You are working for a firm that makes a special type of fertilizer that is sold in bags. They sell millions of these bags a year. Because of the accounting system, they claim that their fixed costs go up $100 for every hundred bags. Would you model this as a fixed or variable cost in a model?
Answer to relevant QuestionsIf it costs $10 million to build a new facility and you expect to depreciate the building over 20 years, why wouldn’t you include the full $10 million when you are building a model with a year’s worth of demand? Open the file Accounting Allocations.xls (on the book web site) to see a list of sample accounts that a firm has for their various plants. Your team has already gone through these accounts and has determined whether the ...In the model, why would you expect the costs to continue to decrease as you add warehouses? In reality, would you expect this to hold up? Why or why not? A popular online shoe retailer has been successfully servicing their customers across the United States with the most popular brands of shoes from tennis shoes to high heels for the past five years. The retailer sources ...If you are creating a model and one of the key considerations is which port of entry you should use, why would you model the port like you would model a warehouse? What costs would be relevant for picking which port to use?
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