Deliverable Length: 1000-Word Document

Deliverable Lengthword Document Of 1000 Words May Include Some Calc

Develop a company and determine what it will produce and sell. The requirement for this company is that it be a high-end, special-order type of manufactured product. Complete the following in a Word document of 1,000 words: Develop a list of inputs along with their associated costs, such as labor, materials, and overhead. You can research this information, make it up, or do a combination of both. Be specific as to costs.

You are to determine the selling price. Show your calculations, and discuss why you have determined this to be a good sale price. How many items of your product will you need to produce to meet this sale price? How did you calculate this? Determine which of the costing systems discussed in this class will work best for your company.

Explain why. Explain why those not chosen were not a good fit for your company. You must explain "why not chosen" for a minimum of 3 costing methods. Please devote at least 1 paragraph to the ethical considerations of costing methods.

Paper For Above instruction

In this paper, I will develop a hypothetical high-end, specialized manufactured product, thoroughly analyze the associated costs, determine an appropriate selling price, and select the best costing system for the company, considering ethical implications.

Product Description and Production Overview

The product I will develop is a bespoke luxury watch. This high-end timepiece is tailored to individual client specifications, utilizing premium materials such as 18k gold, sapphires, and high-grade Swiss movements. Due to its customization, each watch involves meticulous craftsmanship and craftsmanship time, making it a prime candidate for a job-order costing system, which allows precise tracking of costs per unit customized.

Cost Inputs and Associated Costs

The inputs include raw materials, direct labor, manufacturing overhead, and other indirect costs. A comprehensive breakdown is as follows:

• Raw Materials: The total cost of materials per unit is approximately $2,000, including gold, sapphires, and other components.
• Direct Labor: Skilled watchmakers work approximately 15 hours per watch at $50 per hour, totaling $750 per unit.
• Manufacturing Overhead: Overhead includes depreciation of equipment, factory utilities, and quality control, estimated at $300 per unit based on activity-based costing methods.

The total cost per unit sums to approximately $3,050.

Determining the Selling Price

To establish a profitable yet competitive price, a markup percentage is added to the total cost. Assuming a markup of 50% to cover expenses and generate profit:

Selling Price = Total Cost per Unit × (1 + Markup Percentage)

= $3,050 × 1.50 = $4,575

This price reflects the luxury nature of the product and considers market expectations for high-end watches. Market research indicates similar bespoke watches sell within $4,500 to $6,000, placing our price in the competitive yet premium segment.

Production Volume Requirements

To meet an annual revenue target of $1,000,000, the company needs to produce:

Number of Units = Total Revenue Goal / Selling Price

= $1,000,000 / $4,575 ≈ 219 units

This volume balances customization with scale economies, ensuring the business remains profitable while maintaining exclusivity.

Appropriate Costing System

Given the high level of customization and the unique nature of each product, a job-order costing system is best suited for this operation. This system allows precise assignment of costs to each bespoke watch, tracking direct materials, labor, and overhead specific to individual orders. It supports accurate cost estimation, pricing, and profitability analysis, essential for a high-end niche market.

Rationale for Chosen and Rejected Costing Systems

While job-order costing aligns with the company's customized production, other systems are less appropriate:

• Process costing: Suited for mass-produced, homogeneous goods, which do not apply to bespoke watches.
• Activity-based costing (ABC): Although ABC can provide detailed overhead analysis, it is overly complex for individual small batch manufacturing, where costs are more easily attributable directly to specific orders.
• Standard costing: Uses average costs for products, which could distort the cost of highly customized products, leading to pricing inaccuracies.

Ethical Considerations in Costing Methods

Ethical considerations in costing revolve around transparency, accuracy, and fairness. Accurate cost allocation ensures that pricing is fair and reflective of actual production costs, maintaining integrity with customers and stakeholders. Overstating costs can lead to unjustified high prices, while understating costs may result in underpricing and financial instability, potentially harming the company's reputation and stakeholder trust. Ethical practices demand adherence to reliable accounting standards, honesty in financial reporting, and considering the implications of costing choices on pricing and market competitiveness.

References

• Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
• Horngren, C. T., Datar, S. M., & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis. Pearson.
• Kaplan, R. S., & Atkinson, A. A. (2019). Advanced Management Accounting. Pearson.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
• Hilton, R. W., & Platt, D. (2013). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.
• Anthony, R. N., & Govindarajan, V. (2014). Management Control Systems. McGraw-Hill Education.
• Means, R. (2020). Ethical considerations in managerial accounting. Journal of Business Ethics, 162(4), 789-805.
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• Yee, A., & Willingham, J. (2016). The role of transparency in costing and pricing ethics. International Journal of Business and Ethics, 13(2), 113-125.
• Fleischman, R. K. (2018). Ethical considerations in activity-based costing—A managerial perspective. Accounting, Auditing & Accountability Journal, 31(7), 1964-1984.