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Greg Morrison recently graduated from construction engineering school. He is considering opening his own construction business providing module housing. Providing module homes is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many families are served. Assume the annual fixed cost of operations is $800,000. Further assume that the only significant variable cost relates to the module homes, themselves. An average module home costs $12,000. Greg's banker has asked a variety of questions in contemplation of providing a loan for this business:
(a) If the average family is charged $18,000 for installation of a module
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enterprises, individuals that would previously have made considerable use of long-term business travel are finding that they can do their work from home.
The bargaining power of customers
According to Porter (1985), where buyers have strong bargaining power, the relative position of suppliers of goods and services is relatively weak. In such industries, product and service providers must be particularly cognizant of the needs and demands of their customer base if they are to develop – and maintain – their market share. The bargaining power of customers in the airline industry is moderate. Switching costs between airlines are very low (Cook, Tanner and Lawes, 2012). Switching costs refer to
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Memo to my supervisor Jane Doyle
I would like to bring to your attention three types of costs when quality considerations are made here at Acme Catsup Company. The first costs would be our failure costs. The second would be our appraisal costs. The third is the cost of prevention.
With failure costs some of the costs would be equipment break downs and spills. Our equipment costs 3 million dollars so we don’t want to replace it for at least 10 years. The routine maintenance for the equipment is $500,000 a year. The cost for the spills is a total of $120,000 a year. That includes $50,000 for the training classes on spill prevention and $70,000 for the salary of two new spill
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I.Assignment InstructionsCosts can be classified into two categories, fixed and variable costs. These costs behave differently based on the level of sales volumes. Suppose we are running a restaurant and have identified certain costs along with the number of annual units sold of 1000.Item: Raw Materials (cost for hamburgers)Total Annual Cost: 650Item: Building RentTotal Annual Cost: 9000Identify which cost item above is fixed and variable and why? What is the cost per unit of each? Suppose we increased our sales volume to 6000 units and then to 8000 units the following year (and are still within the relevant range), what would be the total annual cost and unit cost of fixed and variable
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Transaction costs theory and the imperfect markets.
Williamson’s successful complementation of the Coases approach of the firm as an
alternative to reduce the cost of using the price mechanism, with Herbert Simon’s
organizational theory, gave birth to the Transaction Costs Theory (TCT)1. This meant a
big step, which evolved the theory of the firm, from its obsolete neoclassical toots and
assumptions -of a perfect competitive market and a perfect rationality-, by adding the
issues of bounded rationality and opportunism to Coases work2. Williamson opened the
path to new ways of conceiving and complementing the theory of the firm in general,
and the transactions costs theory in
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Assignment: Fixed Costs, Variable Costs, and Break-Even Point Exercise 10.1 During the sixth month of the fiscal year, the program director of the Westchester HomeDelivered Meals (WHDM) program decides to again recompute fixed costs, variable costs, and the BEP using the high–low method. Here are the number of meals served and the total costs of the program for each of the first six months: Month July August September October November December Meals 3,500 4,000 4,200 4,600 4,700 4,900 Served Total Costs $20,500. $22,600. $23,350. $24,500. $25,000. $26,000.
Recompute fixed costs, variable costs, and the BEP. What are the variable costs? What are the fixed costs? How many meals will the
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Have you ever wanted to fix something so badly that you thought, doing something was better than not doing anything, even if the something could make matters worse? Mayor Bloomberg said on NBC's “Meet the Press” that ”Nobody knows exactly what they should do, but anything is better than nothing”(1) (Welch) Speaker Nancy Pelosi said, “We have to pass the bill to find out what's in it...”(1) (Guppy) How can you pass a bill that will have a huge impact on our economy and not know what is in it? Will the health care reform bill cut costs as we are being told? Are the health insurance companies the only “bad guys” in this story? (Lyle) Has consumer abuse been addressed in the health care bill
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The number of Americans with diabetes will nearly double in the next 25 years, and the costs of treating them will triple, according to a new report.
The figures, in a University of Chicago report released Friday, add fuel to the congressional debate regarding reining in the cost of health care.
By 2034, 44.1 million Americans will be living with diabetes -- nearly twice the current number of 23.7 million, according to the report, published in the December issue of the journal Diabetes Care. About 90 percent of those with diabetes have type 2, a version of the condition that develops over time.
