Case Study 1-2 Boswell Plumbing Products

Unformatted text preview: Week 1 Discussion Case 1-2 Boswell Plumbing Products Using the concept of incremental analysis, expand on Nick’s response of “Why do you want to know?” What cost information would be relevant to a decision to drop the product that would not be relevant to a decision to increase a production run by 100 units? To elaborate more on Nick Somner’s comment, I believe the interpretation of his borderline impolite approach was to get the manager to decide whether to cut the product or increase a production run by 100 D45 valves. Either decision rests on the manager’s knowledge of the final incremental analysis figures, which Nick the accountant can provide help. If the product is in fact cut from production then costs such as purchasing raw materials, indirect labor and overhead costs can be eliminated. This would be the case if there are more profitable products that the company can focus instead of the D45...
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Unformatted text preview: Case 1-2 Boswell Plumbing Products Boswell plumbing products produces a variety of valves, connectors, and fixtures used in commercial and residential plumbing applications. Recently a senior manager walked into the cost accounting department and asked Nick Somner to tell her the cost of the D45valve. Nick quickly replied, "why do want to know?" Noticing that the manager appeared somewhat startled by this question, he ex- plained, " the cost information you need depends on the decision you're going to make. You might be thinking of increasing a scheduled production run of 3,000 D45s by 100 units or scheduling an additional production run, or you might even be thinking of dropping the product. For each of these decisions, the cost inform- ation that you need is different." Question: Using the concept of incremental analysis, expand on Nick's response on "why do you want to know?" what cost information would be relevant to a decision to drop the product that would not be relevant to a decision to increase a production by 100 units? Decision making relies on incremental analysis. All business decisions can use this process. Incremental analysis is essentially the difference in costs and reven- ue depending on the decision. When Nick wanted to know why the senior man- ager was asking the cost of the D45valve, he knew they would need different in- formation depending on the reason they needed the information. Below are 3 dif- ferent reasons the top management may need the cost of the D45valve A) Increasing a scheduled production run of 3,000 D45s by 100 units:...
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