... Rs. 10000 for 5000 direct labour hours Department B Rs. 30000 for 10000 direct labour hours Fixed overheads: Estimated at Rs. 50000 for 50000 normal working hours. Calculate the cost of Job No. 101 and calculate the price to be charged so as to give a profit of 20% on selling price. Batch costing A customer has been ordering 90000 special design metal columns at the rate of 18000 per order during the past years. The production cost comprises of Rs. 120 for material, Rs. 60 for labour and Rs. 20 for fived overheads. It cost Rs. 1500 to setup for one run of 18000 column and inventory carrying cost is 15%. Since the customer may buy atleast 5000 columns this year, the company would like to avoid making five different production runs. Find the mo0st economic production run. X is committed to supply 24000 bearings per annum to Y ltd. On a steady basis. It is estimated that it will cost .10 as inventory holding cost per bearing per month and that the set up cost per run of bearing manufacture is Rs. 324. a) What would be the optimum run size for the bearing manufacture? b) What is the minimum inventory holding cost at optimum run size? c) Assuming the the company has a...
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...MBA 439: Business Economics CBA Report Writing Topic: Benefit-Cost Analysis of Pacific Islands Alternative Energy (An Economic Assessment of Renewable Energy Options for Rural Electrification in Pacific Island Countries) Lecturer: Professor Jim MacMaster By Tamaroa Tekeiaki – s11059287. Introduction Is there a way for Pacific island countries to opt for a more inexpensive and environmental friendly power source for rural electrification or should they just stick to the current source of energy they are using at the moment? This report provides then a summary of the evaluation on the economic and financial cost of these alternative renewable energy projects that the pacific islands may opt to in terms of their cost-benefit analysis. From recent data report the world relied on renewable sources for around 13.1% of its primary energy supply, according to IEA statistics. Renewables accounted for 19.5% of global electricity generation. (IRENA websites, 2009) According to the report, Woodruff stated that, “In the pacific islands alone approximately 70% (or approximately 50% excluding Papua New Guinea) of the region’s population still lacks access to electricity. In addition, Pacific Island Countries, despite their abundance of renewable energy resources, remain almost completely dependent on imported fossil fuels for meeting their energy needs. However, imported fuel from overseas account for an average of 40% of countries’ gross domestic products. With rising fuel...
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...CHAPTER 3: COST ANALYSIS Multiple Choice b 1. The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method a. includes costs outside the relevant range. b. considers more than two points. c. can be used with more types of costs than the high-low method. d. gives a precise mathematical fit of the points to the line. a 2. The major objective of preparing a scatter-diagram is to a. derive an equation to predict future costs. b. perform regression analysis on the results. c. determine the relevant range. d. find the high and low points to use for the high-low method of estimating costs. d 3. The cost estimation method that gives the most mathematically precise cost prediction equation is a. the high-low method. b. the scatter-diagram method. c. the contribution margin method. d. regression analysis. c 4. Which cost is most likely to be mixed for a manufacturer? a. Raw materials. b. Direct labor. c. Manufacturing overhead. d. Insurance. b 5. Which combinations of object of cost and classification of cost is most reasonable? Object of Cost Classification of Cost --------------- ---------------------- a. Materials used to make products Discretionary fixed cost b. Advertising cost Discretionary fixed...
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...A cost benefit analysis is done to determine how well, or how poorly, a planned action will turn out. Although a cost benefit analysis can be used for almost anything, it is most commonly done on financial questions. Since the cost benefit analysis relies on the addition of positive factors and the subtraction of negative ones to determine a net result, it is also known as running the numbers. Cost Benefit Analysis A cost benefit analysis finds, quantifies, and adds all the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The difference between the two indicates whether the planned action is advisable. The real trick to doing a cost benefit analysis well is making sure you include all the costs and all the benefits and properly quantify them. Should we hire an additional sales person or assign overtime? Is it a good idea to purchase the new stamping machine? Will we be better off putting our free cash flow into securities rather than investing in additional capital equipment? Each of these questions can be answered by doing a proper cost benefit analysis. Example Cost Benefit Analysis As the Production Manager, you are proposing the purchase of a $1 Million stamping machine to increase output. Before you can present the proposal to the Vice President, you know you need some facts to support your suggestion, so you decide to run the numbers and do a cost benefit analysis. You itemize the benefits. With...
