Action Items 1.For each type of cost below, provide a specific cost example, giv

Question

Action Items
1.For each type of cost below, provide a specific cost example, given the context described. Also, provide a brief explanation of why your specific example fits the definition of that type of cost (e.g., for a., explain why the specific cost you selected is a variable cost).
a.A variable cost at a trucking company.
b.A direct cost at a furniture manufacturing company.
c.A product cost at a pharmaceutical manufacturing company.
d.An opportunity cost in a fitness center wanting to diversify its offerings.
e.A step-function cost in a grocery store.
f.A committed cost in a financial (investment) services company.
g.A noncontrollable cost in the bakery division of a food processing company.
h.A differential cost in the decision of an appliance manufacturing company to either make a needed part or outsource its production.
i.A sunk cost in a restaurant’s decision to upgrade its kitchen equipment.
j.A discretionary cost at a hotel chain.

Explanation / Answer

  a. A Variable cost at trucking company . Here Trucking company activties majorly transportation of goods by truck.So on every transportation it would incur some amount of expenses.Here variable cost focused as because of the cost based on number of trnsportation.  Nature of variable cost is that it would be vary through producing of number of units.   b.A furniture Manfacturing cost incurred direct cost in the name of acquiring of raw metierial (wood). All direct metierials treated as a dirct cost incurred.Thus it has compared in 2nd example.   c.Pharmaceutical manufacturing company's produced product through incurring of direct cost and variable cost and specially some of mixed oveheads. Product cost can be obtained from allocting over heads into the finshed product for a specified period.Thus it was compared .   d.An opportunity cost in a fitness center wanting to diversify its offerings: through the expandig of offeres ,the fiteness centre can get additional income,and at the same time for expanding of offers it would incur some amount of expenses.Thus the expansion of offers has been compared with opputnite cost in "D" example.   e.According to weight the cost would be increased in genereal gocery stores. Generelly in grocery store "the cost of storing  metierials and food items  and other things will be prorptionatly changed.   f. commited cost is incurring accorditng to capacity of (fixed) the service .thus it was compared in finacial services company.   g.some of fixed expenses can not be controlled . like manger salary,and factory rent... that is the reason I think, here it was compared by bakery devision of a food processing company. bakery rent ,salaries can't be controlled.   h.Differntial cost means that go for "alternative"  here it was compared for "either make a needed part is one altenative and  outsource its production is another alternative.   i.sunck cost if it is once incurred can' t be get back. here paid cost for equipment is been compared with sunk cost.   j.discretionary cost can be changed by the mangement. here i think the possibility of some of mixed advertisement,maintaince cost incurred can be changed by the mangemnt easyly in hotel chain.   thank you ....    

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