Question 1
Fixed costs for Polaris
Rent
The amount paid to the owner of the premises occupied by Polaris is a fixed cost because; it remains constant depending on the lease agreement, which may demand a monthly, quarterly or even annual payment.
Permits and licenses Permits and licenses are an important consideration for the business to operate legally. Therefore, the enterprise has to acquire them within the period stipulated by law, which in most cases is on a yearly basis. The cost is relatively constant, making it a fixed cost.
Variable costs for Polaris
Electricity bill The machinery of the company such as computers relies on power to run. However, the amount of power consumed varies depending on the level of activity in the business,
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The variable costs, on the other hand, will change because the revenue of the enterprise largely affects this type of costs. As for the mixed costs, they too will change but not to a larger extent, when compared to the variable costs. Therefore, the costs of rent, permits, and licenses will remain the same because revenues do not affect them. Instead, the property owners set the rent prices with little consideration of the revenue of the enterprise, whereas the government sets the costs of permits and licenses based on policy and not the revenue of the business. On the other hand, a revenue increase signals an increase in operations of the company. Consequently, the costs of electricity and discounts will also increase because of their dependence on operational activities at the enterprise. Lastly, regarding salaries, the fixed component of it, comprising of managerial and other costs will remain the same. However, the variable component of the salaries will increase as the revenue increases. Similarly, as for the repair and maintenance, the fixed component will remain the same as the variable component increases. The sum effect will be an increase in mixed costs, which will be lower than variable costs due to the effect of fixed costs within the wider mixed
The adjustment will be determined by any significant influencing factors identified by the organisation, such as changes in staffing levels, replacing equipment and the increased cost of gas and electricity prices. In some organisations, the adjustment may be as simple as adding the
Note: You can assume that variable costs are constant so that the average of them is the variable cost relevant for a change in sales.
Demand – Customers are loyal and identify with the HD brand. Currently demand outmatches supply, so HD is considering whether to raise prices or expand capacity via various options.
Finally, at the facility-level, the five Operations costs are likely to vary mainly with the
In this table, it reflects the changes in fixed plant overhead from $420,000 to $378,000. The company still has the fixed selling and administrative expense per quarter of $118,000. The new company fixed overhead is now at $496,000 from the past $538,000 ($42,000) change from past to
from customer needs & responses to new Medisys concepts, & then passed these on to
Income and cost changes because of different levels of activity they carry out in the business. If the sales of the business increase so will the cost. This is because; more production will take place for more sales. Income and cost can be changed by fashion as well. The business will need to be up to date with the fashion. This change will increase the cost as well. But if the business can be up to date, it will bring a higher income as their products going to be popular.
In May 2006, Westmount Retirement Residence was having very low profitability. Its very simple pricing model essentially charged each resident the same price per month regardless of their needs. This was due to a change in the patients´ demands. In the past, patients´ demands were similar and therefore the company´s pricing and costing system was appropriate. But changes in the population and in the requirements of the residents caused that the pricing model remained out of date and the costing system inappropriate. One of the problems observed when analyzing the company´s situation was that due to the costing system used it was not possible to have a clear picture of how much each of the services offered were costing. Consequently, it was clearly very difficult being able to define a pricing system that will give the shareholders the desired profit. The first step was to design a new costing system adequate for the company
Polaroid Corporation, headquartered in Cambridge, Massachusetts, was a company marketed a wide variety of instant photographic products for consumers and industries. After the deregulation of US motor industry consolidation of the warehouses in US took place, which resulted in an improved service level and reduced costs. Overwhelmed by the consolidation results, the management wanted to consolidate the subsidiaries’ warehouses in the Europe to a direct distribution.
1.a) To value Spyder Active Sports Inc., we decided to use the WACC method since we can easily value its cost of assets with the data immediately available to us in the case. We first unlevered the beta’s of 7 comparable companies and took the average to get a comparable unlevered beta for Spyder (Exhibit 1). Since we are assuming Spyder is entirely equity financed, its unlevered asset beta is equal to the beta of its assets. We now have a rough estimate of Spyder’s asset beta, we can
A variable cost is a corporate expense that varies with production output. Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases (Variable Cost, n.d.); in the case study for all cost per event such
Fixed costs (TFC) are costs that are not related to the amount of company’s output. In the case Prestige Data Service, fixed costs include all the cost associated with space, equipment, system maintenance and development. Due to the lack of detailed information, materials, sales promotions and corporate services will be treated as fixed costs. Under this circumstance, total fixed cost is $201,656 (Exhibit 1).
Polaris has been a frontrunner in the design, development, manufacturing, and sales of on and off road vehicles. Originally starting with snowmobiles, Polaris has broadened its market into other products, most recently the acquisition of Indian motorcycles. Polaris has over 25 locations internationally that consists of manufacturing, distribution, research and development, and customer service while keeping its headquarters in Medina, Minnesota (Polaris Industries Inc., 2016).
* Introduces the construction and use of statistical process control (SPC) charts and an understanding of the relationship between SPC and conformance quality.
All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.