Anagene is a biotechnology firm started by Mark Hansen and Harold Bergman in 1993. Hansen and Bergman planned to combine microelectronics and molecular biology to develop products that would have broad commercial applications in genomics and other fields. Anagene’s mission was to facilitate breakthrough genetic analysis. The company went public in the year 1998 and raised $42.9 million. The company’s core product was a cartridge which had to be analyzed with a Anagene-designed workstation. Management anticipated a long string of cartridge sales following the sale of each Anagene workstation.
Anagene’s first major product was a proprietary platform technology – The Anagene Molecular …show more content…
The purpose of the case study is to determine a new costing approach based on capacity. With large amounts of unused capacity, the decision of how to apply capacity costs is critical to the company's management and its reporting strategy with analysts.
DIFFERENT TYPES OF CAPACITIES
Essentially, there are four different kinds of capacity.
Theoretical Capacity: -This is the volume of activity that could be attained under ideal operating conditions, with minimum allowance for inefficiency. It is the largest volume of output possible.
Practical Capacity: - It is the highest activity level at which the factory can operate with an acceptable degree of efficiency, taking into consideration unavoidable losses of productive time (i.e., vacations, holidays, and repairs to equipment).
Normal Capacity:-It is the average level of operating activity that is sufficient to fill the demand for the company's products or services for a span of several years, taking into consideration seasonal and cyclical demands and increasing or decreasing trends in demand.
Master-Budget Capacity :- It is similar to normal capacity, except it is a short-run level based on demand, it minimizes under- or over applied overhead but does not provide a consistent basis for assigning overhead cost. Per-unit overhead will fluctuate because of short-term changes in the expected level of output. Currently, Anagene is using