Please complete the following by typing your answer letter next to "ANS" (example "ANS: c) and return to your Instructor via Blackboard by midnight, August 1, 2012:
A (n) ____ is a review to determine whether the policies and procedures specified by top management have been implemented.
A) management audit
B) internal audit
C) internal control
D) internal accounting control
A) are quantitative expressions of plans of action
B) ignore areas that are problem areas
C) are deviations from a plan
D) ignore areas that are presumed to be running smoothly
3) Which of the following costs is a variable cost?
A) rental expense for factory building for manufacturer of electronics
B) lease cost for factory machine for manufacturer of electronics
C) fuel for airplane for airline
D) depreciation expense of airplane for airline
4) On Fire Company, a producer…… [Read More]
Managerial accountants are charged with all financial matters that do not pertain to the financial accounting statements. ithin their company, they ensure that the company has good financial security, they perform analysis on costs and revenues, they perform budgeting, handle taxes, and their work is frequently used in strategic planning, whereby they provide the financial analysis to management to help make better decisions (No author, 2012). Some of the ways in which the job contributes have changed, especially with the advent of computerized decision-support systems, information systems and dashboards, each of which provides real time information to the managers, including cost information. The integration of these systems with managerial accounting has only served to make the managerial accounting role even more important over time.
This role has not changed over time, although arguably the management accountant role has become more prominent. Management accountants have always performed their existing…… [Read More]
Managerial accounting is different from financial accounting because it is used primarily by companies and organization to generate weekly, daily and monthly reports to help them forecast future financial events (Birnberg, 1992). The profession of managerial accounting looks at the many ways managers can help facilitate increased revenues over defined times, and the future in general. It is not concerned with investments as much as it is concerned with the overall profitability of the company in which the manager works with. Managerial accounting once began as a method of simply keeping track of an organizations time and finances, much like a treasurer might. Over time however, and especially given the current global state of the economy, managerial accounting is now concerned with the profitability and future success of organizations not just domestically but also globally. The use of the internet and technology has dramatically changed the way…… [Read More]
Elkay is a manufacturer of sinks. The company has three plants, serving different markets. The Ogden plant is high-volume, low-margin production. The company has new technology that makes it an innovator in efficiency. The Lumberton plant focuses on high margin items. Broadview is for commercial, institutional and specialty products. The company's information provides feedback about profits that indicates one customer type provides all of the profits, and the other customer types are significant money-losers.
Assessment of Problems and Issues
The company faces a few issues in the marketplace. Elkay now has new competition entering the market from China, and this new competition is going to drive down the price on poorly-differentiated products at the low end. This is a natural consequence of new competition in a market that was previously in an equilibrium state. The new competition is going to challenge some of Elkay's customers to drop the…… [Read More]
That we do not find out about cost overruns until the project is completed creates a climate where managers are motivated to overlook past transgressions yet are powerless to address future ones. Lastly, I would tie performance-based bonuses either to non-financial measures or to ones based on financial accounting, subject to GAAP and other defined rules and procedures. In general, financial incentives are only necessary when there are competing incentives (Jensen, 1994); that is not the case here.
1. Sue faces multiple challenges. She has cost overruns on her major project; her incentives do not correspond with what is best for the company (agency problem); and she may embarrass the company if the project comes in over budget. She has few tools with which to work. She has basic financial statements and managerial accounting statements. There were no interim statements to help her gauge the financial status of K3 or…… [Read More]
For Period Ended Dec 31, 20XX
less V Mfg Cost
less V Op/Selling Cost
Gross Profit (Contribution Margin)
Fixed Mfg Overhead
Fixed S&A Exp
Total Fixed Costs
E-Company Income Statement
For Period ended Dec 31, 20XX
Less Mfg Cost
Less Op/Selling Cost
Less S&A Exp
The gross profit margin is 75.6%. This is calculated as the (revenue -- cogs) / revenue (Investopedia, 2011). The contribution margin is similar, but does not include costs associated with goods still sitting in inventory. It would be more easily calculated as (29 -- 1.2 -- 4.9) / 29 = 78.9%.
The net margin should be calculated on the basis of the GAAP income statement, so in that case it would be $4,765 / $10,005 = 47.6%. If the net margin was calculated on the basis of the…… [Read More]
2. Research the answers to management tax or auditing questions- once an accountant understands their job, they must be prepared to answer very specific questions concerning the accounting information that is provided (Johnstone & Biggs, 1998). hile most CEO's and people in various departments have some understanding of accounting, there are some very intricate financial details that only accountants fully understand (Johnstone & Biggs, 1998). ith this understood, successful accountants will be prepared to answer complicated questions related to management tax and auditing questions. If the accountant does not have the capacity to answer these questions correctly the decisions that the business managers make may be incorrect.
3. Convey the results to colleagues- not only do successful mangers have to be able to understand and answer questions; they also must have the capacity to convey results with colleagues (Johnstone & Biggs, 1998). This means that successful managers must have good…… [Read More]
According to Investopedia, management accounting is "the process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization's goals." The essence of managerial accounting is that managers blend and merge accounting information into realistic and practical goals and objectives. Ultimately, mangers should try to incorporate the three E's of efficiency, economy and effectiveness. This essay will address three methods that attempts to address these three principles and compare them to determine which one is the most important.
