The Cost Of Cost Management

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1. The Cost Of Cost Management
Unit VII Essay
Brittney Dixon
Columbia Southern University Introduction
Cost management is worried with the way toward arranging and controlling the financial plan of a
project or business. It incorporates activities, for example, arranging, evaluating, planning,
financing, funding, overseeing, and controlling costs so that the project can be finished inside the
affirmed spending plan. Cost management covers the full life cycle of a project from the underlying
arranging stage towards measuring the genuine cost execution and project completion.
Intangible and Tangible Cost Benefits
Intangible Cost Benefits
Intangible costs are effortlessly measured. Some intangible costs may incorporate a drop in
employee spirit, disappointment ... Show more content on Helpwriting.net ...
They are additionally simple to measure, so management tends to concentrate on the control of
tangible costs
One of the major tangible cost benefit of project management is budgetary savings funds. Extend
managers control spending plans and settle on choices about how best to designate assets during the
time spent moving in the direction of a project 's goals. At last, the distinction between coming in
under spending plan or having an overrun is a function of workforce productivity and project
management. The cash that project managers spare their organizations expands the project 's advent
on assumption and stays available for upcoming projects
Indirect and Direct Costs
Indirect Cost An expense, (for example, for publicizing, processing, support, security, supervision)
brought about in joint utilization and, in this manner, hard to appoint to or relate to a particular cost
object or cost center (office, work, and program). Indirect costs are generally steady for an extensive
variety of output, and are assembled under a fixed cost. There are some examples of indirect cost
which include accounting/legal expenses, administrative expenses, office expenses, rent, telephone
expenses and utilities. These are used in normal everyday life for normal business people.
Direct Cost
Direct costs is a cost that can be followed straightforwardly to (or related to) a particular cost
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3. The Cost of Turnover
The Cost of Turnover
Putting a Price on the Learning Curve by Timothy R. Hinkin and J.BruceTracey
Employee turnover does more than reduce service quality and damage employee morale—it hits a
hotel’s pocketbook.
E
mployee turnover has long been a concern of the hospitality industry, and therefore of researchers
who examine industry human–resources concerns. One stream of research that arose in the past 20
years was an effort to quantify the cost of employee turnover. Although most managers agreed that
turnover was bothersome, calculating a dollar figure for employee departures would provide those
Timothy R. Hinkin, Ph.D., is a professorof managementorganization, human resources, and law
(MOHRL) and director for undergraduate ... Show more content on Helpwriting.net ...
The lodging industry sees fierce competition, with new products and branding strategies vying for
the dollars of increasingly demanding consumers. Technologically, the industry has made
tremendous progress in revenue–management systems, computerized reservations, and POS
systems, and we can only hazard a guess what the internet will eventually mean to the lodging
industry. Virtually all jobs have been altered by technology and downsizing, and hotel employees
have more to learn and do than they did two decades ago. The demographic characteristics of the
workforce have changed, and in many markets most of the people considered employable are
already employed. With predictions of labor shortages to come, competition for qualified employees
will only increase, making employee retention an important managerial objective. A recent stream of
research has empirically demonstrated a significant relationship between sound human–resources
practices and financial performance.3 For example, a recent study by Delerey and Doty found that
three HR practices— namely , results–oriented perform mance appraisals, employment security, and
profit sharing—were strongly related to return on equity and other financial measures of a firm’s
3 For example, see: Jeffrey Pfeffer and John Viega, “Putting People First for Organizational
Success,” Academy of Management Executive, Vol. 13, No. 2 (1999), pp. 37–48; and James L.
Heskett, Thomas O. Jones, Gary
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5. cost reduction and cost avoidance
Cost reduction
Generally defined as the act of cutting costs to improve profitability.
Cost reduction, should therefore, not be confused with cost saving and cost control. Cost saving
could be a temporary affair and may be at the cost of quality. Cost reduction implies the retention of
essential characteristics and quality of the product and thus it must be confined to permanent and
genuine savings in the costs of manufacture, administration, distribution and selling, brought about
by elimination of wasteful and inessential elements form the design of the product and from the
techniques and practices carried out in connection therewith.
In other words, the essential characteristics and techniques and quality of the products ... Show more
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Contingent workforce management
Organizations are relying more heavily on contingent workers to meet critical staffing needs. As this
need continues to grow, the coordination of staffing suppliers and the ability to strategically
administer the process and control spend becomes paramount. Establishing clear, enterprise–wide
management programs can ensure consistency, flexibility and responsiveness that drive results.
Successfully implementing a Contingent Workforce Management program requires a technology
solution with a foundation based on standardized efficient and effective processes. However, true
strategic optimization is difficult to achieve without a clear win–win strategy and partnership within
your supply chain. Key to realizing a true partnership model is derived from a clear understanding
of the primary value proposition organizations may recognize within a structured program and how
an organization can leverage those vendor benefits in their quest to achieve true supply chain and
flexible workforce optimization.
Design for supply
Focuses on the design and selection of common components for product families or platforms. This
concept is to minimize component variations used to produce each brand or family of products.
While it is important for marketing to differentiate each offering so that it can adequately satisfy the
needs of unique consumer segments, differentiations that are
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7. Cost Descriptors
Introduction
This paper will clarify the various terms used to describe costs, such as fixed, variable, direct,
indirect, and sunk, giving examples of each to help a good understanding of current budget
discussions. These concepts will help HR Management with an understanding of making effective
budget decisions for its company, since they need to have clear and full knowledge of basic
accounting language to grasp the concepts of the various accounting terms.
The term cost can be defined as the amount to be paid for products or services or a required payment
for purchasing products and services used as a constant during a period. Costs can have different
definitions, based on what kind of use it is required. They can be considered fixed ... Show more
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The profitability is not high, but at least, the fixed costs will be paid and maybe some profitability
will be achieved.
Opportunity Costs are used to measure the costs of the resources. They can be defined as the cost of
an alternative that must be forgone in order to pursue a certain action, or the benefits received by
taking an alternative action, or, still, the difference in return between a chosen investment and one
that was passed up. As example, the benefit of studying a MBA and spending money on it or save
the money for future expenses, or better saying, using the money to pay expenses in daily basis.
Conclusion
Various terms are used to describe costs. Having an understanding of these terms will provide a
better insight to managers and companies on making budget decisions, efficiently. Not only the ones
described above should be considered, but also all types of costs related to the decision in effect.
Efficient managers will considered all aspects related to the analyses in question.
References
Answers.com. Investment Dictionary. Copyright ©2000, Investopedia.com – Owned and Operated
by Investopedia Inc. Retrieved August 10, 2008 from http://www.answers.com/topic.html
Arkes, Hal & Blumer, C. (1985). The Psychology of Sunk Cost, Organizational Behavior and
Human Decision
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9. Cost Production and Types of Cost
Generally, the term cost of production refers to the 'money expenses' incurred in the production of a
commodity. But money expenses are not the only expenses incurred on the production of a
commodity. There are number of services and inputs such as entrepreneurship, land, capital etc.,
which are offered by an entrepreneur without changing any price or receiving any payment for them.
While computing the total cost of production, allowance should be made for such expenses. It is
therefore essential to have clean understanding for the different types of cost:
Some example of the Types of Cost:
1. Actual (or, Acquisition or, Outlay) Costs: Actual costs are the costs which the firm incurs while
producing or acquiring a good or a service ... Show more content on Helpwriting.net ...
Sunk costs are irrelevant for decision–making, as they do not vary with the changes contemplated
for future by the management. It is the incremental costs, which are important for decision–making.
11. Out–of–pocket Costs: are those expenses, which are current cash payments to outsiders. All the
explicit costs like payment of rent, wages, salaries, interest, transport charges, etc., fall in the
category of out–of–pocket costs.
