volumes published to date are:
D. Kynaston:
Austerity Britain 1945-51 (2008)
Austerity Britain 1948-51: smoke in the valley (2008)
Family Britain 1951-57 (2009)
Modernity Britain: opening the box, 1957-59 (2013)
Modernity Britain: book two. A shake of the dice 1959-62 (2014)
Modernity Britain: 1957-62 (2014)
D. Sandbrook
Never had it so good: a history of Britain from Suez to the Beatles (2006)
White Heat: a history of Britain in the swinging sixties (2007)
State of Emergency: the way we were. Britain, 1970-1974 (2010)
Seasons in the Sun: the battle for Britain, 1974-1979 (2014)
Essays on many of the topics covered in the module can be found in P. Addison/ H. Jones (eds.) Companion to Contemporary Britain 1939- 2000 (2005) and in F. Carnevali/ J.-M.Strange (eds.) Twentieth Century Britain: economic, cultural and social change (2007, 2nd ed.), part 3.
HMSO, Britain (the library contains a volume for each year since 1986)
R. Jowell (ed.), British Social Attitudes (multi-volumed by year and theme)
Use of the Internet
Its value for the study of British history and politics is largely in terms of ease of access to documents and articles that have been put on line. So you must familiarise with the huge range of other resources that exist in the Learning Centre.
Useful Websites
British Political facts at http://www.ukpol.co.uk
History Today Web Site : www.historytoday.com
History and Policy.org
There may be other useful websites; do some browsing and use your discretion. Try to ensure they are linked to reputable agencies or institutions such as universities or the BBC. It is also strongly advised to browse in journals for additional material; Contemporary British History (classmark 942.085) is particularly recommended for aspects of political, economic and cultural developments in post-war Britain.
Additional reading
Class and Classes:
J. Goldethorpe, Social Mobility and Class Structure in Modern Britain (1987)
D. Cannadine Class in Britain (2000) chs. 4 and 5
K. Mann, The Making of an English Underclass, (1992), ch. 5.
K. Roberts, Class in Modern Britain, (2001)
N. Abercrombie and A. Warde, Contemporary British Society, (2000).
N. Abercrombie and A. Warde, Social Change in Contemporary Britain, (1992).
K. Kumar, From Post-Industrial to Post-Modern Society, (1991)
P. Clarke, Hope and Glory, chs. 8 and 9.
G. Marshall, Repositioning Class, (1997), chs. 3 and 6.
J. Lawrence `Class, “Affluence” and the study of everyday life in Britain c. 1930-64’ Cultural and Social History 10 (2), 2013
K. Gildart `From Dead End Streets to Shangri Las: negotiating social class and post-war politics with Ray Davies and the Kinks’ Contemporary British History 26 (3) 2012
J. Firth `”This is where I belong”: identity, social class and the nostalgic Englishness of Ray Davies and the Kinks’ Popular Music and Society 29 (2), 2006
The post-war period and the 1950s
P.Hennessy Never Again: Britain 1945-51 (1993)
P.Hennessy Having it so good: Britain in the Fifties (2006)
C. Barnett The Lost Victory (1995)
C.Barnett The Verdict of Peace (2002)
For a history of the Welfare State see N. Timmins, The Five Giants: A Biography of the Welfare State (2001)
