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Essay / Research Paper Abstract
This 3-page paper examines the difference in contributing margin costs between allocating and not allocating fixed costs. AutoZone's balance sheets are used as an example. Bibliography lists 1 source.
Page Count:
3 pages (~225 words per page)
File: D0_MTautozcos.rtf
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Unformatted sample text from the term paper:
service. Based on that report, the student has been asked to recast the information with unallocated costs and analyzing the effectiveness of the report.
Its been said by various financial gurus that sometimes allocating costs to products or departments or divisions can help a company gain a clearer understanding of what is
doing well (or not, as the case may be). There is some sense in this - by allocating costs directly to the units (or products) that are generating those costs,
we can probably fully understand whether a division or product is a drain on the corporate bottom line or if it has nothing to do with it. This can then
give managers a better idea of where costs might be coming from, and what needs to be done to reduce them. As
there arent specific allocated costs, unfortunately, in any of AutoZones statements of operations, well have to offer a reasonable estimate of fixed costs and use AutoZones approximate figures. The time
period is FY 2008. With the contribution margin effectively calculated by subtracting total revenue from total variable cost, we can get the margin income statement as a percentage of sales.
Segment Contribution Margin Income Statement With No Allocation of Fixed Costs Net sales 6,522,706 LESS Cost of sales 3,254,645 LESS Operating, selling, general and other
2,143,927 Operating profit 1,124,134 Margin contribution 17% In the example below, well allocate fixed costs from cost of sales
(which would include overhead and equipment) and knock those out to determine what the different figures might show. Well allocate cost of sales to other division units. In other words,
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