12. Book Costs : are those business costs which do not involve any cash payments but for them a
provision is made in the books of account to include them in profit and loss accounts and take tax
advantages, like the provisions for depreciation and for unpaid amount of the interest on the owner 's
capital employed in the firm. In a way book costs are the imputed costs or the payments by a firm to
itself
13. Accounting Costs : are the actual or outlay costs. These costs point out how much expenditure
has already been incurred on a particular process or on production as such. Since these costs relate
to the past, these are generally sunk costs. The accounting costs are useful for managing taxation
needs as well as to calculate profit or loss of the firm.
14. Economic Costs: (relate to future) They are in the
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11. The Cost Of A Cost Analysis
A cost analysis can be conducted in order by companies in order to estimate their cost when making
decisions (Douglas, 2012). Managers can various methods to analyze costs for decision making
purposes these are total variable cost, average variable cost, marginal costs (Douglas, 2012). In
addition the company can use profit maximization and marginal revenue to help make decisions
(Douglas, 2012). This paper will analyze two different scenarios and use various methods to help
them make the decisions at hand. The first scenario will analyze a pizza company. William, owner,
is trying to increase outputs while minimizing their costs. It has been determined that four ovens
cost the company $1,000. In addition, he has supplied the following ... Show more content on
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This makes the most efficient number of employees to be at six because this is the highest return
between employee numbers zero and eight. If William was to pay each employee $500 per week, he
could determine his variable cost by taking their pay per week by the number of employees. Once
this is computed he can add it to the fixed cost to determine his total cost. The marginal cost can be
computed by taking the incremental total cost divided by the incremental output (Douglas, 2014).
Employees Variable Cost ($) Fixed Cost ($) Total Cost ($) Incremental Cost ($) Pizza Produced
Incremental Output Marginal Cost ($)
0 0 1,000 1,000 0
1 500 1,000 1,500 500 75 75 6.67
2 1,000 1,000 2,000 500 180 105 4.76
3 1,500 1,000 2,500 500 360 180 2.78
4 2,000 1,000 3,000 500 600 240 2.08
5 2,500 1,000 3,500 500 900 300 1.67
6 3,000 1,000 4,000 500 1140 240 2.08
7 3,500 1,000 4,500 500 1260 120 4.17
8 4,000 1,000 5,000 500 1360 100 5.00 This shows that to minimize their marginal cost they should
have five employees because this marginal cost is $1.67 and when you hit six employees their
marginal cost increase with each added employee. Marginal productivity declines as companies hire
more employees after a certain level. This is based on the law of diminishing returns which is if a
company continues to add variable inputs to its fixed inputs in the production process,
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13. Advantages Of The Cost Of Cost
Advantages of Absorption Costing
This Costing system takes both fixed and variable costs into consideration. This becomes very
essential for taking the pricing decisions, as the manufacturer will get a clear idea of the profit
margin to be made on each sale, as all costs would have been merged into the product cost.
Absorption cost treats all expenses as relevant. The absorption costing notes that, prices determined
for products and services must cover the organization's full expenditure system and, therefore,
should be included in unit costs.
The bottom line profitability measures indicate the expenses beard in the production areas which are
included in the calculation of expense per unit and is a reflection of the expense system of ... Show
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Under this costing method, a part of fixed cost is carried forward to the next accounting period as
the closing stock is valued at the total cost which includes fixed cost proportionally.
Under Absorption costing, unit costs at different levels of output are different hence, the process of
cost control and cost comparison is challenging.
Under this approach, monitoring efficiency can lead companies to make faulty decisions in terms of
production.
For a company making regular production and sales, with equal quantity of units each period,
absorption costing will show the real cost of goods sold. If the production and sales are irregular,
this approach will reflect that variable costs and fixed overheads change according to the sales. The
fixed overhead costs won't have any effect due to the level of production or sales but, variable costs
will be affected by the level of production or sales. For a company having fluctuations in the level of
sales and production, variable costs provide a better picture of costs to be incurred in order to run a
business unit.
The disadvantage of absorption costing approach is the method of managing the fixed overhead
costs. In this approach, all manufacturing costs are allocated to products. When companies do not
make sales of the products they produce in a period, these costs remain in the balance sheet. This
keeps the income high during periods
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15. The Cost Of Costs : Possible Cost Containment Strategies...
The Cost of Costs: Possible Cost–Containment Strategies for U.S. Health Care
American's health care cost is notoriously high compared to other industrial countries' health care
costs. Why is this the reality? This is the question Mark Stabile et. al. argues in "Health Care Cost
Containment Strategies Used in Four Other High–Income Countries Lessons For the United States."
Although the other four countries– Switzerland, UK, Germany and France–are not perfect, they
have cost–containment strategies that the U.S. could replicate. The main goals are that the U.S.
needs better cost–effective measurements, an increase in negotiating powers with providers and
pharmaceutical companies, and more uniform prices for the same services. The question then
becomes how will the U.S. accomplish these goals?
The cleanest way to lower cost prices would be to create a single–payer system. The government
would be the sole payer for health care and thus have more power to negotiate for lower costs,
which would be unilaterally implemented. In addition, the government would decide which
medicines and technologies should be purchased or pursued, similar to the UK's National Institute
for Health and Care Excellence (NICE) system. However, this is idealistic and based upon a purist
single–payer system, which even if it could be implemented, would run counter to the current U.S.
system in place, which relies heavily upon private insurance.
What then would be a realistic strategy to lower costs? Richard
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17. Corporate Cost, Human Resource Management Cost
As corporate cost is the cost associate with Treasury cost, Human resource management cost.
Acitivity based costing seeks to identify cost drivers that are directly link all the activities e.g.
support activities and production activities to the product manufactured or service provided. The
cost of all those activities are assigned to products or services via the activity cost driver, according
to the each product relative consumption of these activities. Allocating corporate overheads based on
the use of volume related cost driver alone can produce the misleading cost information such as
inappropriate allocation can lead to faulty conclusions about the relative product profitability.
Whether corporate costs should be allocated to individual divisions when an business has more than
one division that depends on whether the corporate costs are incurred primarily to support divisions
business activities and whether the allocation can be reliably determined. For example, if the
divisional companies are not closely related to the corporate costs and similarly the corporate costs
are not necessarily incurred to facilitate the operation of each division then arguably the corporate
costs should not be allocated to divisions.
The allocation division also depends on the nature and type of the business, the purpose of the
corporate costs allocation process and how divisions are divided. For example, if the change of
corporate cost is in proportionate with the increase or decrease of
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19. Cost Of Billboard
What Are the Added Costs of Renting a Billboard?
Other than renting a billboard, there are other costs that must be accounted for. On average,
companies will spend $500 to $1,000 to pay someone to design the billboard. Buying the vinyl
material for a bulletin billboard will cost about $500 for 700 square feet of vinyl. To lower costs,
businesses can always choose to hire a freelancer online to complete the design.
How Do I Rent the Billboard That I Want?
If the business has already found the right spot for their advertisement, the next step is actually
renting the billboard. Normally, the advertiser's name will be listed below or next to the billboard
image. Once this name is found, businesses can look up the advertising company online ... Show
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They allow running text and easy changes between different advertisements. Often, companies can
rent them for a portion of the time each day or during specific time periods like rush hour.
Painted Billboards: While these were once the most popular option, painted billboards have been
increasingly replaced by graphically produced designs.
Scented Billboard: Believe it or not, companies like Bloom have used scented billboards so that
people smell scents like charcoal when they pass by the billboard.
Mobile Billboards: A mobile billboard is often placed on a car or temporarily added to large events.
While they are less common, mobile billboards are often more memorable for consumers.
No matter what a business is looking for, there are many different types of billboards and price
ranges that are available. From national chains to local advertisers, businesses can find the exact
advertising products that they need. Once the business has found the right location, the billboard can
help to boost their brand and increase the buzz surrounding the
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21. Cost Allocations
Apple Valley Family Practice
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Apple Valley Family Practice
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Introduction
Apple Valley Family Practice is a medical practice with four locations in the Minneapolis/St. Paul
area. The clinical staff consists of 20 physicians, all of whom practice in one or more areas of family
medicine, and 46 physician extenders and nurses.
