Design and launch of a new product or service
Option 1
Your team has been assigned to design and launch of a new product or service. This could be an external product for sale or an internal service to support other departments. As you prepare for your first team meeting, you know that identifying and classifying costs will be an essential part of the project.
• Briefly explain what the new offering is (NOTE: this can be hypothetical or based on your current role at your company; you should not share any proprietary information)
• Identify and describe one fixed cost and one variable cost in your department, and explain whether they are controllable or non-controllable.
• Identify whether these costs are traceable to direct materials, direct labor, or overhead.
- OR -
Option 2
Consider your current organization, describe how costing is used or could be used to better understand the financial breakdown of products and/or services delivered. Would this information support you in your current role and/or aspired-to role? Have you seen instances where costing is not used effectively or could be better leveraged?
Sample Solution
Our team is tasked with developing and launching a subscription-based wellness app that offers personalized fitness plans, nutrition guidance, and mental health support. The app will utilize AI to provide tailored recommendations based on user data.
Cost Identification
- Fixed Cost: Office rent. This is a fixed cost as it remains constant regardless of the number of app downloads or subscriptions. It is considered non-controllable as it's determined by the lease agreement. This cost is classified as overhead as it cannot be directly traced to the production of the app or the generation of revenue.
Full Answer Section
- Variable Cost: App development costs. This is a variable cost as it fluctuates based on the number of features developed and hours spent on development. It is considered controllable as the team can manage the scope and resources allocated to development. This cost is classified as overhead as it supports multiple products or services.