Oracle Corporation

Posted: August 26th, 2021

Discussion 2: Oracle Corporation

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Discussion 2: Oracle Corporation

Background of the Company

Oracle Corporation is a multinational manufacturing technology company based in the United States of America whose headquarters are in Redwood Shores, California (Oracle Corporation Annual Reports, 2020). The core business of the corporation manufacturing and selling technology-based computer products and applications, including cloud engineered systems, database software, and enterprise software products. It has its brand in database management systems(Oracle Corporation Annual Reports, 2020). Therefore, the company develops computer systems oriented towards solving business-related technological problems.

Additionally, the company innovates, develops, and builds tools and software for middle-tier systems, database development, customer relationship management (CRM), and enterprise resource planning (ERP)(Oracle Corporation Annual Reports, 2020). Equally, it is also involved in manufacturing and trading software and hardware components as well as theircomplementary auxiliary services. These include consulting, training, financing, and hosting services(Oracle Corporation Annual Reports, 2020). Therefore, the company’s mainstream products include computer-based applications, middleware servers, fusion managers, databases, workstations storage, and cloud enterprise managers(Oracle Corporation Annual Reports, 2020). As usual, a company in this category incurs various manufacturing costs that are used in realizing its operations and related activities(Oracle Corporation Annual Reports, 2020). These expenses can be categorized as general and administrative expenses, hardware, cloud services, sales and marketing, license support, and restructuring expenditures. (Oracle Corporation Annual Reports, 2020). Thus, the subsequent sections analyze Oracle’s manufacturing costs by particularly classifying the company’s major costs into fixed, variable, and mixed expenses.

Manufacturing Costs

Primarily, the manufacturing costs of the company can be subdivided into fixed and variable expenses(Zaharia & Bordeianu, 2018). However, some costs can be a mixture of both categories, hence, termed as mixed costs(Zaharia & Bordeianu, 2018). The costs act differently according to the units’ manufactured and sales volume; thus, they can either have a direct correlation with the products or not (Zaharia & Bordeianu, 2018). In 2019, Oracle’s total manufacturing expenses amounted to $ 25,971, which accounts for the three categories of expenditures. Furthermore, the costs are classified into fixed, variable, and mixed according to how they vary with the production units in the company. Below is the tabulation of the manufacturing costs.

Table 1: Oracle Corporation Manufacturing Expenses

Operating Expenses	$ In Million
Cloud service andlicenses support	3,782
Hardware	1,360
Service	2,853
Sales and marketing expenses	8,509
Research and Developments (R&D)	6,026
General administrative costs	1,265
Intangible assets amortization	1,689
Acquisition-related expenses	44
Restructuring costs	443
Total expenses	25,971

Source: Oracle Corporation Annual Reports (2020)

Fixed Costs

Fixed expenses are not affected by variation in the sales level and production units(Thomas, 2016). The costs remain constant irrespective of the units developed and produced in a company(Thomas, 2016). Hence, the prices do not considerably vary when the sales volume decrease or increases for a particular period (Thomas, 2016). In Oracle Corporation, the fixed costs include the manufacturing expenses as identified in Table 2 below;

Table 2: Oracle Corporation Fixed Expenses

Fixed expenses	$ In Million
Cloud service and licenses support	3,782
Sales and marketing expenses salary for administrative staffs	8,509
Intangible assets amortization	1,689
Total fixed costs	22,529

Source: Oracle Corporation Annual Reports (2020)

Variable Costs

On the contrary, the variable costs frequently change in a stipulated period, usually a financial year (Gersil & Kayal, 2016). Thus, the prices have a direct correlation with the sales level, and an increase in the sales level of the units sold in a company leads to an immediate proportional increase in the variable costs (Gersil & Kayal, 2016). The variable expenses in Oracle Corporation that vary with the production level are indicated in the following table 3.

Table 3: Oracle Corporation Variable Costs

Variable Costs	$ In Million
Restructuring	443
Acquisition-related expenses on purchase of company fixed assets	44
General administrative costs indirect labor	1,265
Hardware purchasing costs of direct raw materials	1,360
Research and Developments (R&D) to innovate new products	6,026
Total variable costs	9,135

Source: Oracle Corporation Annual Reports (2020)

Mixed Costs

These elements comprise both the fixed and variable features, or they are semi-variable costs (Thomas, 2016). Mixed expenses are fixed up to a particular level of production units, and then they frequently change with the change in the units produced and sales volume (Thomas, 2016). The semi-variable costs in Oracle Corporation are indicated in table 4 below;

Table 4: Oracle Corporation Mixed Costs

Mixed Costs	$ in Millions
Services charges include direct labor costs and cloud service costs	2,853
Total mixed costs	2,853

Source: Oracle Corporation Annual Reports (2020)

References

Gersil, A., & Kayal, C. (2016). A Comparative Analysis of Normal Costing Method with Full      Costing and Variable Costing in Internal Reporting. International Journal of       Management, 7(3).

Oracle Corporation Annual Reports (2020). [Online] Annualreports.com. Available at:             <http://www.annualreports.com/Click/24624> [Accessed 25 June 2020].

Thomas, D. (2016). Costs, benefits, and adoption of additive manufacturing: a supply chain perspective. The International Journal of Advanced Manufacturing Technology, 85(5-8), 1857-1876.

Zaharia, V., & Bordeianu, D. (2018). COST STRATEGIES IN MANUFACTURING             COMPANIES. Proceedings in Manufacturing Systems, 13(4), 157.