costacctg13_sm_ch05

It can then emphasize its moreprofitableproducts b

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Unformatted text preview: the simple boom box will be overcosted (it consumes a relatively low level o f resources but is reported to have a relat ively high cost). 3. Using the cost hierarchy to calculate activit y­based costs can help Teledor to ident ify both the costs of individual act ivit ies and the cost of act ivit ies demanded by individual products. Teledor can use this informat ion to manage its business in several ways: a. Pricing and product mix decisio ns. Knowing the resources needed to manufacture and sell different types o f boom boxes can help Teledor to price the different boom boxes and also ident ify which boom boxes are more profitable. It can then emphasize its more profitable products. b. Teledor can use informat ion about the costs of different activit ies to improve processes and reduce costs of the different activit ies. Teledor could have a target of reducing costs of act ivit ies (setups, order processing, etc.) by, say, 3% and constant ly seek to eliminate activit ies and costs (such as e...
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