Making Decisions With Cost Systems I categorized each of the following Cost Vari
ID: 2780632 • Letter: M
Question
Making Decisions With Cost Systems
I categorized each of the following Cost Varieties by placing them within the Product Cost or Period Cost column/system.
Cost Variety
Product Cost
Period Cost
Overtime premium paid assembly workers
Wages paid to employees in finished goods warehouse
Factory building maintenance department
Factory security guards
Wages of engineers in quality control
Wages paid to assembly-line employees
Fire insurance on plant
Advertising expenses for T-shirts
Fire insurance on corporate headquarters
Property taxes paid on corporate headquarters
Salaries of public relations staff
Salary of corporate controller
Then I divided the Cost Varieties between the Product Cost and Period Cost systems, identify each product cost within the following appropriate sections: Direct Materials, Direct Labor, or Manufacturing Overhead.
Product Cost
Direct Materials
Direct Labor
Manufacturing Overhead
Fire insurance on plant
Wages paid to employees in finished goods warehouse
Wages of engineers in quality control
Wages paid to assembly-line employees
Factory security guards
Factory building maintenance department
THE QUESTION: provide at least two recommendations for which types of costs David should pay the most attention to in order to reduce costs. (paragraph each) Include a rationale for each recommendation. (paragraph each)
Cost Variety
Product Cost
Period Cost
Depreciation on PCs in marketing departmentOvertime premium paid assembly workers
Wages paid to employees in finished goods warehouse
Factory building maintenance department
Factory security guards
Wages of engineers in quality control
Wages paid to assembly-line employees
Fire insurance on plant
Advertising expenses for T-shirts
Fire insurance on corporate headquarters
Property taxes paid on corporate headquarters
Salaries of public relations staff
Salary of corporate controller
Explanation / Answer
To reduce the cost of the production following costs should be considered :
1) Overtime premium paid assembly workers : The overtime payment is the extra and high rated payment to the workers. Also, the overtime payment shows that the production schedule is not perfect, the production process is overlapping. So, David should pay attention at “Overtime premium paid assembly workers”.
2) Advertising expenses for T-shirts : The cost of the advertisement incurred on the publicity of the product constitutes around 33% of the total cost of sales. So, it would be important for the David to pay attention on the advertisement expenses to reduce the costs.
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