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Fixed costs variable
The value and importance of job order costing
The value and importance of job order costing
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The most important thing in chapter one is the Lean Thinking Model. My reason is it allows you to see the concept of doing more with less. A practical example of this is TESCO a grocery retailer in Britain uses lean thinking to improve its replenishment process for cola products.
The most important points or concepts in chapter two are how to prepare an INCOME STATEMENT and a BALANCE SHEET. My reason is they are the most important in understanding the financials of a business. They give you a picture of the performance of your business. A practical example of this is as follows:
Company revenue-expenses= net income= 6000-4700=1300 this 1300 net income must also be shown on the balance sheet as equity. (Garrison, 2010)
The most important point or concept in chapter three is JOB ORDER COSTING. My reason is allows one to distinguish overhead cost versus direct labor cost. Example is the cost of service in a law firm. The time expended on clients by an attorney is direct labor and the legal documents preparation, and secretaries , legal aid, etc can be categorize as overhead. (Garrison, 2010)
The most important point or concept in chapter five is the behavior of FIXED and VARIABLE COST. An example of fixed cost would be rent and taxes paid to utilize a facility for doing business. This cost is constant and can only decrease on a per unit basis as the level of activity increases. In contrast variable cost reacts to some activity occurring. This activity is what drives the cost up or down. (Garrison, 2010)
The most important point or concept in chapter six is determining the CONTRIBUTION MARGIN RATIO. Determining the contribution ratio allows one to see the impact of fixed expenses and sales on the profit. Practi...
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...rall cash balance. An example could be the household budget. For instance your inflow of cash would be your paycheck and the out flow that affects overall cash balance in your check book ledger could be anything from utilities to mortgage. The picture allows you to know whether you will be able to meet other financial obligations. (Garrison, 2010)
The most important concept and point in chapter 16 are ratios and their effect. Ratios are not a cure all but they do give an organization the ability to take a quick glance at their ability to meet certain financial obligations. For example a ratio analysis can give a bank that is making a loan to you a clear example if you have enough liquid or disposable income to repay the loan. (Garrison, 2010)
References
Garrison, R. H. (2010). Managerial Accounting (13th edition ed.). Ney York, New York: McGraw-Hill Irwin.
[4] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 3, Cost Assignment, p. 54-59
Donal E. Kieso, Wegandt J. Jerry, Warfield D. Terry. (2012). Intermediate Accounting. Hoboken, NJ: Wiley.
The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
Monea, M. (2009). Financial ratios – Reveal how a business is doing? Annals of the University Of Petrosani Economics, 9(2), 137-144. Retrieved from http://www.upet.ro/eng
Important factors of a company’s outlook are its financial strength and weaknesses. These factors can be evaluated by reviewing the firm’s financial statements and using ratios to help measure a company’s liquidity, leverage, activity, profitability, and growth. Financial ratios are computed by using the information found in a company’s financial statements: primarily income statement and balance sheet. The calculations from the current year, previous years, and other companies in the industry are used as a basis to identify and ev...
Garrison, R. H., Noreen, E. W., & Brewer, P. c. (2010). Managerial Accounting. New York: McGraw Hill/Irwin.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
A strong balance sheet gives an investor an idea of how financially stable the company really is. Many professionals consider the top line, or cash, the most important item on a company’s balance sheet. The big three categories on any balance sheet are “assets, liabilities, and shareholder’s equity.” Evaluating Barnes & Noble’s assets for the time 2014, 2013 and 2012 the company’s performance summarizes that it is remaining stable. These numbers reflect a steady rate over the three year period. Like assets, liabilities are current or noncurrent. Current liabilities are obligations due within a year. Key investors look for companies with fewer liabilities than assets. Analyzing this type of important information, informs a potential investor that if the company owes more money than they are bringing in that this company is in financial trouble. Assessing the liabilities of the balance sheet, for the same time period, it is also consistent with the assets. The cash flow demonstrates a stable performance in the company’s 2014, 2013 and 2012 assets and would be determined that the liabilities of this company are also stable. Equity is equal to assets minus liabilities, and it represents how much the company’s shareholders actually have claim to. Investors customarily observe closely to the retained earnings and paid-in capital under
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.
13. Romano, P.L. "Trends in Management Accounting." Management Accounting, August 1990, pp. 53-56. 14.
Prasad, M. and Sinha, K. 1990. Principles of Management Accounting. First Edition Delhi: Jainendra Prakash Jain at Shri Jainendra Press
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
Balance sheet-: Balance sheet is a statement at the book value of all of the assets and liabilities of a business or other organization present a particular date such as the end of the financial year. It is known as a balance sheet because it reflection accounting identity the components of the balance sheets. The balance sheet must follow the following formula:
Kinney, Michael R., and Cecily A. Raiborn. 2013. Cost Accounting: Foundations and Evolutions, 9th Edition. Cengage Learning.