One method of maximizing the use of accounting management is to become aware of the benefits of efficiency. Chandler (1977) revealed that the coordinating efforts accomplished at the managerial level can have a profound and deep impact on the efficiency of an organization. These principles are revealed in this author's five benefits discussed in his argument for the rigid coordination inherent in a staff and line organization.…… [Read More]
Managerial accounting intended provide managers information make decisions run company successfully. The information reliable, timely complete. Its provision,, dictated accounting management information system place.
The fastest growing and developing field in today's society is indubitable the IT sector, which has transformed from a closely regulated and controlled experiment into a force impacting every aspect of the daily life, from the preparation of breakfast to the completion of complex professional chores. Within the business community, technological development has been represented through a wide array of elements, one of the more common ones being the development and implementation of EP -- enterprise resource planning. EP is generically defined as "a system which brings all the decision making information from all the departments in a company into one single place in order to increase efficiency, productivity and profit of the company" (EP Definition, 2010).
The introduction of the EP is as…… [Read More]
Managerial and Financial Accounting
Case Managerial Accounting - Variable Costing Managerial accounting emphasizes short-term profit analysis, income statement important. Consequently, 'll examine discuss income statements case.
Managerial and Financial Accounting
Financial and managerial accounting basic difference comes on the uses. While, financial accounts are prepared for use by external parties, managerial accounts are prepared for use internally. The process of preparing the accounts in both financial and managerial accounting use similar source for data their emphasis differs. Managerial accounting has a measure to guide and direct the mangers orientation on future perspectives of a firm. Financial accounts primarily provide information on the firms past performance and transactions in summary. The managerial accounting aspect gives a detailed reflection of constantly monitored performances and a reflection for projected estimates (achchh, 2011).
Objectivity and validity of financial accounting information is an expectation of the users. Managerial accounting information need only to be relevant…… [Read More]
Managerial Accounting -- Budgeting: Differential Analysis
This assignment considers variable costing as a decision-making tool for evaluating whether to accept an order to manufacture Product C, which is a product proposed by an existing customer for whom Lewis Company is manufacturing Product B. Two general methods for valuing inventory and for determining the cost of goods sold are absorption costing and variable costing. The data in this case study is presented in the absorption costing format. Absorption costing is typically associated with financial reports, as in this case, with the Absorption Income Statement. Managers prefer variable costing as a tool for making business decisions ("Accounting for Management," 2012). Variable costing must be employed when the contribution margin format is used in an income statement ("Accounting for Management," 2012). To say that these two methods are simply alternative approaches would be a misstatement since the two costing systems can generate substantively…… [Read More]
Managerial Accounting -- Budgeting 1 &
(1) Is this a static or flexible budget?
Since many of the budget line items are based on student enrollment, this budget format is considered to be a flexible budget. The costs of providing instructors and associated benefits is fixed by the state with regard to the ratio of students to teachers, and students per classroom (which is more a function of fire codes and building codes, but it is still a determinant with regard to budget flexibility). The expenses associated with the school facility are fixed and generally cannot deviate in response to increases or decreases in enrollment. Personnel and plant costs are two major items in the school budget, and neither provides options for flexibility. That said, much of the proposed budget is based on student enrollment scenarios -- of which there are three at 120 students, 100 students, and 66 students.…… [Read More]
Why do you think the division was profitable immediately under the new ownership?
An organization uses cost allocation methods to determine the cost of one unit of its product. Cost allocation refers to the process of linking all the cost incurred during the production process to the product. Direct costs and indirect costs are the cost associated with production of a product. Direct costs are those that are traceable to the product such as the price of wool in the production of shirts. Indirect costs are not traceable to the final product directly as taxes charged. Cost allocation enables the organization to determine the cost of its products by ensuring that a profit margin allocated to every unit produced.
In the case study, the manufacturer found that a component of the company was producing losses thus decided to sell. A group of workers bought the division and realized…… [Read More]
Cost-volume-profit analysis is a tool used in managerial accounting that helps companies to determine the level of production (and sales) required by the company to break even. In CVP analysis, costs are separated into fixed and variable costs. The assumption is that the fixed costs do not change, while the variable costs do change with the level of production. Once sales are taken into account, so are variable costs, with the leftover being the contribution to fixed costs. The point where the contribution equals the fixed costs is the breakeven point. The basic CVP formula, therefore, is as follows:
Profit = total revenue -- variable costs -- fixed costs
There are a couple of main reasons why CVP analysis is valuable. The first is that this form of analysis can help guide production/sales decisions. CVP analysis can, for example, help a company know when a product should be…… [Read More]
The company taken for analysis is: Microsoft Corporation. The company has a history as follows: The revenue comes from developing a wide range of software products and services for all types of computing devices. The software products include operating systems like the Windows Series for personal computers, servers, and many other business solutions applications. The company also sells some hardware and gaming products like Xbox 360 gaming and even digital music and internet services like Bing, Windows Live, Microsoft Office Web Apps, and also the recent online advertising through the adCenter platform. Microsoft has consistently remained the top company in the industry with stake holder support seen through the higher value of the stock and ratings.
Did the company perform well? Why or why not?
To manage a portfolio it is necessary to look at the cash flow situation, and the profitability of the company and the ratios…… [Read More]
This is also a problem that must be addressed at the trustee level, rather than the treasurer level. Although these realities push this lower down the priority list, a medium-term priority should be to provide estimates to the trustees of the future funding levels required so that they can seek these funds in advance of the actual demand increases.