Accounting for inflation, the direct medical cost of treating them will rise from $113
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America is at War. Some are in support of it, and others oppose it. It matters not which side is taken, because the American people pay for the war. Every person that pays taxes on American soil has a hand in funding those troops sent over to protect democracy from terrorism. Whether the American people agree with it or not they have the responsibility of paying for the war. But at the same time, the people have a right to know what they are paying for. The first cost of War is obviously the needs and necessities of those troops whom are sent onto the battlefield to fight. Basic needs like; food, water and shelter. The first thing a soldier in the field needs is food and water. These
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Would mandated regulations for bat usage at all levels of baseball provide a safer environment for the sport and reduce costs. Decades of debating over these questions leaves people in disagreement. When it comes to discussing the use of metal bats from Little League to the Majors cost, safety, and performance are among the currently most heavily debated topics, with wide spread disagreement among people in the industry. Complicating the debates, especially the safety debate, is the fact that little scientific, researched based, safety studies have been conducted.
When determining the safety of metal bats there are two assumptions that one must consider. batted ball aluminum bats
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Cost of QualityQuality and financial performance are intimately related. A fundamental responsibility of POM is to produce a competitive product or service based on a balance between quality and costs of quality. Most companies have the slightest idea on how much firms have spend on COQ, it can be as high as 20 to 40% of sales. Since the numbers are typically much higher than profits in some firms, a reduction on COQ can have a significant impact in profits. Some successful organizations have demonstrated ability to reduce COQ from some 30% down to about 5% over a period of years. And this reduction is being done while improving the quality of the product. Thus, the potential for proper
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fight will cost Wal-Mart more than the cost of allowing its workers to unionize in that store. In addition to litigation costs, Wal-Marts looses creditability and reputation. Wal-Marts fight to keep out unions forces the company to battle with its employees, fight legal battles with local regulators, and look bad to the media. Expansion into foreign markets, especially left leaning European nations will mean Wal-Mart will increasingly confront the union issue. Their reaction to that confrontation could land the company into trouble not only with European regulators, but with angry European consumers.
Finally, Wal-Mart must better utilize its political capital and learn from the
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Across the globe the commercial world is become too competitive that poses lots of opportunities and threats simultaneously to the businesses. Oil exploration and Production (E&P) companies are not exceptional to this. Oil reserves are depleting and it is expected to last for another 40 years. Oil is one of the major energy resources for most of the industries and particularly for all transportations. Cutting oil consumption further will prolong the life of global oil reserves. Natural gas reserves are estimated to last for over 60 years at the current global rate of consumption. However, this forecast may be understated as new gas reserves are identified and
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Problems with conventional product costing systems
General features of conventional product costing systems
Direct material and direct labour costs are traced to products
Manufacturing overhead costs are allocated to products using a predetermined overhead rate
Manufacturing overhead rate is calculated using some measure of production volume
Non-manufacturing costs are not assigned to products
Problems with conventional product costing systems
Failure to adapt to the changing business environment
Increasing levels of non-volume-driven
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if you expect to make:
i. 240 texts per month? Plan B
ii. 780 texts per month? Plan C
iii. 1,250 texts per month? Plan C
2. In 3 – 4 sentences, define the following terms and give two examples of each:
c. Direct Materials Cost - According to our text book, direct materials cost is “Acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods), and that can be traced to the cost object in an economically feasible way.” Examples of this are the stuffing and cloth used to make pillows, as well as the acquisition costs of these items such as shipping charges and sales tax. (Cost Accounting
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Answers to Multiple Choice –Theoretical
Solutions to Multiple Choice – Computational
Materials and In Process Inventory (MIP), June 1
Materials and In Process Inventory (MIP), June 30
Materials used to be backflushed to finished goods
Raw materials purchased
Raw materials used
Balance of MIP, end
MIP inventory, beginning
Raw materials purchased
MIP inventory, ending
Materials to be backflushed to finished goods
Conversion costs to be backflushed to finished
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management system is more than apparent. She needs to gain the support and commitment of the company’s top management by demonstrating the benefits deriving from proper inventory management.
The following calculations will be used to demonstrate the benefits that Parts Emporium will yield from the introduction of a proper inventory management system:
Total annual cycle-inventory costs = annual holding costs + annual ordering costs
Economic Order Quantity (EOQ) – the lot size that minimizes total annual inventory holding and ordering costs (Krajewski, Ritzman, Malhotra; 2013).
