We can use the cost structure analysis with our employers simply by analyzing the fixed costs of a company and the variable costs of the company. For instance we can use the variable production costs and the variable selling costs. Now let's analyze for instance, a local computer repair company that has a 2013 sales of $673,000 and we include variable production costs of $15,000 for processors and $12,000 for computer batteries. The variable selling costs were $50,000 for commission sales. The fixed manufacturing costs included would be $2,300 for taxes on the factory and $4,000 on the factory maintenance. The company also uses $15,000 on salaries and wages with $5,500 on the lease. The total variable costs are $77,000 and the total fixed costs are $26,800. The contributed margin is $596,000 and pre-tax income would be $569,200. Assuming we had a income tax of twenty percent, that would give us $113,840 worth of income taxes giving us a net income of $455,360.
FEEDBACK:
I think that cost structure analysis should have been used at my employer in the past when they decided that there was not a need for us to work twelve hour shift ,they decided that there was not enough information to warrant us to do so ,so they moved the extra people they had out of our department, some retired ,some found other jobs outside of BD. We were told a few months later that we all would be going to a twelve hour shift and that they had to hire more people to ensure that they had enough people to operate four full shifts. I think that if they took the time to do a cost structure analysis then maybe they would have kept us on twelve hours and if there was not enough work for us all then most of us would like to have an extra day off if we had vacation hours we could have used that or just no work day. Either way it would not have been so complicated to figure out that we had a few months of low work orders but when the volume picked up we will still be able to meet all of our customer needs by figuring out the volume of products produced ,how much material it takes to make it ,how much we pay our employee to manufacture the product ,we will be able to have a more accurate of what it takes to manufacture our products. Using the cost structure analysis in the future will keep us better informed of what possible changes we may have to make on the future so that we stay competitive in this tough economy.
FEEDBACK: