Tuesday, February 11, 2020

Analyze the companys cost structure (e.g., variable vs. fixed costs, Essay

Analyze the companys cost structure (e.g., variable vs. fixed costs, manufacturing vs. non-manufacturing costs, direct vs. indirect costs, job costing or process costing, etc) for starbucks - Essay Example When allocating the rent of the Starbuck store rent it is advisable to divide the rent by the number of coffee bags sold (Maryanne, 109). Manufacturing and non manufacturing costs: Manufacturing costs are indirect factory related costs that are incurred during the manufacturing process. The cost of manufacturing overhead cost must be assigned to each unit produced so that inventory and cost of goods sold can be valued. For the case of Starbuck Company non manufacturing costs include direct material and direct labor. Again the non manufacturing costs represent manufacturer’s expenses that occur apart from the manufacturing function. These expenses are not product cost and are reported in a financial statement as expenses incurred. They include interest on business loan, marketing and advertising costs, taxes and salaries of the staffs (Maryanne, 110). Job costing and process costing: Job costing is a way of determining the cost to a company for each unit of item. This is done by taking each job as independent and how much each job cost to produce a number of units. This allows manager and executives to calculate the amount of profits made from each job. The Starbuck Company for each type of drink it delivers a certain price. This is an effective way of controlling the price of a product. Process costing is a process in which the company come up with long term statistics to know how the price keep on changing over time (Maryanne, 112). It also simplify record keeping hence allowing the company to when changes need to be made. Direct and Indirect Costs: Material, labor and other expenses which are directly or easily traceable to a product, service or job are known as direct costs. In the production of coffee, materials are purchased, wages are paid to workers and certain other expenses are incurred directly (Wiley & Sons, 34). All these take an active and direct part in the manufacture of a product and are, therefore, called direct

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