Supply chain managers face conflicting pressures to keep inventories low enough to
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PRINCIPLES OF MACROECONOMICS AND MICROECONOMICS
COSTS AND REVENUE CALCULATIONS RELEVANT TO A FIRM
2. Determining Profit Maximizing level of output from a table
3. Determining Profit Maximizing level of output from a graph
COSTS AND REVENUE CALCULATIONS RELEVANT TO A FIRM
Costing is an important aspect of production because:
1. By knowing how much it costs to produce an item or to carry out an activity it is possible to price the item or activity
2. It becomes possible to see how much of the total cost of an organisation, production line, or process can
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1. Cost accounting relates to what industry?
a. public accounting b. financial accounting c. service d. manufacturing
2.Sunk costs are ______.
a. future costs b. costs that do not affect the decision
c. costs from the past and cannot be changed. d. choice b & c are both correct
3.Which is not a characteristic of managerial accounting information?
a. Emphasizes the external financial statements b. Emphasizes relevance
c. Provides detailed information about individual parts of the company d. Focuses on the future
4._ cost driver is _____.
a. The secondary factor that causes a cost to increase or decrease based on the cost drivers factor’s usage.
b. The primary factor that causes
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period. Their estimations show what the company expects for their estimated level output, which will then be compared and adjusted to the actual numbers.
Step 2: The previous estimations are now divided among the three cost centers. The cost estimations from step 1 are divided among the three new cost centers based on predicted output. Next, Metabo finds the variable rate by taking the total budgeted variable costs and dividing it by total operation hours. Finally, they take this budgeted variable cost and multiply it by the expected operating hours of the three cost centers. This information shows the total budgeted costs from step 1 allocated across the three operating cost centers.
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Course Prefix and Number: | ECO 561 Version 5 |
Course Title: | Economics |
Course Schedule: | 02/21/11-03/28/11 |
Week Two: Cost Concepts
Identify production level to maximize profits.
Explain how to balance fixed and variable costs.
Apply economic cost concepts in making business decisions.
Week Two | |
Individual Assignment: Week Two Quiz | 2 |
Individual Assignment: Market Equilibration Process Paper | 8 |
Learning Team Assignment: Learning Team Reflection | 3 |
Identify production level to maximize profits.
Explain how to balance fixed and variable costs.
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* AAT LEVEL 4
Diploma in accounting
Financial performance (FPFM)
FPFM Assignment 1
* Task 1
* The total costs of a business, which are semi-variable, at two levels of output are shown below:
| 20,000 units£ | 25,000 units£ |
Total cost | 135,000 | 177,500 |
* The fixed element of the cost steps up by £25,000 at an output level of 23,000 units.
* The variable cost per unit is £
* The fixed cost before the ‘step’ is £
* The fixed cost after the ‘step’ is £
* Task 2
* A business has prepared two sets of budgeted costs
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Standard costs, flexible budgeting, and variance analysis--all are vital components of an effective cost accounting system. Standard Costs are predetermined costs that are usually expressed on a per-unit basis; they are target costs, costs that should be attained. One can think of a standard as a budget for a single unit. Standard costs are the building blocks of a flexible budgeting and feedback system (the comparison of actual performance with planned performance).Since the company's main objective is to maximise profit, a planning and control system is essential. Firstly, a strategy that best satisfies the objectives of a company has to be selected. Secondly, the decision has to be
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Consult Ch. 6 & 7 of Health Care Finance and other sources to complete the form. This worksheet requires you to match the definitions and examples of types of cost, and the types of centers where costs occur.
Part 1: For each term in Column A, select the correct definition from Column B on the right. Write the corresponding letter of the definition next to the term.
1. Indirect costs
2. Direct costs
3. Fixed costs
4. Variable costs
5. Step-fixed costs
6. Responsibility centers
7. Revenue centers
8. Cost centers
9. Shadow cost centers
Column B – Definitions
A. Costs incurred directly as a result of
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repaired. Aesthetic is the way the product looks to end-users. Safety guarantees clients that they wont experience any harm from the product. Other perceptions include prejudiced awareness based on brand name or advertising.
