Cost Behavior

Cost Behavior

Introduction

Simpson Manufacturing Company has many subsidiaries that help the organization in selling products in different sectors of the economy. The company offers engineering, wood, and building manufacturing products. The company operates its operations in different parts of the world. The major customers of Simpson Manufacturing are the construction companies, industrial and residential construction companies and etc. During the last three years company has been able to generate huge of profits. The company has to face a lot of competition and one of their major competitors is Masco Corporations. The cost behavior analysis of the two companies will help in understanding the financial and industry position of the two companies.

Discussion

Simpson Manufacturing Company operates in the small tools and accessories industries. There are very few companies operating in this sector of the economy therefore the major competition faced by Simpson Manufacturing is from Masco Corporation. In order to analyze the financial performance of the two companies it is important to analyze the cost behavior. The cost behavior analysis of the companies will help us in analyzing the amount of profits earned by both the companies is held up in paying the cost of manufacturing the products. There are key elements that will help us in analyzing the cost behavior of the two companies.

 

Masco Corporation

Simpson Manufacturing Company

Revenues

7,467,000

6,03446

Cost of Goods Sold

5,683,000

332,642

Accounts Receivable

914,000

88,194

Accounts Payable

1,552,000

71,587

Inventory

769,000

180,129



The above financial information is of the year ending 2011 which clearly shows that Simpson Manufacturing Company is in a better position as compared to their competitors. The cost contribution of Masco Corporation of the revenues earned by the company is more than 70 percent which shows the reason why the firm is unable to generate income from its operations during the last three years. On the other hand Simpson Manufacturing Company is able to control is manufacturing cost ...