J. Fyrth (ed.) Labour’s Promised Land? Culture and Society in Labour’s Britain 1945 -51 (1995)
S. Brooke `Gender and Working-Class identity in Britain during the 1950s’ Journal of Social History
The 1960s and social change
A. Marwick, The Sixties (1998)
J. Street, ‘Youth Culture and the Emergence of Popular Music’ in Gourvish and O’Day.
P. Clarke, Hope and Glory, ch. 8.
J. Green All dressed up: the sixties and counter-culture (1998)
M. Donnelly Sixties Britain (2005)
P. Thompson `Labour’s Gannex conscience? Politics and popular attitudes in the “permissive society”’ in P. Coopey et al (eds) The Wilson Governments 1964-1970 (1993)
J.Weeks, Sex, Politics, and Society, ( 1989) chs 13 and 14
M. Collins The Permissive Sixties and its enemies (2007)
D.Morrison and M.Tracey, American Theory and British Practice, in R. Dhavan and C.Davies (eds), Censorship and Obscenity (1978)
M.Durham, The Thatcher Government and the Moral Right, Parliamentary Affairs, January 1989
M.Durham, Sex and Politics (1991)
T.Newburn, Permission and Regulation (1992)
D.Cliff, `Religion, Morality and the Middle Class’, in R.King and N.Nugent (eds), Respectable Rebels (1979)
Second Wave Feminism
V. Amos and P. Parmar `Challenging imperial feminism’ Feminist Review 17 (1984)
B. Bryan, S. Dadzie and S. Scafe `Chain reactions: black women organising’ Race and Class 27 (1) 1985
P. Byrne `The politics of the women’s movement’ Parliamentary Affairs 49 (1), 1996
B. Caine English Feminism 1780-1980 (1997)
A. Carter The Politics of Women’s Rights (1998)
G. Griffin Feminist Activism in the 1990s (1995)
E. Meehan `British Feminism from the 1960s to the 1990s’ in H. Smith (ed.) British Feminism in the Twentieth Century (1990)
J. Mitchell `Reflections on twenty years of feminism’ in J. Mitchell and A. Oakley (eds) What is feminism? (1986)
G. Nain `Black Women, sexism and racism: Black or anti-racism feminism?’ Feminist Review 37, 1991
S. Rowbotham The Past is Before Us: Feminism inaction since the 1960s (1989)
P. Welch `Origins and development of the Women’s Liberation Movement’ http://pers-www.wlv.acuk/~le1810/wlm.htm
P. Welch `Feminist Theory, Consciousness Raising and Political Action’ http://pers-www.wlv.ac.uk/~e 1810ftcrpa.htm
A. Weir and E. Wilson `The British Women’s Movement’ in W. Wilson Hidden Agenda: theory, politics and experience in the women’s movement (1986)
P. Thane, ‘Towards Equal Opportunities? Women in Britain since 1945’ in Gourvish and O’Day
P. Clarke, Hope and Glory, chapter 11.
A. T. Mallier and M. J. Rosser, Women and the Economy, (1987)
C. O’Donnell and P. Hall, Getting Equal, (1988)
J. Webster, Shaping Women’s Work, (1996)
A. Coyle and J. Skinner, Women and Work, (1988)
J. Lovenduski and V. Randall, Contemporary Feminist Politics, (1992).
H. L. Smith, British Feminism, (1990)
A. Coote and B. Campbell, Sweet Freedoms, (1986)
S. Rowbotham Promise of a Dream (2001)
The crisis of the 1970s (and the debate over Britain’s economic decline)
A.Beckett When the lights went out (2009)
H. Pemberton `Strange Days Indeed: British politics in the 1970s’ Review article Contemporary British History 23 (4), 2009.
D. Coates The Question of UK Decline (1994)
B. Collins & K. Robbins (eds) British culture and economic decline (1990)
C. Barnett The Audit of War (1987)
R.English & M. Kenny (eds) Rethinking British Decline (2000)
R. Middleton (Review article) `The Political Economy of Decline’ Journal of Contemporary History 43(3), 2006.
T. Gourvish and A. O’Day, ‘Decline or Resurgence? in Gourvish and O’Day (eds.) Britain Since 1945
M. W. Kirby, ‘The Economic Record since 1945’, ibid.
A Gamble Britain in Decline (1994, 4th ed.)
W Hutton The State We’re In (1996)
A. Wright `British Decline: political or economic?’ Parliamentary Affairs 40 (1), 1987.
The Conservative Party and Thatcherism
All the Politics textbooks at classmark 320.941 have sections on the Conservative Party and for more detailed accounts see:
P. Riddell The Thatcher Decade (1989)
D. Kavanagh & A. Seldon The Thatcher Effect (1989)
R. Skidelsky (ed) Thatcherism (1998)
A. Gamble The Free Economy and the Strong State (1994 4th ed.)
S Hall and M Jacques (eds) The Politics of Thatcherism (1983)
A Sampson, Who Runs This Place? (2004).
