Analysis of Nikkei Products

Table of Content

Their first products were track running shoe that is well-known until nowadays. The Company sells a line of performance equipment under the NIKKEI rand name, including bags, socks, sport balls, aware, timepieces, electronic devices, bats, gloves, protective equipment, golf clubs and other equipment designed for sports activities. It also sells small amounts of various plastic products to other manufacturers through its wholly owned subsidiary, NIKKEI MIM, Inc.

In addition to the products the Company sells directly to customers through its Direct to Consumer operations, the Company has entered into license agreements that permit unaffiliated parties to manufacture and sell certain apparels, digital devices and applications and other equipment designed for ports activities. Nikkei product Nikkei produces a wide range of sports equipment specially sport shoes. They currently also produces shoes and jersey for the wide range of sport including track and field such as football, ice hockey, basketball and cricket.

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Nikkei also produces shoes for outdoor activities such as tennis, golf, skateboarding, association football, baseball, cycling, volleyball, cheerleaders, aquatic activities, auto racing, and other athletic and recreational Uses. It is obvious that Nikkei specialized in sport footwear. Direct costs refer to materials, labor and expenses related to the manufacture of a product. Other costs, such as depreciation or administrative expenses, are more difficult to allocate to a specific product, and therefore are measured indirect costs. Direct material is a direct cost and includes any raw material that sums up as a part of the final product.

The raw materials used in the manufacture of the final product. The costs of direct material used in making of a pair of shoe include the cost of producing fabrics, plastic, rubber and leather. Direct labor consists of the amount paid to workers to manufacture the product. The hourly wage paid to assembly line worker is a primary ingredient in the cost f make shoe. (Referee appendix A & B) Indirect cost is an expense (such as for advertising, computing, maintenance , security , administration) incurred in joint usage and, therefore, difficult to assign to or identify with a specific cost object or cost center (department, function, program).

Indirect costs are usually constant for a wide range of output, and are grouped under fixed costs. Indirect materials are materials used in the production process, but which cannot be linked to a specific product or job. Alternatively, they may be used in such slight quantities on a per-product basis that it is not valuable o track them as direct materials (which involves including them in the bill of materials). Thus, they are consumed as part of the production process, but are not integrated in substantial amounts into a product or job.

Examples of indirect materials are cleaning supplies, Disposable safety equipment, disposable tools, fittings and fastener, glue and tape. Indirect labors are defined as employees or workers (such as accountants, supervisors, security guards) who do not directly produce goods or services, but who make their production possible or more efficient. Indirect labor costs are not readily identifiable with a pacific task or work order. They are termed indirect costs and are charged to overhead accounts. Manufacturing overhead (also known as factory overhead, factory burden, production overhead) involves a company’s factory operations.

It includes the costs incurred in the factory other than the costs of direct materials and direct labor. This is the reason that manufacturing overhead is often classified as an indirect product cost. Generally accepted accounting principles require that cost of direct material cost, direct labor, and manufacturing overhead be considered as the cost of products for valuing inventory and for determining the cost of goods sold. (Expenses that are outside of the factory, such as selling, general and administrative expenses, are not product costs and are not inventoried.

They are reported as expenses on the income statement in the accounting period in which they occur. ) Examples as such rental, TO premiums, depreciation, utilities, indirect labor cost, indirect material cost, taxes and so on. Actual manufacturing overhead are the actual cost incurred during and accounting period for manufacturing overhead. This also includes actual indirect material, factory rental, depreciation, utilities, insurance, and property axes. Applied manufacturing overhead costs added to work-in-progress inventory during an accounting period. Refer to appendix A, B, C and D) Product cost is a financial accounting concept under general accepted accounting principle (GAP). Product cost is any cost associated with getting products and services ready for sale. Product costs are Direct Material, Direct Labor, and Manufacturing Overhead. Period cost is a financial concept under general accepted accounting principle (GAP). Period cost is the cost that not a part of the cost providing programs and services. Period cost do not directly relate to readying products or services for sale.

Rather these costs, which included office rent, advertising, customer service and sales force compensation relate more to the passage of time. Fixed overhead costs don’t change, are easy to predict and don’t depend on your volume of sales. They include rent, insurance, depreciation on assets such as equipment and vehicles, office expenses and administrative salaries. You might allocate some fixed expenses to specific departments: for example, factory utilities and rent, production supervisors’ salaries and inventory insurance.

Variable, or semi-variable, overhead expenses are more difficult to predict because they vary according to sales, seasonal changes, promotional outcomes and changes in the cost of goods and services. They include phone expenses, office supplies and mailing and promotional expenses. Examples of Graphs Fixed Cost Manufacturing OOH 2011 2012 2013 Rent 5,000 Deprecation on Non-Current Asses(straight line method) 6,000 Variable Cost Utilities 1 ,oho 2,400 2,000 Taxes 1 ,800 Appendix A These are few examples of on how to derive a direct material.

In order to calculate the direct materials usage or quantity variance, we start with the umber of acceptable units of products that have been manufacture also known as the good output. At the Nikkei this is the number of good shoes physically produced. Note: We are not determining the quantity of shoes that the Nikkei should have made. Rather, we are determining whether the 100 pairs of shoes that were actually manufactured were produced efficiently. In the case of direct materials, we want to determine whether or not the company used the proper amount of synthetic cotton to make the 100 that were actually produced.

Actual shoes manufactured 100 pair of shoes Standard centimeters of fabric needed 0 CM Total standard meters of for the actual goods shoes manufactured – the number of fabric that should have been used to make the good output comic Total 1 Com We determine the total standard cost of the fabric that should have been used to make the 1 00 aprons by multiplying the standard quantity of fabric (1 Com) by the standard cost of a fabric of denim ($2 per CM): Total standard meters of for the actual goods shoes manufactured 1 Com Standard cost for per CM $2 Standard cost of in the good shoes output $2,000 In our example, the Nikkei should have used comic of fabric to make 100 shoes. The company actually used comic of synthetic cotton, we say that the Nikkei did not operate efficiently?an extra 200 CM of fabric was used (comic vs.. comic = CACM). When we multiply the CACM of fabrics by the standard cost of $2 per CM, the result is an unfavorable direct materials usage variance of $400.

Let’s put the above information into a format commonly used for computing variances: Direct Material Inventory for the actual fabric of cotton used x standard cost of per CM of fabric Direct Material Usage Variance (SST Cm – Actual Cm) x Standard Cost Standard fabrics that should have been used to make the DOD output – SST Cm x SST Cost Act Cm x SST Cost (CACM) x $2 SST Cm x SST Cost comic x $2 1 Com x $2 $2400 $400 (Unfavorable) $ 2000 Direct Material Inventory: $2400 Indirect materials are not usually tracked through a formal inventory record keeping system. Instead, an informal system is used to determine when to order additional indirect materials.

These are the actual amount of direct material and indirect material amounts are being used for the calculation in manufacturing amount: Material inventory on at 1 Jan 2013 – $45,000 Material purchased on credit during 2013 – $ 150,000 Direct Material issued to production -$ 130,000 Indirect material issued to production -$ 20,000 Material Inventory Account Balanced b/d 1 50,000 130,000 Manufacturing O/H Balance b/d 195,000 Appendix B 45,000 A/C Payable Work-Len-Progress 20,000 45,000 As the end of the November 2013, the cost accounting department uses the labor time records filed during the month to determine the following direct labor cost of each job.

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