COST ANALYSIS

Cost Analysis

Cost Analysis

First thing that needs to be discussed is the importance of ABC costing. The cost analysis of the three models of the fridge has been done. The first analysis was done of the model that was low. The low model contribution margin has been $2,120,000 which shows that the sales revenue of the low model was not very low. In fact, the low model of the refrigerator was able to achieve high amount of sales. Therefore, it means that the low model sales revenue was not very low and they earned good amount of profit as well because the overheads were even not very high of the Low Model of Refrigerator.

The second analysis has been done of the model that is mid. The contribution margin that the mid model has earned is $269,500 which shows that the sales revenue of the mid model is less as compare to the low model. The reason why this particular thing has happened is due to the low sales of the mid model. However, the costs are low of this model but the importance of sales revenue is very high under these circumstances. The overheads of the mid model are even high which means that this project has certainly not done well.

The third analysis has been done of the model that is Hi. This model has performed very poorly because it has not achieved a single amount of profit. The sales revenue was very low of the Hi model which indicates that the sales were very less of this particular model as compare to the other models. It means that this model needs lot of improvement in the future. Therefore, these were the ABC analysis of these three models. The importance of ABC analysis will always remain no matter how ...