The Group Organization
Three Support departments:
Administration
Facilities
Finance
Three Support departments:
Administration
Facilities
Finance
Three patient services departments: ... Show more content on Helpwriting.net ...
Weaknesses: mistakes Opportunity Cost; some service departments are not charged for the use of
other service departments; and selection of which department is

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24. Cost Management : Cost Behavior
INTRODUCTION
The first part of the report will focus on the cost behavior and how this will benefit the company
when it comes to profit making, as the company managers do not clearly understand the relationship
between business activities and the costs of those activities. It will then go on to discuss cost
function and how it can be derived for this company.
The last part of this report will focus into the company's profit and how it can be predicted in
relation to the changes in volume, costs and prices. It will look into the Cost Volume Profit analysis
to do so in regards to the company selling multiple products. The report will conclude with the
assumptions of CVP analysis.
ISSUE 3A
Cost Behavior:
Cost behavior is the way in which different production costs are affected by the change in the level
of production. Cost behavior categorizes costs into three types; namely fixed costs, variable costs
and semi variable. Fixed costs are those, which will not change with the level of activity but within
the relevant range. Fixed costs are going to be incurred even at zero production (e.g. rent expense).
However, fixed costs per unit decrease with increase in production (Wong 2014).
Variable costs are those that change with the level of productions i.e. the total variable cost increase
when more units are produced and vice versa. Semi–variable costs have properties of both fixed and
variable costs due to presence of both variable and fixed components in them. An example of
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26. Total Cost Of The Project Costs
Sample:
A.Section 1
Total Cost of the Project
Source of Revenue Amount
Salary/Wages $300.00
Administrative project costs (i.e. mailing, photocopying, fax, etc.) $100.00
Equipment rental (audio/visual) $400.00
Rental of meeting rooms $175.00
Rental of sound system $225.00
Translation $225.00
Food $150.00
Non–alcoholic beverages $50.00
Total Planned Expenditures (1) $1600.00
B. Section 2
Anticipated Revenue
Sources of Revenue Amount
Government of Canada Support (other than VAC)
– Canadian Heritage $100.00
Provincial/Municipal Government Support
– Provincial Cultural Development $200.00
Private Sector Support
– ABC Company $100.00
Donations
– DEB Restaurant (food and non–alcoholic beverages) $200.00
Fund–raising
– 50/50 tickets $200.00 ... Show more content on Helpwriting.net ...
Simple Project Budget
Youth–led Research on Civic Engagement Grant
Candidate Forum to be hosted by Youth Council $3,000
Coordinator (for 4 month program) 10 ,000
Postage 300
Printing 2,000

27. Recognition 200
Travel 1,000
Total $16,500
There is a budget that used to explain the costs of a program you envision to your supervisor or
Board. The emphasis here is training youth and helping them develop a deeper sense of community
ownership and civic engagement, however when writing the initial budget, you can't forget that the
lead you assign to work on this project would have a large portion of their time occupied. This is not
a volunteer–only program; it would rely on focused coordination and management from a member
of your staff, and that must be factored into the overall cost.
The next sample will be more detail to give information and it has to be detail to maintain the trust
of the people.
2. More Detailed Project Budget
Health–E–Seniors
Revenue
__(Group being asked)_____Foundation $9,000
(Company, Faith or Community–based Partner) $1,000
Salary for Partner's AmeriCorps member (Program Coordinator) (undisclosed, in–kind)
Volunteer Contribution $106,800
(25 volunteers, 5 hours/week for 40 weeks = 5000 hours)
Independent
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29. Cost of Universities
Thesis statement: Both universities, local or foreign portray their own uniqueness, from the cost of
studying to the environment factors and the similarity in experiences.
1) Topic sentence:
The cost of studying in local universities and foreign universities is greatly different.
Supporting details:
 Cost of tuition fees in foreign universities is higher than in local universities.
 Studying in local universities need to spend about forty to fifty thousand ringgit whereas studying
in foreign universities, we need to spend a few hundred thousand ringgit.
 With the present economy downturn and the dropping value of the local currency, costs of tuition
fees are increasing and definitely more expensive.
 Cost of living in foreign ... Show more content on Helpwriting.net ...
 Students will interact with different people from different background and know the way other of
how people's life is while they are studying in foreign universities. On the contrary, they do not get
the chance to adapt to a new culture if they are studying in local universities.
 In addition, students who are studying in foreign universities might have communication barrier
while students who are studying in local universities will not come to this problem since they are
still using their own mother tongue language to communicate.
 Educational and social facilities are different in local universities and foreign universities.
 Educational and social facilities are more variety in foreign universities than local ones.
 For example, laboratories, computer laboratories, libraries, studios and theatres can be found in
almost every educational institution.
 Climate in foreign countries is different from the climate in local universities, which is in the
country of Malaysia.
 Foreign universities in foreign countries have four seasons, which as spring, summer, autumn and
winter throughout the year. However, local universities which are in Malaysia are only optional for
tropical rainforest climate.
 Students who want to study in foreign universities should learn to adapt to a different climate in
foreign country.
Conclusion:
The environment to study in foreign universities and local

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32. How Much Is The Cost Of Zero Cost?
How Much is the Cost of Zero Cost?
To a neo–classical economist zero is just another price. To the average coustemer it brings to the
mind the word of free. We are always trying to get something for nothing so if something is free
then consumers impulsively take the option. Ariely shows how this impulse comes with hidden costs
that debunk the myth of rational consumers. Whether it's from eating too much free food or
accumulating worthless free pens, clickers etc, people are always trying to get a free lunch.
As usual (this is what is so great about the book) Ariely did an experiment to find the answer. He set
up a stall with offering two piles of chocolates, the first being Lindt truffles and the second being
Hershey kisses. He sold the Lindt for 15 cent and the Hershey for 1 cent. Due to their superior
quality 73% choose Lindt and 27% chose Hershey's. So far, so good. An economist would say that
Lindt was obviously a superior product and as the benefit from it outweighed its cost better than
Hershey did, it sold better. So Ariely knocked one cent off the price of each chocolate, so that the
Lindt truffle cost 14 cent and the Hershey kiss was free . If Lindt was a superior product then it
should hold its place as its relative price hadn't changed, it still cost 14 cent more than Hershey. Sure
the proportions had changed, but one cent is the same amount in your pocket regardless of
proportions. You don't buy goods in proportions; you buy them in absolute amounts. Any
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34. Cost Accounting
Peanuts and Cost Accounting
A problem faced by a Restaurateur (Joe) as revealed by his Accountant–Efficiency Expert (Eff. Ex.)
EFF. EX. Joe, you said you put in these peanuts because some people ask for them, but do you
realize what this rack of peanuts is costing you?
JOE It ain 't gonna cost. 'Sgonna be a profit. Sure, I hadda pay $25 for a fancy rack to holda bags,
but the peanuts cost 6 cents and I sell 'em for 10 cents. Figger I sell 50 bags a week to start. It 'll take
12 ½ weeks to cover the cost of the rack. After that, I gotta clear profit of 4 cents a bag. The more I
sell, the more I make.
EFF. EX. That is an antiquated and completely unrealistic approach, Joe. Fortunately, modern
accounting procedures permit a ... Show more content on Helpwriting.net ...
Decrease the square foot value of your counter. For example, if you can cut your expenses 50%, that
will reduce the amount allocated to peanuts from $1,563 down to $781.50 per year, reducing the
cost to 35 cents per bag.
JOE (Slowly) That 's better.
