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Running Head: Carter Systems Canada, Inc. Analysis 1 1. How does the cost breakdown of the previous orders and Mr. Travis? estimate
differ? What can be inferred about the nature of the new product from the cost
From the previous analysis, it is seen that the cost of each unit of the products is $27.88
for the 8000 units. After the analysis the Mr. Travis found that the cost is higher, the cost was
$28.26. This is because there has been change for cost to $7.30. These include the cost of raw
material that is used in the manufacture of the products and are directly identified with the
product. The items that are identified as the direct materials are listed in bill of materials. Direct
labor cost is also increased in and is found to be $5.09. One can infer that the product is that the
buyers are ready and in need of having it and most of the firms do not have the understanding of
2. How can each item of a cost breakdown be interpreted in regard to each other and the quoted company? Of all the cost breakdown items, which items are more important and
open to negotiation?
The direct cost for Mr. Travis value to direct materials to cost a higher as compared to that
of the other companies, the direct, and material for Bell Systems is $6.20 while that of D & G
Technologies is $5.90. Direct labor is also higher for Mr. Travis with that of Bell Systems being
$4.25 while that of D & G Technologies is $4.00. The cost of tooling however is lower for Mr.
Travis as compared to that of the two companies. The cost of tooling for Mr. Travis is valued at
$2.00 while that of Bell Systems is $3.22 while that of D & G Technologies is $2.20. Carter Systems Canada, Inc. Analysis 2 The cost of direct labor and that of administrative purposes are important and are subject
to negotiation. This is because the direct labor cost can be reduced by reducing the number of
employees. As well, we can reduce it by negotiating with employees to decrease the cost of
operation of the company. Both direct and indirect costs are factors with profit that is to be
achieved. The costs are a complexity of the work that is to be performed and the risks that are
assumed when manufacturing the products.
3. What factors might have caused the variance between D & G Technologies? quotation and Mr. Travis? estimate? Between D&G Technologies? quotation and Bell
Systems? quotation? Factors affecting SOT and the two lowest quotes, Reliability, and value
The overhead rates are to be high and hence the business is efficient. As seen in the
analysis by Mr. Travis it is evident that the rates are at an average level of between $1.35 and
$2.90. The pricing performs a break-even multiplier and is got to be the sum of total indirect cost
and direct cost and divided by the direct costs. The overhead cost is less than $2.20 and the firm
has general administrative cost of $1.23 and to sum of the direct cost and the material cost is
($7.30 + 5.09). For covering of the overhead cost, therefore, there is need for a multiplier of 3.2
on every dollar of material cost and direct labor. This will also help in covering for the expenses
and the break even. As stated by Pelham (2016), any of the values above the multiplier are
therefore seen to be a loss while that higher indicates that there is a profit.?
The factors that might cause a difference in the variance in the quotation include the
technology that is use by market share and the size of the organization. Buyers using recent
technology use a lower cost and serve their customers faster while the large suppliers have the Carter Systems Canada, Inc. Analysis 3 advantage of economies of scale hence their chargers a lower as compared to the other smaller
buyers (Kuklinski, 2015).
The reliability of cost estimate made by the buyers? are important for the supplier to make
adjustments and understand the way that the others work and the needs that are available in the
market. Value is gain from the comparison of the quotations since the supplier is able to
understand the parts that they can work on to reduce the cost of manufacturing a product.
Although the manufacturing overhead cost is, high for SOT is has a higher multiplier and hence
the high value of $29.78. The value of tooling is also high for the buyer of up to $8.35. Carter Systems Canada, Inc. Analysis 4 References
Kuklinski, M. R., (2015). Benefit?cost analysis of a randomized evaluation of Communities That
Care: monetizing intervention effects on the initiation of delinquency and substance use
through grade 12. Journal of experimental criminology, 11(2), 165-192.
Pelham, W. E. (2016). Comparative Cost Analysis of Sequential, Adaptive, Behavioral,
Pharmacological, and Combined Treatments for Childhood ADHD. Journal of Clinical
Child & Adolescent Psychology, 1-12.
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