# The Cost Of \$ 240

2617 WordsMay 29, 201511 Pages
Part A - Case Study: The following short article appeared on page one of The Age newspaper on 16 February 2015: A family in Cambridge received their Christmas presents from friends in Paris this week – 50 days after their parcel was posted. French posties sent it to Cambodia, and the near-20,000-kilometre trip, via several other countries, is estimated to have cost delivery firm Parcel Force \$240 to deliver three children’s books. Question 1: How do you think the cost of \$240 would have been calculated? (2 marks) Answer: To arrive at the cost of \$240 there would have been many assumptions as we do not have the actual cost information about the different fixed and variable cost. The allocation of overhead cost based on the usage of…show more content…
(Weygandt, 2012) Predetermined overhead rate = Estimated annual overhead cost / Expected annual operating activity The cost is an important driver in this activity base and is dependent on the below criteria: • The weight of the parcel. • The distance travelled to deliver the parcel. Question 2: Regardless of the exact method used to calculate the cost of delivering the lost parcel, in what way or ways would such a calculation be subjective? Give examples to illustrate your answer. (2 marks) Answer: The parcel company is a service company and each company must know the cost incurred for each of its delivery for continuously and successfully generating revenue. Therefore in addition to the cost occur during a particular period there should be cost. In order to calculate the cost during the whole period , first of all we need to calculate the cost per unit to be accounted for which will be based on weight and distance between the source destination and the final destination. For example, if there are two parcel of the same weight that has been sent to different destination then the cost involved would be different depends on the distance travelled to deliver them. Therefore cost per km will also be additionally considered by the courier company to measure the cost for each delivery as per destination and weight of the parcel.