costs, particularly how and why “Fixed Costs to Production” and “Fixed Costs to Sales” differ from each other. For NASA, “Fixed Cost to Production” includes all cash and non-cash fixed expenses associated with the production of butyl as well as direct costs including direct labor, maintenance, raw chemicals, and fixed utilities. Concerning the “Fixed Cost of Sales”, the nature
of the Polysar business leads NASA facilities to transfer output to and from EROW depending upon expected EROW customer demand, and the divisions have the ability to transfer/sell finished goods that were produced in a previous period. The fixed costs associated with these transfers are not “sold” to normal customers, thus should are not included the “Fixed Cost to Production” totals. In addition, transfers to finished goods inventory is inventory sold in the current period, but this inventory has different fixed costs because it was produced in a prior period with different fixed costs. Thus, it is inappropriate to apply the current production fixed costs to those goods. Actual Budget Fixed Cost to Production $44,127.0 $44,625.0 Fixed Cost of Sales ($35,769.0 ) ($29,145.0 ) $8,358.0 $15,480.0 Reconcilation Transfers to/from FG Inventory $1,120.0 $2,450.0 Transfers to EROW 8,540.0 13,650.0 Transfers from EROW (1,302.0) (620.0) $8,358.0 $15,480.0 MATCH MATCH We have provided proof for the information shown in Exhibit 2 pertaining to the difference in budgeted and actual Standard Fixed Cost totals for the period. The butyl Standard
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