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Relevant vs. non-relevant costs

Part 1

Identify a decision that has recently been made or will be made in the near future in your organization. Identify two relevant and two non-relevant costs in this decision. Support your answers using CM calculations.

If you cannot identify specific actual amounts, make a reasonable estimate and apply the tool as if the data were factual.

Your report should include
? The name and nature of the organization
? The activity and time period you used
? The inputs you used
? Your results
? Any implications from your results

Part 2
Retrieve any report in the organization that allocates common costs to a division, product, or service. Recast that report with unallocated costs and comment on the usefulness of that revised report
If you are unable to identify any report with allocated costs, create a report that you think may apply to your organization and treat the data as if it were factual.

Your report should include
? The name and nature of the organization
? The activity and time period you used
? The inputs you used
? Your results
? Any implications from your results

Part 3
Identify a product or service in your organization that could use ABC. Then identify at least two activities for ABC and the appropriate cost drivers for those activities. Estimate the application rates for each cost driver.

If you cannot identify specific actual amounts, make a reasonable estimate and apply the tool as if the data were factual.

Your report should include
? The name and nature of the organization
? The activity and time period you used
? The inputs you used
? Your results
? Any implications from your results

Solution Preview

Part 1.

In your introduction to Boeing, note that it is the world's largest aerospace company and the largest exporter in the U.S.

As an example of a major decision, can look at Boeing's decision out outsource much of its production of the 787. This is the first aircraft the will be outsourced above the 70% level (see http://www.businessweek.com/magazine/content/06_05/b3969417.htm). The decision to outsource seems to be the source of the delays around the testing and delivery of the 787. Essentially, Boeing had trouble with its supply chain, which was spread across the globe.

Obviously outsourcing the engineering and design work was important in the development of the 787. The move was done to save money, and Boeing has become more profitable in recent years. Boeing increased its revenue for 2009 by 12.10% to $68.3 billion since 2008. The 787, in spite of delays, is likely to be profitable for the company. According to Forbes, this new plane 787 Dreamliner may tip the scales in Boeing's favor. This new plane has a lightweight composite material design which Boeing claims will give it a 20% increase in fuel efficiency (see ...

Solution Summary

Relavant and non-relavant cost decision making, common costs, and activity based costing for Boeing

$2.19