Gomez Electronics manufactures three models of portable compact disc (CD) players. The Company uses the full cost of a standard-costing system for internal and external financial reporting. However, the president of the company is considering switching to a standard direct costing (ie, the variable cost) of the system for internal purposes. Students were asked to prepare two sets of income: one based on a standard full cost of the system, and the other based on a standard system of direct costing. Each set of income contains information that reflects the sales budget and the budget of the production, as well as actual sales and actual production. Gomez Electronics has three manufacturing divisions, each of which has excess capacity. And the Company has received an offer from a major discount on the purchase of a large number of CD players, which, except for the plastic casing, similar to one of the players Gomez Electronics "CD. Proposal includes, price, total amount and delivery schedule. Students are asked to make a decision on whether to accept the company offer. Additionally, students are asked to make recommendations regarding the adoption of a standard direct costing system for domestic use. "Hide
by E. Richard Brownlee II Source: Darden School of Business 6 pages. Publication Date: September 6, 2004. Prod. #: UV1745-PDF-ENG
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