Costs and Profit Assignment Essay

The most purely variable cost of all, these are the raw materials that go into a product. Piece rate labor. This is the amount paid to workers for every unit completed (note: direct labor is frequently not a variable cost, since a minimum number of people are needed to staff the production area; this makes it a fixed cost). Production supplies.

Things like machinery oil are consumed based on the amount of machinery usage, so these costs vary with production volume.

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Billable staffers. If a company bills out the time of its employees, and those employees are only paid if they work billable hours, then this is a variable cost. However, if they are paid salaries (where they are paid no matter how many hours they work), then this is a fixed cost. Commissions. Salespeople are paid a commission only if they sell products or services, so this is clearly a variable cost. Credit card fees. Fees are only charged to a business if it accepts credit card researchers from customers.

Only the credit card fees that are a percentage of sales (i. E. , not the monthly fixed fee) should be considered variable. Freight out. A business incurs a shipping cost only when it sells and ships out a product. Thus, freight out can be considered a variable cost. 2. Choose a real or made up example of a company, and describe at least three fixed costs the company has. (1-3 sentences. 1. 5 points) Amortization. This is the gradual charging to expense of the cost of an intangible asset (such as a purchased patent) over the useful life of the asset. Depreciation.

This is the gradual charging to expense of the cost of a tangible asset (such as production equipment) over the useful life of the asset. Insurance. This is a periodic charge under an insurance contract. Interest expense. This is the cost of funds loaned to a business by a lender. This is only a fixed cost if a fixed interest rate was incorporated into the loan agreement. Property taxes. This is a tax charged to a business by the local government, which is based on the cost of its assets. Rent. This is a periodic charge for the use of real estate owned by a landlord. Salaries.

This is a fixed compensation amount paid to employees, irrespective of their hours worked. Utilities. This is the cost of electricity, gas, phones, and so forth. This cost has a variable element, but is largely fixed. 3. Is gross profit or net profit more important to consider when you’re deciding how successful and profitable a company is? Why? Explain. (1-3 sentences. 2. 0 points) Gross profit is the difference between a company total revenues or sales of its products and services, and the direct costs associated with producing and selling a company & products and services, which is defined as the cost of goods r cost of sales.

Gross profit is also referred to as gross margin or gross income. Understanding gross profit is useful in providing a snapshot of how effectively and efficiently a company & management team manages the resources and expenses directly associated with manufacturing or creating their products and services while, Net profit, or net income, is a company total earnings after subtracting all its expenses from its total sales and other income for a specific period of time.

Typically, net profit is measured on a quarterly or annual basis. When compared with a company net profit during other periods, it can provide useful measure for how profitable a company is over time and the overall performance of the company & management team. 4. If you were running a company, describe at least two things you would do to improve its productivity. (1-4 sentences. 2. 0 points) This is a massive one in today’s era of modern technology: emails, instant messaging, status updates, SMS etc.

When you are in the middle of an important task and you get interrupted or distracted, it can take you up to 20 minutes to get back into the zone. If this happens 3 times in a day, that’s 1 hour of lost productivity. In a airtight, that’s 10 hours or more than one whole day of lost productivity, just from being interrupted. Imagine what you could do if you had a whole extra day every fortnight. Now you know how. The television networks know about prime time – that is the time when most people are watching and they will get their best return for their money.

Hence, they put on their best shows during this time. What is your prime time? Your prime time is the time when you are at your most productive. Use this time to take on your most challenging and valuable tasks. For me, my prime times are either in the mornings or evenings. I try to keep my afternoons for lower value tasks while my mornings and evenings are set aside for tasks that require significant thinking. 5. Describe at least two advantages a large company has over a smaller company. (1-4 sentences. 2. Points) awareness versus smaller ones. Brand recognition pertains to the percentage of people aware of a company’s brand name and products. Most large companies start out as smaller organizations. They build their brand recognition through personal selling, advertising and public relations. An advantage of having stronger brand recognition is that customers will usually think of those companies first when making purchase decisions. Hence, companies with greater brand awareness generally sell more products in the marketplace. . Choose a good you are familiar with, and analyze its economic utility, using the questions below. NOTE: Choose a good for this exercise, not a service. A. What type of good did you choose? (1 sentence. 1. 0 points) Doris is a good familiar brand I know . B. Describe the form utility of the product you chose. What makes its form useful? Can you think of any improvements that could be made to its form utility? 1-3 sentences. 2. 0 points) using raw materials to make more valuable product.

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