S. Evans `The Not So Odd Couple: Margaret Thatcher and One Nation Conservatism’ Contemporary British History 23 (1), 2009
(The journal Parliamentary Affairs has numerous review articles on Thatcherism in editions from 1984 to 1991; check these years).
New Labour
All the Politics textbooks (see classmark reference for topic above) have sections on the Labour Party and the emergence of New Labour. Also see:
W. Leggett After New Labour (part 1) (2005)
S. Fielding The Labour Party (2003)
S. Fielding Labour: decline and renewal (1999) chs. 8-10
A. Gamble `New Labour and Political Change’ Parliamentary Affairs 63 (4), 2010
Much of the more specialist material on the character and development of New Labour is to be found in journal articles. If you want further references for these, please consult the module leader.
The Far Right in Britain
N. Fielding The National Front (1981)
C. T. Husbands What happens to the National Front Now? (1979) –online
M. Walker The National Front (1977)
S. Taylor The National Front in English Politics (1982)
M. J. Goodwin `The extreme right in Britain: still an ugly duckling but for how long?’ Political Quarterly 78 (2), 2007.
R. Ford and M.J. Goodwin `Angry White Men: individual and contextual predictors of support for the British National Party’ Political Studies 58 (1), 2010
D. Halikiopoulou and S. Vasilopoulou `Towards a “Civic” Narrative: British national identity and the transformation of the BNP’ Political Quarterly 81 (4) 2010.
N. Copsey and G. Macklin British National Party: Contemporary Perspectives (2011)
P. Lynch et al. `The United Kingdom Independence Party: Understanding a niche party: Strategy, candidates and supporters’ Parliamentary Affairs 65 (4) 2012
R. Ford and M. Goodwin Revolt on the Right: explaining support for the radical right in Britain (2013)
T. Cantle `Review article: The Far Right: rumours about their death are premature’ Parliamentary Affairs 65 (4) 2012
The Contemporary Coalition
P.Taylor-Gooby & G. Stoker `The coalition programme: a new vision for Britain or Politics as usual?’ Political Quarterly 82 (1), 2011
R. Fox `Five Days in May: a new political order emerges’ Parliamentary Affairs 63 (4), 2010
J. Green `Strategic recovery? The Conservatives under David Cameron’ Parliamentary Affairs 63 (4), 2010.
Symposium in Parliamentary Affairs 67 (1), 2014
Britain and the EU
D.Allen `The United Kingdom: towards a parting of the ways’ in S.Bulmer and C. Lequesne (eds) The Member States of the European Union
P. Jones and P. Norton Politics UK (2014) ch. 27
M. Dangerfield `”Euro? What Euro?” the financial crisis and “business as usual”. UK attitudes to economic and monetary union. Split: Faculty of Economics (posted on WOLF)
Chs. on EU in I. Budge et al. The New British Politics
M. Garnett and P. Lynch Exploring British Politics
S. Wall `Is Britain a European Nation?’ Europe’s World (2008); available via www.europesworld.org
A. Geddis Britain and the European Union (2013)
Financial Times has frequent articles on EU –use this paper.
Learning Activities:
Lectures, seminars, tutorials (for consultations and feedback on assignments). Normally, formal lectures of one hour and a seminar of one hour. The seminars are an opportunity for a deeper consideration of the events, ideas and concepts raised in the lecture and for planning for the assignments. Attendance at seminars is strongly recommended.
#20
PC management program
1. Describe your recommendation for the PC management program for the BENNEB Corporation.
2. Describe your recommendation for the total cost of your recommended PC management program the first year and the second year of your revised program.
