Task 1:
Cost accounting is an important type of accounting which helps to provide all the information and details about the cost of each, whether it’s direct activity or indirect activity during the productions of the finishing of product.
This type of the cost has been applied to decrease the limitations of financial accounting by giving that a good insight for the production cost and managerial cost.
Furthermore, the objective of the cost accounting is based on the ability and cost-effectiveness to inform the company the action of what happens in the company. Costing provide the management of the company to provide the need to control the action plan which is detailed the cost information in the future.
The financial accounting, which its
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is into 3 different of Businesses type; which are Marketing Research, Event management and Ad agency. Each of these departments has sub departments under it. EVENT MANAGEMENT DIVISION –
Revenue, profit, and investment centre have been identified in each organization, the reason of grouped those units into different categories because these units are not able to generate profit but are able to support the cost decisions of the firm which it comes under cost centre. All units that support to increase the income it comes under Revenue centre.
Revenue centre having a power on sale and there is a little authority of cost control. There is some disadvantage of revenue centre because this centre are assessment based entirely on sale, therefore there is no reason to control the cost by the revenue centre.
Investment
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Task 5:
1.
Step 1:
Highest Units: 80,000
Highest Cost: 115,000
Step 2 :
Lowest Units: 60,000
Lowest Cost: 97,000
Step 3 :
Variable cost per unit = (Difference between costs)/(Difference between Units)
= ((115,000-97,000))/((80,000-60,000))
= 18,000/20,000 = 0.9
Step 4 :
Total Fixed Cost = total cost of highest – (total unit of highest × V.C) = 115,000 – (80,000 × 0.9) = 115,000 – 72,000 = 43,000
OR
Total Fixed Cost = total cost of lowest – (total unit of lowest × V.C) = 97,000 – (60,000 × 0.9) = 97,000 – 54,000 = 43,000
2.
Total cost = fixed cost + (V.C × unit) = 43,000 + (0.9 × 75,000) = 43,000 + 67,500 =
Fixed expenses are those that will be there everyday the lodge is open regardless of the number of skiers. The Lodge is open 200 days per year and the cost of running the new lift is $500 per day for the entire 200 days giving us $100,000 in fixed costs. Variable costs are the expenses based on the number of customers. There is an additional $5 expense per skier per day associated with the new lift. If there are 300 skiers multiplied by $5 each multiplied by the 40 days that they are expected to be on the lift, we will have $60,000 in variable expenses.
The WACC is basically computed by the sum of multiplying the costs per component to its respective proportional weight (how much that company uses a certain cost of capital) [See Appendix 1]. As financial management is focused on the maximization of the stock price, an optimal structure of costs based on these three factors is needed.
Molloy will also need to calculate another important financial component that represents the difference between unit price and variable cost. This ratio is known as the contribution margin. From Chapter 16, the contribution margin “is the difference between the unit-selling price and the variable cost per unit” (Anthony, Hawkins, Merchant). In the case of MEHS, the unit contribution is as follows:
[6] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 8, Cost-volume-profit analysis, p. 165-173
1) Total Variable Costs are 60% of Total Costs; While the other 40% are from fixed costs.
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
This, in order to identify what are the true costs of each customer and each order, enables the company to fully understand its cost structure thereby providing the base for better business choices and higher profitability. These are very sensible goals indeed. Even though the company is profitable, implementing a new, activity-based cost accounting system will allow the company to improve its margins and become even more focused and competitive in the future. 2.2. What is the difference between a.... ...
Process costing System is an accounting expression which describes one method to determine the manufacturing costs to the units manufactured . Processing is typically used when similar units are mass produced. Also process costing system is a type of accounting process costing which is used to determine the cost of a produced inventory. Chartered Institute of Management Accountants (CIMA) defines process costing as " The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes. Costs are average over the units produced during the period, being initially charged to the operation or process "( College Accounting Coach, 2007). Process costing is more important and appropriate for all businesses producing identical products during which production is an ongoing flow. Toyota is on the of the major companies in the world that used well-known new philosophic management to produce identical products using process costing system.
Rishinek, A., 1983. Control Aspects of Standard Costing: Variance Analysis, Inflation Adjustment, The Learning Curve and their Computer Applications. Managerial Finance, 9(1), pp. 14-18.
Management accounting plays a crucial role in manufacturing competitiveness by supplying relevant information which guides and facilitates management planning and control, decision making, and performance evaluation (Amenkhienan. and Green, 1990). Until recently, management accounting has been heavily criticized for failing to provide timely and accurate information, and for not keeping pace with the new manufacturing environment and technologies (Johnson and Kaplan, 1988). Other criticisms suggest that management accounting reports are of little help to operating managers and that the system fails to provide accurate product costs.
Total cost is all of the expenses incurred in the production of a product, to include fixed and variable costs. Fixed costs, are expenses that are constant and do not change from month to month regardless of the amount of products sold. For instance, the rent of the factory is considered a fixed cost, for the reason that, the rent must be paid whether products are produced and sold or not. Variable costs,
g is an important tool that can help management in making informed decision. Though it is not legally required but still it is necessary to run an entity effectively. Cost accounting is turned toward the future. There are different methods of costing in Cost Accounting: Absorption costing and Variable costing. Both have some merits over the other.
Cost can be divided into fixed and variable and by considering into fact that fixed and variable cost can be unarguably split into two, even though they behave differently based on the level of sales of volumes. Since, cost is used in every field to determine the price of an item and the unit sold. Two of the main components of cost are fixed and variable cost and is used to differentiate between the costs that have no direct correlation to business and those that do.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.