The Cost Versus Return Trade Off

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.

Develop and diagram an activity based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?

Q.1) Compute the following quantities for the current production process as well as for Mike’s and Ike’s plans, assuming the plans are implemented as described in the case.

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

In January, Reyes Tool & Dye requisitions raw materials for production as follows: Job 1 $960, Job 2 $1,630, Job 3 $720, and general factory use $680. During January, time tickets show that the factory labor of $6,100 was used as follows: Job 1 $1,570, Job 2 $1,940 Job 3 $1,670, and general factory use $920. Prepare the job cost sheets for each of the three jobs. (If answer is zero, please enter 0, do not leave any fields blank.) Job 1 Date 1/31 1/31 Direct Materials 960 0 Job 2 Date 1/31 1/31 Direct Materials 1630 0 Job 3 Date 1/31 1/31 Direct Materials 720 0 0 1670 Direct Labor 0 1,940 Direct Labor 0 1570 Direct Labor

1) a. Sheen should stock the optimal stocking quantity in this situation, which is 584 newspapers. The expected profit at this stocking quantity is $331.44. b. Q= µ+Φ-1(Cu/(Cu+C0))δ Q=500+ Φ-1(.8/(.2+.8))100 Q=500+(..7881)(100) Q=579 This is off by 5 newspapers from the model given in the spreadsheet, which results in a $.03 difference in profits. 2) a. With the opportunity cost of her time per hour being equal to $10, Sheen should invest 4 hours daily into the creation of the profile section. This would raise here optimal stocking quantity to 685 newspapers and would increase her expected daily profit to $371.33. b. Sheen’s choice of effort level, h, to be 4 hours was chosen because, in order to maximize profit, she would need an effort

Decisions will be made by using the concepts of marginal costs and marginal revenue to maximize profit. A mix of pricing and non-pricing strategies will be

The assignment method was used in determining ways that the schedule can be change to maximize production while reducing idle time, completion time, and potentially labor costs. Using the information that was provided, Operator A will cost $10.00 for the first job, $11.00 for the second, $9.00 for the third, and $10.00 for the fourth. Operator B will cost $12.00 for the first job, $9.00 for the second job, $8.00 for the third, and $8.00 for the fourth. Operator C similarly will cost $11.00 for the first, $11.00 for the second, $11.00 for the third, and $9.00 for the fourth. Last, Operator D will cost $11.00 for the first, $11.00 for the second, $9.00 for the third, and $10.00 for the fourth. While

2. Alpha company has 4 departments. A & B are support departments, 1 & 2 are

Our lives are a series of deliberate day-to-day decisions that develop into milestones which ultimately define who we are as individuals. One such defining point in my life is to pursue further education by obtaining a Master of Business Administration. The additional knowledge and skills that I will obtain will benefit me as I grow further in my career. My professional experience coupled with the Eller MBA will expand my knowledge as I work toward my short-term and long-term goals. The program will provide increased resources while utilizing my experience to enhance my leadership skills, work toward my life goals, expand my knowledge of business and bring personal experience and insight in accounting and finance to the program.

The manager of Shamrock Manufacturing plans replacing of large piece of manufacturing equipment that the company uses in a production process with a more efficient model. The replacement of 3-years old equipment promises reducing the direct manufacturing and electricity costs. The manager of the plant hesitates replacing because the next year he expects promotion in larger Houston plant and the fright that he will he will reduce the operating income.

1. Bridget Company uses activity-based costing. The company has two products: A and B. The annual

7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.

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Helix Company produces several products in its factory, including a karate robe. The company uses a standard cost system to assist in the control of costs. According to the standards that have been set for the robes, the factory should work 780 direct labour-hours each month and produce 2600 robes. The standard costs associated with this level of production are as follows: