Cost Analysis for Decision Making

Cost Analysis for Decision Making Essay example
College
Essay
Finance & Accounting
Pages 3 (753 words)
Download 1
Part (a): Discuss each of the four alternatives outlined above. Identify the relevant costs (including amounts) for each of the four alternatives, and explain why these costs are relevant to the decision. Identify any costs that are not relevant, and explain why they are not relevant…

Introduction

will continue making the containers and performing maintenance.)  Alternative B: Liquid Chemical Co. will continue making the containers, but it will outsource the maintenance to Packages, Inc.  Alternative C: Liquid Chemical Co. will buy containers from Packages, Inc., but it will perform the maintenance.  Alternative D: It is completely outsourced. Packages, Inc. will make the containers and provide the necessary maintenance Alternative A: In case if Liquid Chemical Company opt this alternative in which it will continue to make containers and performing simultaneously, the company will have to incur all the necessary costs as all those costs would be relevant costs needed to make and maintain the current production. Relevant costs pertaining to this particular alternative are full material costs amounting to $500,000, full labor cost which includes cost of supervisors and workers amounting to $500,000 cumulatively. Moreover, the full departmental costs of Dyers’ that amounts to $358,000 would also be a part of this alternative. Overall, this alternative would incur $1,717,000. The costs that are not relevant to this particular alternative are contract costs to Packages Inc in relation to maintenance and container, severance cost and pension cost. The advantage of this alternative is that the company will have control over its production pattern, job security of Dyer’s departmental workers etc. ...
Download paper
Not exactly what you need?

Related papers

Simon Everly PLC Financial analysis and decision making
INTERPRETATION OF LIQUIDITY RATIOS Liquidity of an organization is its ability to meet its short term duties (obligations), and it is amongst the major measures of organizations’ financial health (Brigham & Ehrhardt 2011). The liquidity ratios for Simon Everly PLC determined in this task involved: Current Ratio and Acid Test Ratio. Interpretation of the Current Ratio This ratio shows the ability…
Ration Analysis in Decision Making
The healthcare company that is going to be evaluated in this report is Cameron Memorial Community Hospital. The financial statements of Cameron Memorial Community Hospital are illustrated in Appendix A and B. The tool that is going to be used to analyze the financial statements of the company is ratio analysis. The Cameron Memorial Hospital was founded in 1926 by Don F. Cameron. The hospital is a…
Accounting Information in Decision Making
Individual Roles b. Group (corporate) iv. Conclusion Accounting Information in Decision Making Introduction Engaging accounting information is an idea of great magnitude in decision-making. Decisions adopted by a business defines it success. This sensitive endeavor demands critical attentions. Accounting provides facts essential for understanding the subject under question. Therefore, accounting…
Cost and Decision-Making Analysis
The formula for calculating the contribution margin is as follows: Contribution margin= Fixed cost per unit – Variable cost per unit. This provides sufficient information to facilitate the calculation of break-even point in total sales dollars. The formula for calculating the break-even point in total sales dollars is as follows: B/E point (in total sales dollars) = Fixed Cost ? P/V ratio In a…
management accounting & decision making
As at September 30, 20X0 Property, Plant and Equipment 1,840,000 Less: Depreciation (133,167) Net Book Value 1,706,833 Inventory 9,000 Receivables 144,585 Cash 172,700 Total Assets 2,033,118 Owner's Capital 2,000,000 Profit for the year (92) Creditors 12,960 Overhead cost payable 20,250 Total capital and liabilities 2,033,118 The above statement presents the cash budget, income statement and the…
Accounting and Decision Making
It is prudent to treat such income as accrued or deferred income as it has not been received and should not be treated as sales income (Nikolai et al 2009). The accounting standards require that revenue should be recognized when earned and received. Invoices raised on a long term contract for a customer show an ending balance of 219,750. The company is confident that the amount will be fully…
Accounting For Decision Making
To do this, we had to conduct research on the two companies’ performance over the years and analyzed the data using financial ratios and statistical graphs. From our findings we found out that fantastic holdings has good gross profit margins but has higher expenses rates which reduces the net profit margin (Whiteside 2007). It was also evident that fantastic holdings has good profits in…