EFF. EX. Much, much better. However, even then you would lose 26 cents per bag if you charge
only 10 cents. Therefore, you must also raise your selling price. If you want a net profit of 4 cents
per bag, you would have to charge 40 cents.
JOE (Flabbergasted) You mean after I cut operating costs 50%, I still gotta charge 40 cents for a 10
cent bag of peanuts? Nobody 's that nuts about nuts. Who 'd buy 'em?
EFF. EX. That 's a secondary consideration. The point is at 40 cents, you 'd be selling at a price
based upon a true and proper evaluation of your then reduced costs.
JOE (Eagerly) Look! I got a better idea. Why don 't I just throw the nuts out –– put 'em in a trash
can?
EFF. EX. Can you afford it?
JOE Sure. All I got is about 50 bags of peanuts –– cost about three bucks –– so I lose $25 on the
rack, but I 'm outa this nutsy business and no more grief.
EFF. EX. (Shaking head) Joe, it isn 't quite that simple. You are in the peanut business! The minute
you throw those peanuts out, you are adding $1,563 of annual overhead to the rest of your operation.
Joe, be realistic –– can you afford to do that?
JOE (Completely crushed) It 'sa unbelievable! Last week, I was gonna make money. Now, I 'm in a
trouble ––
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36. Cost Allocation And Cost Management
Cost Allocation Almost every single company that is in business faces a serious problem called cost
allocation. Every company no matter what they sell or what service they provide faces the problem
of allocating costs to defined cost objects. The cost allocation process is a very hard process for
most. Cost allocation is a very complex and difficult procedure that requires the application of
appropriate accounting procedures. These accounting methods sometimes will not provide objective
and fair cost allocation because they have irrational bases that are not always reliable or appropriate.
This is why accounting theory and practice steadily try to advance upon methods that are already in
place and help develop new ones that could provide objective and fair cost allocation (Perčević &
Dražić, 2008). Cost allocation is a very crucial procedure for many companies– not just production
companies, but also in companies that provide service. Cost allocation has one purpose and that is to
enable the determination of the cost of a product per unit in production companies and the cost of a
provided service in service companies. Therefore, methods for cost allocation directly affect the
service or product profitability assessment and at the same time sway segment and company
profitability. The main problem is the choice of the cost allocation accounting approach. There are
certain methods for cost allocation that do not apply the same to every company. If the method for
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38. Cost Benefits Of Cost Benefit Analysis
Cost–Benefit Analysis
Raviteja Turaga
Dr. Hammad Elbedour
Analysis, Modelling and Design
Date: 06/03/2016.
Cost–Benefit Analysis
Cost–benefit analysis is an economic evaluation whether to go ahead with the project depending on
the benefits attained from the invested amount on the project (cost). To perform this analysis, all the
inputs (cost) and outputs (benefits) should be measured in the same unit of measurement and at the
same time. Generally, the measurement unit is money (usually dollar). We need to measure these at
the same time because the dollar value changes time to time. While evaluating the cost benefit
analysis we need to take both the tangible and intangible costs in to consideration and classify the
costs in one time cost and recurring costs. So these onetime costs and recurring costs need to have
relation with time depending on the length of the project. Need to determine the fixed costs and
variable costs in both onetime cost and recurring cost. We need to have the relation between time
and money as we determine the costs, benefits and useful life of the project is determined on present
day, to have a successful cost–benefit analysis. We need to maintain a record for all these costs.
The most commonly used Cost benefit analysis are:
1. Net Present Value (NPV): It uses cost of capital and discount rate to determine the present value
of the project.
2. Return of Investment (ROI): It is the ratio of net cash receipts of the project divided
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40. The Cost Of Cost Costing
Procedure costing is utilized when there is large scale manufacture of comparative items, where the
expenses connected with individual units of yield can 't be separated from one another. As such, the
expense of every item delivered is thought to be the same as the expense of each other item. Under
this idea, expenses are amassed over a settled time of time, abridged, and after that designated to the
greater part of the units delivered amid that time of time on a predictable premise. At the point when
items are rather being produced on an individual premise, occupation costing is utilized to amass
costs and appoint the expenses to items. At the point when a creation procedure contains a few mass
assembling and some modified components, then a crossover costing framework is utilized.
Cases of the businesses where this kind of creation happens incorporate oil refining, sustenance
generation, and substance preparing. Case in point, how would you focus the exact expense needed
to make one gallon of flying fuel, when a great many gallons of the same fuel are spouting out of a
refinery consistently? The expense bookkeeping technique utilized for this situation is procedure
costing.
Procedure costing is the main sensible methodology to deciding item costs in numerous commercial
enterprises. It utilizes the greater part of the same diary entrances found in an occupation costing
environment, so there is no compelling reason to rebuild the diagram of records to any huge degree.
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42. Cost Estimating
Project managers must take cost estimates seriously if they want to complete software projects
within budget constraints. After developing a good resource requirements list, project managers and
their software development teams must develop several estimates of the costs for these resources.
There are several different tools and techniques available for accomplishing good cost estimation.
Software development project managers should prepare several types of cost estimates for most
projects. Three basic types of estimates include a rough order of magnitude or ROM, a budgetary
estimate, and a definitive estimate. A rough order of magnitude estimate provides an estimate of
what a project will cost. A rough order of magnitude estimate ... Show more content on
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A large percentage of the total software development project costs are often labor costs. Many
organizations estimate the number of people or hours they need by department or skill over the life
cycle of a software development project. Developing a good cost estimate is difficult. There are
several tools and techniques available to assist in creating them. Four of the commonly used tools
and techniques are analogous cost estimating, bottom–up estimating, parametric modeling, and
using computerized tools. Analogous estimates are sometimes referred to as top–down estimates.
Analogous estimates use the actual cost of a previous, similar software development project as the
basis for estimating the cost of the current software development project. This technique requires a
fair amount of expert judgment and is less costly than the other methods. However, this method is
also less accurate. Analogous estimates are most reliable when previous software development
projects are similar in fact, not just in appearance. Groups preparing cost estimates must have the
necessary expertise to determine whether certain parts of the software development project will be
more or less expensive than analogous projects. If the software development project to be estimated
involves a new programming language, or working with a new type of computer hardware or
network, the analogous estimate technique may result in too low of an estimate. Bottom–up
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44. Implicit Cost Of An Explicit Cost Essay
A) Explicit costs are expenses/payments that are actually made and frequently recorded. They
mirror payment for a business transaction such as salaries, rent, and utilities.(OpenStax Economics,
2016). Implicit costs being intangible are not frequently recorded. This sort of cost mirrors a
potential opportunity, advantages, or points of interest that may have happened in a given
circumstance. (OpenStax Economics, 2016)
EXAMPLES OF WHEN AN EXPLICIT COST IS DIFFERENT FROM AN IMPLICIT COST
1. Implicit costs are expenses connected with utilizing a company 's fixed assets and resources
already owned without paying to utilize those assets. They are opportunity expenses or costs that
originate from utilizing internal resources instead of leasing or renting them, with the organization
surrendering the chance to profiting from the use of those assets and resources so utilized. Cases of
Implicit cost include entrepreneurs renouncing getting a pay, or using their own space for business
purposes freely as opposed to leasing it to earn more income. Organizations can decide whether to
incorporate implicit expenses as potential wellsprings of income. Utilizing your basement or garage
as a wholesale for your home based business without leasing or renting it to your home based
business incurs an implicit cost. (OpenStax Economics, 2016)
Explicit costs, however, are immediate payments made during the course of business or during
business exchanges. This kind of cost obliges organizations to
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46. Cost of Production
Costs of Production
July 2011
Topics to be Discussed
Measuring Cost: Which Costs Matter? How do Cost Curves Behave? – Cost in the Short Run – Cost
in the Long Run How to Minimize Cost? How to draw Implications for Business Strategy?
