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Essay / Research Paper Abstract
This 6 page paper looks at a case study supplied by the student and undertakes the costing of different goods sold to assess their fixed and variable costs and total potential profit and the differences that would result from the use of various fixed cost allocation methods. The bibliography cites 2 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEcostcase2.rtf
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Unformatted sample text from the term paper:
an hourly allocation rate for the fixed and variable overheads of 10.36, with 1 hour for product B, 3 hours for product C and 2 hours for product D. This
will then give us the following costs Figure 1 Cost of Product for product mix B,C and D B C D Total Material cost 5.00 10.00 5.00 Direct
labour 5.00 15.00 10.00 Overheads 10.36 31.08 20.72 Total per unit 20.36 56.08 35.72 Total overheads 20720 31080 20720 72520 With the costs calculated, and a cross
check to make sure that that total overhead allocation comes to the total over head cost of 72,500 (we have an over allocation of 20 but this is not significant).
Now we can look at the price that would need to be charged for each item if there needed to be a 40% mark up on each item. Figure
2 Prices with 40% mark up B C D Total per unit 20.36 56.08 35.72 Price at 40% mark up 28.50 78.51 50.01 Now we need to look at
the industry prices, assuming the company will have to keep prices down to this kevel, and if we have to drop any where there is not at least a 25%
mark up we can see what may need to be dropped. Figure 3 Profit compared to industry prices. B C D Total per unit 20.36 56.08 35.72
Industry price 38.50 59.50 49.00 Profit per unit 18.14 3.42 13.28 Profit margin 89.10% 6.10% 37.18% If we go by this then the product that should be dropped is C
as there is only a profit margin of 6.10%. Question 2 If we look at the same company and knock out the product C then we can double D
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