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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.
Describe the Selling costs and Development costs Selling costs: These are costs of seeking to create and stimulate demand (sometimes termed as marketing) and securing orde
During the year the company worked a total of 145,900 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,305,346. What is the amount of underapplied o
Determine the Internal factors of pricing decision 1) Organization factor: pricing decision occur on two level in the organization. Overall price strategy is dealt with by to
Disadvantages of zero base budgeting 1) It is not suitable for all the activities in an organization 2) It has limited application in a profit making organization. In this c
in the past,the company had difficulties separating semi-variable costs between varible and fixed costs.the company''s varible cost per unit consists of the cost of patrol,maintena
BREAK EVEN ANALYSIS Break even analysis is mainly used to explain the relationship between the cost incurred, the volume operated at and the profit earned. To compute the breakev
In this scheme, non-revolving line of credit is extended to the seller to be utilized inside a stipulated period. Assistance is provided to manufactures for promoting sale of their
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
why the activity costing have most comparative bid?
Standard costing in modern environment Standard costing has traditionally been associated with labor-intensive operations, but it can be applied to capital-intensive production
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