Topics to be Discussed
Production with Two Outputs: Economies of Scope Dynamic Changes in Costs: The Learning Curve
Estimating and Predicting Cost
Measuring Cost: Which Costs Matter? Accountants tend to take a retrospective view of firms'
costs, whereas economists tend to take a forward–looking view Accounting Cost – Actual expenses
plus depreciation charges for capital equipment Economic Cost – Cost to a firm of utilizing
economic resources in production, including opportunity cost
Costs ... Show more content on Helpwriting.net ...
HOW does it MOVE? Extent of Rise in Cost Depends on the nature of the PRODUCTION
PROCESS – Extent to which production involves DIMINSHING RETURNS to VARIABLE
FACTORS If MARGINAL PRODUCT OF LABOUR DECREASES significantly as more labor is
hired – Costs of production increase rapidly – Greater and greater expenditures must be made to
produce more output
Determinants of Short Run Costs
Assume Labour: only Variable Input Assume the wage rate (w) is fixed relative to the number of
workers hired Variable costs is the per unit cost of extra labor times the amount of extra labor: wL
∆VC w∆L MC = = ∆Q ∆Q
A Firm's Short Run Costs
Inference: MC decreases initially with increasing returns (0 through 4 units of output) MC increases
with decreasing returns (5 through 11 units of output)

47. TC
Cost 400
($ per year)
300
Total cost is the vertical sum of FC and VC.
VC
200
Variable cost increases with production and the rate varies with increasing and decreasing returns.
100
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49. The Cost Of Cost Management
The product cost information which provided by the cost calculation is the first–hand data of the
cost management. The accuracy of it has play a vital role in the integral effect of the cost
management.
ABC has been defined as "an approach to the costing and monitoring of activities which involves
tracing resource consumption and costing final output."(CIMA)
The activity–based costing (ABC) is a cost calculation method which based on activity as the core,
recognize and measure the activity that uses the enterprise resource, make accurate calculations
about the consumption of resource costs in activities, and then select the cost drivers, allocate all the
activity–based cost to cost calculation object, such like the product or service. The ... Show more
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Therefore, the item of the activity cost information can be more clear and more correct. In the
meantime, ABC can continuous improve the way of the activity through the analysis of information,
to made the distribution of the resources reasonably and hence cost reductions. It has meet the
requirement of the accuracy of the cost calculation and managers of the enterprise can get the
accurate and relate information, it afford the good reference for adjustment of pricing strategy and
business decision to improve the economic performance of the company.
Provide the basis of the activity management, optimize industrial distribution. ABC bring and
dynamic tracking analyze more activities as the scientific basis to its management and enhance the
improvement of the process of the enterprise production and operation, analyze the activity process
according to the activity management thus can find the change of the items' value to take guiding
measures to minimize the consumption of resources in each activity and make it be efficiency
through reduce or cut non–value creating activity and increase the level of efficiency of the value
creating activity to optimize the activity chain and value chain, the information can be more timely
and useful, particularly the information which can directly and positively affect the growth
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51. Harrington: Cost and Variable Costs
Harrington Case Analysis Issue Stagnant sales performance has caused Harrington Collection to
explore new avenues for improved performance, including the launch of a new active–wear line.
Recognizing an emerging trend of low price and rapid style turnover in the women's apparel market,
along with tremendous growth in the active–wear segment, Harrington needs to work strategically to
capture this profitable market opportunity. After careful analysis, it was determined that Harrington
should implement a new active–wear line. Financial 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 ... Show more content on Helpwriting.net ...
In addition, by outsourcing the production in Mexico, it can not only decrease costs, but also
provide the possibility to respond more swiftly to changes in demand. With this in mind, it is
strongly suggested that Harrington launches a new active–wear line.
Appendix A Start Up Costs: | | | Start–up Costs (Pants Plant) | $ 1,200,000 | | Start–up Costs (Hoodie
and Tee–shirt Plant) | $ 2,500,000 | | Equipment (Pants Plant) | $ 2,000,000 | | Equipment (Hoodie
and Tee–shirt Plant) | $ 2,500,000 | | Launch–PR, Advertising | $ 2,000,000 | | Fixtures for Company
Stores | $ 2,500,000 | Total Start–up Costs | $ 12,700,000 | Annual Depreciated Start–up Costs | $
2,540,000 | | | | Annual Ongoing Operating Costs–Fixed: | | | Overhead (Pants Plant) | $ 3,000,000 | |
Overhead (Hoodie and Tee–shirt Plant) | $ 3,500,000 | | Rent (Pants Plant) | $ 500,000 | | Rent
(Hoodie and Tee–shirt Plant) | $ 500,000 | | Management/Support | $ 1,000,000 | | Advertising | $
3,000,000 | Total Fixed Operating Costs | $ 11,500,000 | | | Direct Variable Costs: | Hoodie | Tee–shirt
| Pants | | Sew and press | $ 3.25 | $ 2.00 | $ 2.85 | | Cut | $ 1.15 | $ 0.40 | $ 0.70 | | Other variable
labor | $ 3.20 | $ 2.40 | $ 3.05 | | Fabric | $ 9.10 | $ 2.20 | $ 7.50 | | Findings | $ 3.85 | $ 0.50 | $ 2.30 |
Total Variable Cost | $ 20.55 | $ 7.50 | $ 16.40 | | | | | Direct variable costs translated
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53. Costs
Polysar Limited––recent assignment.
BACKGROUND
Rubber Group is the largest of the three operating units of Polysar Limited. The primary users of its
products, such as butyl and halobutyl, are manufacturers of automobile tires; other users are from
various industries. In 1986, Rubber group contributed 0.8 billion which is 46 percent of the
company annual sale. The operation of the group is divided into four divisions, NASA (North
America and South America) and EROW (Europe and rest of the world), Research department and
Global Marketing department. NASA and EROW operate as profit centers each produce butyl and
halobutyl dedicated to regional customers. Both of the centers have relatively flexible producing
schedule to satisfy the ... Show more content on Helpwriting.net ...
The calculation of the two variances started with the standard fixed cost per tonne which was
derived by following formula:
Standard fixed cost/tonne
=Estimated annual total fixed cost /Annual demonstrated plant capacity
This year, the NASA Rubber's estimated annual total fixed cost was 44,625,000, and the annual
demonstrated plant capacity was 85000tonnes. Thus, the standard fixed cost per tonne for 1986 was
525/tonne.
Then, spending variance was calculated by,
Spending Variance=Actual fixed cost–Standard fixed cost
Actual fixed cost/tonne=Actual annual total fixed cost /Annual demonstrated capacity
NASA had a favourable spending variance of 498thousand this year which means they spend
498thousand less than budgeted. The actual fixed cost per unit was around 519/tonne.
Volume variance was calculated by,
Volume variance=
(Standard fixed cost/tonne) x ([Actual production]–[Demonstrated capacity])
NASA had an unfavourable volume variance of 11.4million which was 5million higher than
expected.
As shown above, volume variance was derived by multiplying standard fixed cost/tonne with the
difference between actual production and standard production.