High employee attrition rate. This is not specifically a treasury issue, so it is lower on the priority scale. However some of the steps that are recommended, for example with regards to segregation of duties, should assist in this area as well. It should be noted that the attrition rate does impact on the efficiency with which resources are used, so it remains a priority, even if at a lower level. If any way to reduced attrition becomes apparent, that suggestion should be made and implemented. This involves expanding somewhat beyond…… [Read More]
Also, these costs are not directly attributable to production and this makes it vital that the company keeps these expenses under constant control.
Break-even point = Fixed costs / (Unit Selling Price -- Unit Variable Cost)
Break-even point for the given data = 500,000 / (20-10) = 50,000
So, the firm has to sell 50,000 units at the current price levels to break-even. The break-even point in terms of dollars is 50,000 * $20 = $1,000,000
Increased Sale Price
When the sale price is increased to $25, the revenue required to break even is $1,250,000.
The firm is estimated to lose 10% of sales, so the units sold will be 45,000. This will bring the revenue to $1,125,000. So the expected profitability will be $125,000.
It is not a good idea not to increase the price because the company should look at expanding the reach of its…… [Read More]
There will be six barbers, each working ten hours per day. They will be able to do 2 haircuts per hour, with an average charge above the median at £35 per cut. They will be at capacity during the two-week run of the Olympics and at 75% capacity during the week before the Games. Revenues during set up and take down will be non-existent. The barbers will make £15 per cut, so roughly £30 per hour. The manager's salary will be £500 per week, with rent being a further £400 per week. All of the equipment will be rented, but this needs to be paid up-front.
Cash Flow Statement
14700…… [Read More]
Thus, cash savings of equal dollar amounts will have a higher present value in year one and a lower present value in year five.
For the first option, the net present value calculation is as follows:
This calculation therefore indicates that the net present value of option 1 is -$18,361. That is, the option does not have a negative net present value. A basic rule of thumb is that firms should not undertake activities that do not have a positive net present value. The cost savings of option 1 do not, when the time value of money is taken into consideration, pay for the project.
For the second option, the present value calculation is as follows:
0…… [Read More]
This scenario shows the importance of variable cost drivers in calculating a breakeven point and conducting effective CVP analysis. In this situation, the company is losing money no matter which scenario with respect to fixed costs is investigated, but there is a solution available for at least the lower fixed cost scenario:
Total variable cost is: (50,000 * 80) + 400,000 = $4,400,000
The average variable cost is: $4,400,000 / 200,000 = $
The average total cost is ($4,400,000 + $1,000,000) / 200,000 = $
Worker Productivity is 200,000 / 50,000 = 4 units per day per worker
If total fixed costs equal $3,000,000 per day the same figures are as follows:
Total variable cost is: (50,000 * 80) + 400,000 = $4,400,000
The average variable cost is: $4,400,000 / 200,000 = $
The average total cost per unit is ($4,400,000 + $3,000,000) / 200,000 = $
Worker…… [Read More]
Differential revenues and costs are those that are incremental to the decision at hand. In general, the company should take on any project that adds to the profitability of the company. There is no indication that this project is mutually exclusive to any other decision. Thus, the financials for this product are as follows:
Herrestad Product C
The variables that are relevant to this decision are what will be incurred as a result of taking on this project. Thus, fixed costs are not relevant. Variable revenue and variable costs are all relevant. Thus, the decision as to whether or not to take on this project resets on the contribution that the project offers to the company. If the project has a positive contribution to fixed costs, then it will improve profitability and therefore should be accepted. If the…… [Read More]
Online "opaque booking websites" such as price-line and Hotwire are profiting in the existing economic climate since travelers are progressively using the internet to scout for better online packages. Similarly, "opaque pricing" has started to become ever more popular as shrewd customers respond to offers where they can book together and benefit or take their shot at purchasing a surprise proposal that safeguards the veracity of their fares and rates.
By preferring to use an online service like Hotwire or price-line, in conjunction with their own marketing campaign or as a standalone outsource for selling their vacancies and getting future bookings, the companies benefit greatly on multiple levels.
Firstly, they gain from absolutely free advertising that has tremendous outreach; these intermediaries market the products and services without any charges -- they earn from the commissions on the proceeds or through other means. Another advantage for high-priced services like…… [Read More]
Greater emphasis must be placed on studies to highlight the factors which affect the diffusion of these managerial accounting techniques which can increase an organizations productivity, efficiency and competitiveness. (Tan, 2002, p. 226) Innovative academic researchers and managers should pave the way for a scientific management movement which can lead to the design of management accounting systems which are significantly different from the traditional ones. (Johnson; Kaplan, 1991, p. 12) However, one must remember that the pressure by critics to implement innovative management accounting techniques often results in companies rejuvenating old and abandoned techniques such as capital appraisal techniques. Therefore, organizations must be warned of such practices and adopt well-researched and scientific managerial accounting techniques. (Bhimani, 1996, p. 225)
Bhimani, Alnoor. 2006. Contemporary issues in management accounting.
Bhimani, Alnoor. 1996. Management Accounting. Oxford University Press.
