Acc501 Week 1 Comparative Managerial Accounting And Cost Behavior

Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.

The traditional costing method is a distribution of manufacturing overhead costs to the actual products manufactured. By using this

| (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would:

To effectively plan overhead costs for a product the management must aim to eliminate activities that do not add any value to the product in question. The process of costing is very important in that it supplies information on evaluation and control to various aspects of a business enterprise. Variance measures price and quantity differences that occur in any budgeted and actual prices and quantities. There exist a difference between fixed overhead spending variance and variable overhead spending variance in that the fixed overhead spending variance does not include estimation error while variable spending variable does.

Appropriately tracing costs is extremely important when creating segmented income statements. Traceable costs are those costs that are directly incurred by and traceable to a specific segment of an organization (Brewer, 2015). This figure is then used when computing the segment margin, which indicates the long-run profitability of that business segment (Brewer, 2015). If costs are traced inaccurately, the profitability of a business segment may be over or under valued which may lead managers to make potentially unfortunate business decisions regarding that segment. For example, if the fixed costs of segment A are inaccurately traced to segment B, segment B may look as though it requires more money to break-even. Based on this inaccurate information,

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

Factors affecting variable costs, including productivity and others that change the supply of and demand for labor costs change with the number of products offered for sale. These are called variable costs. Variable costs include the wages of sales people or other employees, raw materials, electric power to run machines, and the cost of maintaining inventory. We believe that the lack of alternative energy vehicles available and when high fuel costs will drive the costs at times.

Company operates in the Industrial Sector – Services, and Industry – Regional Airlines. According to the Standard Industrial Classification System (SIC), company belongs to the industry group 451: Air

Variable pricing or revenue management, was used extensively in the rental car business to optimize profits. Car rental providers crucial expense item was its fleet of vehicles (operating cost).

| | |justify valid conclusions |advantages and disadvantages of them and show deep understanding |

One type of cost is called fixed cost. This type of cost is the expense of a business that does not change and are always constant in a business. When money is made, debts are the first initiative to be paid off. Fixed costs include rent, wages to employees, and equipment needed to produce you good and or service. In for example a Flower shop, the fixed costs would be the rent on the building, the payment of the delivery vans, and employee salaries. The other type of costs is called variable cost. This type of cost is one that is ever changing. Again in a Flower shop the variable costs would be a dozen roses. One week a dozen roses may cost the flower shop five dollars to buy them and then they sell them for forty-five dollars. Then the next week the price of the roses my rise by five dollars now costing the flower shop ten so in order for the florist to make the same amount of money as last week he needs to increase his price to the consumer with the increase on price he is paying. The basic main idea of cost is to keep it as low as possible to gain the highest profits.

This examination paper comprises 6 pages Candidates should answer questions as follows: All questions should be answered. Show all major workings for your numerical calculations. The examination will be marked out of 100 marks. Question 1: 60 marks Question 2: 11 marks Question 3: 14 marks Question 4: 15 marks The following material is provided: Nil Use of calculators: Only calculators on the University of Otago list of approved calculators are permitted. (Subject to inspection by the examiners) Candidates are permitted copies of: One A4 (or smaller) sheet of paper that is

All businesses work with the main objective of making a profit. The determination of the profitability of the businesses will depend on the assessment of various factors of production as they contribute to the final income. The most primitive way of expressing the profit of a firm is through the subtraction of the costs from the revenues. Fixed cost is costs that are not changeable over a long period of time while the variable costs do change as time changes. Traditionally, the statement of accounts and profitability only took into consideration the interplay between the two factors- costs and revenues. In this traditional statement, variable costs and fixed cost were treated similarly. The separation of the costs as either fixed cost or variable cost came into being with the advent of the margin statement. In simplest terms, contribution margin has been used to indicate the result of excess between the revenues and the variable costs. The contribution margin is therefore, an in-depth statement of profit to take to account a lot of other financial variables in the like revenues, expenses, profits, and losses among others. Gross profit is a crude profit since it does not entirely belong to the company’s revenue. These are some of the loopholes in the accounting that the contribution margin exists to seal and it does this through the consideration of net profit in the accounting period other than the gross profit. The most important application of the contribution

There are different costs that respond to the different activities like variable costs are directly associated with the products sold. The cost behavior patterns of selling, general, administrative, and other operating expenses are determined, and these expenses are budgeted accordingly. For example, sales commissions will be a function of the forecast of either sales dollars or units. The historical pattern of some expenses will be affected by changes in strategy that management may plan for the budget period. In a participative budgeting system, the manager of each department or cost responsibility center will submit the anticipated cost of the department 's planned activities, along with descriptions of the activities and explanations of significant differences from past experience. After review by higher levels of management, and perhaps negotiation, a final budget will be established. Because of the necessity to recognize cost behavior patterns for planning and control purposes, overhead costs will be classified as variable or fixed.

Additionally, product costs may be used in assisting with planning and control. Managers may need to obtain reliable cost estimates for planning purposes, as budgets are set. If costs vary and are frequently subject to change then decision making will not be effective. By comparing actual costs to planned costs, current costs can be controlled.