OPPapers.com Essay Index >> Business >> Cost Management
We have many free term papers and essays on Cost Management. We also have a wide variety of research papers and book reports available to you for free. You can browse our collection of term papers or use our search engine.
Cost Management. We have one company that operates two businesses. They
both manufacture and sell their product. One specializes ...
Strategic Cost Management. ... Reference List Blocher, EJ, Stout, DE, Cokins, G, Chen,
KH 2006, Cost Management A Strategic Emphasis, McGraw-Hill/Irwin, New York. ...
Cost Management. Introduction The chief Administrator of an Uptown Clinic,
Dr. Stephanie White, is concerned about the dilemma of ...
Cost Management. OPERATIONS Unicycles Bicycles Total sales $150M $150M Occupies
75,000 sq. ft. 25,000 sq. ft. Advertising $2.5M $2.5 ...
Cost Management. Program Area Costs Program Area Revised Costs Administration
Administration Salaries Salaries Administrator 60,000 ...
Submitted by km5sec on April 2, 2007
Category: Business
Words: 774 | Pages: 4
Views: 218
Popularity Rank: 34,912
Average Member Grade: N/A (Add a Comment / Grade this Paper)
We have one company that operates two businesses. They both manufacture and sell their product. One specializes in unicycles and the other bicycles. Total sales of both businesses are $170 million, $150 million for the unicycle and $20 million for the bicycle. They share a warehouse of 100,000 square feet, 25,000 square feet for the bicycle and the remaining for the unicycle. Total costs were split 50-50. The total warehouse cost is $3 million and the total advertising cost is $5 million.
Unicycle Bicycle
Total Sales 150,000,000 20,000,000
Advertising 2,500,000 2,500,000
Rent 1,500,000 1,500,000
The costs of advertising and rent for both businesses within the company are the same based on the traditional method. Both businesses have an expense of $4 million.
The unicycle business takes up 75% of the warehouse and makes 88.24% of the total sales for the company. The bicycle business company uses 25% of the warehouse and brings in 11.76% of the total sales for this company. In allocating the expenses between these two businesses one will need to implement a new accounting system. The ABC (activity based costing) system will work well within this company. This system will first take into account all indirect resource costs for the company. It will then assign costs of activities within the two businesses. (Horngren, Sundem, and Stratton, 2005) Looking more closely at the company one sees that things need to be taken a step further by utilizing the two-stage ABC System. This system will use “two stages in allocation to get from the original indirect resource cost to the final product or service cost.” (Horngren, Sundem, and Stratton, 2005) Breaking down the costs within an ABC system can show a company where each cost is. It enables the company to be better able to make decisions based on financial data. There are three major differences between the traditional...
You must Login to view the entire paper.
If you are not a member yet, Sign Up for free!