Southern New Hampshire University
Module Three Homework
Respond with short answers in paragraph form.
1) What are the various methods that can be used to analyze distribu on costs?
A method of distribu on cost analysis is the cost-bene t analysis. This method is used compare costs and bene ts of a distribu on system and determines how to proceed based on the analysis. The cost-bene t analysis is an easy tool and assigns dollar values to cash in ows and ou lows throughout business performance. The company uses es mates and determines the present value of the expected future costs. Since es mates are used, error can occur and lead to the company making wrong decisions. Another method of distribu on cost analysis is ac vity- based cos ng. The ac vity-based cost analysis is an in-depth review of all costs associated with the distribu on system to determine the major cost drivers of the cost and determine e ec ve plans on how to eliminate them. Under this method, overhead and indirect costs are assigned to its related product or service. Doing so, the ac vity-based cos ng analysis recognizes the rela onship between costs and overhead ac vi es to its nished products.
2)Why is it important for the controller to keep track of distribu on costs? It is important for a controller to keep track of distribu on costs because these costs depict the expenses that are associated with distribu ng goods, producing goods, and other costs linked to retail. Keeping track of these costs is important in carrying out a company's supply chain process. This should be done frequently so that a business does not fall behind and is unable to recognize such costs later.
3) What steps might a controller take if the distribu on costs of a certain product exceed the actual price the customer was being charged? The controller should rst determine the reason for the distribu on costs exceeding the actual price of the goods. From there, the controller can iden fy poten al solu ons for the company's problem and present them to management. In most cases, if the distribu on costs can't be lowered, I imagine companies discon nuing the product or lowering its price if possible.
4) What is meant by the term "standards" in the context of distribu on costs? Standards in the context of distribu on costs signi es certain rules the company had set for each element of costs for each line of product manufactured or service performed. Having standards ensures consistency and accuracy for the company in determining its distribu on costs and properly assigning these expenses.
5) Why is it important to set distribu on standards? Se ng distribu on standards is necessary to promise consistency in the company's repor ng and alloca on of costs. Without standards, es mates can't be assumed accurate and the company repor ng its distribu on costs won't be consistent with its data.
Southern New Hampshire Univer