StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Accounting for Decision Makers -Discussion Question - Assignment Example

Cite this document
Summary
Jointly manufactured products are dependent on similar raw materials and production process. The manufacturing companies engage in decision-making concerning the sale of a product or the further process…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.4% of users find it useful
Accounting for Decision Makers -Discussion Question
Read Text Preview

Extract of sample "Accounting for Decision Makers -Discussion Question"

Accounting for Decision Makers -Discussion Question Task Port Allen Chemical Company Most manufacturing companies make Sell-or-process further decision. Jointly manufactured products are dependent on similar raw materials and production process. The manufacturing companies engage in decision-making concerning the sale of a product or the further process decision. Joint products share raw materials and production process up to a point known as split-off. At a split-off point, the company can decide to either sell all the products or engage one or two products in a further refining process.

The decision to sell-or-process further is based on the cost-benefit analysis of the two decisions. The decision to further process a product after the split-off point invites further costs and revenues known as the incremental costs and revenues (Sell-or-process-further decision, 2013). Management accountants can support the decision to process further only if it generates more revenue than costs. Based on the case of the Port Allen Chemical company, raw material D is used in the production of products E and F.

Based on the case, $ 100 is the cost of converting 100 liters into 60 liters and 40 liters of products E and F respectively. Therefore, the cost of producing 60 liters of product E = (60/100)*100 = $ 60, while the cost of producing 40 liters of product F = (40/100)*100 = $ 40. Product F can be sold at $ 6 or can be further processed at an additional cost of $5/liter and can be sold for $ 13/liter. Based on the information, the incremental revenue per liter = (13 – 6) = $ 7. The approach of the analysis is incremental costs as done below (Hartgraves & Morse, 2015).

Incremental revenue (7*40)280Incremental costs (5*40)200Incremental revenue due to process further80 Based on the above table, the decision to process product F further generates more revenue than the cost incurred ($ 80). The incremental approach states that when the difference between the incremental revenue and incremental cost is positive, the process further decision should be implemented. Otherwise, the decision to sell is suitable (Hartgraves & Morse, 2015). Therefore, Port Allen Chemical Company should further process product F.

ReferencesHartgraves, A. L., & Morse, W. J. (2015). Managerial accounting. United States?: Cambridge Business Publishers.Sell-or-process-further decision. (2013). Retrieved from http://accountingexplained.com/managerial/relevant-costing/sell-or-process-further

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Accounting for Decision Makers -Discussion Question Assignment - 2”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1691015-accounting-for-decision-makers-discussion-question
(Accounting for Decision Makers -Discussion Question Assignment - 2)
https://studentshare.org/finance-accounting/1691015-accounting-for-decision-makers-discussion-question.
“Accounting for Decision Makers -Discussion Question Assignment - 2”, n.d. https://studentshare.org/finance-accounting/1691015-accounting-for-decision-makers-discussion-question.
  • Cited: 0 times

CHECK THESE SAMPLES OF Accounting for Decision Makers -Discussion Question

Historical Cost Convention and the Accrual Concept for Stewardship

This essay "Historical Cost Convention And The Accrual Concept For Stewardship" discusses the historical cost convention is unarguably one of the most debated topics in the theoretical base of accounting.... This expense, however relevant and certain will not feature in the books of accounts, because it does not concern the current accounting year.... The accrual concept of accounting does not mean that any future expense will be recorded.... Only that expense, which is part of the current accounting year, will find a place in the books of accounts....
10 Pages (2500 words) Essay

Management Principle of Nike

The researcher states that this essay is aimed to help us understand how a strategic objective could be attained through change in collective and individual behaviour of the employees of Nike, that is well-known worldwide sportswear corporation with headquarters in the US.... hellip; The researcher comments on various statements relating to “spend the company's money as if it were your own”, and “we want people to understand the thinking that lies behind it” as well as “finding out what other companies did in this are?...
14 Pages (3500 words) Essay

Financial Planning and Control

The major topics covered in the are how the financial planning is applied to an engineering business, the effect of financial information on decision making, and how other the use of other financial techniques such as standard cost and variance analysis are used to optimize the effectiveness of an engineering business.... An engineering firm working on a construction project can mitigate risks from natural disasters by making the financial decision of purchasing insurance that covers 100% of the damage causes by such an...
4 Pages (1000 words) Essay

International Accounting Standard - A Radical Change to Financial Statement Presentation

This paper "International accounting Standard - A Radical Change to Financial Statement Presentation" focuses on the fact that IAS 1 prescribes the presentation basis of financial statements for the purpose which ensures that the entity's financial statements are comparable with the previous period.... states that a complete financial statements' set has to contain a statement of equity changes in a given period, cash flow statement for the period, financial position statement in the period's balance sheet, comprehensive income statement and the notes which include a summary of explanatory notes and the accounting policies....
12 Pages (3000 words) Essay

Fair Value Measurement

In addition this will also discuss how fair value is used by Next PLC as a measurement attribute in IAS 19 Employee Benefits and IFRS 9 Financial Instruments (financial assets only).... hellip; This outline will present what is fair value measurement and when it is required or permitted in the preparation of financial statements....
9 Pages (2250 words) Essay

Discussion Questions

What are some examples of how ratios are used in the decision-making process?... Ratios help managers in decision making by providing information that help them evaluate the company.... This is because of the bond amortization form earlier years which also helps in calculation of the premium each yearHow would you describe the accounting procedures for notes payable and accounts payable?... Why does the Financial accounting Standards Board allow both methods?...
1 Pages (250 words) Assignment

International Issues in Accounting and Audit

based Generally Accepted accounting Principles (GAAP) actually switched their focus towards adopting the 285).... This has therefore prompted various companies worldwide to adopt the International Financial Reporting Standards (IFRS).... This process began in 2005 with various European Union states adopting these techniques so… Since 2005, the numerous states that have been planning to convert from the U....
11 Pages (2750 words) Essay

Fraud and Allocation of Funds

According to this, he tries to indicate that in one way or the other, not all the capital that is input into the bakery department is provided for… He thinks that perhaps because the department makes a lot of profit yearly, the person in charge does not see the need of remitting extra money to be used as input into the department despite the fact that that there may be increases in inputs to departments from the overall Accounting Management Number Issue The issue in question is fraud in relations to allocation of funds and lack of accountability in the bakery sector by the departmental management....
2 Pages (500 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us