By reorganizing the formula, it became:
Volume Variance=
Standard fixed cost/tonne x Annual total production–Estimated annual total fixed cost
Simply speaking, the variance measures the amount of designated
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55. Cost Of Cost Management Accounting Essay
TASK 1
Name– Sonia Sharma
Student ID– 20150076
Unit– 26367
COST MANAGEMENT ACCOUNTING
ANSWER 1.1
a) DIRECT COSTS:– A direct cost is defined as the price that can be directly applied to production
of goods. The direct cost classifies direct material, direct labour and manufacturing overheads. The
direct cost is related to labour, raw material and expenses related to the production of goods. Direct
cost is simply as the cost that is applied directly to the product. For example– wages of full time and
part time staff.
b) INDIRECT COSTS:– Indirect cost can be defined as the cost which cannot be directly applied to
the product. In simple words any cost apart from direct material, direct labour and manufacturing
overheads is considered as indirect cost. For example– insurance of company building, wages of
cleaners working in the company premises etc.
c) FIXED COSTS:– A fixed cost is referred to a cost which doesn't changes with circumstances. If
there is a fixed cost of any product or service one has to pay the cost. For example, the rent of the
house is fixed that has to be paid every week, no changes are acceptable. For example– salary of full
time staff.
d) VARIABLE COSTS:– A variable cost is a changing cost. In case of any changes the cost of the
product changes. For example, the cost paid to a casual worker may vary. More hours done by the
worker will pay him well
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57. Cost Accounting : Cost Audit Essay
MEANING OF COST AUDIT
Cost audit is basically the analysis of cost accounts and also checking on the efficiency of cost
accounts and to ensure that these accounts are matching the predetermined cost accounting plans. It
also determines the accuracy of the cost accounts. They also ensure that the accounts conform to the
principles, plans, procedures and objectives. It shows the deviation in plans. It is also known as
efficiency audit as it checks the efficiency of working of predetermined plans. It consists of the sum
total of expenditure and revenue and determines the true work efficiency of a plan. It is used to
assess the operational efficiency and resource management of an organisation. It is essentially the
verification of the cost accounts so as to ascertain the variations in the efficiency of the organisation.
DEFINITION OF COST AUDIT
The concept of cost audit has been elaborated by ICWA as 'an audit of efficiency of minute details of
expenditure, while the work is in progress and not a post mortem examination. Financial audit is a
'fait accompli', cost audit is mainly a preventive measure, a guide for management policy and
decision in addition, to being a barometer of performance'. (ref. yourrticlelibrary.com)
Cost Audit may be defined as "the verification of cost records and accounts and a check on the
adherence to the prescribed cost accounting procedures and the continuing relevance of such
procedures."(Ref. A Textbook of Financial Cost and Management
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59. Cost and Overhead
fsdfsdsdfSuppose sales in 2001 equal 26,000 units, as budgeted in January, and that actual
manufacturing expenses turn out to equal budgeted expenses. Prepare an income statement for the
year (just include the manufacturing expenses) that will help senior management and the board
understand the economics of cartridge production in 2001.
5. Work through the Youngstown Products numerical example (below).
Youngstown Products, a supplier to the automotive industry, had seen its operating margins shrink
below 20% as its OEM customers put continued pressure on pricing.
Youngstown produced four products in its plant and decided to eliminate products that no longer
contributed positive margins. Details on the four products are provided ... Show more content on
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It calc ulates a p lant–wide overhead rate by dividing total overhead costs by total direct labor hours.
Assume, for the calculations below, that plant overhead is a committed (fixed) cost during the year,
but that direct labor is a variable cost.
Calculate the plant–wide overhead rate. Use this rate to assign overhead costs to products and
calculate the profitability of the four products. The assignment spreadsheet provides a starting point
for your calculations, with some data and formulas already supplied.
Suppose sales in 2001 equal 26,000 units, as budgeted in January, and that actual manufacturing
expenses turn out to equal budgeted expenses. Prepare an income statement for the year (just include
the manufacturing expenses) that will help senior management and the board understand the
economics of cartridge production in 2001.
5. Work through the Youngstown Products numerical example (below).
Youngstown Products, a supplier to the automotive industry, had seen its operating margins shrink
below 20% as its OEM customers put continued pressure on pricing.
Youngstown produced four products in its plant and decided to eliminate products that no longer
contributed positive margins. Details on the four products are provided below: A B C D Total
Production Volume
(units) 10,000 8,000 6,000 4,000
Selling Price $15.00 $18.00 $20.00 $22.00
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61. Costs and Direct Labor Cost
Midterm2Practice Key
1. The following data have been recorded for recently completed Job 501 on its job cost sheet.
Direct materials cost was $3,067. A total of 30 direct labor–hours and 104 machine–hours were
worked on the job. The direct labor wage rate is $12 per labor–hour. The company applies
manufacturing overhead on the basis of machinehours. The predetermined overhead rate is $11 per
machine–hour. The total cost for the job on its job cost sheet would be: A. $4,571 B. $3,757 C.
$3,090 D. $3,427 Applied manufacturing overhead = Predetermined overhead rate x Actual
machine–hours Applied manufacturing overhead = $11 x 104 Applied manufacturing overhead =
$1,144 Total cost = Direct materials + Direct labor + Applied manufacturing ... Show more content
on Helpwriting.net ...
$79.66 per unit B. $90.81 per unit C. $29.07 per unit D. $75.70 per unit
10. Data concerning three of the activity cost pools of Bramhall LLC, a legal firm, have been
provided below:
The activity rate for the "meeting with clients" activity cost pool is closest to: A. $125 per meeting
hour B. $65 per meeting hour C. $80 per meeting hour D. $665,500 per meeting hour
Kleppe Corporation has provided the following data from its activity–based costing accounting
system:
The "Other" activity cost pool consists of the costs of idle capacity and organization–sustaining
costs that are not assigned to products.
11. How much indirect factory wages and factory equipment depreciation cost would be assigned
to the Customer Orders activity cost pool? A. $240,000 B. $72,000 C. $68,000 D. $480,000
12. How much indirect factory wages and factory equipment depreciation cost would NOT be
assigned to products using the activity–based costing system? A. $0 B. $68,000 C. $280,000 D.
$200,000
13. In this problem, there are three possible overhead allocation bases: direct labor (present system),
machine hours (the proposed system), and number of batches. First, calculate product costs under
each of the three allocation schemes: (a). Direct labor cost as the allocation base (present system):

62. Bluethings 120,000 .50 $60,000 95.238% 342,857 60,000 $462,857 $ 3.857 Graythings 6,000 .50
$3,000 4.762% 17,143 3,000 $23,143 $
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64. The Costs And Costs Of The Cost Of Building New Orleans
Next, it is necessary to identify the land that is possibly flooded and this can be calculated as: 0.50 x
0.63 = 0.315 or 31.5% of the land is flooded. Hence the probability that the area is flooded is 0.315
or 31.5%. Assuming the probabilities, rebuilding the city together with the levees will amount to
$1.818 trillion in 100 years. Rebuilding the levees as of 2010 was $14 million; however, there is an
additional cost of the residual risk of Katrina. This residual risk can be calculated as: $14 / 0.6223 =
$22.5 billion. This implies that rebuilding the levees would amount to a total of $14 + $22. 5 =
$36.5 billion. Thus, with these estimates, the cost of rebuilding New Orleans for the federal
government would be: Cost of building new ... Show more content on Helpwriting.net ...
In addition, some of the New Orleans residents might decide to rebuild their homes and businesses
themselves instead of waiting for the federal government. While considering rebuilding New
Orleans, a good question to ask is what the government would do with the money that it plans to use
to rebuild the city if it was diverted to other projects. The best thing to do would be to build another
city elsewhere or settling the people and businesses affected away from the city. Another option
would be to give a cash settlement to every individual, family or business that suffered a loss and
allow them to choose to rebuild in New Orleans or elsewhere. Suppose the federal government
would spend $1.818 trillion to rebuild the city but instead gives a cash settlement to the city dwellers
who are about $1.3 million people, each resident would get about $1.39 million that is more than
enough to pay for a new home and business in a different town. One pitfall for the federal
government to rebuild the city is that spending that huge amount of money might not make sense if
the residents do not want to stay. This would imply that the new city would become obsolete despite
the billions spent to rebuild. To avert this risk, the government will need to assess whether the
people want to stay and whether New Orleans needs a big city (Glaeser, 2005). The estimated
relevant expected utility The probability (p) of a hurricane similar to
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66. Total Cost Minimization : The Cost Of Money
Total Cost Minimization There are many problems in the world today, ranging from war and
fighting, to disease and starvation. However, one of the biggest issues in today's day in age is
money. People either have too much money or not enough of it. Money is something that everybody
needs to survive in order to support themselves as well as their families. In order to maintain a
decent amount of money, people are always thinking of ways to save money and reduce the amount
of money spent on a day to day basis. The idea of saving money and reducing the amount of money
spent is especially important to companies. The more money companies are able to save will
increase the profit, which is what all companies all around the world aim to do ... Show more
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The amount of money lost on paying for the labour in Canada would decrease the profit of the
company immensely. However, having company products manufactured in countries, such as China,
would be much more cost effective. The pay in countries, such as China, is significantly lower than
what is required in North America. This means that workers will get paid less, and the company will
save money on labour costs for their product. This is one of the main reasons as to why so many
products that are bought in North America are manufactured in China. Though having the product
manufactured in China may lower the overall quality of it, it will decrease the manufacturing costs.