3. Create a one page email to the CEO indicating the successes of your program after the first year.
4. The paper should be eight (8) pages, double spaced written in MLA format, containing no (0) sources or references. Please provide writing only, no charts or graphs included.
5. The purpose of this business case is to expose you to the complete solution of reducing an IT expense category versus just a slice that you might get in the normal procurement process. Please elaborate on this concept.
Annual current total cost of PCs.
Number of PCs
Total Laptop Desktop LCD
14,000 11200 2800 $1,701,000.00
Price/Unit $1,400.00 $700.00
$17,640,000.00 $15,680,000.00 $1,960,000.00
Travel Bag Docking Station Back-up Device Total Cost
$672,000.00 $616,000.00 $1,750,000.00 $38,318,000.00
The current model of Benneb shows a number of IT related expenses which represent over spending and more specifically uncontrolled allocation of funds. PC related extreme spending is nearly $20 M. The operating systems do not represent a common platform (Windows Vista, Windows 2000, and Mac) resulting into increased service charges. The table above represent the estimated annual current total cost of PCs.
You are the vice president of global procurement at BENNEB Corporation, a global manufacturer of scientific equipment. The BENNEB Corporation has revenue of approximately three billion dollars and operates in thirty countries, primarily the North America, Western Europe, Japan, China and Korea. The company employs approximately twelve thousand employees.
The CEO has just asked you to partner with the CIO to take over the management of all PCs for the corporation; he believes that this spending is out of control and needs management. The CEO estimates that the company is spending in excess of $20M a year in PC related costs. Currently there is no control over PCs and each department orders PCs from their prefer vendor on their own refresh schedule. This has been a problem for IT department for years because while some departments and individual buy new PCs every year, there are some clerical positions that have PCs that are five or more years old; many times these old PCs prevent IT from rolling out the newest version of an application or package. In addition, there is a wide variety of operating systems in existence ranging from Windows 2000 to Window 7 plus about 200 MACs. The corporation does have an Enterprise Agreement from Microsoft for Office and the vast majority of employees have Office 2007 with a few employees on Office 2010. The Enterprise agreement with Microsoft allows the corporation to run which any version of MS Office Suite. The annual cost of the maintenance related to the Enterprise Agreement is $1,000,000 per year (29% of the original purchase price).
The CEO has asked the accounting department to transfer all PC related assets to IT. You are surprise to see that the average age of the PCs in the inventory is 30 months and the average remaining value of the PCs is $215. All the PCs are currently being depreciated over thirty-six months. This does not include any PC that is explicitly labeled as a R&D PC that is located in one of the many research labs. In addition, there appears to be approximate 14,000 PCs for 12,000 eligible employees.
Since there are no standards currently in place, individuals are typical ordering a new PC with a monitor. Over ninety percents of the monitors currently in place are LCDs. In addition, those ordering laptops are typically ordering, a new monitor, travel bag (costs vary wildly) and a new docking station. In addition, there is a wide range of backup devices being order which since most are being expensed, the company has no record.
The procurement organization has estimated that the current purchase of PCs, on average, has the following profile (Figure 1).
Items Average Costs
Desk Top PC $700
LCD Monitor (17”) $135
Laptop $1400
Docking Station $55
Backup Device $125
Lap Top Bag $60
Figure 1
Aside from the help desk, IT has approximately 90 employees around the world providing desk side support (Figure 2).
Region Nbr of IT Avg Costs (USD)
US 30 $90,000
Canada 6 $75,000
Mexico 4 $45,000
Western Europe 30 $120,000
Japan 4 $130,000
China 10 $45,000
Remainder of Asia 6 $60,000
Figure 2
It is also estimated that the Help Desk has approximately 25 FTEs which work on the resolution of PC type of problems. The average cost of the Help Desk employee, who is located in the US, is approximately $75,000.
Currently, the laptop to desktop ratio is 80:20. The current break down of employees by job role are listed below along with the percentage of that class of employee that is either mobile or travels more than 20% (Figure 3).
