Fourth and final part of the presentation. See background information for the module one SLP.Required:Make comments and suggestions on the following topics in your presentation.Enterprise and corporate performance management.Behavioral change management.The balanced score card.How to foster goal congruence for the organization and employees.SLP Assignment ExpectationsSubmit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.Combine the submissions from prior module(s) into one file before uploading to the dropbox.
Accounting Cost
Systems and Cost
Behavior
Air Filter for Ventilation Systems
Kendra R. Knuckles
Trident University International;
Jan 26, 2020
For many years, the ventilation systems have gained
relevance in the offices, industrial workplace,
workstations and even homes (Moreno et al., 2017).
Air Filter for
Ventilation
Systems
The demand for these systems is high, due to clean
air and health reason.
Hence, the company can take advantage of the
change in market and the competitive demand.
For this to be achievable, one must consider
enhancement and market changes so that its
supply quality products that customers will be
preferred.
THE FILTERS ARE USED TO
ENSURE THAT THE AIR COMING
THROUGH OFFICES OR THE
PLACE STORED IS FREE OF
EXTERNAL COMPONENTS
SUCH AS DUST, VIRUSES OR
POLLEN GRAINS
THE EXTERNAL COMPONENTS
CAN HAVE SEVERAL SIDE
EFFECTS WHEN INHALED, AND
MOST PEOPLE CONSIDER THE
FILTERS SAFER AND HEALTH
SUPPORTIVE (MORENO ET AL.,
2017) BECAUSE OF THEIR ROLE
TO HELP PURIFY THE AIR.
WITH A GOOD COST BEHAVIOR
ANALYSIS, I WAS ABLE TO
PRODUCE THE POSSIBLE COST
ESTIMATES.
THE COST ESTIMATES WILL
HELP IN CREATING A COSTEFFECTIVE PRICE APPROACH
STRATEGY FOR HIGH QUALITY
PRODUCTS.
The Air Filters
THE FIRM WILL, THEREFORE,
NEED TO MAKE
CONSIDERATION AND SET
ASIDE CAPITAL TO FUND THEIR
DEVELOPMENT.
Cost Estimates and
Pricing
CO ST EST I M ATES O F AI R FI LTE RS
Cost element
Estimates(Cost per Unit, S$)
Cost of materials
4.0
Cost of labor
8.0
Fixed Cost
3.5
Overhead cost
6.5
Total cost (per unit)
22.0
• The production of proposed air
filtered will fall under the
following cost estimates
(Agarwal & Kickhöfer, 2018).
• The total unit production cost for each filter is roughly about $22.
Pricing
suggestions
(1)
• The recommendation will be setting the price at a range of $30 and a
maximum of $35 would will be set at fair price.
• The price estimation is considering both the customers and the
company.
• For the company, it will gain enough profits through the set price.
• The price also hands the cost of production to customers as the profit
will be the excess of production costs (Cohen et al., 2016).
• On the other hand, the cost is limited to $35 to ensure that, the
company will be providing the product at prices customers can agree
and afford to pay.
• By increasing production, the company can negotiate with the
suppliers input of materials so the cost of the parts will decrease by $2
each unit and a similar reduction in overhead costs with a $3 decrease.
Pricing
suggestions
(2)
• With such a decrease in the cost of production, the overall production
will be expected to lower from $22 to $17.
• The effect will be an effect of economies-of-scale.
• Finally, with such cost reductions, the company will enjoy higher
profits in the end.
Cost-Volume Profit
(CVP) Analysis
• Ventilation
Cost-Volume Profit (CVP)
Assumptions
Costs are either variable or fixed
Sales price per unit, variable cost per unit, and total
fixed cost are constant
Mixed costs must be split into their fixed and variable
costs
The behavior of costs is essential for CVP analysis
Example
Energy Recovery Ventilators
Price per unit: $500
Variable costs per unit: $300
Fixed costs of production: $80,000
$
$
Fixed Costs
Volume
$
Variable Costs
Volume
$
Variable Costs
Fixed Costs
Total Costs
Volume
The Break-Even Point
$
Break-Even point (sales dollars) = Variable Costs +
Fixed Costs + Profits
Contribution Margin Method
Break-Even point (sales dollars) = Fixed Costs ÷
Contribution Margin.
