Understanding Cost Behavior and Product Liability in Business Management
Explore the concepts of cost behavior, fixed costs, variable costs, attributable costs, and product liability in business management. Learn about strict product liability, punitive damages, and ethical problem analysis in business.
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Presentation Transcript
Kitchen Essential Products, inc: Student Coaching Notes 1
Questions 1, 2, & 3: Cost Behavior Variable Costs: a cost whose total changes directly and proportionally with volume. Variable costs are constant on a per unit basis. For example: a necklace requires $235 each for gold, clasp, and stone. The materials cost is $235 for one necklace and $23,500 if we produce 100 units. 2
Questions 1,2, & 3: Cost Behavior Fixed Cost: is constant in total regardless of the number of units produced within the relevant range of operations or within a time period. Committed fixed costs are costs like depreciation where we have purchased a plant asset and will spread its cost over time. Managed fixed costs are costs like marketing or research and development that we have decided to incur based on a strategic budgeting or decision making process. 3
Questions 1,2, & 3: Attributable Cost Attributable Cost is a cost that is incurred to benefit a product, a department, or other organizational unit, that could be avoided if the unit or product did not exist. This is not a short run concept. Costs that are attributable to a product or organizational unit may have to be managed and eliminated. Consider the physical plant and machinery devoted to manufacturing a product. If the product is eliminated from the line, ultimately the equipment and plant will have to be sold or adapted to do something else productive. 4
Question 4: Strict Product Liability Defendant is a Merchant Selling the Underlying Product for Use or Consumption The Product was Defective: Marketing Defect, Design Defect Causation 5
Question 4: Punitive Damages Compensatory vs. Punitive Damages Standard for Granting Punitive Damages Granted only in exceptional and egregious instances Defining Egregious A deliberate act or omission with knowledge of a high degree of probability of harm and reckless indifference to consequences Egregious Conduct in Product Liability Cases When a manufacturer has knowledge that his product poses a grave risk to the health or safety of itsusers and fails to take any protective or remedial action 6
Question 5: How to Analyze Ethical Problems in Business Guidelines to use to help us make ethical decisions Utility: Cost-Benefit Analysis Rights: Determining and Protecting Entitlements Justice: Is it fair? 7
Question 6: Five Tests of Strategic Thinking Test 1: Ability To See the Whole Picture Test 2: A Sense of Direction or Destiny Test 3: Openness to New Experience Test 4: Gap Between Current Reality and Future Test 5: Use of Creative and Critical Thinking 8
