allowable cost for a particular new product and then developing the prototype that can be profitably manufactured and distributed for that maximum target cost figure.” Target cost for a particular product can be calculated by starting with the anticipated selling price/target price of the product and less the profit margin required or desired profit as follows: Anticipated selling price – desired profit = Target cost Target costing in fact, is a tool that can be used for managing the costs. Normally
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difference in cost behavior namely fixed and variable costs in relations to fluctuations in output or turnover. This budget is designed to change appropriately with such fluctuation. The steps to develop a flexible budget, management should first identify the activity index and the relevant range of activity. Secondly, they should identify the variable costs and determine the budgeted variable cost per unit of activity for each cost. Third, they should identify the fixed costs and determine the
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index and the relevant range of activity 2. Identify the variable costs, and determine the budgeted variable cost per unit activity for each cost 3. Indentify the fixed costs, and determine the budgeted amount for each cost 4. Prepare the budget for selected increments of activity within the relevant range. Remember: Both Cost and/or Revenue were both variables in the original budget, that amount will need to be recalculated when preparing a flexible budget. If the cost was identified
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responsibility, develop performance measures, establish daily monitoring, and reporting structure, weight costs, benefits, and motivation to achieve goal congruence and managerial effort. The decision-making should be centered on Guillermo’s business goals; thus, reflecting the company long term and short term goals. Team A will examined Guillermo’s Furniture Store and discuss the following: Cost relationships and behaviors in the company decision-making in implementing a control system that will help
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valves, connectors, and fixtures used in commercial and residential plumbing applications. Recently a senior manager walked into the cost accounting department and asked Nick Somner to tell her the cost of the D45 valve. Nick quickly replied, “why do you want to know?” Noticing that the manager appeared somewhat startled by this question, he explained, “The cost information you need depends on the decision you’re going to make. You might be thinking of increasing a scheduled production run of
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Cost Structure It is easy to increase raw materials, labor and supplies to meet demand but not so easy to buy a new forklift since they are capital investment which require large financial outlays and time for completion A proper understanding of cost structure hinges on the fundamental distinction between fixed costs and variable costs. Fixed costs can be classified into two categories: - (1) committed fixed costs, p - (2) discretionary fixed costs. Committed fixed costs are costs associated
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liquidation costs (for items purchased versus items not purchased). 2. There are a three different scenarios to decide relevant costs and revenues: stock kept for a sold item, excessive stock of an unsold item, and no stock for a demanded item. First, if stock is kept of a particular sold item, all costs related to buying and selling the product would be included. The costs that need to be included are the selling price, the buying cost, the carrying cost, and the marketing cost. Second, if excessive
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Course Description - An examination of cost accounting principles and practices such as job order costs, process costs and standard cost controls as well as specific managerial problem areas such as budgeting pricing policies and inventory control. In addition to the acquisition of the common body of knowledge and discipline-specific mastery, we address three goals: * Critical Thinking – the ability to identify a problem, ascertain what information is relevant, and arrive at conclusions based on
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Costing Activity-Based Costing (ABC) attempts to more accurately assign overhead costs to the users of overhead by focusing on activities. The basic principle underlying activity-based costing is that an activity, which is a task, operation, or procedure, is what causes costs to be incurred. For example, cutting raw materials consumes, labor and machine hours. Likewise, warehousing products consumes resources (costs) such as employee time for driving a forklift, the electricity to power the forklift
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demand. False 6. Cost–benefit analysis (CBA) is a set of techniques for assisting in the making of decisions that translates all relevant concerns into market (dollar) terms. True 7. The appropriate measure of economic cost is opportunity cost. True 8. How much has to be paid for treatment, and how much the treatment is worth, depends on whose perspective a cost–benefit analysis of health care is taking. True 9. The chance that you might become injured or sick is a cost, as is the chance
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