English and Literature
Submitted By nenei990
Discuss how the current operations can be improved through better cost controls
Custom Snowboards is currently using a traditional costing method. While this method can be beneficial to some companies, CS is lacking with their operational expenses and overall results utilizing it. By using this costing method Custom Snowboards is grouping their costs together under one overhead item and getting the cost for production. With CS growing and expanding, it is important that they find a better way to determine and estimate production and their earnings.
When considering which costing method would be most beneficial to CS it is important to analyze how each method would impact the company. The Activity Based Costing Method (ABC) identifies the activities that are performed by a company and then assigns indirect costs to products. This system recognizes the relationship between costs, activities and products, and through this relationship assigns indirect costs to products less arbitrarily than traditional methods. (Investopedia, 2014) This method is generally beneficially to companies that deal with manufacturing. Now that CS is starting to create custom snowboards they are going to be comparing the total costs for material and labor between the regular and customized snowboards. The total direct costs or materials and labor for both the traditional and ABC costing method is $3,375,143 for the regular snowboard and $1,177,344 for the personalized product. With the company using the traditional costing method they charge a lump sum for manufacturing overhead. Under the traditional method the regular products cost is $1,068,982 and 334,048 for the personalized boards. The total production cost for the regular snowboard is 4,444,125, based on these numbers, and is 1,511,392 for the customized snowboards. When considering using the ABC costing method CS breaks...