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...------------------------------------------------- Cost Benefit Analysis [ECON 453] ------------------------------------------------- Assignment II Aditya Gurung Dr. T.M. Horbulyk April 2, 2012 1. Based on the article, describe as best you can: (i) The reference group for the cost benefit analysis Reference group for the cost benefit analysis (CBA) refers to the set of persons whose gains and losses are to be included as directly relevant to the project decision-making process. It is a sub set of people who will be benefited or affected by the implementation of the project. In the case of Bolu Mountain Tunnel project, the set of people who will directly benefit from the implementation of the project are the people who can now avoid traveling by Bolu Mountain Passage (D100 highway) as they can get to there destination by traveling through the tunnel in much safer conditions along with reduced travel time. (ii) The purpose of the study The purpose of any social CBA is to examine and assess whether or not the social benefits of the proposed policy or project outweigh its social cost. By doing so, it can assist decision-making by facilitating the allocation of resources to their most valuable application. In the case of given article, the purpose of the study is to conduct the CBA of the Bolu Mountain Tunnel Project and examine if the project is worth to be implemented. (iii) The estimated project life over which the project is evaluated The estimated project life...
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...University of Phoenix | Cost Benefits Analysis | BSA310/Paula Billups | | Sharon Link Mcknight | 10/27/2014 | | Cost Benefits Analysis Evaluating quantitatively whether to follow a course of action Basic cost-benefit analysis is a moderately easy and extensively used method for determining whether to make a change. As it is named suggests using the technique simply add up the value of the benefits of a course of action, and subtract the costs associated with it. Cost are either one-off or may be continuous. Benefits are most often received over time. We create this effect of time into our analysis by calculating a payback period. This is the time it takes for the benefits of a change to repay its costs. Many businesses look for payback over a specified period, e.g. three years. In its simple form, cost-benefits analysis is carried out using only financial costs and financial benefits. For example, a simple cost/benefits analysis of a road scheme would estimate the costs of building a road, and subtract this from the economic benefits of improving transport links. It would not measure either the cost of environmental damage or the benefit of quicker and easier travel to work. A more sophisticated approach to cost/benefit measurement modes is to try to put a financial value on intangible costs and benefits. This can be highly subjective, is, for example, a historic water meadow worth $25, 000, of is it worth $500, 000 because of its environment importance...
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...Analysis of cost The role of costs goes far beyond influencing production and profits. Costs affect input choices, investment decisions, and even the decision of whether to stay in business. Is it to hire a new worker or to pay overtime? To open a new factory of expand and old one? To invest in new machinery domestically or relocate production abroad? Bangladesh want to choose those methods of production that are most efficient and produce output at the lowest cost. Analysis of cost is devoted to a thorough. First we consider the full array of economic cost, including the central notion of marginal costs. Then we examine how business accountants measure cost in practice. Short – Run Cost: ← Total cost ← Marginal cost ← Average cost Total Cost Total cost means that represents the lowest total dollar expense needed to produce each level of output q. TC rises as q rises. So that a firm’s total cost (TC) is the cost of all the factors of production it uses. We divide total cost into total fixed cost and total variable cost. Total cost is the sum of total fixed cost and variable cost. That is, TC = FC + VC Fixed Cost Sometimes we can be called “overhead” or “sunk costs”, they consist of items such as rent for factory or office space, contractual payment for equipment, interest payments on debts, salaries of tenured faculty, and so forth. These must be paid even if the firm produces no output, and they don’t change if output changes. For...
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...Cost-Volume-Profit Review Problems (For Exam 1) QUESTION 1 Bridal Shoppe sells wedding dresses. The cost of each dress is comprised of the following: Selling price of $1,000 and variable (flexible) costs of $400. Total fixed (capacity-related) costs for Bridal Shoppe are $90,000. A. What is the contribution margin per dress? Revenues – Flexible Costs = CM $1,000 - $400 = $600 B. What is the Bridal Shoppe’s total profit when 200 dresses are sold? Revenues – Flexible Costs – Capacity-Related Costs = Total Profit 200 ($1,000) – 200($400) - $90,000 = $30,000 C. How many dresses must Bridal Shoppe sell to reach the breakeven point? X = Capacity-Related Costs/Contribution Margin X = $90,000/$600 X = 150 dresses D. How many dresses must Bridal Shoppe sell to yield a profit of $60,000? Total Revenues – Total Costs = Total Profit $1,000X - $400X - $90,000 = $60,000 $600X = $150,000 X = $150,000/$600 X = 250 dresses QUESTION 2 Northenscold Company sells several products. Information of average revenue and costs are as follows: Selling price per unit $20.00 Variable costs per unit: Direct materials $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual...
