Essay about Tashtego

1439 Words Dec 26th, 2013 6 Pages
CASE STUDY
Tashtego

Advanced Topics in Management Accounting and Control

The purpose of this paper is to analyze the economic situation of the company Macedonian Shipping and give a recommendation whether the company should use the motor vessel Tashtego as a freight tender beween Dar-es-Salaam and Zanzibar in East Africa or as a tapioca ship between Balik Papan and Singapore in the East Indies.
Fundamental to all these considerations are measurement issues. Financial measures, in particular, cost measures, are needed to evaluate alternate strategies on whether to introduce a new product or service line, to determine the appropriate sale price and the consequent market position for the firm’s product.

Question 1)
“Contribution”
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For the total revenues for each vessel the freight rates for Tapioca and for manufactured goods are multiplied with the amount of tons that are moved from one harbour to the other.

2. Total contribution for a round trip | | | | | | TASHTEGO | LARGE VESSEL | | BP-SP Tapioca | SP-BP goods | BP-SP Tapioca | SP-BP goods | | | | | | | | | | | Capacity (t) | 3.950,00 | 3.150,00 | 6.850,00 | 3.150,00 | | | | | | freight rate/t | 5,10 | 2,70 | 5,10 | 2,70 | Revenue | 20.145,00 | 8.505,00 | 34.935,00 | 8.505,00 | | | | | | | | | | | Total Revenue | 28.650,00 | 43.440,00 | Total Cargo costs | 10.153,00 | 14.300,00 | Total contribution | 18.497,00 | 29.140,00 |
As cargo costs vary with the freight moved they are calculated as a product of Cargo costs per ton, as stated above, and the capacity for each of the vessels, i.e. for Tashtego 1,43*3950 + 1,43*3150 = 10.153,00 and for the large vessel 1,43*6850 + 1,43*3150 = 14.300,00.

Question 3)
Incremental cost is the cost associated with increasing production by one unit, in this case sending Tashtego on a round trip. It represents the added costs that would not exist if the round trip was not made.
The turnaround at Balik Papan takes 3 days for one of the large vessels and 2,5 days for Tashtego. The
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