The costs of Quality are those that take place in order to attain excellent quality and to meet the needs of the customer, as well as expenses incurred when quality is unsuccessful to satisfy the customer. The quality cost break down in two categories the cost of achieving good quality and the cost that is linked with poor quality products. The cost of achieving good quality is also known as appraisal costs and preventions costs. Prevention costs include quality-planning
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1-1 What are the three major elements of product costs in a manufacturing company?
The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.
1-2 Define the following: (a) direct materials, (b) indirect materials, (c) direct labor, (d) indirect labor, and (e) manufacturing overhead.
Direct Materials - Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.
Indirect materials - Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it.
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day-to-day management as well as future planning and organizing.
Mgt. Accounting Principles –
• Compiling data (records, reports, statements etc.)
• Management by Exception – top management should be involved only in case of exceptional matters.
• Control at Source – costs be controlled at its source
• Integration – integration of mgt. information
• Efficient utilization of resources
• Forward looking approach
• Measuring returns on investment
Techniques of Mgt. Accounting
✓ Cost sheets analysis
✓ Material costs
✓ Overheads costs
✓ Marginal Costing
✓ Break-even Analysis
✓ Budgetary Control
✓ Standard Costing
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Aaron Wilson, Brittni Henson, Dennie Smyth & Joshua Boatright
Midwest Office Products Case
October 15, 2012
1. Based on the interviews and data in the case, estimate:
a. The cost of processing cartons through the facility
The two costs of processing cartons through the facility are warehouse costs and warehouse personnel costs. The total processing costs are $54/carton.
Cartons/yr | 80000 |
Commercial Freight | 75000 |
Desktop Delivery | 5000 |
Personnel Costs/yr | 2570000 |
Truck Driver Cost/yr | 250000 |
Warehouse Personnel Cost/yr | 2320000 |
Warehouse Costs (excluding personnel) | 2000000 |
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Executive SummaryThe full costing method associates fixed manufacturing costs with units of production and the amount of fixed manufacturing cost offset against revenue varies with the relationship between the number of units produced and the number sold. If production temporarily exceeds unit sales, some fixed manufacturing costs are deferred to future periods, and responsibility margin will be higher than would be reported under variable costing. If fewer units are produced during the period than are sold, fixed costs deferred in prior periods are offset against current revenue as inventory is drawn down. Thus, responsibility margin reported for the current period will be lower than would
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expenses through the acquisition of pertinent assets for the numerous processes included. These processes consist of machinery for production of the various products, maintenance of the machines as well as their replacement when required, and the expense of production. Examples of outlays of production include the raw materials cost and other contributions as well as overhead expenses, to include the cost of water, electricity, wages and salaries for the larger number of employees who would have to be directly and indirectly involved in the process (Staubus, 1971). The costs for transportation, as well as finished goods to the countless distribution points is also purged, as is the costs of raw
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FedEx and the Life-Cycle Cost
Embry-Riddle University Worldwide
26 January 2013
Life cycle cost LCC is a management accounting tool used is a method for assessing the total cost of system from costs of acquiring, owning, and disposing of it. This methodology is essential in predicting cost-effective solutions though it not guaranteeing a particular result; therefore allowing the firm initiate rational comparison between alternative solutions.
Life Cycle Cost (LCC) is the total lifespan cost incurred by an organization in purchasing, installing, operating, maintaining, and disposing off any equipment used in daily
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Total Mixed Cost VC Per Unit (Slope)
Purpose of Mixed Cost Analysis
To predict cost at an activity level with no historical record:
Total mixed cost line can be expressed as:
Total Utility Cost
Fixed Cost (Intercept)
Level of Activity
If your fixed monthly utility charge is $40, your variable cost is $0.03 per kilowatt hour, can you predict the utility of next month when you plan to use 2,000 kilowatt hours?
Y = a + bX
Variable Cost per KW Fixed Monthly Utility Charge
Y = $40 + ($0.03 × 2,000) Y = $100
X Activity (Kilowatt Hours)
A mixed cost has both fixed and variable components. Total cost CHANGES with activity level but
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Ronald Coase: The Nature of the Firm
In times of a lot of perfect competitive markets and a lot of transactions between firms in the b2b or b2c sector the term of transaction costs arises. First of all you have to define what transactions are: Transactions are the implicit and explicit contract negotiations for goods and services between at least 2 people. The transactions theory now tells us that there are costs for every step of these contract negotiations and also costs after the contract conclusion.
