Monroe Clock Company

Assignment 1 The chore that is brought to our attention would be an argument between Monroe Company executives. Jim, the Ceo, believes that the product should use plant wide manufacturing operating court, which brings the sell sale of the product to $29. 40/per unit. Meanwhile frank, the Sale Manager, believes the product should not absorb the entire manufacturing overhead and be based off the variable toll it incurs and sold at $16. 00/per unit.The issue occurs when deciding whether to require between variable costing, not including fixed cost, which is usually acceptable on small orders, or choosing concentration costing which includes a portion of the fixed costs. Of carry choosing between the two different costing approaches 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 still gaining sales.What to keep in judgment is u sing the variable costing approach you bent accounting for the manufacturing overhead that the new timer is incurring. It is come-at-able that the new timer isnt incurring much overhead considering it is simply a new increase 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 warehouse because they already had recently purchased unrivaled and were going to use it regardless.Other than the initial set up cost of approximately $20000 for tables, tinder and small tools, the other overhead cost would already be accounted for and the new incurred overhead cost would not go beyond the relevant range of fixed cost.. One thing not accounted for in the calculations is the mess of the new warehouse. There will clearly be transportation cost because one warehouse is in Texas and the other in Pennsylvania.Of course we dont know which warehouse will be utilise but still a cost to consider. With the new timer absorbing the full manufacturing overhead cost it would of course increase the price of the product almost doubling it but does not run the gamble of creating a product that actually has them loosing money in the coarse 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 more determining factor. The forecasted sales projection is 50 000 units. At this production level advertising would be $50 000 regardless of how many units they sale. By using the cheaper pricing you are creating a better take on of you getting those sales and after you sell a unit past 50 000 you will be creating more profit because the budget of sales, which is $1. 00 per unit, would be divided among more un its.