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Absorption cost
Absorption, or full cost systems, transfer the full cost of the supplying department to the receiving department. Where a profit is to be allowed to the supplying division, it is necessary to determine a policy which can be consistently applied. Typical systems may allow a profit based on cost, sales or investment.
Variable cost
Variable cost based systems overcome the decision-making problem of full cost system. Transfers from one division to another are made at variable cost. Standard variable cost overcomes the problem of passing on inefficiencies and diseconomies from division to division.
There are two ways by which profits can be created at a divisional level. The first approach is to apply the principles illustrated in A to marginal costing. Transfer pricing schemes would allow a suitable level of contribution, as measured in terms of contribution on sales ratio. An alternative approach is to create a two-part charging system. One part of the scheme would transfer a lump sum, representing an allowance for divisional fixed cost once a year to allow each division the chance of creating a final profit. The second part of the scheme would value transfers at variable cost.
Two types of costs concerned in factoring are as: 1) The service fee or factoring commission 2) The interest on advances granted through the factor to the firm. Factoring
Activity Based Costing (ABC) differs from Absorption Costing (AC) in the manner in which overheads are charged to units. ABC charges overheads to units based on their proportion
Cascade Water Company (CWC) currently has 30 000 shares of common stock outstanding, trading at a price of R42 per share.
State the Penetration pricing As opposed to the skimming pricing the objective of penetration pricing is to gain a foothold in a highly competitive market. The objective of thi
Identify the management assertions related to each of the fictitious supplier credits and unrecorded amounts in accounts payable using the facts presented
Cash discount is given to buyers to bring them to make prompt payment. The credit terms identify the percentage discount and the period throughout which it is obtainable. Liberal c
Advantages of Value Added Statements 1) Managers might be in a better position to control their organizations own inputs than the cost and usage efficiency of purchased materia
how much is this service?
Identify whether each of the following transactions involves spot exchange, contract, or vertical integration. For the last item if the contract length is optimal or suboptimal.
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