Employee Roles Number Travel
Sales 1800 100%
Sales Support 2000 80%
F&A 575 10%
Marketing 250 75%
Procurement/Supply Chain 250 10%
HR 450 25%
Customer Services Call Agent 1250 0%
Professional Services Consultants 1250 90%
Engineers 1500 40%
Order Management 500 0%
Product Management 500 50%
Assembly/Machine Operators 1000 0%/0% usage
IT 500 25%
Legal 150 90%
Management 1000 50%
Executive Management 25 100%
Figure 3
Explanation: Total Cost of Ownership (TCO)
Establishing a Total Cost of Ownership model is one mode of cost management. The starting point for implementing a TCO model is to establish an owner to every IT service category. The data center is a very large category; hence servers could be broken out as a separate category.
The key to implementing a TCO program is understanding the spend levers (procurement levers). The primary levers are rate, demand/volume, service level/engineering specifications and compliance. The rate is typically the easiest leverage to change in the short term because it involves negotiating with the vendors (normally where procurement starts). Reductions in demand and volume will correlate positively with spend as will reductions in the service level or engineering specifications. Finally, compliance ensures that spending adheres to the spend guidelines.
An example of this approach is building a TCO for copiers and printers. The first step in this process is capturing all the costs associated with the printers and copiers. This has to be a comprehensive collection of all the costs: monthly lease costs, click costs associated with lease assets, depreciation on owned devices and consumables/toner costs. With this data it is possible to build a cost model. For example, the data may indicate that individual office desk printers cost $0.05 per sheet for black and white and $0.25 per sheet for color. A representative cost for a copier or system printer might be $0.01 or less per black and white copy and less than $0.10 per color copy.
Once this model has been built it is possible to evaluate alternatives. An example of an alternative is Multi-Function Printer (MFP) that has a cost of $0.005 per black and white copy and $0.05 per color copy. This represents a change in the rate. The next step is to establish a role based model for who will be permitted to keep personal printers on their desks. This simple role based model might be that only executive secretaries and selected employees in human resources are permitted to keep their personal printers. This will represent a change in the service level in that most employees will have to walk to the location of the MFP’s. There are several means for reducing demand for printing: reduce the number of color devices, by changing all defaults to black and white, change the defaults for two-sided printing and eliminate all title/header pages. This example over simplifies the process of establishing a TCO process. The collection of the data in some companies can be very complex. In addition, the implementation of this solution requires the owner take in account lease expirations as well as the remaining depreciation of the current devices. This process will most likely take several years
Simplified Explanation: Management Accounting
Overview
One of the fundamental skills that an IT manager needs to have is the ability to manage organizational budgets. Management accounting is different from financial accounting in that its primary focus is understanding the spend within an organization rather than publicly reporting results to stakeholders. Management accounting primary purposes are internal budget controls and organizational decision making.
According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is “the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources” (CIMA Official Terminology). Management accounting provides for strategic decision making, performance management and risk mitigation within an organization.
Most organizational management budgets today are represented in a spreadsheet format. The spending typically represented in an IT organizational budget, as rows, are operational expenses (to be explained later) which have the following categories of spend (to name a few): salaries and benefits, maintenance expense, telecommunications (data and voice), travel and entertainment, education, facilities, supplies, depreciation, and amortization. This is an over simplification as you will clearly see in Figure 1. In addition, as columns, there is a representation of expenses in a prior period, the plan (budget) for the current period and then either the actual results of the current period or a forecast for a future period.
Figure 1
Budget Report Month of April (BENNEB)
In addition, there are columns that represent variances from both the prior year and the current year plan (budget). This allows a manager to determine their performance for the period and to investigate potentials dependences from the prior period which will allow the manager to determine whether they will make the budget. In most organization, the budget is a form of contract between the manager and their management/company.
In addition to an operational budget, the IT manager will also have a capital budget for the purchase of fix assets such as server, data center improvements and spend associated with software.
