Guillermos Furniture Scenario

This paper will provide an analysis of 2 production scenarios. We will calculate costs associated with running a production facility. Furthermore, the analysis will be used to provide a basic understanding of how changes in staffing and productivity impact profit and loss.

In the previous chapter, we discussed the economic theory of production. Comprehending production theory (the relationship between inputs and output) is a necessary prerequisite to understanding cost theory (the relationship between production and costs). As we noted in the previous chapter, costs are derived from production activities. As worker productivity increases, for example, unit costs decrease.

Next there is total cost and total revenue. Total cost is what the company spends to produce a certain quantity of its product. This includes the cost of all the materials,

Thirdly, at the product activity level, the two Operations costs are likely to vary mainly with the Number of Units Produced and the three Sales costs are also likely to vary mainly with the Number of Units Produced.

Finance is the act/process/study of managing money in such a way that you aquire and keep more money, and lose less of it. Finance is deciding what to do with the money you have. Accounting is figuring out how much money you have.

Tootsie Roll Industries is applying for a loan package that will help them achieve superior things. There are many opportunities that can be accomplished by allocating money to different areas. The different areas include healthier ingredients, expansion, and advertising. These areas will increase the production and success of the Tootsie Roll Industries, Inc. Within this loan package, there are many exciting things that will improve and perfect healthier candies at Tootsie Roll Industries all over the world.

* Finance is the study of how people and businesses evaluate investments and raise capital to fund them. Our interpretation of an investment is quite broad.

In order for a company to succeed and be successful, it is very important for the company to understand the difference between profit and cost of goods. There are costing tools that can help a business figure out what the cost of product is during the manufacturing process. These tools are beneficial for a company to figure out how much profit can be made. These tools take the cost of manufacturing the unit and subtract it from the sale price of the product. Having this information, the profit per unit, is very beneficial for a company to know which products they should produce more heavily, or which ones to eliminate. I want to discuss two costing methods that are beneficial to a

Operating costs are expenses supplementary with the operations, maintenance and administration of a business on a daily basis. The operating cost is a component of operating income and is customarily included on a company’s income statement. A business's operating costs consist of f two core constituents, fixed costs and variable costs. A fixed cost does not change with an increase or decrease in sales or productivity and must be paid regardless of the company's activity or performance (Lowengrub, 2016). A variable costs changes in direct proportion to the change in production. If production increases, those costs are variable and linked to the change in production.

In each of these alternatives notice both negative cash flow and negative NPV. What a manager views these performances there seems to be returns less than the cost of capital therefore investor’s value are whipped out.

Financial management is important to the organization because it provides pertinent finance and accounting information to help managers accomplish the purpose of the organization. Financial accounting provides accounting information to external users. On the other hand, managerial accounting is more for managers (internal users) to use for things like planning, budgeting, etc. The definition of finance has changed over the years, but it’s used to ultimately evaluate previous decisions and make assessments for future decisions of the organization.

Production costs are costs associated with manufacturing goods or providing services and are classified as direct materials, direct labor, and overhead.

Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and or cash flow. It is often discussed in terms of probability of loss and the expected magnitude of the loss.

Operating expenses includes production costs, such as direct labor, indirect labor, inventory carrying costs, equipment depreciation, materials and supplies used in production, and administrative cost. This was not happening at Alex’s plant. His inventories had increased over the past six or seven months and operational expense also increased. This meant he had a lot of work to do to keep his plant open and he was now aware of it.

The final type of cost that I will be talking about is Total Costs. Total cost describes the total economic cost of production which is made up of variable costs, which can change according