2. The point of view that Ed Branson supports is a resource spending point of view. It is almost the opposite of Sally Jones' view in that it is judged by the savings in the short run. Cost pools are thought to be driven by salaries, wages, equipment, space costs, and so forth. Using these cost pools, we can figure out our saving would be $2,542 and our wages savings of around $90,000 (Exhibit 2). This total is less than the $100,000 increase in direct materials which would result in a loss of $7,468 by using Ed Branson's view.
3. Using the spending point of view, you can save significantly towards your bottom line in a very short amount of time. On the other hand, the usage point of view will save money in the long run because future proposals would add to idle capacity so that eventually they could reduce capacity and save money. The best option might be some sort of hybrid between the two points of view. The company could save money in the short run until the true effects of the ABC costing method using usage could take affect and save the company money.
4. The proposal does meets the needs of the company for the time being... [continues]
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