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Unformatted text preview: I-20.04 1 of 2 1 of 2 Liz Ortega builds custom cabinets. The process usually begins with a preliminary visit to a potential customer location to take measurements and prepare a bid. Measurements and bidding are done by a salesperson. Many times, this preliminary visit does not result in an order. Once an order is received, there are a number of order-specific "shop setup" processes (calibrating saws, lathes, sanders, etc.). The "shop setup" process is the same no matter how many individual cabinets are produced for each order (i.e., some orders are for just a few cabinets, and some orders are for hundreds of identical units). Setup is followed by production and the amount of time and labor is heavily correlated to the number of units produced in the order. The final step is delivery to the job site, and the cost for this activity is mostly a function of distance from shop to job site. Liz has been applying factory overhead based on direct labor hours, and realizes that this costing model is sometimes ineffective in producing competitive and/or profitable bids. costing model is sometimes ineffective in producing competitive and/or profitable bids....
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 101 taught by Professor Hudack during the Spring '11 term at FIU.
- Spring '11