Palmpro Company Case Study Solution

233816 Words 936 Pages
Register to read the introduction… However, the large drop in PalmKid’s contribution margin per unit combined with a decrease in the actual number of PalmPro units sold as well as a drop in the actual contribution margin per unit below budget, led to the total contribution margin being much lower than budgeted.

Other factors could be discussed here––for example, it seems that the PalmKid did not achieve much success with a three digit price point––selling price was budgeted at $149 but dropped to $102. At the same time, variable costs increased. This could have been due to a marketing push that did not succeed.

14-33 (20 min.) Market-share and market-size variances (continuation of 14-32). 1. Worldwide Aussie Info. Market share Actual Budgeted 500,000 400,000 110,000 100,000 22% 25%

Average contribution margin per unit: Actual = $108.80 ($11,968,000  110,000) Budgeted = $130.75 ($13,075,000  100,000) Market-share variance Budgeted  Actual Budgeted  contribution margin  market  market    per composite unit  share share    for budgeted mix 500,000  (0.22 – 0.25)  $130.75 500,000  (–0.03)  $130.75 $1,961,250 U Actual market size in units Budgeted   Actual  market size  market size   in units in units    Budgeted Budgeted contribution margin market  per composite unit share for budgeted
…show more content…
15-9 The stand-alone cost-allocation method uses information pertaining to each user of a cost object as a separate entity to determine the cost-allocation weights. The incremental cost-allocation method ranks the individual users of a cost object in the order of users most responsible for the common costs and then uses this ranking to allocate costs among those users. The first-ranked user of the cost object is the primary user and is allocated costs up to the costs of the primary user as a stand-alone user. The second-ranked user is the first incremental user and is allocated the additional cost that arises from two users instead of only the primary user. The third-ranked user is the second incremental user and is allocated the additional cost that arises from three users instead of two users, and so on. The Shapley Value method calculates an average cost based on the costs allocated to each user as first the primary user, the second-ranked user, the third-ranked user, and so on. 15-10 All contracts with U.S. government agencies must comply with cost accounting standards issued by the Cost Accounting Standards Board (CASB). 15-11 Areas of dispute between contracting parties can be reduced by making the “rules of the game” explicit and in writing at the time the contract is signed. 15-12 Companies increasingly are selling packages of products or services for a single price. Revenue allocation is required when managers in charge of developing or marketing individual products in a bundle are evaluated using product specific revenues. 15-13 The stand-alone revenue-allocation method uses product specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products. The incremental

Related Documents