Variable Cost - 1729 Words

Cost management | Wilkerson Company Case | | 1. What is the competitive situation faced by Wilkerson? The competitive situation faced by Wilkerson is quite severe. Price cutting in its main product has led to a huge drop in profit. While price increase in another product line partially made up the loss. We will discuss the detailed situation line by line. (1) Valves It was the first product line developed by Wilkerson and its high quality brought it a loyal customer base. Even if several competitors could match Wilkerson’s quality in valves, none had tried to gain market share by cutting price. Therefore the competitive situation for valves was not so fierce that Wilkerson could maintain its gross margin. (2) Pumps†¦show more content†¦gineering $100,000 Providing engineering $100,000 Packaging and shipping $150,000 Packaging and shipping $150,000 # of shipments # of shipments Engineering hours Engineering hours Machine hours Machine hours # of production runs # of production runs # of production runs # of production runs Direct material Direct labour Direct material Direct labour Valves, Pumps, Flow Controllers Valves, Pumps, Flow Controllers (2) Activity-based cost driver rates Activity | cost | Cost driver | # of cost driver | Cost driver rate | Machine-related activities | 336,000 | Machine hours | 11,200 | 30 | Setting up machines | 40,000 | # of production runs | 160 | 250 | Receiving and controlling | 180,000 | # of production runs | 160 | 1,125 | Providing engineering | 100,000 | Engineering hours | 1,250 | 80 | Packaging and shipping | 150,000 | # of shipments | 300 | 500 | Summary of product lines’ overhead cost allocation | Valves | Pumps | Flow controllers | ABC overhead cost per unit | | | | Machine-related activities | 15.00 | 15.00 | 9.00 | Setting up machines | 0.33 | 1.00 | 6.25 | Receiving and controlling | 1.50 | 4.50 | 28.13 | Providing engineering | 2.67 | 2.40 | 12.50 | Packaging and shipping | 0.67 | 2.80 | 27.50 | Total | 20.17 | 25.70 | 83.38 | Summary of product lines’ cost and profitability in activity-based costing | Valves | Pumps | Flow controllers | Direct labor | 10.00 | 12.50 | 10.00 |Show MoreRelatedVariable Cost and Company1042 Words   |  5 PagesSection B Attempt Any Six Questions (6*5= 30) 1. Company A’s costs are mostly variable, whereas Company B’s costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain. 2. Crystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follows: Sales in Units July. . . . . . . . . . . . . . 30,000 August . . . . . . . . . . . 45,000 September . . . . . . . . 60,000 October . . . .Read MoreVariable Cost2976 Words   |  12 PagesDescribe the schedule of cost goods manufactured. How does it tie into the income statement? 5. Why are product costs sometimes called inventoriable costs? Describe the flow of such costs in a manufacturing company from the point of incurrence until they finally become expenses on the income statement. 6. Is it possible for costs such as salaries or depreciation to end up assets on the balance sheet? Explain. 7. â€Å"The variable cost per unit varies with output, whereas the fixed cost per unit is constantRead MoreHarrington: Cost and Variable Costs1062 Words   |  5 PagesFinancial Analysis While doing the financial analysis it is important to calculate the unit price first. Using the wholesale price rather than the retail price, the calculated unit price is $95. Next, we sum up the start-up costs and operating costs, both fixed and variable, and use these numbers to calculate the breakeven units. After calculation, the breakeven point is 289,846 units. Appendix A shows the details of our process. 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Two of the main components of cost are fixed and variable cost and is used to differentiate between the costs that have no direct correlation to business and those that do. Definition:- Fixed cost isRead MoreThe Cost Of Variable Cost2557 Words   |  11 Pagestotal variable cost changed depending on the production whereas the total cost stays the same no matter how much a business sells whether it’d be thousands or none. Unlike a fixed cost, a variable cost can be much more difficult to budget, and may at times exceed the limits of the budget when the variable cost is related to an unexpected expense, and sometimes it can come to the stage where the limits of the budget can exceed due to the unexpected expenses rise. The advantages of Variable costingRead MoreDifference Between Product Revenue And Variable Cost1142 Words   |  5 PagesContribution margin is one of the vital tools utilized throughout the Capsim simulation and business operations in general. Bushong and Talbolt (2001) summarizes the contribution margin ratio as the difference between product revenue and variable cost, over variable cost. Recommendations under the Capsim simulation advised that groups maintained a contribution margin no less than 30% as this will aid in long-term business profitability and sustainability (Capsim, 2014). Through the successful understandingRead MoreComputer Equipment : Fixed Cost And Variable Cost804 Words   |  4 PagesExhibit 2 has fixed cost and variable cost both in the report. Other cost we need to look it is the opportunity of the purchased computer equipment which has a value of around $25,500. The lease computer equipment is cannot be cancelled, so we consider it a sunk cost and do not take it into consideration. Next, we need to look at the purpose of creating PDS. The purpose was to help deregulate PTC and rescind the push through of a rate increase. If they shutdown PDS, PTC would have to pay marketRead MoreTotal Variable Costs1408 Words   |  6 Pagespredict costs and manage them on a day-to-day basis, managers must identify: A. cost of resources used B. key activities and resources used to perform activities C. cost drivers D. all of the above 2. Cost drivers are ________. A. measures of activities that require the use of resources and thereby cause costs B. different types of functional areas in the firm C. different types of cost calculations D. the different functions in the value chain 3. Which of the following statements about costs is FALSERead MoreVariable Cost and Net Operating Income3885 Words   |  16 PagesASSIGNMENT P 6-16 , P6-17 PROBLEM 6-16 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO1, LO2, LO3] Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plants operation in the form of a worksheet. Because the new antenna is unique in design, management