inventory costing and capacity analysis

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1、9InventoryCostingandCapacityAnalysisLearningObjectivesFewnumberscapturetheattentionofmanagersandshareholdersmorethanoperatingprofits.1.IdentifywhatdistinguishesvariableInindustriesthatrequiresignificantupfrontinvestmentsincapacity,costingfromabsorptioncostingthedecisionsmaderegardingthelev

2、elofsuchfixedinvestments,2.Computeincomeunderabsorptionandtheextenttowhichthecapacityiseventuallyutilizedtomeetcostingandvariablecosting,andcustomerdemand,haveasubstantialimpactoncorporateprofits.explainthedifferenceinincomeUnfortunately,thechoiceofcompensationandrewardsystems,as3.Understan

3、dhowabsorptioncost-wellasthechoiceofinventory-costingmethods,mayinduceingcanprovideundesirableincen-managerialdecisionsthatbenefitshort-termearningsattheexpensetivesformanagerstobuildupofafirm’slong-termhealth.Itmaytakeasubstantialexternalshock,inventorylikeasharpeconomicslowdown,tomotivate

4、firmstomaketheright4.Differentiatethroughputcostingcapacityandinventorychoices,asthefollowingarticleillustrates.fromvariablecostingandabsorp-tioncosting5.Describethevariouscapacitycon-LeanManufacturingHelpsCompaniesReduceceptsthatcanbeusedinabsorp-1tioncostingInventoryandSurvivetheRecession

5、6.Examinethekeyfactorsinchoos-Canchangingthewayamattressispiecedtogethersaveacompanyingacapacityleveltocomputeduringaneconomicdownturn?ForSealy,theworld’slargestmattressthebudgetedfixedmanufacturingcostratemanufacturer,theanswerisaresounding“yes!”Sealyisamongthousandsofmanufacturersthathave

6、remained7.Understandotherissuesthatplayanimportantroleincapacityplan-profitableduringtherecessionbyusingleanmanufacturingtobecomeningandcontrolmorecost-efficient.Leanmanufacturinginvolvesproducingoutputinanuninterruptedflow,ratherthanaspartofunfinishedbatches,andproducingonlywhatcustomersor

7、der.Drivingthisleanmovementisanurgentneedtopareinventory,whichreducesinventorycosts.Beforetheadoptionofleanpractices,thecompanyusedtomanufactureunitsatpeakcapacity.Thatis,itmadeasmanymattressesasitsresourcesallowed.Sealyemployeeswerealsopaidbasedonthenum