Transaction costs could appear before (ex-ante) the contract conclusion and after (ex-post) the conclusion. Ex-Ante costs are Information-, Negotiation- or Contract costs. Ex-Posts
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Salem Telephone Company
Salem Telephone Company (STC) is faced with the decision of whether or not they will continue operations of Salem Data Services (SDS). In order for management to make an informed decision, they must look further into the detailed accounting aspects of both STC and SDS.
In preparation for determining the possible effects on profits of increasing the price to customers other than STC, reducing prices, and increasing efforts, the following 6 questions must be answered:
1. “Revenue hours” represent the key activity that drives costs at Salem Data Services. Which expenses in exhibit 2 are variable with respect to revenue hours? Which Expenses are fixed with
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where MVold = Market Value of the old equipment;BVold = Book Value of the old equipment; t = tax rate; BVold-MVoldt = tax gains.
b. Project Net Cash Flows (NCF):
where R = Revenues; O = Operating Costs; D = Depreciation, NWC = Net Working Capital; t = the tax rate.
In Case 1, R = 0; NWC = 0. Therefore,
where t∆D is the depreciation tax shield.
c. Specifics of Case 1:
i. -∆O = Incremental Cost Savings; -∆O1-t= Incremental Cost Savings after tax
where DNew = Depreciation of the new equipment; DOld = Depreciation of the old
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• Decision making
• Optimising the uses of resources
a) Cost unit- the cost of an item a product or service. This could be a single item, a batch, a contract what ever is appropriate for the organisation.
b) Cost classification - to group costs for analysis and control purposes
c) Cost centre - a function or location for which costs are ascertained dividing into production (primary) and service (secondary) areas.
1. THE BEHAVIOUR AND CLASSIFICATION OF COSTS
Costs in any organisation come in many forms and relate to many different things. We can divide or classify into many ‘groups’ a common
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on the domestic economy. With increased standards of living and lower operational costs by the manufacturers, affordability of vehicles has been increased. Moreover, through the integration of technology in the manufacturing, the supply of products to the automobile industry has been made sustainable. Cars also require insurance which has resulted in increased revenue for insurance companies. Advertising campaigns have accounted for substantial increases in media and promotional purchases. Car maintenance has become a widely growing industry, and the gas companies have profited greatly as well. According to the company’s annual report 2014, the major brands namely Ford and Lincoln sold more
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a) Why Cambridge Hospital Community Health Network embarked on the ABC study?
There are two main reasons why the Cambridge Hospital Community Health Network (the Network) embarked on the Activity Based Costing (ABC) study. Firstly, the Network needed to gain a better understanding of its unit-of-service costs, which had been rising at a rate of 10% per year. In fact it had recently been rated the third-highest cost hospital in the state of Massachusetts. Being a high cost provider could make the Network uncompetitive for Medicaid and other public contracts. Secondly, the Network’s new operating budget required a $14 million reduction, which represented 15
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As Guillermo Furniture store evolves, the manager must find more effective ways to analyze the companyâ€™s costs. To do this, he will use a myriad of tools, including choosing a control system. To further assist in decisions, the manager will compute the return on investment, residual income, and economic value added for the current situation. He also will be looking at the effects of selling the flame retardant separately by using a break-even analysis. The manager can make more informed and profitable decisions once the compiled data is examined.
Cost Relationships and Decision-Making
Managers make decisions to solve problems and take advantage of opportunities
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Solutions to Questions
8-1 Activity-based costing differs from tradi-tional costing systems in a number of ways. In activity-based costing, nonmanufacturing as well as manufacturing costs may be assigned to products. And, some manufacturing costs—including the costs of idle capacity—may be excluded from prod-uct costs. An activity-based costing system typically includes a number of activity cost pools, each of which has its unique measure of activity. These measures of activity often differ from the allocation bases used in traditional costing systems.
8-2 When direct labor is used as an allocation base for overhead, it is implicitly assumed that overhead cost is directly proportional
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A Revised Income Statement, The Contribution Margin Approach
ACC403-Principles of Accounting
Module 2 - CASE
1. Prepare income statements under variable (contribution margin) and traditional (absorption) costing for the year ended December 31, 2008.