Some organizations combine elements of both the operational and capital budget to derive a cash budget. This is more common in companies owned by private equity organizations or individuals rather than publicly traded companies. Most of these accounting principles hold true at the management level for public sector organizations, though the emphasis on the differences between expense and capital budgets become more acute due to how public sector organizations receive their funding. Funding across multiple years is often handled differently in the public sector than by corporations.
The next section will attempt to clarify the differences between capital expense (CAPEX) and operating expense (OPEX).
CAPEX versus OPEX
Capital expenditures are purchases that provide future value. A capital expenditure is incurred when a business spends money either to buy fixed assets (tangible or intangible) or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capital expenditures are used by a company to acquire or upgrade physical (tangible) assets such as equipment, property, buildings or intangible assets such as software. In accounting, a capital expenditure is added to an asset account (“capitalized”) on the balance sheet of the company, thus increasing the asset’s basis (the cost or value of an asset). One of the primary reasons for adjusting and tracking asset value is for tax treatment purposes.
For tax treatment purposes (which vary by country), capital expenditures are costs that cannot be deducted in the year in which they are paid or incurred, and must be capitalized. The general rule is that if the property acquired has a useful life longer than the taxable year, the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in question. The useful life and the method of treatment (straight line versus double declining balance) for an asset use in managing accounting are often different that the tax treatment method or useful life in the stator books of the company. Most corporations have a stator set of accounting books for tax purposes and a management set of books to management over sight. For example, most IT fixed assets like PCs, servers and network hardware has a useful life of three to five years which some tax codes might allow for accelerated treatment of the life cycles of less than three years.
Included in capital expenditures are amounts spent on:
• .acquiring fixed assets
Tangible asset (e.g., buildings, mainframes, servers, PCs)
Intangible assets (e.g., software, implementation costs, labor associated with software development)
• fixing problems with an asset that existed prior to acquisition if it results in a superior fixture
• preparing an asset to be used in business (e.g., installation costs of a large server)
• restoring property or adapting it to a new or different use
Figure 2
Table of Asset Useful Life – Representative Examples
Asset Type Useful Life
Furniture, Office Equipment 8- 15
Copiers/MFPs 3-5
Computer Equipment – PCs 3 – 4
Computers Equipment – Servers 3 – 5
Computer Equipment – Mainframes 3 – 7
Telecommunications Equipment 3 – 7
Security Systems (e.g., access systems) 3 – 5
Software – Enterprise (and associated labor) 5 -10
Software – other 3 – 5
Buildings (e.g., data centers) 30 – 45
Critical Infrastructure (e,g., generators, UPS, HVAC) 10 – 20
Land Not depreciable
An ongoing accounting question of any company is whether certain expenses should be capitalized or expensed. Costs that are expensed in a particular month simply appear on management reports as a cost that was incurred that month. Costs that are capitalized, however, are depreciated/amortized over multiple years. Capitalized expenditures show up on the balance sheet rather than the profit and loss statement of a company. Most ordinary business expenses are clearly either expansible or capitalizable, but some expenses could be treated either way, according to the preference of the company usually based on some minimal spend (ranges vary from $500 – $10,000). When interest is associated with the purchase of an asset, it is also spread out over the life of the asset.
Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the useful life of the asset. Depreciation is the reduction in the value of an asset used for business purposes during certain useful life (amount of time due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion, inadequacy, rot, rust, decay or other such factors).
Depreciation and its related concept, amortization (generally, the depreciation of intangible assets), are non-cash expenses. Neither depreciation nor amortization will directly affect the cash flow of a company, as both are accounting representations of expenses attributable to a given period.
In 1998, there was a change made in the treatment of labor associated with either developing custom software or implementing package software for internal use. This change exclude the R & D treatment of software being developed for sale. This new treatment of labor associated software for internal use is referred to as SOP 98-1.
SOP 98-1 is a Statement of Position titled Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, issued by the American Institute of Certified Public Accountants. SOP 98 provides guidance on the capitalization of software created for internal use. The SOP applies to all non-government entities and had to be adopted for fiscal years beginning after December 15, 1998, although earlier adoption was encouraged.