In the business industry, all that matters is money. It is all about how to increase profit and minimize
total cost of the products. Even though the quality will be lowered, companies will continue with
this process because it saves money and benefits them greatly. As stated above, the business industry
is only interested in money and making a profit. This also means that most companies to not care
about being ethical when creating their products. This is where problems, such as child labour,
occur. Illegal activity, such as child labour, costs next to nothing for a company. Since child labour is
most prominent in countries, such as Bangladesh, it is very common for products to be
manufactured there. The children are barely being paid which will save the
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68. Variable Costs
IE401–Econ401 MidTerm Managerial Economics
NAME:
Each of the 20 multiple choice questions is worth 3 points. Mark your answers on the ANSWER
KEY on page 5. Also provide BRIEF answers to each of the 4 "essay type/logical" questions.
Multiple–Choice Questions
1. A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All
costs associated with production and sales total $10,000; however, if the manufacturer were to
produce one additional basketball per day, total costs would increase to $10,100. From these
amounts, we can tell that
a. the firm has negative profit.
b. marginal cost equals $100.
c. marginal cost equals $150.
d. marginal cost equals marginal ... Show more content on Helpwriting.net ...
What is the average total cost of production when 20,000 units are produced?
a. 4,500.
b. 3,500.
c. 2,500.
d. 1,500.
16. As a manufacturer increases output, which of the following costs should decrease?
a. Average total cost.
b. Average fixed cost.
c. Marginal cost.
d. Average variable cost.
17. A spirits manufacturer is considering two potential production investments: Option A costs an
initial $2 billion and will involve variable costs (labor and material) of $5 per bottle of spirits.
Option B costs an initial $4 billion and will involve variable costs (labor and material) of $3 per
bottle of spirits. Assuming an annual capital charge equal to 10 percent of the initial costs, what is
the average fixed cost at production level of 30,000,000 bottles per year for the Option A facility?
a. $10.00.
b. $5.00.

69. c. $6.00.
d. $6.67.
18. A spirits manufacturer is considering two potential production investments:
Option A costs an initial $2 billion and will involve variable costs (labor and material) of $5 per
bottle of spirits. Option B costs an initial $4 billion and will involve variable costs (labor and
material) of $3 per bottle of spirits. Assuming an annual capital charge equal to 10 percent of the
initial costs, what is the average fixed cost at production level of 20,000,000 bottles per year for the
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71. Costs and Labor
Chapter 4: Costs and Cost Minimization
Multiple Choice
1. Suppose you are a star basketball player at a major university in your sophomore year. You are
sought after by several NBA teams. Which of the following choices best characterizes your
opportunity cost if you choose to drop out of college and enter the NBA?
a) The value of your college scholarship that you have given up.
b) The skills that two more years of playing at your college would have given you along with their
additional value over the rest of your life, in addition to the educational value of the college degree.
c) The total of explicit costs that have been incurred in the past.
d) The total of implicit costs that have been incurred in the past.
Ans: B
2. You ... Show more content on Helpwriting.net ...
13. An isocost line represents
a) all combinations of inputs in which the firm produces the same level of output.
b) all combinations of inputs in which the firm has the same level of total cost.
c) for a given level of output, the various points that will produce that same level of output at the
same cost.
d) all combinations of output that yield the same total cost level.
14. The cost–minimization problem of the firm is to
a) maximize output subject to a given cost constraint.
b) minimize total cost.
c) minimize average cost.
d) minimize total cost of producing a particular level of output.
15. The long–run is
a) a time period in which all input levels are fixed.
b) a time period in which at least one input level is fixed.
c) one year.
d) a time period in which no input levels are fixed.

72. 16. A difference between the short run and the long run is that a firm in the short run
a) faces an unconstrained cost minimization problem, whereas the firm is constrained in the long
run.
b) faces a constrained cost minimization problem, whereas the firm is unconstrained in the long run.
c) faces a constrained cost minimization problem in both the short run and the long run.
d) faces an unconstrained cost minimization problem in both the short run and the long run.
17. When the level of capital is plotted on the vertical axis and the level of labor is plotted on the
horizontal axis, the slope of the isocost
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74. Direct Cost And Indirect Cost
Explain the concept of a direct cost and an indirect cost
An organization may classify the costs of manufacturing a product as
Direct cost or
Indirect costs on the basis of whether they can be attributed to the production of goods or services or
not.
Direct cost:
Direct cost is a cost that can be located in full for the product manufactured, service rendered or a
department being costed.
Explanation:
Direct costs are expenditures that an organization can directly attribute to the cost objects, i.e.
product manufactured or activities of a department. Direct costs comprise of the following:
Direct material cost
Direct labor cost
Other direct costs
Direct material cost:
These are the costs of material utilized in the manufacturing ... Show more content on
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Cost of packaging material for the manufactured product.
Direct labor cost:
Direct labor cost is the cost of the labor force directly engaged in the manufacturing of the product
or rendering of service. Direct labor cost can be determined by measuring the time consumed in the
manufacturing of the product. Direct labor cost consists of basic pay and overtime worked in the
manufacturing of the product.
Examples of direct labor cost are:
Cost/ wages of workers directly involved in the manufacturing of the product.
Cost of special personnel required solely for the manufacturing purpose, i.e. testers, engineers and
researchers.
Other direct costs:
Other direct costs are the expenditures that cannot be considered as a direct material cost, direct
labor cost or indirect cost. These are expenditures incurred as the direct consequence of
manufacturing a product and can be traced in full to the product. Examples of direct costs are:
Designing costs
Cost of hiring special machinery and equipments for a particular product.
Prime cost, a combination of direct

75. ... Get more on HelpWriting.net ...

77. Cost of Quality
Assuming an agreement is made between a supplier and a customer such that the supplier must
ensure that all parts are within tolerance before shipment to the customer, what is the effect on the
cost of quality to the customer? Cost of quality is the cost associated with the quality of a work
product. As defined by Crosby in his "Quality Is Free", Cost Of Quality (COQ) has two main
components: Cost Of Conformance and *Cost Of Non–Conformance. Another view is that cost of
quality is the amount of money a business loses because its product or service is not done right in
the first place. From fixing a warped piece on the assembly line to having to deal with a lawsuit
because of a malfunctioning machine or a badly performed service, ... Show more content on
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Each product is different in some way from the one just made prior. There are thousands of variables
that affect thousands of characteristics of a product. In an environment that is constantly changing, it
may not be feasible to measure every characteristic of the product. There are no tools to detect every
characteristic. What is critical is to control the important parameters of the process throughout the
product life cycle. This helps to ensure that the quality is built into the product as it is manufactured.
What most companies do is select a handful of characteristics considered to be important to their
customer. They measure those few to ensure that they meet customer requirements. They perform
their 100% inspection, and if the product passes it is shipped to the customer. They are very
surprised when they get a phone call from the customer that their product ruined the customer 's lot
and not only does their customer want their money back but they want to be compensated for the
losses as well. At that point the quality manager will retrieve the test results from the product, which
shows that the product passed all quality inspection requirements before shipment. The result is lost
customers. Either way the cost will be substantial to the manufacturer. What went wrong? The 100%
inspection was
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79. Cost and Price
Economics
Discussion Questions
1. Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw
material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee,
would the price of a cup of coffee rising by $0.01? Explain.
