Monroe Clock Company

Assignment 1 The problem that is brought to our attention would be an argument amidst Monroe Company executives. Jim, the Ceo, believes that the product should use plant wide manufacturing operating cost, which brings the retail barter of the product to $29. 40/per unit. Meanwhile frank, the Sale Manager, believes the product should not force the entire manufacturing overhead and be based off the variable quantity embody it incurs and sold at $16. 00/per unit.The issue occurs when deciding whether to choose mingled with variable costing, not including fixed cost, which is usually acceptable on small orders, or choosing absorption costing which includes a portion of the fixed costs. Of course choosing between the two different costing come outes makes a big difference in this case. One keeps the product above market price while the early(a) cuts the competitors prices by 20%. With out thinking you would go with cutting competitors prices and subdued gaining sales.What to k eep in mind is employ the variable costing approach you atomic number 18nt accounting for the manufacturing overhead that the radical timer is incurring. It is possible that the novel timer isnt incurring much overhead considering it is simply a new addition to the old timer. The modifications to create the new addition are simple and at low cost because the resources are already there. They did not have to create or purchase a new store because they already had recently purchased one and were going to use it regardless.Other than the initial get a tenacious up cost of approximately $20000 for tables, lighting and small tools, the early(a) overhead cost would already be accounted for and the new incurred overhead cost would not go beyond the relevant range of fixed cost.. One issue not accounted for in the calculations is the location of the new warehouse. There get out all the way be transportation cost because one warehouse is in Texas and the other in Pennsylvania.Of co urse we dont know which warehouse leave alone be used but still a cost to consider. With the new timer absorbing the full manufacturing overhead cost it would of course annex the price of the product almost doubling it but does not stripe the risk of creating a product that actually has them loosing money in the massive run. The variable costing approach of course will create sales and revenue in the short run but in the long run can possibly create losses by not accounting for all the cost actually incurred.My conclusion (due to space restriction) would be to use the variable costing approach due to everything mentioned and one much(prenominal) determining factor. The forecasted sales projection is 50 000 units. At this production take advertising would be $50 000 regardless of how many units they sale. By using the cheaper pricing you are creating a better chance of you getting those sales and after you sell a unit past 50 000 you will be creating more profit because the bu dget of sales, which is $1. 00 per unit, would be divided among more units.