Costs and Transfer Price

If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows:

The calculation has proven that contribution margin of Model S is higher than Model LX. In conclusion, all resources should be allocated to produce Model S up to its maximum production capacity.

| Use this information for questions that refer to the World Tennis Ball (WTB) Company case.

After a few months of detailed scrutiny of the numbers, we were able to make pricing decisions more quickly by using the breakeven change in volume to set the new price. Based on our broad

2. If the department that produces Item 345 was a profit center and if you were the manager of that department, would it be to your financial advantage to lower the price?

The $320,000, on the other hand, is a fixed cost associated with the proposed addition.

As a result we can see that only one of the four above criteria is met and it is a fixed price. Based on these findings we can advise to change WAG’s policy on revenue recognition upon the delivery of the product. This will lower the sales revenue by $50,000, as well as cost of goods sold and net income.

Referring to Vice President of Finance, he want to pursue the current approach because they are in profitable based on contribution margin by 35 percent. The company just needs to monitor their margin in control their cost well.

\Sam Johnson is the owner of a medium-size electronics company, Integrated Electronics Manufacturing (IEM), which produces high-grade electronic modules used by several major electronics manufacturers to produce a variety of military and commercial telecommunications devices such as aircraft radios, navigational equipment, land-based satellite receivers, and other items. IEM has 60 employees. Normally, IEM purchases electronic parts such as resistors, capacitors, circuit boards and enclosures from several different suppliers and assembles the modules in its own facility. Some of the parts, like circuit boards and enclosures, are built to IEM engineer’s specifications while others are “off the shelf”.

Cost of 401’s – we have 3,000 in inventory so 3,000 x 0.4 = 1,200

switching  cost  to  find a different supplier to make a mold for their product to mass produce.  The

The valves that the company makes are produced using four different machine components and are produced and shipped in large lots. Scott feels as if the competitors are now able to match their quality but have yet to try and gain market share by cutting the prices of their valves. Additionally, the pumps are made using five components from machines and then assembled into the final product. These are then shipping to the industrial companies that have purchased these pumps. One issue is that competitors keep lowering their prices on their own pumps, so Wilkerson has to match these and lower their prices as well. This makes it hard for Wilkerson to keep their gross margin profits up since their prices continue to lower. Last, the flow controllers need more labor and machining components than either the pumps or the valves. Additionally, there are many other alternatives that are used in the industry so more product runs are needed for these versus the pumps or valves. Also, more shipments are needed for these since there are shipped to industrial companies. The flow controllers were doing better than the valves or the pumps since Wilkerson was able to raise their

After analyzing the results from the previous quarter, it was determined that the prices set for each segment were not sufficient. Product sales priority were also not properly adjusted. With the R&D investments, sales priorities needed to be changed for the main focus to become the most profitable market segments. Prices were not competitive which in turned decreased revenue, market share, and profitability. To become more competitive we altered the prices in each market segment. The Workhorse product was the first to change, the price was lowered to $2500 in an attempt to increase sales; at this price Team 4 was still making a profit on this product, as well as making the price much more competitive. The Workhorse sales priority was also lowered to 3rd in Americas and 4th in APAC and EMEA. This product was not selling as well as we had hoped, and was no longer as profitable as it once was which led to this decision. Next, the Innovator product’s price was adjusted; this involved a price increase to $4100. This price was adjusted to include the new

Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.

Please discuss the possibilities of increasing Kamp’s profit by using the formula for basic cost per unit and by reorganizing. Please use a concrete example to indicate how the board of Kamp can manipulate the unit costs for the types 2, 3, and 4 by reorganizing its cost information system. How, do you think, can the boards of the Vecu concern and the MB division determine whether Kamp manipulates data on unit costs?