Traditionally cost accountants had arbitrarily added a broad percentage of analysis into the indirect cost.[3] In addition, activities include actions that are performed both by people and machine. However, as the percentages of indirect or overhead costs rose, this technique became increasingly inaccurate, because indirect costs were not caused equally by all products. For example, one product might take more time in one expensive machine than another product—but since the amount of direct labor
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Chapter 10 Flexible Budgets and Performance Analysis Solutions to Questions 10-1 The planning budget is prepared for the planned level of activity. It is static because it is not adjusted even if the level of activity subsequently changes. 10-2 A flexible budget can be adjusted to reflect any level of activity—including the actual level of activity. By contrast, a static planning budget is prepared for a single level of activity and is not subsequently adjusted. 10-3 Actual results can differ
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Wilkerson Company Introduction Wilkerson Company is in the business of manufacturing valves, pumps, flow controllers etc. Severe industry wise price cuts in the pumps business, which is Wilkerson s major product line, has badly affected the company s margins (Gross Margin of 19.5% as against a planned gross margin of 35%). On the other hand the flow controllers division was performing above the expected profits (yielding a Gross Margin of 41%, a value higher than 35% estimated). Wilkerson needs
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Journal of Business & Industrial Marketing Emerald Article: Activity-based costing: a powerful tool for pricing John C. Lere Article information: To cite this document: John C. Lere, (2000),"Activity-based costing: a powerful tool for pricing", Journal of Business & Industrial Marketing, Vol. 15 Iss: 1 pp. 23 - 33 Permanent link to this document: http://dx.doi.org/10.1108/08858620010311539 Downloaded on: 05-04-2012 References: This document contains references to 4 other documents To copy
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a department would survey employees to estimate the percentage of time they spend on activities and then assign the department's resource expenses according to the average percentages you get from the survey. Armed with figures, known as the cost-driver rates, managers could assign the costs of the department's resources to the customers and products that use its services. This worked well in the limited setting in which it was initially applied, typically a single department, plant, or location
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customized motors. Overhead costs were simply separated into three groups. While materials related and support related categories were allocated to products based on different drivers, production related overhead was traced to cost centers directly. In order to overcome issue of accuracy, EMW identified key departmental costs drivers and was trying to adopt activity-based cost system. Issues and Problems (1) Different from the traditional cost system, the simple activity-based costing system has broken
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come up in a day to day working environment. | Pilot Flying J LLC,. Is a travel center whose main focus and costomer market is the trucking companies that distribute goods across the United States. Dieseal fuel is not the only thing that these drivers expect when they come into the travel center, but they also expect hot food and hospitable and friendly costomer service. The corporations main goal is to provide quality costomer satisfaction and they focus on providing the best shopping experience
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Holly Manufacturing Case Study Holly Manufacturing Company produces two cello models. One is a standard acoustic cello that sells for $600 and is constructed from medium-grade materials. The other model is a custom-made amplified cello with pearl inlays and a body constructed from special woods. The custom cello sells for $900. Both cellos require 10 hours of direct labor to produce, but the custom cello is manufactured by more experienced workers who are paid at a higher rate. Most
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Syte was started in 2014 by former commodity relocator’s, also known as semi drivers. The focus of the company is to provide quality yet affordable products. The products we specialize in are for the sole purpose of keeping the windows and mirrors clean and clear for those that drive 18 wheelers. Until now, side view mirror wipers for semis has been non-existent. The product is designed to meet the need of the drivers with the specific truck he or she is driving. Though the concept is the same
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$20 | $10 | Direct labor cost/unit | $0.20 | $0.80 | Total direct cost | $20.20 | $10.80 | Overhead cost/unit (Working 2) | $65.75 | $29.625 | Full Production Cost / Unit | $85.95 | $40.425 | Working 2 Activity | Total cost ($) | Cost driver | Total number | Product X($) | Product Y($) | Batch setup | 100,000 | No of setups | 20 | 100,000/20x10=50,000 | 100,000/20 x 10=50,000 | Order handling | 200,000 | No of orders | 40 | 200,000/40x24= 120,000 | 200,000/40 x 16=80,000 | Machining
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