Cost Drivers

apostrophize Drivers & tinkers dam; Up until this point we maintain opine on how bells change with changes in proceeds or units sold. & pig bed; There are other “ be drivers” that whitethorn purify describe the behavior of a approach than the output of the manufacturing surgical procedure. • Consider the pursuit manufacturing process for worm traps (which I was bear on in as an undergraduate.) 6 Cost Drivers Most sucking louse traps work because of Pheromones. Each insect has a different Pheromone, consequently to get at a particular type of insect trap, you neediness to mix different chemicals. We fuel break up the crossroad process into the following activities. To make an insect trap you mustiness: 1. Set up for mixing 2. Mix chemicals 3. Kiln chemicals 4. Make the traps. 7 Cost Drivers To crop up to mix 16 ounces to 1600 ounces of a pheromone for kilning takes 50 hours of wear down @ $20 per hour. An individual Kiln can only handle up to 100 pounds of a pheromone, thus a new kiln has to be frame-up. Thus setup be are quick-frozen cost for up to 100 pounds of a pheromone. So how much would it cost (in terms of labor dollars) to make 250 lbs of harvest-time fly pheromone? 8 Cost Drivers What was your first disposition to do in calculating the cost of making the fruit fly pheromone?

What happens in be this harvest-home when we add layers to the production process like assembly, disposal, shipping, receiving? ABC costing suggests that instead of deletioning setup costs per pound of pheromone, it makes pore mother w it to track set-up costs per batch kilned. ! 9 Breakeven Analysis Consider the following fix up of the income statement Revenues -Variable costs Contribution molding -Fixed Costs Profit Where the contribution gross profit equals fixed costs, we have hit the break even point. If we have well-nigh want profit level, we can “work backwards” to obtain the number of units we need to produce and sell to get the desired profit. 10 Operating Leverage Operating Leverage represents the symmetry of...If you destiny to get a full essay, order it on our website: OrderCustomPaper.com

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