Unit 3 Discussion Question Accounting PDF

Preview

Summary

Discussion Question...

Description

Welcome to BUS 5110 Managerial Accounting Discussion Forum Unit Four (04) In the discussion forum, you are expected to participate often and engage in deep levels of discourse. Please post your initial response by Sunday evening and continue to participate throughout the unit. You are required to post an initial response to the question/issue presented in the Forum and then respond to at least 3 of your classmates’ initial posts. You should also respond to anyone who has responded to you. Your Discussion should be a minimum of 250 words in length and not more than 450 words. Please include a word count. Following the APA standard, use references and intext citations for the textbook and any other sources. Continuing with the company selected in Unit 2, think about the types of financial data that would be included and excluded in differential analysis. Propose which specific revenues and costs should be considered in an evaluation to drop or keep a:  

Customer Product line

In addition, explain sunk and opportunity costs as they relate to your selected company. Should these costs be considered in differential analysis? Why or why not?

ANSWER: Boeing has many opportunities to use differential analysis in their business ranging from outsourcing engineer staffing, research for new product lines as well as outsourcing the process of building portions of their planes. To determine if Boeing should change their current airline customers (purchasing airplanes), they would utilize a differential analysis process to help them make the most informed decision. Financial Data (differential analysis): The difference in costs with an alternative plan of action than what’s currently being followed, and the analysis of those variations is called a differential analysis (Heisinger, 2012). Creating a model of the current state and comparing that to the proposed options allows you to determine the differential amount to help guide your decision.  Included: Sales revenue and total production costs would be used to calculate the contribution margin and profit variation in a differential analysis. o Sales revenue: Current sales vs. sales if Boeing eliminates the airline customer. o Total production costs including variable costs (direct materials, direct labor, and manufacturing overhead), fixed costs (supervisor salaries, building rent, and equipment leases). o Opportunity costs demonstrating the potential revenue if a customer or product is eliminated. o Sunk costs for items already purchased or created.  Excluded: Boeing should not include sales or expenses which are not related to the product line being discussed when. For example, Boeing’s space program and services

program revenue and expenses would not be included in a differential analysis of this kind. Allocated fixed costs may also be excluded when evaluating product lines.

Revenues and costs considered in evaluation (drop/keep): Comparing the options in a differential analysis, the alternative with the highest calculated profit would be the recommended decision.  Customers: Evaluating current airline customers, Boeing would look at sales revenue, cost of goods sold (per unit variable costs), fixed costs and differential fixed costs. . They would determine the variation of profit with and without the airline customer to determine which alternative has the highest profit.  Product Line: Boeing may want to determine if keeping a specific airplane model product and should pull financial data for each product line to compare against one another. Compared to a customer evaluation, eliminating an entire airplane product from their offering would have direct fixed costs that may be eliminated such as R&D expenses, warehouses and supervisor salaries are dedicated to the specific product lines. Allocated fixed costs, however, such as rent on larger warehouse and C-level salaries would not be reduced and are utilized for multiple product lines. Boeing may have some opportunity costs may also be evaluated if Boeing was able to rent out their current warehouses for profit. Sunk costs associated to equipment purchased for the specific airplane would also be taken into account.

Resources Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers. Retrieved from https://2012books.lardbucket.org/books/accounting-for-managers/index.html Press Release. (2019) Retrieved April 24, 2020, from https://s2.q4cdn.com/661678649/files/doc_financials/2019/q4/4Q19-Press-Release.pdf Supply Chain (n.d.). Retrieved April 22, 2020, from http://www.boeing.com/commercial/services/parts-solutions/index.page Quarterly Reports. (n.d.). Retrieved April 19, 2020, from https://investors.boeing.com/investors/financial-reports/default.aspx...