SOP 98-1 describes the allocation of project expenses to either expense or categories that can be capitalized. The main parameters of the guidance are that planning and initial selections of alternatives are expensed as incurred because no value has been created at this point. After the planning has been completed and coding has begun, these costs may be capitalized (including internal labor working directly on the project as documented by keeping timesheets). External consultants may also be capitalized. Capitalization stops when the project is ready for its intended use. Training end-users, the post implementation and the operational expenses are not capitalized but expensed as incurred. In the case of the labor costs associated with the implementation of a commercial software package, the useful life of the capitalize labor is the same as the useful life of the commercial software package. The useful life of the custom developed software is estimated life of the custom software in production before it will be replaced. A comparison of the custom developed software to a similarly available commercial package would create additional credibility. (e.g., custom general ledger software to commercially available general ledger package)
An operating expense or expenditure (OPEX) is an ongoing cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a multi-functional printer is the CAPEX, and the annual paper, toner, power and maintenance cost is the OPEX. Operating expense OPEX may also include the cost of workers and facility expenses such as rent and utilities.
In a company, an operating expense is a day-to-day expense such as sales and administration. In short, this is the money that the company spends in order to turn inventory into throughput. Operating expenses also include depreciation of plants and machinery which are used in the production process. On a management report, “operating expenses” is the sum of an organization’s operating expenses for a period of time, such as a month or year. Note that in management accounting, operating expense include both cash and non-cash items.
Operating expenses include:
• accounting expenses
• license fees (excluding software licenses above the company’s minimum threshold)
• maintenance and repairs, such as snow removal, trash removal, janitorial service, pest control, and lawn care
• advertising
• office expenses
• supplies
• attorney fees and legal fees
• utilities, such as telephone
• insurance
• property management, including a resident manager
• property taxes
• travel, entertainment and vehicle expenses
• leasing commissions
• salary and wages
• raw materials
For most common leases (operating leases) the monthly payments are considered an operating expense in the month they are incurred. Based on the residual value of the asset at the end of the lease, it make be categorized as a capital lease. While this makes a difference in financial accounting, it usually has very little impact on management accounting.
Without going into an in-depth study of cash flow analysis, which is outside the scope of this class, looking at the management reporting on a cash basic is a combination of all the capital expense for the period plus the operating expense minus the depreciation and amortization for the period. Figure 3 will attempt to make this more clear.
Figure 3
Chart of Expenditure on a Cash Basis – BENNEB
The blue and red bars represent the cash expenditure of this IT organization. The blue bar is the operating expense without depreciation and amortization. The green side bars (to the right) represent the depreciation and amortization that has been excluded from the blue bar. While the simplest explanation of the cash basis is all invoice that we paid in the period (in Figure 3 the period is a year). Most company work on an accrual basis which means that the expense is accrued at the time it was received or put into use versus when the cash was actually paid (e.g., many invoices are paid net 30 or 45 days which pushes the cash outlay one or two months). On an annual basis the two are usual very close, but there would be more significant variances when looking at monthly periods. The accruals allow manager to get a better picture of what was actual spent even when looking at things on a cash basis.
Total Cost of Ownership – PC (Group)
Group Case Analysis Paper, Ten (10) Pages, Double Spaced, The case analysis should address the four actions at the end of the case. At the end of the discussion you will need to provide a summary of key points learned from the case and their application in managing the IT resource. The analysis should incorporate some of the tools discussed in the segment around Total Cost of Ownership.
Homework assignments should be submitted to the instructor via WebCT drop box. Please include your name in the header of your assignment and in the electronic file name (name_segment_3.xxx). Papers will be evaluated using the following criteria:
Total Cost of Ownership Case – PC grading rubric
Criteria Points
Current TCO of the PCs 50
Process used to calculate Current TCO 75
Revised TCO after Reductions 150
Letter to CEO 25
Total 300
