Accounting as the Profession Free Essay Example, 1500 words

The selling behavior is a good indicator of the possibility since the new product is selling beyond expectation and the old product which is good product has sales which are lagging. The assumption would be that the new product is underpriced and the old product is overpriced right now. In order to prove this theory, Sandra performs three analyzes to determine the cost and selling prices of the two products. Three analysis realized which are illustrated in Appendix A, B, C are a cost analysis and price determination based on the current cost system, a departmental cost structure, and pricing allocation and an activity-based cost system analysis. Current Cost systemThe first analysis is a cost analysis based on the current system which was the system in place before the introduction of the Bush Bashers boots products. This system determines the cost by adding direct cost and a global overhead which is determined based on a budgeted production which uses man hours as the cost driver t o determined overhead costs. The company produces 80,000 units of BB and 300,000 units of WW. We will write a custom essay sample on Accounting as the Profession or any topic specifically for you Only $17.96 $11.86/pageorder now The overhead rate per hour based on the current formula is $58.78 overhead rate per hour. The BB product takes 0.20 hr to produce per unit, while the WW takes 0.11 hrs per unit to produce. The direct cost per unit of BB is $28 and $21.6 per unit of WW. By inserting all these variables into the cost formula the final outcome is that the cost per pair of Bush Basher's boots is $39.76 and $28.07 for the Wonder Walkers. By applying a 45% markup the selling price rounded to the nearest dollar of the Bush Bashers is $58 and $41 for the Wonder Walkers. Departmental Cost Appendix B is the second analysis which is cost analysis based on departments (BB and WW production departments). The analysis depicts a detail segmentation of the cost associated with each department. In order to separate cost new overhead was divided into four main categories maintenance, setup, cutting and assembly with two depreciation costs related to cutting and assembly. The final ou tcome of the analysis illustrates that the actual cost of the Bush Walkers is $43.09 and the actual cost of the Wonder Walkers is $27.18.