Alpha Company’s Manager is considering selling price for product C. The company is using Absortion Costing in determining the total cost for each product. From the financial perspective, the company is planned to operate with cost: Production Expence Rp 3.000.000.000 Administration Expense 200.000.000 Marketing Expense 300.000.000 The predicted total asset in the beginning year is Rp 4.000.000.000, and the return of investment (ROI) is 25% Determine the mark up percentage for product C in Alpha Company using Cost-Plus Pricing Method and Absortion Costing! From the results of the mark up percentage for product C in question above, determine the selling price per kg using the Cost-Plus Pricing method based on the Absortion Costing Approach and the company's normal capacity for product C of 1,000,000 kg!
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Alpha Company’s Manager is considering selling price for product C.
The company is using Absortion Costing in determining the total cost for each product.
From the financial perspective, the company is planned to operate with cost:
Production Expence Rp 3.000.000.000
Administration Expense 200.000.000
Marketing Expense 300.000.000
The predicted total asset in the beginning year is Rp 4.000.000.000, and the return of
investment (ROI) is 25%
Determine the mark up percentage for product C in Alpha Company using Cost-Plus
Pricing Method and Absortion Costing!
From the results of the mark up percentage for product C in question above, determine
the selling price per kg using the Cost-Plus Pricing method based on the Absortion
Costing Approach and the company's normal capacity for product C of 1,000,000 kg!
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