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Develop a company and determine what it will produce & sell

Develop a company and determine what it will produce and sell. The requirement for this company is that it be a high-end, special-order type of manufactured product.

-Develop a list of inputs along with their associated costs, such as labor, materials, and overhead. This info can be made up make it up, or do a combination of both. Be specific as to costs.

-Determine the selling price. Show calculations, and discuss why it was determined this to be a good sale price.
-How many items of the product will I need to produce to meet this sale price? How to calculate?
-Determine which of the costing systems will work best for the company. Explain why.
Explain why those not chosen were not a good fit for your company.
Explain "why not chosen" for a minimum of 3 costing methods.
-The ethical considerations of costing methods.

The Objectives

Compare and contrast financial and managerial accounting.
Define fixed, variable, and mixed costs and explain the cost behaviors of each.
Demonstrate the proper accounting for job order costing and process costing.
Distinguish between and demonstrate application of traditional and activity based costing.
Differentiate between absorption costing, variable costing, and throughput costing.
Explain allocation of costs, including the accounting for joint products and by-products.
Review CVP and other methods of estimating and accounting for costs.
Recognize and explain ethical issues related to managerial decision-making that arise from cost accounting information.

Solution Preview

See attached files.

Product: "Watch my Ride"

The product is a device to monitor vehicle trips and prevent trips that are unauthorized, prevent speeds that are unauthorized, and stop the vehicle after any maneuvers that are deemed unsafe. There are two main markets for this device: parents of teenagers and the criminal justice system. The product is sold in bulk to the state and federal courts as a way to track parolees so that their vehicles will only operate on certain routes (gas cuts off if they stray more than 5 miles from authorized destinations). This permits them to keep their jobs and take their children to daycare but nothing else, keeping them productive citizens while they serve their probation. The product is also sold to parents of teenagers so that they can be sure that the vehicles are not run at over a certain mile-per-hour level (presumably the speed limits) and not taken to places other than where the parents expect their child to be.

The price of the product was determined based on the dollar amount of the insurance premium discount that State Farm would give to parents that installed this device on their vehicles. Teen drivers run family insurance premiums up dramatically, especially if there has been a driving incident already. This device brings the premiums back to an affordable level because the car is not able to veer off route, speed, or tolerate multiple extreme maneuvers (once in a while is presumed needed to avoid unexpected events). Swerving or jamming the accelerator down ten times per hours is clearly not safety driving!

The price of the product was also reasonable for parolees (who pay for their own) because it permits them to receive parole rather than incarceration if they keep their jobs. Otherwise they would lose their jobs and go to jail. So, the price could even be higher for them but the firm has decided it is a public service and only charge a reasonable markup over cost.

The product is not available in stores. It must be custom ordered so that the routes authorized, speeds authorized, type of vehicle, ...

Solution Summary

Your tutorial is 1,222 words and includes a discussion of the product ("Watch My Ride"), a device that ensures that the vehicles travel only on authorized routes and at authorized speeds (sold for teenage drivers and parolees). The response shows you the material component and the variable costs to customize the product to each customer. The variable selling and fixed capacity charges are also revealed. The breakeven computations are given, presuming an average product (as they are all customized so units are not all the same). The discussion explains why activity based costing, absorption costing, and process costing are not used. It also explains why they have very few allocations and why. One ethical issue is discussed.