Jet2 Task 4 Essay

2247 Words May 17th, 2013 9 Pages
Competition Bikes Finical Analysis
Dan Petersen
WGU – JET2 Finical Analysis Task 4

A.
1.
To: Vice President
This report has been prepared to argue the case that the company’s current costing method should be changed to the activity based costing method. This report will review; the difference between traditional based costing and activity based costing; traditional split and allocations with activity based costing; and discusses the breakeven point for Competition bikes Inc. with regards to sales units and sales dollars for both CarbonLite and Titanium bikes.
The first item at hand is what kind of detail does activity based costing provide that is different than traditional costing?
The main difference between
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From the overhead analysis completed, it analysis six overhead items with associated costs. This analysis also compares numbers from traditional based costing vs activity based costing. With traditional based costing the analysis shows a total product cost number of 641,320 for Titanium bikes, where as ABC method shows a total product cost as 590,715. There is a difference for Carbon bikes as well. The traditional method shows a 679,380 where the ABC method shows a total product cost of 729,985. These numbers show that Competition Bikes could be overpricing the titanium bikes and could afford to lower the cost in order to be more competitive in the marketplace and maybe even bring in more revenue than previous years. As for the Carbon bikes the analysis states that using the traditional method that total product cost was at 679,380. Once the same analysis for total product cost using ABC method for Carbon bikes shows that number to be 729,985. This knowledge gained from getting a better understanding of each bikes specific costs can really help price the product better so that Competition Bikes remains more competitive in the industry.
2.
1.
a. Analyze the breakeven point for Competition Bikes Inc. with regard to sales units and sales dollars for both CarbonLite and Titanium bikes. The cost volume profit (CVP) analysis is a tool that managers and business

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