2 . The earnings are different since the costs will be allocated in a different way in the 3 methods.
In the standard-cost method, stainlesss steel profits were a function of costs, costs and volume. Product weight (pounds) was the primary unit of measure pertaining to standard price, which included components, labor, direct manufacturing expense and cost to do business cost types. Direct material and direct labor are based on the bill of materials and routings. Immediate manufacturing costs were allocated to products depending on machine several hours. Indirect manufacturing and administrative costs were allocated to items based on pounds produced. That averages the diverse source use by different products.
The DASAR followed a two stage methodology by using resource drivers and allocating activities to products and customers applying cost motorists appropriate towards the activity. The fabric costs and direct labor are the same while using standard expense method. All of the indirect costs are linked to the product by using a causal marriage, so the cost rates will vary for different actions. In the common cost method, the cost prices for direct manufacturing bills are the same for all the activities and manufacturing and administrative overhead is allocated evenly among different goods.
TOC only requires material costs, and all the overhead costs are exactly the same among several products and set.
three or more. In DASAR, the product mixture was decided on the basis of profitability of each product plus the production of the very profitable merchandise was strengthened. It doesn't consider the time and the opportunity cost of utilizing the bottleneck assets. TOC requires into consideration the effect of the most critical resource in finalizing the merchandise mix. This maximizes the product which gives optimum profit about utilizing a single unit from the critical source.
In Lehigh's case, Lehigh must not base their product blend decision on either DASAR or TOC solely. In case, the bottleneck process of each one of the product line is...
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