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Analyze benefit of recalculating cost of pickle production

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Reference no: EM132497521

Requirements

Your analysis for the Controller and Sales Manager is needed to suggest a different way of calculating the pricing of the pickles that may be lower. As part of your analysis, address the following items:

Question 1: Explain why some production costs are variable and some are fixed.

Question 2: Analyze the benefit of recalculating the cost of pickle production.

  1. How would you recalculate it?
  2. What would the result be?
  3. What is the benefit to the company of recalculating the cost?

Question 3: Analyze how financial accounting of production cost differs from managerial accounting of production cost.

  1. Explain the difference between the two accounting methods.
  2. Identify the benefits and drawbacks of each method.

Question 4: Recommend a plan of action to management regarding Super Deals' offer.

  • Below is the cost report for a recent month. In this month, Acme produced 9,000 cases and sold them at $20 per case, which is Acme's normal selling price. Nine thousand cases are well beyond Acme's break-even point, enabling Acme to record a substantial profit at the nine-thousand-case level.

Acme Pickle Company Cost Report

Item

Cost

Cucumbers

$15,000

Spices and vinegar

11,000

Jars and lids

10,000

Direct labor, paid by the case

30,000

Line supervisors, on salary

10,000

Depreciation on factory

10,000

Property taxes on factory

3,000

Insurance on factory

1,000

Total Costs:

$90,000

Cost per case (9,000 cases produced) $10.00

Reference no: EM132497521

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