Break-Even
Point
Profit
Variable Costs
Fixed Costs
Margin of Safety = Total Sales – Break-Even sales
Volume
Target Profit
Unit sales = (Fixed Costs + Target Profit) ÷ CM per unit
Total Costs
Equation Method
Energy Recovery Ventilators Example
Total
Per Unit
Percent
Sales (500 car seats)
$250,000
$500
100 %
Variable Expenses
$150,000
$300
60 %
Contribution Margin
$100,000
$200
40 %
Fixed Expenses
$80,000
Income
$20,000
Contribution Margin Method For BreakEven Point
Margin of Safety
$80,000 ÷ 40% = $200,000 dollars in sales
20% of sales, or 100 units sold
Target Profit – $100,000
Customer Profitability
($80,000 + $100,000) ÷ $200/unit = 900 units
Annual profit/ customer x number of years
with company
$250,000 – $200,000 = $50,000
Multi-Product CVP Model
Energy Recovery Ventilators Exhaust Fan
Ceiling Total
Sales (500 units)
$250,000
100%
$300,000
100%
$550,000
Percent
100%
Variable Expenses
$150,000
60%
$135,000
45%
$285,000
51.8%
Contribution Margin
$100,000
40%
$165,000
55%
$265,000
48.2%
Total
Percent
Total
Percent
Total
Fixed Expenses
$170,000
Income
$95,000
Sales Mix
55%
$550,000
$250, 000
100%
45%
$300,000
CVP Analysis Conclusion
Special Pricing for Customers and
Markets
–
–
CVP Overall Advantages and
Disadvantages
Pricing strategies may be different
based on:
different markets
Customer profiles.
Advantages
Prices may be revised based on:
Increased competition
Preventing new market entrants
Company establishment in a
new market
Disadvantages
– Helpful when making decisions
– Provides details on company
activities
– Human errors
– Limitations for multi-product
companies
– Results in approximations
TRANSFER PRICING AND
RESPONSIBILITY CENTERS
• In a decentralized organization, most
decisions are made by mid-level or
lower level managers rather than the
head of the organization.
Overview
• When an organization chooses to be
decentralized and have hierarchy of
individuals making decisions, the need
for cost centers arises.
• The transition stage will require inputs
from the business analytics.
Responsibility
Centers
•
Organizations can have different subunits each with a different purpose,
aimed at increasing decision making , operational efficiency and
effectiveness.
•
In an organization that is decentralized, the system of financial
accounting for the various subunits is established through responsibility
accounting.
•
Tas performance measurement becomes a complex process,
organization apply the responsibility accounting component.
•
The process encompasses assigning the responsibility of accounting for a
certain subunit of the organization to a certain personnel.
•
Usually, these subunits are structured as responsibility centers in which
managers or supervisors have a responsibility for the performance of the
center and authority to make decisions that impact the center (Walther,
2017).
Responsibility Centers and their Functions
•
The departments in an organization settings are the most
common responsibility centers.
•
When the manager of the responsibility center takes control
of costs, the responsibility center in such perspective is noted
as cost center.
•
When manager takes control of both costs and revenues,
the responsibility center is noted as profit center.
•
In some cases, the manager may have an authority and
responsibility for costs, revenues, and investments. In this
case, the responsibility center is known as investment center
(Walther, 2017).
•
The contribution of responsibility accounting and
responsibility centers have navigated the need for an
internal price for the transfer of goods or services between
units and responsibility centers.
Since cost centers can be a drain on an
organization, it is important to implement
internal charge backs.
Cost centers
A major objective of internal charge backs is
to distribute costs to the business units.
The major aim is to ensure that each of the
unit is accountable for the total cost structure
to know how they contribute to the
organizational profits (Walther, 2017).
The Role of Business Analytics
•
Business analytics have a major role in growing a
decentralized organization especially making
commercial decisions.
•
Business analytics can facilitate an effective
understanding of both secondary and primary
data, which impacts the operational efficiency
of various departments (Weygandt et al., 2010).
•
In the current digital age, the efficacy use of
information makes an organization competitive.
The business analytics can combine the
available data with different models to improve
business decisions.
References
•
Agarwal, A., & Kickhöfer, B. (2018). The correlation of externalities in marginal cost
pricing: lessons learned from a real-world case study. Transportation, 45(3), 849-873.
•
Cohen, M., Lobal, I., & Paes Leme, R. (2016). Feature-based dynamic pricing.
•
Moreno, T., Reche, C., Miguelina, M. C., Capdevielle, M., de Miguel, E., & Querol, X.
(2017). The effect of ventilation protocols on airborne particulate matter in subway
systems. Science of the Total Environment, 584, 1317-1323.
•
•
•
Cohen, M., Lobal, I., & Paes Leme, R. (2016). Feature-based dynamic pricing.
Moreno, T., Reche, C., Miguelina, M. C., Capdevielle, M., de Miguel, E., & Querol, X.
(2017). The effect of ventilation protocols on airborne particulate matter in subway
systems. Science of the Total Environment, 584, 1317-1323.
Walther, L. (2017). Chapter 18: Cost-Volume-Profit and Business Scalability
References
• Walther, L. (2017). Chapter 23: Reporting to
Support Managerial Decisions.LICENSES AND
ATTRIBUTIONS
• Weygandt, J. J., Kimmel, P. D., Kieso, D., &
Elias, R. Z. (2010). Accounting principles. Issues
in Accounting Education, 25(1), 179-180.

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