Product and Service Costs Output represents one of the most important cost objects. There are two types of output: products and services. Products are goods produced by converting raw materials through the use of labor and indirect manufacturing resources‚ such as the manufacturing plant‚ land‚ and machinery. Televisions‚ hamburgers‚ automobiles‚ computers‚ clothes‚ and furniture are examples of products. Services are tasks or activities performed for a customer or an activity performed by a customer
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Assessment 2 – Individual By – Andrew Chan WILKERSON COMPANY Overview Wilkerson Company is facing a decline in profits and has attributed this to a severe price cutting exercise in their Pumps line of products‚ dropping the company’s pre-tax margin to less than 3%‚ far below the historically healthy 10% margins. It appears that gross margins on pump sales in the latest month had fallen below 20%‚ well below the budgeted gross margin of 35%. Although a recent increase to Flow Controllers
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1. If Wilkerson were to cut prices‚ based on contribution margin‚ to just cover short-term variable costs‚ what consequences could it experience? (5 marks) Several break-even-point assumptions are made in calculation: 1) Total fixed costs do not change with volume‚ and will exist regardless if the products are sold or not. 2) Sales mix will be constant. The contribution-margin percentage is 66.1%‚ which means 66.1 percent of each sales dollar is available for covering fixed costs and making
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company’s product costs are the direct materials‚ and manufacturing overhead that are involved in acquiring or making products. Products costs are assigned to an inventory account on the balance sheet and considered to be assets. When the goods are sold‚ the costs are released from inventory and are recognized as expenses in the income statement. Period costs are all the costs that are not included in product cost‚ such as advertising‚ executive salaries‚ and other nonmanufacturing costs. These costs
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the salesperson in Example 1 (page 177) has a salary goal of $800 per week. If product B is not available one week‚ how many units of product A must be sold to meet the salary goal? If product A is unavailable‚ how many units be sold of product B? (3) Assume in Example 1 (page 177) that the salesperson receives a bonus when combined sales from the two products exceed 80 units. The bonus is $2.50 per unit for each unit over 80. With this incentive program‚ the salary function must be described by
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1. The Wilkerson Company is in the business of manufacturing valves‚ pumps and flow controllers. The company has been experiencing profit losses due to price reductions as a result of heavy competition in the pump category‚ which is considered a commodity product. In the valves category‚ Wilkerson seems to be a market leader with a loyal customer base. The valve business is less competitive‚ with no price reductions‚ and therefore the company has maintained its gross margin target while not compromising
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Destin Brass Products Co. Case Report Q1: When Activity Based Costing (Weetman‚ 2010‚ p. 85) is used to calculate the monthly cost per unit‚ two types of costs are distinguished. Firstly the direct costs‚ consisting of the direct manufacturing costs and the run labor costs‚ and secondly the indirect costs‚ consisting of the machine usage costs or depreciation and the overhead costs. These costs allow us to calculate the monthly cost per unit‚ see Appendix 1 for the Excel file
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1)Take all cost elements into consideration‚ because it extends the procurement to the whole life cycle of product within a firm. 2)Reflects the real cost of the purchasing rather than the pure acquisition. 3)It helps to define a rational purchasing policy for the buyer‚ for instance‚ how to allocate the purchasing volume‚ and to whom‚ and etc. 4)It can be a tool to evaluate outsourcing deals. 5)Can be used in negotiations with suppliers‚ by making visible some of the committed costs induced by
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Dysk Compyer‚ Inc must decide whether to introduce a mid-priced 2 version of the firm’s DC6900 minicomputer product line-the DC6900-X minicomputer. The DC6900-X would sell for $ 3900‚ 3 with unit variable costs of $ 1‚800. Projections made by an independent marketing research firm indicate that the DC6900-X 4 would achieve a sales volume of 500‚000 units next year‚ in its first year of commercialization. One-half of the first year’s 5 volume would come from competitors
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Logistics October 28‚ 2008 The articled uploaded are very good and should be read. The lecture does not follow the format of the book but the book is easy to read and forms a background to the course. Preferred definition: (what is logistics? why are we studying logistics) Slide Logistics/concept 3 In the definition‚ every word counts. Key words underlined. Logistics is a process – continually doing it‚ not just once. You plan‚ implement and control. It includes a planning function‚ something
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