Costs and Special Order

2.) What is the ‘relevant range’ for the cost structure? In other words, at what volume might you expect the fixed and variable costs to change appreciably?

3. Andy is trying to decide which one of two job offers he will accept.

5. Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary. Assuming that management is able to decrease discretionary fixed costs by 10%, what would be the impact on Bridgestone’s break-even point revenues?

Question 3: Identify all costs associated with this venture. Categorize these costs as fixed or variable.

A more difficult task is identify and planning for variable costs. Variable costs can change from month to month and sometimes cannot be planned for.

1. The objective of the strategic analysis was to identify which products were world-class in terms of “competitive position and potential,” products which could become world-class, and products which have no hope of becoming world-class.

| Within the framework of a break-even analysis, an examination of is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.Answer

the allocation should be based on the underlying economics of the situation rather than the motives of individuals.

Mixed costs consist of a fixed component and a variable component. Understanding the mix of these essentials of a cost, one can predict how costs will change with different levels of activity. As the level of usage of a mixed cost item increases, the fixed component of the cost will not change, while the variable cost component will

To calculate the total costs involved for each of the three options, I have considered only those factors that are not common in all. I have calculated only the excess of cost that might be required to deploy an option.

Fixed costs are constant and have an impact towards profits despite the number of items sold. Reducing the fixed cost amounts is a sustainable way to make more profits and increase operating leverage (Edmonds & Tsay & Olds). Suggested by Reiss, outsourcing is a way of turning fixed costs into variable costs. Variable costs have a dependence of cost based on production or sale of the product (Reiss, 2010).

Costs Incurred by Irving Equipment would be that of Investigation along with paying for the Insurance of 214 tonnes of equipment. Depending upon NB

o This decision model assumes that variable costs, such as materials and labor, are linear over the relevant range; that is, there are no volume discounts on material, and that addition of more labor does not incur further costs.

Before performing the CVP analysis for the Hampshire manufacturing firm, we identify two basic cost classifications of interest comprising variable costs and fixed costs. As we analyze the case in study, we need to initially acknowledge that both variable costs per

The costs that vary with a decision should only be included in decision analysis. For many decisions that involve relatively small variations from existing practice and/or are for relatively limited periods of time, fixed costs are not relevant to the decision. This is because either fixed costs tend to be impossible to alter in the short term or managers are reluctant to alter them in the short term.