Mechanistic and organic which approach seems better suited for the organization of the future

Both mechanistic and organic organizations are general approaches to structure and control. They both incorporate the bureaucratic dimensions identified by Weber (including hierarchy of authority, centralization, rules, procedural specifications, impersonality, chain of command, span of control). The major difference between mechanistic and organic organizations is the relative degree of emphasis on these eight bureaucratic dimensions. 

 

Mechanistic organizations (e.g., IRS, car registration) tend to place high emphasis on these dimensions. They are characterized by reliance on formal rules and regulations, centralization of decision making, narrowly defined job responsibilities, a rigid hierarchy of authority, and a narrow span of control. Organic organizations (e.g., SAS, Electronic Arts), on the other hand, tend to place low emphasis on these dimensions. Consequently they tend to be more flexible and adaptable. An organic organization is characterized by low to moderate use of formal rules and regulations, decentralized and shared decision making, broadly defined job responsibilities, a flexible authority structure with fewer levels in the hierarchy, and a wider span of control. 

 

Mechanistic organizations are effective in stable environments, whereas organic organizations are more effective in unstable environments. The reason for this is that changes in environmental forces and technological factors are increasingly rapid. These changes will require swift adaptation by organizations if those organizations are to continue to succeed in an evolving global business environment. The organic organization allows much more rapid adaptation to environmental changes than the mechanistic organization does.

Particularly astute students might argue that a contingency approach is a better answer than a simple, blanket statement that the organic approach will always be better. While there has been a tendency for mechanistic organizations to move toward more organic structures, as pointed out in the text, there is still an appropriate place for the traditional mechanistic bureaucracy under certain specific circumstances. It seems reasonable to believe that some organizations will always face a uniform, stable environment, where a mechanistic structure might be appropriate. Thus, an answer specifying a combination of organic and mechanistic as the ideal, to be fitted to the specific task environment confronting the organization, is also a quite appropriate answer.

How Re-work of googs is accounted?

If the rework is normal and actual costing is used, the rework cost is added to the current period’s work in process costs for good units and assigned to all units completed. In companies using predetermined overhead application rates, normal rework costs should be estimated and included as part of the estimated factory overhead cost used in computing the overhead application rates. In this way, the overhead application rate will be large enough to cover rework costs. When actual rework costs are incurred, they are assigned to the Manufacturing Overhead account.

If rework is abnormal, the costs should be accumulated and assigned to a loss account. The units are included in the EUP schedule for the period and only actual production (not rework) costs will be considered in determining unit cost.3 Reworked units may be irregular and have to be sold at less than the normal selling price. The production costs of irregular items should be transferred to a special inventory account and not commingled with the production costs of good units. 

 

When the net realizable value (selling price minus cost to rework and sell) is less than total cost, the difference is referred to as a deficiency. If the number of defective units is normal, the deficiency should be treated as part of the production cost of good units. If some proportion of the defective units is considered an abnormal loss, that proportion of the deficiency should be written off as a period cost.

What is Expense Recognition Principle?

Expenses are defined as outflows of assets or incurring of liabilities (or a combination of both) during a period as a result of delivering or producing goods or rendering services. It follows that recognition of expenses is related to net changes in assets and earning revenues. The approach for recognizing expenses is, “Let the expense follow the revenues.” This approach is the expense recognition principle.

For example, companies recognize expenses not when they pay salary or make a product, but when the work or the product in fact contributes to revenue. Thus, companies match expense recognition to revenue recognition. By matching efforts (expenses) with accomplishment (revenues), the expense recognition principle is implemented. Various expenses, however, are tricky to correlate with revenue, i.e depreciation. As a result, some other rational and systematic approach must be developed.

Costs are usually classified into two categories: product costs and period costs. Product costs, such as material, labor, and factory overhead, attach to the product. Companies carry these costs into future periods if they recognize the revenue from the product in subsequent periods. Period costs, such as salaries and other administrative expenses are recognized when they are incurred. This approach is commonly referred to as the matching principle. However, there is some debate about the theoretical validity of the matching principle. A key concern is that matching allows companies to defer certain costs and treat them as assets on the balance sheet even though these costs may not have future benefits. If abused, this principle permits the balance sheet to become a “dumping ground” for unmatched costs.

When to recognize revenue?

A fundamental matter for many companies is when to recognize revenue. Revenue recognition generally occurs (1) when realized or realizable and (2) when earned. This approach has referred to as the revenue recognition principle.

An establishment realizes revenues when it exchanges products or services, merchandise, or other assets for cash or claims to cash. Revenues are realizable when assets received or held are readily convertible into known amount of cash or claims to cash. Assets are readily convertible when they are salable or interchangeable in market at readily determinable prices without significant further cost. 

In addition, a company delays recognition of revenues until earned. Revenues are considered earned when the company substantially accomplishes what it must do to be entitled to the benefits represented by the revenues. Generally, the point of sale at which a company recognizes revenue. The sale provides an objective and verifiable measure of revenue—the sales price Recognition at the time of sale provides a uniform and reasonable test.