Zauner Ornaments Case Analysis

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

While we are performing our analysis on different aspects of the company, we look at the three main types of cost. When we remain devoted to improving our costs, and the faults related, we show our same devotion to our consumers. This is portrayed by the quality of products we put on the shelves. Prevention costs, appraisal costs and Failure costs are areas

Actual costing is rarely used because managers can’t wait until the end of the year to obtain product costs. Information about product costs is needed as the year goes for planning, control, and decision making.

Glaser Health Products manufactures medical items for the health care industry. Production involves machining, assembly and painting. Finished units are then packed and shipped. The financial controller is interested to introduce an activity-based costing (ABC) system to allocate (or distribute) indirect costs to products. Indirect costs, as distinct from direct costs, cannot be unambiguously linked to specific products. The controller would like to calculate product costs based on ABC for planning and control, not inventory valuation.

We compared traditional volume based costing with outcome of ABC and following findings reported. Earlier Zauner was selling small glass ,large glass and specialty glass ball ornament at price of $9 ,$11 and $17 per box whereas price working out by allocating overhead cost using traditional volume based method coming to $21.12 ,$13.56 and $8.43 respectively . It is mentioning that management has not adopted accurate method of costing and correct base of pricing strategy. There is lot of price distortion if Zauner would have been made decision on volume based cost findings. It means that there are many issues with allocating overhead cost in various product lines. Here we have carried out ABC method and Findings are as tabulated below:

3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:

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

Plum’s simple costing system allocates all manufacturing overhead on the basis of machine-hours, an output unit-level cost driver. Consequently, the more

After analyzing the results from the previous quarter, it was determined that the prices set for each segment were not sufficient. Product sales priority were also not properly adjusted. With the R&D investments, sales priorities needed to be changed for the main focus to become the most profitable market segments. Prices were not competitive which in turned decreased revenue, market share, and profitability. To become more competitive we altered the prices in each market segment. The Workhorse product was the first to change, the price was lowered to $2500 in an attempt to increase sales; at this price Team 4 was still making a profit on this product, as well as making the price much more competitive. The Workhorse sales priority was also lowered to 3rd in Americas and 4th in APAC and EMEA. This product was not selling as well as we had hoped, and was no longer as profitable as it once was which led to this decision. Next, the Innovator product’s price was adjusted; this involved a price increase to $4100. This price was adjusted to include the new

INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to

Allege making ways to promote and select as there are means to ascribe with trades deducting from retail prices. Argue with purchases such as use of a cut base want having certainty with price differences and requirements. Cite and score points if you want a cost deductible change process that alters costs on store.

With this system each customer’s order cost the same amount to complete causing orders with high profit limits to subsidized orders with low profit limits making it difficult for Super Bakery to know the true cost for an order. The company changed to the activity-based costing (ABC) system allowing the managers the ability to recognize the cost and profit margins for each sale. The ABC system associates the costs with the activities allowing managers the opportunity to access a system that allocates overhead costs that uses multiple bases. Costs can be traced back to each individual’s account regardless of the product provider letting managers know which products are profitable and which ones are not. The traditional costing system allocates cost to departments or jobs instead of overhead cost pools. The traditional costing system makes it difficult to know which activity or product is making a profit.

In college, Erik learned about an alternative costing approach called activitybased costing (ABC). However, the examples he remembered involved manufacturing firms. He wondered whether East Penn could develop an ABC system, with

Activity based costing is defined as "an accounting method that identifies the activities that a firm performs, and then assigns indirect costs to products" (Investopedia, 2011). It has been argued that the way a company measures its costs can have a significant difference on the managerial decisions that it makes (No author, 2011). For example, this New Millennium Linen's management believes that the company makes most of its money from small gift shops, because an analysis based on contribution margin has illustrated that this type of customer has the highest contribution margin (80%) of the three types of customers that New Millennium sells to. What activity-based costing does in this situation is it allows managers to see how much of each activity is required to service each customer.

Because Harrington Collection thinks that sales people are the most important factor in the consumer decision-making process, they spend significant resources training their personnel and offering them attractive commissions. Their expenses are understandable, and didn’t change for the fiscal year of 2007. What did change were the Manufacturing Group’s expenses. The Manufacturing Group’s SG&A increased 4.63% in 2007, meaning that the cost of maintaining the current manufacturing set up is increasing.