Bragg, Steven M. 2009. Just-in-time Accounting: How to Decrease Costs and Increase Efficiency. John…… [Read More]
Strategic Management in Large Multinational Corporations
Strategic… [Read More]
The costs allocated to a cost object can be considered as fixed or variable as well as direct or indirect costs. There are two types of costing systems that are used by management accountants i.e. job-costing systems and process-costing systems. While job-costing systems mount up and track costs differently for every product or service, the process-costing systems are basically used by companies manufacturing huge quantities of similar or identical products. Notably, companies usually classify manufacturing costs into three various categories i.e. manufacturing overhead, direct materials, and direct labor ("Systems Design: Job-Order Costing," n.d.). Even though direct materials and direct labor costs are traced to jobs, manufacturing overhead costs are not traced to jobs in similar ways. However, manufacturing overhead costs are included with direct materials and direct labor on the job cost sheet since it is also a product cost. Assigning these costs to overhead units…… [Read More]
This has an effect on: the kind strategy they are using to achieve their objectives, the attitude among employees / managers and how quickly a firm can adapt to changes inside the marketplace. ("usiness Success in Today's World," 2009)
Alternatives that can be used in Organizational Planning
One possible alternative that could be used to help provide businesses with better reporting is for them to begin using International Financial Reporting Standards. This is when the largest economies in the world, agreed to work together to create universal budgeting procedures that everyone can use by 2014. The basic idea behind this approach is to improve transparency and accountability, by having all of the various firms following widely accepted accounting practices. Once this occurs, is when there will be a shift in the way organizations are planning for a host of events. As a result, this kind of approach should be considered…… [Read More]
(Schroeder, 2011) ("What you can and must do to stay Secure," 2011)
How the Costs of Various Risks are evaluated prior to and after Decisions have been made
The way that costs are evaluated is based upon the total expenses to the company and the impact that it will have on their profit margins. This is achieved by conducting a cost basis analysis and then determining if this procedure will help to directly address the various risks facing the business. Once this occurs, is when everyone can see how a particular action will help the firm to realize its operation goals. (Schroeder, 2011) ("What you can and must do to stay Secure," 2011)
After this is when, the management will have a series of different reviews conducted that will determine the overall nature of the threat. At which point, there will be specific recommendation and adjustments made to the company's…… [Read More]
For example, using the I Tunes store, the firm reported an increase of7% on a quarterly basis. While other products such as portable devices saw an increase in their earnings of 30% in one quarter. These figures are significant, because they are showing how the revenues are accounted for during the actual quarter that they are received. This is what makes their earnings more accurate and reliable. ("Apple," 2011)
How this is System is Applied and Evaluated?
The way that this system is applied, is every quarter the management will provide investors with guidance about the earnings and future projections. If there are any kind of positive or negative changes, managers will let analysts know about what is happening by providing them with a range that is more precise. Once this occurs, is when investors and analysts will be able to effectively evaluate the company. ("Apple," 2011)
The way that…… [Read More]
To achieve these objectives there are several tools that are utilized to include: controlling the accounts payable, receivable, job costs and inventory through a series of ledgers. This is important, because it is showing how an organization can be able to use these ideas to help improve productivity and efficiency. This is the point that the operating margins of the firm will begin to decline. Once this takes place, is when the company can most effectively adapt to changes inside the sector. (Stout, 2009, pp. 195 -- 217)
At the same time, we will be implementing a procedure that will control the cash flow of the project. This is designed to ensure that there are sufficient amounts of funding to address the needs of the division. While being able to, monitor where various expenditures are taking place. The way that this is accomplished is through looking at a number of…… [Read More]
In the business actuality of the present day, where knowledge management together with intangible assets are fundamental sources of competitive advantage, the individual action and behavior of employees ranging from first-line personnel to management can facilitate the success or downfall of an organization’s reputation. This has a substantial effect on share value, the capability to attract and sustain consumers, investors, personnel, or clients, and the risk of violating compliance (Jamshidinavid and Kamari, 2012). Addressing business ethics and responsibility issues within a business entity begins the compliance of the pertinent legislations and codes of practice. As a provider of business needs with scarce resources, there is the need to have the capability to make a distinction between the appropriate and inappropriate way of taking expense into account when making decisions regarding practices and processes of clients. In the contemporary business setting, the role that is played by accountants is significant.…… [Read More]
The weighted average cost of capital is as follows:
In a net present value analysis, the cost of capital is often used as the discount rate. A net present value analysis seeks to reflect the value today of cash flows in the future. In order to do that, the future cash flows must be discounted back to present day dollars. There are a number of different ways to obtain the discount rate. The company might utilize a hurdle rate that they choose given their own reasons. Another approach is to use the rate associated with the financing that the firm wants to use -- for example if it intends to issue a bond it might use that bond rate as the hurdle rate. However, the weighted average cost of capital (ACC) is one of the most common.
The ACC is often adjusted to suit the risk profile of…… [Read More]
Dick and Mac McDonald opened their first restaurant in 1940 in San ernadino, California. These men were among the first to introduce the concept of "fast food," and made dining fun for children. McDonald's went on to enjoy over 60 years of growth, which has only tapered in the last year due to a failure to expand successfully into places such as olivia. Despite these recent setbacks, it is notable that only the third world could thwart McDonald's is a testament to its brand name and its revenue model. There are currently over 28 thousand McDonald's Restaurants in over 120 countries. McDonald's global sales in 2000 were over 40 billion, and the company could boast 16 billion customers that year.
