Management Accounting
Autor: antoni • September 30, 2011 • Essay • 702 Words (3 Pages) • 1,878 Views
Manufacturing costs:
Direct labour, direct materials, indirect manufacturing costs, manufacturing overheads
Look at the break even point in units – topic 4 page 9
There are two cost management systems that could be considered at SGP: Job order costing or process costing, activity-based costing (ABC) for product costing.
SGP seems to be using ABC. The manufacturing overhead for SGP having been applied using a single cost allocation cost driver in this case being; direct labour.
Given that they have diverse products maybe ABC is not the best method to use as it can distort unit product costs. SGP has 4 activity cost pools that it has identified, variable manufacturing overheads, fixed manufacturing overhead, corporate overhead, selling & general administration.
Manufacturing costs:
Direct labour, direct materials, indirect manufacturing costs, manufacturing overheads
Look at the break even point in units – topic 4 page 9
There are two cost management systems that could be considered at SGP: Job order costing or process costing, activity-based costing (ABC) for product costing.
SGP seems to be using ABC. The manufacturing overhead for SGP having been applied using a single cost allocation cost driver in this case being; direct labour.
Given that they have diverse products maybe ABC is not the best method to use as it can distort unit product costs. SGP has 4 activity cost pools that it has identified, variable manufacturing overheads, fixed manufacturing overhead, corporate overhead, selling & general administration.
Question 1:
I do not agree with the figures presented in Exhibit 2.
Total costs on the various production volumes seems to be higher than the selling price even before the price increase, stating that SGP has been operating at a loss per unit. At one point SGP used to be a major entity in the industry probably a price setter and was able to influence the setting of prices for the non-glare glass products. Understanding how to analyse product costs is important for making pricing decisions. Even when prices are set by overall market supply and demand forces and the firm has little or no influence on product prices, management still has to decide the best mix
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