Jefferson Multi Media

JEFFERSON MUTLI MEDIA INC.

What is the cost for each of the three products Mr. King chose at random? What explains the differences?

The cost of the three products, which is measured by using a number of hours and units required for special effect, Recording studio, Concept Design and Artist Relation. Each of these resources are specifically used for the purpose of developing Cassettes, CDs and DTS system. The calculations for each of the product has been calculated on the basis of units or hour required for each of these resources. (Please refer to appendices for the calculations)

As it could be observed that the difference between the resultant cost for each of these product, is solely based on the usage difference of these resources for example, as it's a fact that the DTS (Digital Theatre system) requires more special effects, recording studio hours and concept design as compared to the CDs and Cassettes, therefore DTS is embedded in the Theatre system where the sound and video Presentation needs to be more effective and highly intensive, due to which its requirement is demanding. Similarly cassettes require relatively few units of concept design and recording hours for its development.

Which of the three systems is the best? Why?

There are three systems developed by the company to allocate the cost of producing these three products and the description of each of these is as follows:

a. The first system requires the allocation of the direct and indirect cost on the basis of the appropriate apportionment method, however the resultant cost would be a total figure for the whole product, which fails to recognize the separate cost for each of these products, which in turn gave less chances for cost control and reduction opportunities.

b. The second system allows the proper allocation of the cost based on these three products namely: CDs, Cassettes, and DTS. Such allocation would help to determine the total cost for each of these products however, it fails to recognize the difference between the level of resources required by each these products. So it would offer a moderate level of opportunity for cost control and reduction.

c. The third system allows the proper allocation of cost on the basis of resources consumed by each of the main activities involved in the manufacturing of each of these products, namely: Recording Studio hours, Special Effects, Concepts Design and the Artist relation. Such cost allocation would help to identify the detailed analysis of the cost activity that needs to be reduced in order to increase the Performance of the company.

Hence the best system of all these three should be the third one which allocates the cost on the basis of resources utilized.

How might you improve upon the system