Responses to Other Students: Respond to at least 2 of your fellow classmates with at least a 50100-word reply about their Primary Response regarding items you found to be compelling and enlightening. To help you with your discussion, please consider the following question:
- What differences or similarities do you see between your posting and other classmates’ postings?
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Table of Contents
Waldemar Morales Perez:
There are two major areas on which you can segregate the costs for your business the variable costs and fixed costs. One important thing to recognize is that you would find both types of cost either in manufacturing or in a service business. Things like rent for your facilities and salaries for supervisors are considered a fixed cost that you can find in any type of organization. Other types of costs that you can encounter on a business can be an hourly paid employee, materials that are related to a provided service, or even to manufacture a product sold by the company. Learning to understand this cost is key to being successful in your business, in particular, the variable ones since these are going to fluctuate depending on the number of services provided or in how your production levels fluctuate. Getting to know well these concepts help you to be able to calculate things like your contribution margin, target profit, and your break-even point on any kind of business.
In conclusion, in any kind of manufacturing or service business, if you do your diligence, you can calculate all your fixed and variable costs. After this, you should be able to come with a contribution margin and use it to calculate how many sales you need or how many services you need to provide to achieve your desired results and have a growing successful business.
Stephanie Labarca:
- How can these same principles work for both manufacturing and service businesses?
- How did you arrive at your conclusion? Provide an example.
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Labarca:
Cost classification involves the separation of a group of expenses into different categories. A classification system is used to bring management attention to certain costs that are more crucial. These principles work in the manufacturing business very well. It can be classified into three costs which are direct labor, direct materials, and manufacturing overhead. These principles work in the service business as well. It can be classified into three costs which are prime cost, product cost, and factory cost.
I arrived at this conclusion because the cost classification can be applied to any type of company. Cost is considered a tool for future evaluations and categorizing the cost into categories allows the company to have a clear picture of the whole business model. The different costs involved in a business process to fulfill accounting objectives and facilitate economic analysis. An example of cost classification would be a manager separating costs into different categories. They would have to use the manufacturing process, the basis of variability, and managerial decision-making. Cost classification can be used in any business setting and is a great tool to use.
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