This chapter focuses on a crucial crisis issue with consequences that have affected many companies worldwide, the spread of the COVID-19 pandemic. Deliveries were cancelled, and many companies closed their facilities completely around the world. Taking into account the capacity and structural nature of fixed costs, activity-based cost estimation may be more appropriate than traditional cost estimation to create the capacity to manage production cost structures to eliminate possibilities for idle costs, as these are a function of using the capacity offered to the installation. This chapter theoretically presents the relationship between the main costs of idleness, crisis, and profitability as a measure of the company's value. This is important, as the company's value can be delayed by the occurrence of a crisis, and the health pandemic has created a field emerging from research with advances in strategic cost management.
TopIntroduction
The pandemic that is observed due to Covid-19 and, as a consequence, the removal of workers caused the lockdown, social distancing and the huge impact in the economy and the one of the consequences was the failure of thousands around the world. Companies have been trying to fight to survive and maintain their working capital in order to pay the minimum bills that are required to avoid bankruptcy.
It is not known, until now, how the economy will recover, nor how most will react, in all sectors. As it is known, the company's operational continuity in times of economic uncertainty is determined by its ability to manage costs and expenses in a way that maintains the financial flow to maintain the company's value.
As the main source of financial information, accounting is fundamental to give the manager the necessary direction in situation of crisis, so that the manager can evaluate his financial decisions, monitor, and redirect his activity. The correct management of costs and expenses takes on an important discussion for the decision-making process, in order to generate competitive advantage (Porter, 1989; Souza et al., 2020).
Besides the importance of the information, it is important to discuss the correct concept of the costs and expenses. The correct allocation of costs and expenses may be a huge difference in times of important financial decisions. However, many structural factors may be considered when the company classify their costs and pay attention to the “hidden costs” that are not considered in the decision-making process.
Hidden costs, or intangible costs, arise from activities that are difficult to identify, often fully performed, such as machine maintenance, unnecessary movement, set-up, or preparation of machines with inefficient use of time, and consequently interfere, impairing the functioning of the process and productive (Gama et al., 2009).
The purpose of this chapter is theoretically presenting the relationship between the main costs of idleness, crisis and maintaining the company's value. The chapter discusses, in an essay form, an overview of the management of idle costs given by the literature.
In this sense, in order to face this crisis, which has altered the productive structures of different countries in the world and profoundly changed the social and economic dynamics in the most different areas, this chapter presents itself as a contribution to its confrontation and to provide an update to the academic fields. Thus, this chapter is justified by the importance of addressing themes related to emerging issues for discussion in the accounting-management academic community to face crises and provides insights to achieve practical results, in the process of (re) stabilizing society during and after of the pandemic.
In addition, this chapter provides a discussion with information that illustrates the issues, problems, and trends related to the book's theme. The section on conclusions presents a constructive and analytical assessment and lists arguments for suggestions for improvement with measures that can be taken by countries to avoid the negative impacts of the pandemic in order to establish measures to help “level the economic curve”, limiting the economic loss, as well as so that companies can establish more accurate decision making, prioritizing the best decisions for their operational structures with an emphasis that can improve the area of the subject studied.