4.20n class #13
1. Lets graph the flexible budget=2.2m+8*DLH
2. Next, lets look at applied OH
Lets graph this
3. How much OH did we apply?
= 620,000 HRS
So, app OH=62,000*1.02=6,324,000
Chapter 4 day 2
In the absence of market discipline, we must design administrative systems to do what the
1. Partition decision rights
2. Measure performance
3. Reward performance
(all three legs
Chap 8 Day 1
Re: cost allocations
1. death spiral (in class #14, and prob 8-24)
2. Allocating depreciation and fixed costs as a commitment mechanism (prob 8-10)
a. Efficient investment
b. Efficient vitalization
3. Service department cost
Cost allocations are pervasive in practice.
What is a cost allocation? = distributing ()
Common costs (indirect costs overhead) to a cost (object, product, service, customer, region,
3/31 Case 10-1
(a) Lets directly compute profit associated with the acquisition
+ car care Rev
- car care VC
- addl. FOH
- addl. Fixed SG&A
- addl. VAR SG&A
Chapter 5 Day 2
Transfers of goods and services among sub-units
Invariably takes place
1. Student credit hrs
2. Coca-Cola (sales of concentrate to other countries)
We use cost allocations (chp 7&8) and transfer prices (chp 5) to account for thes
Why do markets exist?
Markets exist because of the right to transfer ownership of an asset and receive the proceeds.
Markets do the things really well.
1. Measure performance
2. Record performance
3. Partition decision rights to their highest-valued use
Chap 9 Day 1
Absorption Cost System - Period Costs to I/S
(GAAP Requires) -Product Costs: First to B/S/ and then to I/S
COGS to I/S
EST . Activity(eg . D
Chapter 10 Day 1
Absorption cost systems provide strong incentives to overproduce.
Assume one product
As we discussed in Chp 4, firms partition decision rights. Thus, organizations are divided into
sub-units. We can think of these sub-units as responsibility centers.
Three several types of responsibility centers:
1. Cost center- tasked with effi
As we know, in the absence of market discipline, firms must design systems to:
1. Partition Decision Rights
2. Measure Performance
3. Reward Performance
Budgets= plan for a using limited resources, are wonderful at doing this.
Chap 11 Day 1
Traditional Volume- based absorption cost system (OH portion only)
Why DL hrs?
It is measured in any cost system.
1. complies with GAAP
2. Simple/easy to understand
3. Less expensive
As we known, in the essence of market discipline, firms must design systems to
1. Partition decision rights 2.measure performance 3. Reward performance
Budget=plan for a using limited resources are wonderful at Day this
A. NO, increased Radio Rev=1,500*0.005*3550=26625 < 30000 increased TV
Rev=500*0.008*3200= 12,800 <30,000
B. Yes, 26625 + 12800 = 39,425 - 35,000 cost = 4425 per month =increase in CF
Allocated sports wire cost