The posting by Daniel Gonzalez presents information that is useful to enhance understanding on various financial information and how it relates to the business operation of Eddison Electric Company (EEC). The information provided explains the significance of financial information by noting that it can be used to fix company mistakes and improve company practices. Additionally, it provides an accurate definition of the terms variable cost, fixed cost, and mixed costs. The information shows the benefits that a company has by having variable costs since when sales are low, expenses will be low. It also shows the disadvantage of having a high fixed cost since the business will be required to maintain a high revenue level.
One additional question from the reading of the posting will be on the advantages of fixed costs and the disadvantage of having a high variable cost. Could having a high fixed cost be beneficial in projecting the profits of a company with better accuracy? Can having a high variable cost be disadvantageous as it makes it difficult to project company profits accurately?
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Further clarification may be provided on target costing. Target costing is a system which a company plans in advance for product costs, price points, and price margins for a new product. Additional information can be provided to ensure proper understanding of target costing. However, the application of target costing is accurate as it can be used to determine the viability of EEC’s projects by using price projections and market research.
The similarities between my posting and that of other classmates is in the definition of variable costs, fixed costs, and mixed costs. Additionally, the answers were similar by noting that a change in volume of sales will increase variable costs and fixed costs may not change. The answers were different regarding the application of targeting costing. Target costing can be used to predict the profitability of a company in the next few months or years. The answer varied by other classmates that noted target costing can be used to determine the viability of a project by conducting market research.
