Part A - Case Study: The following short article appeared on page one of The Age newspaper on 16 February 2015: A family in Cambridge received their Christmas presents from friends in Paris this week – 50 days after their parcel was posted. French posties sent it to Cambodia, and the near-20,000-kilometre trip, via several other countries, is estimated to have cost delivery firm Parcel Force $240 to deliver three children’s books.
Question 1: How do you think the cost of $240 would have been calculated? (2 marks)
Answer: To arrive at the cost of $240 there would have been many assumptions as we do not have the actual cost information about the different fixed and variable cost. The allocation of overhead cost based on the usage of
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(Weygandt, 2012)
Predetermined overhead rate = Estimated annual overhead cost / Expected annual operating activity
The cost is an important driver in this activity base and is dependent on the below criteria:
• The weight of the parcel.
• The distance travelled to deliver the parcel.
Question 2: Regardless of the exact method used to calculate the cost of delivering the lost parcel, in what way or ways would such a calculation be subjective? Give examples to illustrate your answer. (2 marks)
Answer: The parcel company is a service company and each company must know the cost incurred for each of its delivery for continuously and successfully generating revenue. Therefore in addition to the cost occur during a particular period there should be cost.
In order to calculate the cost during the whole period , first of all we need to calculate the cost per unit to be accounted for which will be based on weight and distance between the source destination and the final destination.
For example, if there are two parcel of the same weight that has been sent to different destination then the cost involved would be different depends on the distance travelled to deliver them. Therefore cost per km will also be additionally considered by the courier company to measure the cost for each delivery as per destination and weight of the parcel.
If you were to send a letter or package by courier, getting a quote based on the size/weight is another way of calculating the cost.
- The incremental cost in this case is all the cost elements in E1 or E2 except the labor cost and the transportation and storage cost. That is because the labor is not not a volume dependent element. Also, the transportation and storage is not part of the incremental cost because the company was operating its own fleet of truck and was using its own warehouses to storage the
As cargo costs vary with the freight moved they are calculated as a product of Cargo costs per ton, as stated above, and the capacity for each of the vessels, i.e. for Tashtego 1,43*3950 + 1,43*3150 = 10.153,00 and for the large vessel 1,43*6850 + 1,43*3150 = 14.300,00.
Transit time is an important element as well. Any reduction in transit time therefore reduces the overall cost of the delivered goods. Transit times can be improved by
c. Explain how the location of each curve graphed in question 7b would be altered if (1) total fixed cost had been $100
3. Describe two methods that you can use to calculate postage charges for mail and / or packages. [2.3]
One of the major benefits of expansion is the reduction of fixed cost (fixed and selling). The cost is absorbed by 85,000 units instead of 80,000 units resulting in saving of $0.42 per unit.
Consider a product line with 50% gross margins (after subtracting volume-related expenses from prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.
Royal Mail is the largest provider of postal services in the United Kingdom and one of the largest postal service providers in the world. This paper analyzes
3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)
b. Use your answer to part A to determine the total annual indirect cost assigned to:
According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.
The evolution of the express mail industry had become a quick on-time shipping and delivery of packages. The service had become effective, reliable, and prompt, which most of the top companies could deliver on these guaranteed promises 96-99% of the time. But, delivery services were only a portion of the services being offered to their customers. Carriers had mastered information management that they shared with their customers. Customers were now able to fill out labels, track the route of their package, and assisted in billing using both via carrier provided software or the Internet.
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?
b. Use your answer to part A to determine the total annual indirect cost assigned to: