Management Accounting - Cost Classification - 2266 Words

COST CLASSIFICATION ASSIGNMENT To classify the various costs would first of all require a definition between the two types of accounting that practically all businesses have to face and a number of key terms which are equally important. These are management accounting and financial accounting. 1. THE DIFFERENCE BETWEEN MANAGEMENT FINANCIAL ACCOUNTING: Management accounting is concerned with decision making, cost apportionment, planning and control. It is based within the organisation and is solely for the use of the managers to conduct their business dealings. The process of management accounting is proactive meaning the company is looking ahead, not backwards. Financial accounting on the other hand is externally based and is†¦show more content†¦This means that it is up to them on how many employees they would like to work on a certain process. This is also the case with direct materials and variable overheads. However, there are also costs which can be controlled up to a certain extent, such as advertising costs. In this case, a department manager would be able to control how much of the allocated advertising budget is spent in their department. However, once this budget is spread throughout the whole company, it will be difficult for that particular manager to oversee budgets in the other departments. Incremental costs are those cost which increase or decrease because of an increase or decrease in one whole unit of output. As an example, the incremental cost of increasing the level of software packages from 10 units to 15 units is the additional cost for Microsoft of producing five extra units of software packages Many costs within the manufacturing industry can be easily separated from fixed and variable costs. The method used to achieve this is known as Cost Separation. The calculation for this is very simple and it enables the management to work out how much an individual unit will cost so that pricing and other useful decisions such as planning and control. The following example utilizes the Hi/Low method to explain how costs can be separated: (Hi Low Method): Units of chocolate bar: Total Cost: Total variable cost: TotalShow MoreRelatedManagement Accounting Report Cost Classification2913 Words   |  12 Pages | JUPITER LIMITED Management Accounting Report Prepared for: Jupiter Ltd. Chief executive officer Prepared by: Date: April 03 2012 TABLE OF CONTENTS EXECUTIVE SUMMARY 2 THE ROLE OF MANAGEMENT ACCOUNTING 3 CLASSIFICATION OF COSTS 4 INVENTORY VALUATION METHODS 7 RECOMENDATIONS 11 Bibliography 12 Jupiter Ltd. Management Accounting Report EXECUTIVE SUMMARY 1 2 Read MoreAccounting Management: Cost Classification and Ethics2396 Words   |  10 PagesTASK 1: Cost Classification and Ethics The Sorrel Pharmaceuticals Corporation manufactures a variety of drugs that are marketed internationally. Inventories on May 31 and June 30 were as follows: May 31 June 30 Materials Inventory $354,100 $327,400 Work in Process Inventory 112,600 116,400 Finished Goods Inventory 138,500 142,800 Purchases of materials for June were $142,600. Direct labor costs were incurred and computed on the basis of 27,000 hours at $8 per hour. Actual overhead costs incurredRead MoreBusiness Accounting For Non Specialists1367 Words   |  6 Pages THE UNIVERSITY OF DUNDEE SCHOOL OF BUSINESS: ACCOUNTING AND FINANCE AB51022: BUSINESS ACCOUNTING FOR NON-SPECIALISTS ASSESSED COURSEWORK Essay subject: â€Å"Costs may be classified in a variety of ways, depending on their nature and the information needs of management. The analysis of total costs into its behaviour elements is essential for effective cost and management accounting† Theodorou Ilias 140022413 MSc International Business and Finance In every industryRead MoreThe Distribution Of Annual Net Income Scaled By The Market Value At The Beginning Of The Year1618 Words   |  7 Pagesannual net income scaled by the market value at the beginning of the year (Burgstahler and Dichev, 1997). Notice the obvious shift of observations from just under expected levels of income to just over expected levels, showing evidence of earnings management. Dechow et al. (2000) focus on firms with positive earnings and firms with zero forecast error to evaluate whether firms manipulate accruals and special items to beat the zero earnings benchmark. However, the result fails to establish a significantRead MoreMarketing Analysis : Monster Beverage Corporation1203 Words   |  5 PagesIntroduction Managerial accounting is an intricate profession that implements accounting information provisions to obtain company objectives. Managerial accounting is an important role because it is a cornerstone position that interacts with an array of levels within a company’s organization. Obtaining information and reporting to upper level management requires a strong knowledge of company and management goals in order to produce such expectations. There are differences based upon the side ofRead MoreAnnual Report Of Woolworths Limited 2016 Essay1509 Words   |  7 Pagesa) In accordance to the annual report of Woolworths Limited 2016, the current accounting practice that is applied to the business regarding its inventory disclosure includes; a perpetual inventory system which continually updates the information by increasing or decreasing inventory from reports throughout the year to verify accounting records (Bragg 2016).  A perpetual inventory system in comparison to a periodic inventory system is more efficient and effective for larger corporations. With entitiesRead MoreChapter 1 Revew Accounting Help1048 Words   |  5 Pagesof the following entities would not require accounting information pertaining to their economic activities?  Ã¢â‚¬ ¨a.  Social clubs.†¨b.  Not-for-profit entities.†¨c.  State governments.†¨D.  All of these require accounting information.†¨e.  None of these requires accounting information.    †¨Difficulty: Easy†¨Ã‚   2.  Which of the following is not an objective of financial reporting described in FASB Concepts Statement No. 1?  Ã¢â‚¬ ¨a.  To provide information about how management of an enterprise has discharged its stewardshipRead MoreWhy Did The Fasb Embark On A Project Change The Reporting Standard For Leases?1143 Words   |  5 Pageschange the reporting standard for leases? Under the current financial reporting standards for leases, an entity has to determine the classification of leases to account for by applying bright-line rules. This creates a potential opportunity for management to structure leases in order to achieve a specific desired accounting results (FASB). In addition, the current accounting model does not require operating leases to be recognized on the balance sheet. As a result, investors may underestimate the assetsRead MoreWhy Did It Take The Internal Auditors More Than A Year?780 Words   |  4 Pages Auditing Questions: Why did it take the internal auditors more than a year to dictate the classifications? In May, 2002, Cynthia Cooper, WorldCom s internal auditor, discovered the treatment of line costs as capital expenditures. The internal auditor discussed the mistreatment with the CFO (chief financial officer), Scott D. Sullivan, and the company s controller, David F. Myers. Prior to or on June the 12th, the matter was reported to the head of the auditRead MoreIntroduction to Management Accounting Terms and Examples1202 Words   |  5 PagesIntroduction to Management Accounting Terms and examples Accounting is the process of analyzing and recording transactions for the purpose of preparing reports for statutory reporting, decision making and control.    Types of accounting Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting