Nimpix inc is a small company that creates

Assignment Help Accounting Basics

Reference no: EM13581776

NimPix, Inc., is a small company that creates computer-generated animations for films and television. Much of the company's work consists of short commercials for television, but the company also does realistic computer animations for special effects in movies.

The young founders of the company have become increasingly concerned with the economics of the business%u2014particularly because many competitors have sprung up recently in the local area. To help understand the company's cost structure, an activity-based costing system has been designed. Three major activities are carried out in the company: animation concept, animation production, and contract administration. The animation concept activity is carried out at the contract proposal stage when the company bids on projects. This is an intensive activity that involves individuals from all parts of the company in creating storyboards and prototype stills to be shown to the prospective client. After the client has accepted a project, the animation goes into production and contract administration begins. Technical staff do almost all of the work involved in animation production, whereas the administrative staff is largely responsible for contract administration. The activity cost pools and their activity measures and rates are listed below:

Activity Cost Pool
Activity Measure
Activity Rate
Animation concept
Number of proposals
- $6,000 per proposal
Animation production
Minutes of animation
- $7,700 per minute of animation
Contract administration
Number of contracts
- $6,600 per contract

These activity rates include all of the costs of the company, except for the costs of idle capacity and organization-sustaining costs. There are no direct labor or direct materials costs.

Preliminary analysis using these activity rates has indicated that the local commercials segment of the market may be unprofitable. This segment is highly competitive. Producers of local commercials may ask several companies like AnimPix to bid, which results in an unusually low ratio of accepted contracts to bids. Furthermore, the animation sequences tend to be much shorter for local commercials than for other work. Because animation work is billed at standard rates according to the running time of the completed animation, the revenues from these short projects tend to be below average. Data concerning activity in the local commercials market appear below:

Activity Measure
Local Commercials
Number of proposals
Minutes of animation
Number of contracts

The total sales for local commercials amounted to $240,000.

Required:

1. Determine the cost of serving the local commercials market.

2. Prepare a report showing the margin earned serving the local commercials market.

3. What would you recommend to management concerning the local commercials market?

Reference no: EM13581776

Questions Cloud

Aampa products recieved a check from one of their customers : the following information was gathered from the books of aampa products in order to prepare its bank

Kolinchak company planned to purchase 16250 pounds of : kolinchak company planned to purchase 16250 pounds of material this year at 2.40 per lb. actual results indicate that

Describe a feature of a minority culture from which you : describe a feature of a minority culture from which you think mainstream american can learn

What suggestions do you have to measure the intangible : after listening to the board member list at least 5 elements you would consider critical for the decision support

Nimpix inc is a small company that creates : nimpix inc. is a small company that creates computer-generated animations for films and television. much of the

Describe a fear or phobia that you possess and that was : classical conditioningdescribe a fear or phobia that you possess and that was learned through classical conditioning.

In harley company it costs 30 per unit 19 variable and 11 : in harley company it costs 30 per unit 19 variable and 11 fixed to make a product that normally sells for 41. a foreign

How is budgeting used todayexplain modern accounting money : how is budgeting used today?explain modern accounting money management and the ethical responsibility of christian

This project will help develop your internet skills in : Examine the tools they provide for creating an e-commerce site. You will need to secure a domain name, setup a site, and have the site hosted.

User Account

All Pages