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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.
Ordering Costs These are incurred in getting purchased items into the company’s inventory or stores, and usually consist of clerical costs of: • Making the purchase demand.
Describe the impact of different types of standards on motivations and specifically,the likely effect on motivation of adopting the labor standard recommended?
Illustration of short-term decisions These are, to a significant extent, determined by the excellence of the firm's long-term decisions. Illustration of short-term decisions in
Features of product life cycle costing Product life cycle costing is important due to the following features: 1) product life cycle costing involves tracing of costs and re
The advantages and disadvantages of standard costing The benefits for controlling having a standard costing system in operation can be summed up as follows; Cautiously pl
Types of Simulation 1) Operational Gaining Method: This refers to those situations involving conflict of interest among players or decision makers within the framework o
Assigning Costs and Assets After identifying its value chain, a firm must assign operating activity and assets to value activities. Operating costs must be assigned to the act
Non-Zero Sum Games Within very vast situations of possible non-zero games, varying degrees of co-operation exist between the participants. Games theory has been sufficiently de
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Excercise 2-5 Granger products had the following transactions for the just completed month. The company had no beginning inventories. a)$75,000 in raw materials were purchased
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