Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Management Expert

Problem 1: Sandy Pat, president of the Pressure Cooker Company, was reviewing the product profitability reports with the management accountant, Youl Gaspar. The following conversation took place:

Sandy: I have been reviewing the product profitability reports. Our high-volume cooker, the C-20, appears to be unprofitable, while some of our lower-volume specialty cooker in the S-30 series appear to be very profitable. These results do not make sense to me. How is the product profits determined?

Youl: First, we identify the revenues associated with each product line. This information comes directly from our sales order system and is extremely accurate. Subsequently, we identify the direct materials and direct labour associated with making each of cookers. Again, this information is very accurate. The final cost that must be considered is factory overhead and this is allocated to the products, based on the direct labour hours employed to assemble the cooker.

Sandy: What about distribution, promotion, and other post-manufacturing costs which can be associated with the product?

Youl: According to generally accepted accounting principles, we expense them in period that they are incurred and do not treat them as product costs.

Sandy: Another thing, you say that you allocate factory overhead according to direct labours. Yet I know that the S-30 series have very low volumes but need extensive engineering, testing, and materials management effort. They are our newer, more complex products. It seems that these sources of factory overhead will end up being allocated to C-20 line because it is the high-volume and therefore high direct labour hour product. Yet the C-20 line is easy to make and requires very little support from our engineering, testing, and materials management personnel.

Youl: I am not too sure. I do know that our approach is similar to which employed by many different types of companies. I do not think we could all be wrong.

Required:

problem1. Is Sandy’s concern valid and how may Youl redesigning the cost allocation system to address her concern?

problem2. Identify some of the implementation issues and elaborate on some benefits of new system.

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M96019

Have any Question? 


Related Questions in Business Management

You are now looking at information for a financial

You are now looking at information for a financial management institution.  They have a variety of funds.  Each fund can have multiple types of investments (Common stock, municipal bonds, growth stock, etc.).  Each fund ...

Lets discuss some information security issues associated

Lets discuss some information security issues associated with cloud computing services, and how can an individual or organization protect themselves against them.

The beaver furniture company manufactures and assembles

The Beaver Furniture Company manufactures and assembles chairs, tables, and bookshelves. The plant produces semifinished products that are assembled in the company's assembling facility. The (unassembled) monthly product ...

Incorrect cost estimates can negatively impact project

Incorrect cost estimates can negatively impact project schedules. Consequently, it is critical to have an effective estimating process, which can vary by project. Provide a brief project scenario (describe the purpose of ...

What are some key strategies a manager can use to avoid the

What are some key strategies a manager can use to avoid the escalation of commitment cycle? How can these strategies be applied to the decision-making task?

Leading and managing peopleaim to develop a critical

Leading and Managing People Aim: To develop a critical awareness of current factors affecting leading and managing people and to demonstrate how effective policies can add value to the business' strategic goals. Learning ...

In reflecting upon the idea of functionalism and its

In reflecting upon the idea of functionalism and its relationship to social stability in society, do you agree with concept of the model? In your discussion, specifically address the idea that because society's needs and ...

Terminating and downsizingnbspnbspplease respond to the

"Terminating and Downsizing"  Please respond to the following: Choose two (2) factors from those discussed in the textbook that may cause a possible breach of an implied contract. Suggest two (2) strategy that an employe ...

Product improvement amp pollution controlhello class for

Product Improvement & Pollution Control Hello Class! For this discussion you can choose which question you respond to.  Feel free to respond to both, however only one is required. Please respond to  ONE  of the following ...

The research method selected is cohort prospective study

The research method selected is Cohort (Prospective) Study design. In a minimum of 250 words, provide a scenario and research question for this method. What are some considerations you would need to take in designing the ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen