WoodhouseCL FixedCosts essay

Recalculate allocations using activity based costing (BBC), determine contribution margin less customer support and distribution costs for both approaches above, identify which type f customer should the company support and why, and finally, identify the characteristics of companies that may benefit from an BBC allocation system? Calculate using a Simple Strategy The need to calculate a simple strategy with costs is a indicator of a widespread, deep-seated belief that all costs must somehow be fully allocated to the revenue-producing operating parts Of the organization.

Such allocations are not always necessary nor useful as management information. However, they are accepted as long as all managers are treated alike. The customer support and distribution costs associated with the three types of customers sing a simple strategy first and allocate the costs based on revenues are: *The company’s total support and distribution costs are $240,000.

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Sales based off units are at $20,000 while the contribution margin ratio varies due to efferent quality of towels sold to the stores. Based off revenues of $600,00 with the three types of customers: Description Customer Support & Distribution Costs Department Stores Specialty Shops Gift Shops Activity Level Sales (units) 10,000 5,000 Revenues $200,000 $1 o,oho $300,000 Contribution margin ratio 50% No. Of customers 5 45 250 Total costs/No. F orders places $40,000 10 90 900 Total costs/No. Of sales calls $80,000 195 800 Total costs/No. Of shipments $120,000 20 480 1 ,oho Recalculate allocations using Activity Based Costing (BBC) Activity-based costing (BBC) systems first accumulate overhead costs for each of the activities of an organization, and then assign the costs of activities to the products, services, or other cost objects that caused that activity.

To establish a cause-effect relationship between an activity and a cost object, cost drivers are identified for each activity. Consider the following activities and cost drivers for the Belmont manufacturing plant department of a major appliance producer: Determine contribution margin less customer support and distribution costs for both approaches Identify which type of customer should the company support and why Identify the characteristics of companies that may benefit from an BBC allocation system?

After analyzing and making comparison of an organization’s products and services, the concluding analysis is determining where the organization may have gaps and how it can improve. For example, the organization can leverage key components of management accounting, estimate costs for all internal departments, institute performance standards, and generate vital information to balance accounting across the organization, while monitoring roles, trends and various reasons relating to a specific activity.

Conclusion (Managerial Accounting) In conclusion, briefly explained how management accounting and financial accounting interdisciplinary’ concepts differ, secondly, analyzing the various reasons such as planning and budgeting, decision making and measuring performance to support the knowledge base and overall understanding of concepts, finally, comparing the roles of management and its relationship with management accounting. Overall managerial accounting creators understand how much their products cost, how businesses create currency, and how to strategies for profits and growth.