McDonald's success didn't occur in an incremental, measured fashion. The company only really took off in 1954 when a mixer salesman, Ray Kroc, discovered the operation and found a way…… [Read More]
EP'S IN MANAGEIAL ACCOUNTING CAPABILITIES
Managerial accounting intended provide managers information make decisions run company successfully. The information reliable, timely complete. Its provision, dictated
Effect of EP's in managerial accounting capabilities
EP systems are implemented to assist an organization become more efficient in the running of their business and also to integrate the different departments within the organization. The automation of the business processes ensures that a business remains competitive in today's business environment Hitt, Wu, & Zhou, 2002.
Adoption of EP systems is also widespread because of the advancements made in the technology field. Integrating the different organization departments provides for a centralized management system, and makes it easy for reporting. Barriers that may exist between an organizations function are eliminated, thus providing managers unprecedented access to the organization accounting information.
Managerial accounting capabilities
With an EP in place, an organization changes the way it processes, evaluates and reports…… [Read More]
Managerial Accounting Can Help Managers With Product Costing
Organizational success depends on manager's decision-making prowess. Management functions encompass Organization, Planning, Control and Direction, each requiring access to established, and well organized and presented data. Managerial accounting that comprises of different facets of accounting measures helps access to data for identifying, analyzing, and deciding on long-term and short-term measures towards business sustainability and profitability.
Accounting, in earlier times was restricted to and for external sources -- market, supply and end-users. Presently, its importance to internal operations (especially works, manufacturing, services etc.) has widened the scope to address both internal and external audience and sources. This has helped create a pragmatic feedback system for the managers to rely on.
Cost accounting and management accounting go hand-in-hand although the latter takes into account both revenues and cost while the former considers only costs for its calculations. Thus, management account allows the flexibility of…… [Read More]
Financial accounting is mainly concerned with the financial statements that are given to the stockholders, lenders, financial analysts as well as other important factions outside the company. The accounting principles come hand in hand with financial accounting since they are used in reporting the results of the corporation's past transactions. These transactions are reported on balance sheets, the statement of changes, the statement of cash flow, and the income statement. Financial accounting is mainly used as a representation of the financial health of an organization to the stakeholders. The audience of financial accounting includes board of directors, financial institutions, and the stakeholders. The financial accounting presents a specific period in the history of the organization. The information helps the audience to review the performance of the company (Needles, Powers, & Crosson, 2013).
In contrast, managerial accounting focuses on the provision of information inside the company to…… [Read More]
The applicability of Activity-Based Costing for decision making is directly linked to the influences that ABC has over process control. In this order of ideas, by better identifying the incurred costs or the overhead, managers can better monitor and control the evolution of products, prices, costs and consequently, profits. ABC identifies the costs incurred by each item in terms of resources consumed. Therefore, with the aid of ABC, organizational managements have the ability to control resource allocation.
Activity-Based Costing reveals yet another significant feature: it has the ability to evaluate the costs of not producing an item. This basically means that with the aid of the ABC, managers are able to know how much they have lost due to machine malfunctioning, product damaging, increased inventory costs or time spent waiting for a machine component to be replaced. "Activity-Based Costing therefore gives not only much better cost control, but increasingly, it…… [Read More]
This is a managerial accounting paper
Starbucks accounting questions
From the case in 2004, explain the logic for a price increase from Starbuck's perspective.
In 2004, Starbucks was facing rising costs for its input goods such as milk and coffee beans. In 2004, Starbucks announced that the "price for a tall coffee is going up by 10 cents. A 12 ounce coffee used to cost $1.55 without tax but it will now cost $1.65" (Wirth 2004). Consumers were understandably annoyed by the price increases, and groused about how already expensive coffee was getting more expensive. However, Starbuck's decision seemed to be wise in the short-term. Customers who are price-sensitive to a 10 cent increase in the price of beverages are unlikely to be regular patrons at Starbucks. According to one Starbucks coffee buyer: "Because it's only 10 cents it won't make that much of a difference to me,…… [Read More]
Breakeven point is a managerial accounting term that relates to the point at which the fixed costs are covered (no author, 2013). The breakeven point can be expressed as a dollar value of revenue, or it can be expressed as a number of units (in a simple one-unit firm). There is a breakeven point for services as well as for goods. For a health care institution, the breakeven point should be expressed in dollar value of revenue. The text uses the per unit method, but no health care institution only performs one kind of service. Such an approach is more appropriate for determining the pricing of an individual service, but only then when the demand for that service is known, which is often not the case in health care. The text defines the breakeven point as an understanding of the relationship between cost, volume and profit.
Calculating the breakeven point…… [Read More]
Managerial Accounting: Organizations and Expectations
The profession and practice of accounting has become increasingly prominent and increasingly scrutinized over the past decade or so, in the wake of major scandals and upsets in the business world that can be traced in part to nebulous and unethical accounting practices or outright frauds. Because of this increased prominence, accountants today need to be more concerned than ever with not only the standards to which they hold themselves and their work, but also the appearance of these high standards and performance capabilities. This is one of the major benefits, along with many others, of belonging to a professional organization. The authority and austerity that the right professional organization carries provides these abstract as well as concrete benefits to member accountants, from increasing confidence and camaraderie to detailing the actual expectations and requirements of the task of accounting.