Price of the product comes from the production of the goods all the way till it hits the market shelf.
So when the price of the product like coffee increases during the productivity of the product then the
end cost could increase too. Changes of the productivity can increase by changes in technology and
human capital. This allows the production of the products to become better managed by managers
because it can track all the materials that is ... Show more content on Helpwriting.net ...
For companies that lower the price it's okay for them to increase the prices wants the economy is
back to a recovery state. Consumers will not hold it against the company for increases the prices
because they know that when times get tough they will do what they can to help each customer out
by lowering the prices again.
Companies slashing prices to maintain a marker share is okay because they will do what they can to
stay ahead of the competition. Market shares are a part of the company's financial support. When
customers by the shares in a company they are investing in that company for the long haul and
hoping to make some extra money along the way. When they lower prices it draws customers to
their company name because they want to get a better deal then they possible are at the company
they at. On the flip side is that a company lowering their prices could mean that they have increased
the price because they want to get more profits. This could cause concern by customers that the
company has more room to move the price down because they have just increased it over time
because they wanted profits and might not know what the bottom price really is.
Reference:
Boyes, W. (2012). Managerial economics: Markets and the firm (2nd Ed.). Mason, Ohio: South–
Western
Cengage
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81. Costs and Opportunity Cost Essay
* Nobel Prize–winning economist Ronald Coase noted,"The cost of doing anything consists of the
receipts that could have been obtained if that particular decision had not been taken." For example,
the opportunity set for this Friday night includes the movies, a concert, staying home and studying,
staying home and watching television, inviting friends over, and so forth. The opportunity cost of
taking job A included the forgone salary of $102,000 plus the $5,000 of intangibles from job B.
Opportunity cost is the sacrifice of the best alternative for a given action. Public accounting firms
confront this issue. The car's opportunity cost in the decision to keep it for resale is $7,200, but in
matching expenses to revenues, the ... Show more content on Helpwriting.net ...
On May 12, Emrich ordered a 50–gallon drum of a specialty acid known as GX–100 for use in a
May 15 job. It used 25 of the 50 gallons in the drum. The 50 gallons cost $1,000. GX–100 has a
shelf life of 30 days after the drum is opened before it becomes unstable and must be discarded.
Because of the hazardous nature of GX–100 and the other chemicals Emrich uses, Emrich works
closely with Environ Disposal, a company specializing in the disposal of hazardous wastes. At the
time of ordering the GX–100, Emrich anticipated no other orders in the May–June time period that
could use the remaining 25 gallons of GX–100. Knowing it would have 25 gallons remaining, it
built $1,000 into the cost of the job to cover the cost of the GX–100 plus an additional $400 to cover
the cost of having Environ dispose of the remaining 25 gallons. On June 1, a customer called and
asked for a price bid for a rush job to be completed on June 5. This job will use 25 gallons of GX–
100. Emrich is preparing to bid on this order. What cost amount for the GX–100 must be considered
in preparing the bid? Justify your answer. 1000 dollars is sunk cost–no need to consider –400 dollars
is depose of it–need to consider P 2–13: Volume and Profits Assuming the firm sells everything it
produces and assuming that variable cost per unit does not change with volume, total profits are
higher as volume
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83. Costs and Joint Cost Allocation
Unitron Friday
1 'produced as/ sold as' matrix Sold as | Produced as | | | 401 | 402 | 403 | 404 | 405 | Total | | 401 |
90,000 | 10,000 | | | | 100,000 | | 402 | | 110,000 | 30,000 | | | 140,000 | | 403 | | | 60,000 | 40,000 | |
100,000 | | 404 | | | | 20,000 | 20,000 | 40,000 | | 405 | | | | | 20,000 | 20,000 | | Total | 90,000 | 120,000 |
90,000 | 60,000 | 40,000 | 400,000 |
2
Physical Measures Method | Produced | Proportion | Joint Cost Allocation | Unit Cost | 401 | 90,000 |
(90,000/400,000)0.225 or 22.5% | (200,000 x 0.225)45,000 | (45,000/90,000)0.5 | 402 | 120,000 |
(120,000/400,000)0.3 or 30% | (200,000 x 0.3)60,000 | (60,000/120,000)0.5 | 403 | 90,000 |
(90,000/400,000)0.225 or 22.5% | ... Show more content on Helpwriting.net ...
6 | –1.66667 |
| sales value | proportion | cost allocation | cost/unit | amount sold | 401 | 40,000 | 0.153256705 |
30651.341 | 0.30651341 | 100,000 | 402 | 84,000 | 0.32183908 | 64367.81609 | 0.459770115 |
140,000 | 403 | 70,000 | 0.268199234 | 53639.84674 | 0.536398467 | 100,000 | 404 | 32,000 |
0.122605364 | 24521.0728 | 0.61302682 | 40,000 | 405 | 20,000 | 0.076628352 | 15325.6705 |
0.766283525 | 20,000 | seconds | 15000 | 0.057471264 | 11494.25287 | 0.114942529 | 100,000 | |
261,000 | | 200,000 | | |
| 401 | 402 | 403 | 404 | 405 | seconds | Revenue | 40,000 | 84,000 | 70,000 | 32,000 | 20,000 | 15000 |
Costs | 30651.34 | 64367.82 | 53639.85 | 24521.07 | 15325.67 | 11494.25 | Profit | 9,349 | 19,632 |
16,360 | 7,479 | 4,674 | 3,506 | GM% | 0.233716 | 0.233716 | 0.233716 | 0.233716 | 0.233716 |
0.233716 |
3(a)(i)
Revenue = 6,000 x 0.4 = 2,400
If we fill the order with 402's
Cost of 401's – we have 3,000 in inventory so 3,000 x 0.4 = 1,200
Plus fill the rest of the order with 402,s – 3,000 x 0.4 = 1,200
Total Cost = 1,200 + 1,200 = 2,400
Profit(Loss) = 2,400 – 2,400 = 0
Or if we produce more 401's instead
Revenue is unchanged = 2,400
Cost of 401's = 6,000 x 0.4 = 2,400

84. Profit(Loss) = 2,400 – 2,400 = 0
3(a)(ii)
Revenue is unchanged = 2,400
Cost of 3,000 401's = 3000 x 0.31 = 930
Cost of 3,000 402's = 3000 x 0.46 = 1380
Total Cost = 2,310
Profit (Loss) = 2,400 – 2,310 = 90
Or if we produce more 401's
Revenue is unchanged = 2,400
Cost of 6,000
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86. Energy Costs
Energy costs There are various energy sources available in the world today. These are either
renewable sources or non–renewable sources. Some of the non–renewable sources include coal, oil,
and nuclear fuel while renewable resources are solar energy, wind power, biomass, geothermal wave
and tidal power, hydropower and so on. Cost–supply and uncertainty are usually quite asymmetric
when it comes to the energy industry and any other industry in the world. The paper will look at the
future of energy extraction in terms of costs.it will also look at how technological improvement have
impacted energy extraction even in the wake of the depletion of convectional sources. Cost–supply
and uncertainty are asymmetrical when it comes to extraction of energy. The cost of energy
extraction will determine the supply. The future of energy extraction is quite uncertain since non–
renewable energy sources are slowly being depleted. The future of energy extraction is quite
uncertain which means that the cost and supply are going to be determined by the availability of the
energy sources which will be extracted. The future of extraction of energy is determined by as a
result of costs. This is because there are various techniques which are used in extraction of energy.
These techniques used all cost differently depending on the complexity of the method of extraction
that is being used. The convectional energy sources which are in existence are slowly being
depleted. This means that the
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