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...Description: Look around you. Is there anything which you see which seems like a riddle but when looked at with the lens of costs and benefits makes sense? List one such example. This example is from personal experience. I have recently changed my job. The day before joining I bought a branded hand bag for say price X knowing very well that the end of season sale was likely to start in the next fifteen days. I was also aware from past experience that I would easily get a discount of 25% on waiting till that period. I went ahead and bought it in spite of a nudging feeling of making an irrational purchase and having indulged myself. Now in the light of cost benefit analysis my decision appears rational as at that time I had not considered the benefits drawn on purchasing: 1. My old hand bag had worn out and I was uncomfortable in carrying it to the new workplace. With the new bag I felt more confident and positively disposed for the new assignment. Changing jobs is a big step and there is an underlying concern about being able to adjust to the new environment and culture. Not that the bag would help me adjust but psychologically I felt more confident. 2. I had been exploring the markets for a suitable hand bag for a long time as mentioned above the old one had worn out. At the time of purchase I had liked the handbag in the first look itself. I did not want to wait till the end of season sale for two reasons. First as I was taking up a new job and I knew I will have to run...
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...Lecture 5: Cost-Volume-Profit Analysis In this module, we are going to discuss a simple concept yet a powerful financial planning and decision-making tool for managers. This concept is called CVP analysis or cost volume profit relationship. Profits are the difference between revenues and costs. Both revenue and cost depend on the volume of operations. So, in the short run whether you make a profit or a loss depends upon the volume of sales you make. What is the unknown for a manager when he or she tries to project profits for future? The managers know the costs and the selling price. So the only unknown is the volume of sales. The importance of CVP analysis flows from the fact that it emphasizes the inter-relationship between costs, volume of sales, and selling price, and therefore it represents a unified picture of all financial information in a simple framework. What effect on profit can American Airlines expect when it adds a new flight on the Dallas Chicago route? How many patient days of care must Dallas Children’s hospital provide in order to cover all of its operating costs? How will the profits for Texas Instruments change if it sells 10% more of its DLP chips? Each of the above questions concerns the effect on cost and revenues when an organization’s activity changes. CVP analysis summarizes the effects of changes in organization’s volume of activities on its costs, revenue and therefore profit. Although the word profit appears in CVP analysis, this analysis...
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...Analysis of Direct Cost November 27, 2011 Direct labor cost is the prices charged for the production of specific goods or services. Direct costs refer to materials, labor and expenses related to the production of a product. Direct labor is labor directly associated with the work being produced (Murphy, p. 98). Other direct labor is labor readily identifiable with a particular objective such as a contract and labor important enough to warrant identifying and measuring so we can keep up with its cost (Murphy, p.99). Companies use systematic procedures, work breakdown structure and phase diagrams to estimate direct labor cost. One of the most widely used methods to estimate labor cost is the work breakdown structure or WBS (Murphy, p.101). The phase diagram is very similar to the WBS except that the detail of the work is spread out over a longer time period. To effectively analyze direct labor cost, you need to establish a model or standard rate. The standard rate is an estimate of what you expect the direct cost of labor will be under normal conditions. To accurately measure direct labor cost, you must include all expenditures, not just wages. Two primary components of a model is the projected cost of one hour of direct labor and the number of labor hours required to produce one unit. Other direct costs are often the type of cost that the firm would normally charge as an indirect cost, but the proposed contract requires a large, unusual, or one-time expenditure for...