The Institute of Management Accountants is…… [Read More]
Yet, financial statements and managerial accounting reports can be highly effective nonetheless. Sometimes they will merely confirm what the proprietor already knows, but there are inevitably going to be times when they will reveal that the proprietor's assumptions about the nature of the business are false. Moreover, accounting can act as essentially a second opinion. The proprietor may feel one thing is true, but the numbers can reveal something different.
Overall, accounting is an essential component of any business. Sole proprietorships often make less use of accounting, in part because the law does not obligate them to engage in any more than the most rudimentary accounting. However, proprietors should not overlook the value of accounting. Accounting helps to reveal the business' past performance, but can also be used to enact organizational controls today and to help plant for more effective operations in the future. By understanding the firm's cost structure…… [Read More]
Managers use various analysis for various reasons. The comparative analysis compares line items in statements to past statements that detects changes in the accounts, which could indicate problem areas in operations. The ratio analysis detects emerging trends, weaknesses, and strengths of the business. The cost-volume-profit (CVP) analysis evaluates cost factor behaviors and shows how profits can be affected by the factors.
The comparison analysis is especially important to keep expenses in check. y comparing line items on the financial statements against previous period statements, changes can be detected and investigated. For example, where labor is one of the highest expenses, if labor is higher for this period with approximately the same sales volume, it shows a sign of wasted labor hours that would need to be investigated. Labor may not be being utilized in ways to prevent waste, which cuts into the profits. Another high area of waste…… [Read More]
A senior executive in a Fortune 500 firm along with their colleagues on the company's management team are dependent on accurate, timely, and pertinent financial information regarding the health of the organization. Accounting information has aptly been described as "the language of business, which is used in the management, planning, control, and decision- making processes integral to achieving organizational objectives" (Marshall, D. & McManus, W. 1996). In this regard accounting information falls into distinct categories: financial and managerial accounting; yet with considerable overlap in their utilization by management. Explication of these accounting areas provides considerable insight into their utility in providing effective quantitative data for analysis.
Financial and Managerial Accounting
Financial accounting concerns itself with the "preparation and reporting of financial statements for an entity" (Marshall, D. & McManus, W. 1996); while managerial accounting "is concerned with providing information to managers- that is, to those who are inside…… [Read More]
"Management believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods."
ased on the data retrieved and the projections made, the accounting division will proceed to the development of the consolidated statements for all of GM subsidies and the overall group. There are 24 consolidated statements, as follows: Discounted Operations; Asset Impairment; Investment in Nonconsolidated Affiliates; Marketable Securities; Variable Interest Entities; Finance Receivables and Securitization; Inventories; Equipment on Operating Leases; Income Taxes; Property - Net; Goodwill and Intangible Assets; Other Assets; Accrued Expenses, Other Liabilities and Deferred Income Taxes; Long-Term Debt and Loans Payable; Pensions and Other Postretirement enefits; Commitments and Contingent Matters, Stockholders' Equity; Earnings per Share Attributable to Common Stocks; Derivative Financial Instruments and Risk Management; Fair Value of…… [Read More]
Another factor that should be taken into consideration is that of overall strategy. Financial statements are snapshots, and sometimes it can be difficult to discern from looking at a small sample of them the firm's overall direction. Key strategic decisions can have a significant impact on the financial statements for a limited period of time. For example, during the period studied FedEx was having trouble absorbing Kinko's which it had purchased. These difficulties are not fully reflected on the income statements for 2005 and 2006. Instead, they appear as an unusual item (a writedown) in 2008. Likewise, UPS took a $6.1 billion writedown in 2007, which made the financial figures for that year look terrible. There is always strategic context in financial statements. That context is not always readily apparent, but it should be taken into consideration when analyzing the financial statements.
The potential impact of mergers and acquisitions should…… [Read More]
a) i) Using direct labour hours as the cost driver for the overhead costs, the following table presents the net profit calculation for each line of motorcycle:
Activity-based costing is designed to allocate overhead costs based on the resources that each activity consumes (The Economist, 2009). The key to activity-based costing is that the cost drivers are assigned differently, and in a manner that should better reflect actual resource usage than a cost driver that may be picked almost at random (Investopedia, 2013). Using ABC, the following are the net profit calculations for the three different products at Vroom.
2800000…… [Read More]
Margin is quite simple and states that a certain value of the production volume exists for which costs are accounted for, but profit is null. This critical production volume is calculated by applying the following formulae:
The Variable Cost per Unit is calculated as Total Variable Cost per Current Volume. Therefore, aggregate revenue (Quantity (Volume) x Price per Unit (P)) shall be equal to the Variable Cost per Unit x Quantity + Fixed Costs + Profit
Q x P=VCU x Q + FC + Profit
x (P -- VCU) = FC + Profit and Q = (FC + Profit) / (P -- VCU)
The critical point is reached when the Contribution Margin is equal to the Fixed Costs and Profit is zero, since the Contribution Margin the sum of the Fixed Costs and Profit.
The first point I think that needs to be maid is that the Contribution Margin is…… [Read More]
ACC403 Module 4 Threaded Discussion Managerial Accounting 21st Century The purpose management accounting organization support competitive decision making collecting, processing, communicating information helps management plan, control, evaluate business processes company strategy.
