A Revised Income Statement, The Contribution Margin Approach Research Paper

A Revised Income Statement, The Contribution Margin Approach - Research Paper Example The per unit fixed manufacturing overhead is computed by dividing the total fixed overhead cost with the budgeted units produced. In the mentioned question, the total fixed overhead cost was calculated by dividing $1.6 million with the production capacity of 400,000 units. Thus, every unit produced has fixed manufactured absorbed at $4 per unit. In the discussed scenario the units produced and budgeted units are assumed to be same thus, the question of over and under absorption of overhead does not arises. As apparent from the above analysis, under the marginal costing method, both the net profit and the contribution margin will increase by $229,000 if the company decides to sell additional 10,000 units. This represents an increase of 4.49% of the current profit. Whereas, in the income statement as per the absorption costing method, the net profit increases by $189,000 and the gross profit shows an increase of $201,000. The following table also highlights the revised net profit percentages. Absorption costing method is usually discouraged due to the fact that in this system of costing a portion of fixed cost is subsequently carried over to the next accounting period as part of the closing stock. This can distort the profitability presentation of the period by including fixed cost of the prior period in the current period. In addition, absorption costing also depends on the on the levels of output and if the output changes, its consequent impact is on the per unit cost of the product. From the managerial perspective, the marginal costing is the more relevant method for the analysis of cost and revenue information. This method of costing significantly assists the management in decision making process. In addition, the presentation of marginal costing is easily understandable by all the managers. Keeping all the above factors into consideration, it is more relevant for the CFO of

Analysis of Private Prisons Research Paper Example | Topics and Well Written Essays - 1250 words

Analysis of Private Prisons - Research Paper Example These and many other factors cause an increase in the number of illegalities, increased crime rates and thereby overcrowding of prisons. With the increase in the number of offenders, there is a need to substitute government (public) prisons, hence, the need for private prisons (Shefer & Liebling, 2008). The second factor that led to the increase in privatization of prisons is capitalism. Previously, prisons were a form of social cleansing as it was a way of getting rid of extreme deviants regarded as a threat to social tranquility. However, capitalism saw the change of this view; people regard prisons as a business entity and, therefore, a means to make a living (Shefer & Liebling, 2008). Evidence shows that the government, through respective states, aggressively bids for the incarceration of offenders in private prisons. The reasons remain similar to the onset of privatization of prisons. The government wants to reduce overcrowding in prisons and cut the costs of running the penal j ustice system. The government also argues that hiring private contractors is cheaper than training state employees so as to make them proficient (Shefer & Liebling, 2008). ...The companies that run private prisons amass wealth and build political ties. With these powers, the companies influence politicians and other political entities to pass policies that support higher rates of incarceration. Secondly, these prisons somewhat handpick their inmates (Shefer & Liebling, 2008). This allows them to engage low-cost offenders while the backlog of high maintenance offenders goes back to the public sector. High maintenance can include patients suffering from costly diseases such as diabetes or those incapable of labor due to a disability (Reisig & Pratt, 2004). The privatization of prisons has a negative effect not only on the inmates but also society. Nurge (2004) reports that at the onset of privatization of prisons, there was a cordial relationship between the prison guards and the pris oners. The management of the prisons was also better or matched the standards of public prisons. However, in recent times, new statistics show that private prisons are facing the same negative issues as public ones. This is in regard to prisoners’ relationship with the guards and the adequacy of prison facilities (Shefer & Liebling, 2008). There are several possible explanations for this situation. Some researchers claim that previously, the prison guards in private prisons were free of the penal system corruption. With time, however, they got assimilated and developed the survival for the fittest technique common in public prisons. The guards now mistreat the inmates and engage in other forms of corruption detrimental to the safety of the inmates.