Management
This is useful for management, because it helps them to determine if this decrease in prices will have an impact upon the overall bottom line. Once they have determined this, they can be able to take steps to protect the company's profit margin
Conclusion
This is important, because it highlights an effective tool that managers can use to address the underlying challenge they could face.
One of the assumptions underlying CVP analysis is that total costs remain constant over the relevant range of activity. What does this mean and how does fixed costs per unit per lamp unit change with increased production over the relevant range of activity? Provide your answer in about 200 words in the international memorandum mentioned below.
Subject: Fixed Cost per Unit
Introduction
CVP production will help managers be able to effectively monitor costs and determine the underlying impact that they will have on the profit margins.
CVP Analysis
The increased cost per unit will depend upon the volatility in the costs, in association with the product. Where, cost increases could erode the profit margin, while cost decreases could result in an improvement.
Conclusion
These different elements are important, because they highlight the underlying effect that this can have on an organization's profits. As a result, managers will use this as tool to carefully monitor what is taking place.
Calculate the unit cost for each product using direct labor hours as the basis for applying overhead (i.e. The Plantwide approach).
The unit cost for amateur bicycles using direct labor is $2.00. While, the unit cost for professionals is $3.00. (Mehta 2010)
Calculate the unit cost for each product using activity-based costing (i.e. ABC approach)...
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