The importance of management accounting within an organization:
Changes and evolution of the managerial accountant's role
The distinctive feature of managerial accountancy is that members of the profession work for one specific company on a consistent basis, versus being employed by a variety of clients. "The role of the management accountant is to perform a series of tasks to ensure their company's financial security, handling essentially all financial matters and thus helping to drive the business's overall management and strategy" (ole of the managerial accountant, 2012, Business Careers). Depending on the seniority of the accountant, these duties may include budgeting, tax advice and policy, managing assets within benefits packages and other forms of strategic planning (ole of…… [Read More]
Accounting Process and Financial tatements.
A reliable internal system of accounting is an essential element of a solvent profit or nonprofit business entity. By recording virtually every business activity or endeavor, with regards to the creation of monetary inflows of sales revenue and monetary outflows of expenses resulting from operating activities; an accounting system should provide the financial information needed to evaluate the profitability or effectiveness of past and operations. Along with maintaining data for reporting purposes, an effective accounting system will effectively report the status of asset resources, creditor liabilities, and ownership equities of the business entity. With today's rapid and ever expanding technological developments have lead to increasing operating speeds, convenient data storage capabilities, reliability and significantly reduced costs.
Historically, maintaining an effective accounting system involved extensive manual labor which was described as tedious, aggravating, and time exhaustive. Recording transactions, adding subtracting, summarizing, and checking for errors were…… [Read More]
accounting systems, their tradeoffs, and discusses the differences between countries in their approaches.
Each of the cost accounting systems discussed in the articles accomplishes some management goals better than other systems, but there are tradeoffs involved with each. Different nations approach their cost accounting systems differently due at least in part to differences within cultures. For instance, GP is more suited to countries where the culture is one of uncertainty avoidance, one of the five dimensions of Hofstede's taxonomy. GP offers the most uncertainty avoidance because there is relatively little ambiguity in the assignment of costs; GP is characterized by narrowly defined cost centers and strict cost center criteria. Cultures such as Germany's are characterized by a management environment that includes highly skilled workers and technical expertise among managers. This is in contrast to the U.S. where workers tend to have more generalist skill sets and managers have been educated…… [Read More]
It sheds light on why the financial results deviated from expectations and what remedies can be included in the next strategic plan in order to ensure that the company improves performance in the next period.
There are differences among budgeting techniques in different companies and it may well be that some generalizations can be made between the budgeting techniques in different countries. In the Netherlands, for example, budgets are often a compilation of departmental budgets set by lower-level managers (De ith & Dijkman, 2008). Yet within that country, there is considerable divergence among public companies. The same is true for companies in other major estern nations as well -- a wide range of techniques is used in any given sample of companies.
It should be noted that in the U.S., there is a move towards post-budgeting techniques, such as Beyond Budgeting, Activity-Based Costing or the Balanced Scorecard (Becker et al.,…… [Read More]
hat drives consumption of costs?
In Activity-Based Costing (ABC), consumption of costs is driven by a company's activities (Investopedia, LLC, n.d.), such as production, administration and sales (Cokins, 2010, p. 9). The company's product consumes activities, whether main or supporting activities, and those activities consume company resources (Cokins, 2010, pp. 9, 11). In that context, a cost driver is something that drives the cost of a company's activity (Investopedia, LLC, n.d.); it is a "factor which generates occurrence of resource (capacity) expenses" (Cokins, 2010, p. 8). For example, a manufacturing business may have an activity of running machinery, which will have cost drivers such as machinery operating hours, labor, maintenance and power consumption (Investopedia, LLC, n.d.). That same manufacturing company may also have the activity of release into production, which will have cost drivers such as the number of products (Cokins, 2010, p. 13). Cost drivers are chosen according…… [Read More]
Managerial Accounting for Sleepease Ltd.
"Identify, discuss and critically evaluate the advantages and problems of using the following costing methods for internal reporting purposes":
absorption costing; marginal costing.
"Refer to the Sleepease case as and when necessary"
The absorption costing is the type of managerial costing where both the variable and fixed costs are charged to process or product. Thus, "absorption costing is a method for appraising or valuing a firm's total inventory by including all manufacturing costs as product costs, regardless of whether they are variable or fixed and therefore it is frequently referred as the full cost method." (Nawaz, 2013 p 50).
Accordingly, the company will be able to determine costs of a product after determining both the variable costs and fixed costs. Sleepease will derive several benefits from using the absorption costing for the production of their product.
First, the absorption costing will assist the…… [Read More]
The management accounting leads candidates into finance, risk management and even production management. hile CMA certification is not necessary to pursue a career in management accounting, it is recommended. The IMA claims that certified management accountants earn on average $25,000 more per year than non-certified peers (IMA, 2011).
As with the accounting profession in general, there is increased demand for management accountants. CMAs are in demand because of their ability to contribute to the profitability of businesses, and demand for CMAs is expected to grow in coming years. Because CMA job duties are less structured than those of financial accountants or auditors, CMAs enjoy greater career flexibility.