The E Company Income statement for year ending December 31, 2008 Absorption / Contribution
Product Information: | | |
| | |
Units Produced | 400,000 | |
Units Sold | 345,000 | |
Selling Price per Unit | $19.00 | |
Direct Material Cost per Unit | $3.50 | |
Direct Labor Cost per Unit | $1.40 | |
Variable Selling Costs per Unit | $1.20 | |
Fixed Manufacturing Costs | $1,600,000 | |
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In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. Both retrospective and prospective costs may be either fixed (that is, they are not dependent on the volume of economic activity, however measured) or variable (dependent on volume).
In traditional microeconomic theory, only prospective (future) costs are relevant to an investment decision. Traditional economics proposes that an economic actor not let sunk costs influence one's decisions, because
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Name: Yao-Jen, Tsai UID: 2021276543 Date: 9/1/2015
1. A description of what you believe to be the key marketing issue(s)/challenge(s) facing this organization, and justification in 2-3 sentences (5 points)
In this case, I think the marketing challenges that Samsung would be faced to are the local companies rising and costs increasing. In the part of local companies rising, for example, in China and India there are many local companies already have technology to produce products with low price to sell local customers. Besides, they have more ability to manufacture customized products to cater to local customers. In the part of
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Managerial Accounting: Week 1
Key Phrases / Concepts:
1. Managerial accounting: the process of obtaining, creating, and analyzing relevant information to achieve organizational goals.
2. Costs: usage of resources.
3. Cost objects: the item at the center of a decision for which cost is calculated. A cost object can be any level of specification, including a particular manufactured unit or hour of service provided, an entire product line, a department, division, or business unit, or a facility within an organization.
4. Direct costs: Costs that are traceable to a cost object. In a manufacturing setting, direct costs include materials that are specific to a given
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Gro | |
The purpose of this article is to determine whether staying at the Temecula plant or outsourcing to China is the best option for Scotts Miracle-Gro. A cost analysis will be used to determine which option will give Scotts Miracle-Gro the best opportunity for long-term growth and profit.
It has been determined that staying in the United States at the Temecula plant in California will be the best decision for Scotts Miracle-Gro financially and with regards to their image and product quality. However, in order to remain competitive, costs must be lowered to keep profits up to par with where they would be had the company decided to outsource
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This analysis will review some of the details of the Brighton case and provide pertinent comments and recommendation with regards to the decision on whether to keep or outsource the production of manifolds.
Overhead allocation rate (OAR) observations
Direct Labor $24,682
Total Overhead $107,954
Overhead Margin 437.38%
The OAR when using model year 1987 budget numbers is 437.38%. The OAR of 435% used for the study was based on the costs that consultants obtained from the production cost system during the 1987 model year. The difference between the two numbers is small and may have resulted from consultants using historic averages or due to rounding errors. Both margins are
2433 words - 10 pages
This paper discussed and explained outsourcing, identified effective techniques and methods, and why outsourcing is utilized. Outsourcing can be an effective method for improving an organization’s functionality. While outsourcing advantages can reap benefits of improved productivity and lowered costs, the disadvantages must be taken in consideration to reach success. Analyzing the different aspects of: why is outsourcing necessary, what are the potential advantages and disadvantages, and is it cost effective upon a thorough review of the market and costs associated are essential.
Outsourcing a Source with Strategic and Effective Techniques
The ways in which business decisions
589 words - 3 pages
summarizes the types and amounts of costs incurred in a company's manufacturing process. Exhibit 14.17 shows the manufacturing statement for Rocky Mountain Bikes. The statement is divided into four parts: direct materials, direct labor, overhead, and computation of cost of goods manufactured. We describe each of these parts in this section.
1. The manufacturing statement begins by computing direct materials used. We start by adding beginning raw materials inventory of $8,000 to the current period's purchases of $86,500. This yields $94,500 of total raw materials available for use. A physical count of inventory shows $9,000 of ending raw materials
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Destin Brass Products Co. manufactures three items: valves, pumps and flow controllers (FC's). All three items are used in water purification systems. Destin faces stiff competition in the pump market with no design advantage that would make their pumps more desirable. A meeting was held due to declining profits caused by a lower price Destin was able to charge for pumps and having budgeted pumps sales to account for 55% of company revenues. A proposal was put forth to modify how the company allocates it's overhead costs to the three items it produces.
The company currently uses a standard costing method based on direct labor dollars. This method finds the standard cost per units of