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...| Be sure to review the live lecture recording (available Now) Appendix A: 1. The use-case diagram shown in Figure A-1 F captures the Student billing function but does not contain any function for accepting tuition payment from students. Revise the diagram to capture this functionality. Also, express some common behavior among two use cases in the revised diagram by using include relationships.Appendix B:1. When should you use an Agile method, and when should you use an engineering-based method for developing a system? Support your answer. Course Project:Create a Use-Case Diagram for the CRM System following the UML guidelines in Appendix A of the textbook. * Doc sharing Project Workbook - Week 7 folder, has instructions on how to create a Use Case using Visio (but you can use any MS Office application). * Need to include processes for Record Customer Activities, Send Promotions, Generate Point Redemption Coupons, and Generate Customer Reports processes. * The hint is to look at the external entities, processes, and data stores from the Level 0 DFD on page 187. * Actors: * The Customer is a source and a sink - and should be shown as one Actor on our Use Case. * The three data stores will be the other actors: * Customer Activity Records. * Marketing Database. * Product Database. * Process: Each of the sub process on page 187 will become a Process reflected in the Use Case. * So we have a total of four processes. * Send...
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...someday. Watches, in particular, have always been preserved nicely in cupboards for decades even if not working The Target customers: Both new and existing consumers as old watches of any brand are accepted. This offer also allows customers to exchange watches in any condition, which is a definite crowd-pleaser. * Cost :Consumer felt they were earning that 20 per cent discount on exchange old watch to new . While for the company Strategically it promotes multiple purchase and ownership of watches * Benefits: For consumer there is an element of engagement with the consumer as the consumer is giving away old stuff for which he/she would not have got any value otherwise. In addition, it also bringing happiness to the underprivileged with this initiative. While for companies sales almost double compare to the pre-scheme period (Consumers prefer a brand over others if the offering is interesting). Brand's preference score goes up (it is about 70% during discounts).Tactically, as an activity the exchange offer helps to bring in more footfalls. Engage in a social cause by donating selected watches that can be refurbished are used for charity Other Cost and Benefits: * Why company promote discount sale during festival season * Why credit card companies give cash bash * Why companies give cash discounts to the suppliers * Why most mobile apps are free to download &...
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...This is a case of outsourcing where contribution analysis is carried out. Outsourcing is the ordering of goods or labour from the outside the vendors manufacturing plant. In this case the company is intending to outsource the production of 30,000 Alpha Phones from Original Equipment Manufacturers rather then producing in-house. Apart from the quantitative analysis’s qualitative factors will also be considered as necessary (Horngren, Datar and foster, 2003 p. 378). Alternative solution From the given information about Clear Hear, the following alterative solutions to meet the end state goals resulted; 1. To make 70,000 and switch production of 30,000 units from Beta model to Alpha. 2. To make 70,000 and purchase 30,000 units from Original equipment manufacturers 3. Outsourcing all the 100,000 units. Analyzing and evaluating the above alternative i) To make 70,000 and switch production of 30,000 units from Beta model to Alpha: - In this case the manager will use the excess capacity (idle capacity) of 70,000 and switch production of Alpha. To produce the product, only the variable overheads will change but the fixed overheads will remain the same. This is because the expected variable costs will vary with the number of unities produced and the idle capacity available for use will make the fixed costs not to change (Goldratt and Cox 2004, P. 60-61). Therefore the manager can only choose to produce the product if the cost of producing is less than buying. The contribution...
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...Shannon Carl ACC 310 Cost Accounting 1 Analysis of Cost Accounting Jess Stern 5/28/2012 “Cost accounting is a type of accounting process that aims to capture a company’s costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment.”( Cost Accounting, 2012). By analyzing the importance of cost accounting to the success of a firm, we will get a better understanding as to why companies use this type of accounting process. Becoming knowledgeable about the various methods of cost accounting and how they are used will enable the company to operate the process appropriately. Understanding how an operating budget works to discipline a firm’s management is also useful information when running a company. To do so, one needs to know the actual elements of the budget and how they are constructed. Lastly, one more beneficial piece of information to comprehend would be what a variance analysis is and how it is used. In the midst of discussing the previous items, there will be various elements that relate to the above topics in which there will be further detail provided. First, why is cost accounting so important to the success of the firm? “Managers rely on cost accounting to provide an idea of the actual cost of processes, departments, operations or product which is the foundation of their budget, allowing them to analyze fluctuation and the way funds are used socially for profit” (Llango, 2009)...
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