Both types of accounting positions are poised to enjoy significant growth. There is also a trend in business, particularly since Sarbanes-Oxley, of looking to accounting professionals to lead firms. More CEOs are coming from the accounting stream than ever before, which highlights the…… [Read More]
(5) Auditors and CPAs should consider several ways that the Sarbanes-Oxley Act and SEC implementation rules as a whole impact accountants and work closely with regulators to address these effects. (6) Public accounting firms need to reconsider external auditors' participation with their client's internal audit function and control structure. This reporting on the internal controls can be very useful and add value to the integrity and quality of the financial reporting process. However, management accepts full responsibility for the design and maintenance of the adequate and effective internal control system. (7) Auditors should advise their clients and make recommendations for the appropriate disclosures of financial information. A more timely, relevant, objective, and transparent financial reporting process should improve the quality, integrity, and reliability. (8) it is necessary to use more effective and objective audit procedures and related standards to improve audit efficiency. The role of independent auditors on financial statements…… [Read More]
76), ROE has ranged from 21.6% to 28.3% in recent years, with the 2007 figure being 25.6%. This reflects outperformance of both the industry and the market. The ROA has exhibited similar outperformance of both industry and market. The return on assets for JNJ over the past several years has ranged from 13.1% in 2007 to 17.l% in 2005. The industry five-year average is 8.85% and the market five-year average is 7.50%.
Net Income increased despite decline in revenues
Growth in each business segment
R&D expense growing slower than revenues
2-year upward trend in net income
Upward trend in cash levels
Upward trend in cash flow from operations
Current ratio 46.36% higher than industry
Interest coverage 80.09% higher than industry
Net margin 14.04% higher than industry
Return on Equity 1414.79% higher than industry
Return on Assets 48.02% higher than industry
Decline in revenue this year (1st…… [Read More]
Further, Oracle also has templates and process definitions for the electronics components market as well. Lastly the financial modules with Oracle can also be used for local government reporting in addition to SOX compliance.
For the small business of $2M their needs are drastically different than the $100M distributor that has offices across multiple geographies. The $2M company for purposes of this example is a manufacturer of air conditioning spare parts and is heavily manufacturing based. Their customer base is primarily throughout the U.S. Their primary need is for an accounting system that can has Accounts eceivable, Accounts Payable, General Ledger, Billing, Inventory Management, distributed order management and sales order management, all core functions of an accounting system (Collins, 2006). In addition this small manufacturer also needs support for Debt Collection, electronic payment processing, online payroll, timesheets and purchase requisition as well. All of these features can be found in…… [Read More]
A static budget is defined as a budget that is "planned ahead of time based on the owner's best guess about future actual activity." This type of budget is therefore put together for the upcoming time period, and is often based on the data from past time periods, plus or minus different adjustments that management thinks will be necessary. In contrast, a flexible budget is one where the business management can make changes in the midst of an accounting period. Flexible budgeting allows for management to make better decisions on the fly, because the information used in those decisions is kept more up-to-date. Static budgeting relies only on the ability of management to analyze the numbers after the period in order to determine the magnitude and direction of variance, along with the causes of variance. For a flexible budget, management can identify issues with the budget right away, and…… [Read More]
Managerial Prerogative Has Gone Too Far?
Whenever an organization is founded and the objectives for its existence have been established, the founders and management of said organization are expected to ensure the continuity, viability, and resilience of the enterprise. This is done via the allocation of needed resources (i.e. capital, human, financial, etc.) and formulation of strategies in order to achieved set and target organizational goals. Once operational, there are other duties, responsibilities, accountabilities, rights and privileges management can and must exercise to achieve continued operational success and efficiency. One of these management principles or concepts is known as managerial prerogative, which "includes the right to organize operations and methods of working, issue detailed instructions on the circumstances in which work is performed, and take in matters relating to working hours in so far as these are not rigidly regulated by collective agreement (Eurofound, 2009)." Often, managerial prerogative is institutionalized…… [Read More]
ABC Overall risk profile
The ABC Company may face series of risks based on the current industry and economic issues. First, the company is operating in a competitive market environment making the company to face a fierce competition from other companies producing similar products. Thus, the ABC Company may likely to lose some of its customer to competitors if the price per product is too high.
Moreover, the current recession may affect the purchasing power of customer, which may affect the company annual revenue. Moreover, inflation is likely to increase the cost of production. Another risk issue is that the company should satisfy its shareholders by declaring high dividends and failure to satisfy the shareholder may make some shareholders to disinvest their fund from the company, which may make the company to lose the public image. (Daniel, Njikizana, . & Chamboko, 2011).
Current ABC cash flow using Direct…… [Read More]
&D activities fall into four pools with the following annual costs.
Market analysis $1,050,000
Product design 2,350,000
Product development 3,600,000
Prototype testing 1,400,000
Activities Cost Drivers Estimated Drivers
Market analysis Hours of analysis 15,000 hours
Product design Number of designs 2,500 designs
Product development Number of products 90 products
Prototype testing Number of tests 500 tests
(a) Compute the activity-based overhead rate for each activity cost pool
Activity-based overhead rate = total budget overhead / basis
= 1,050,000 / 15,000
= $70 per hour (Market Analysis)
Activity-based overhead rate = total budget overhead/basis
= 2,350,000 / 2,500
= $940 per design (Product Design Number)
Activity-based overhead rate = total budget overhead/basis
= 3,600,000 /
=$40,000 per product (Product development number)
Activity-based overhead rate = total budget overhead/basis
= 1,400,000 / 500
= $2,800 per test (Number of tests)
(b) How much cost charged to an in-house manufacturing…… [Read More]