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Introduction to management accounting - Essay Example

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Introduction to management accounting

The company is also intending to manufacture natural toothpaste, which is expected to attract a large number of consumers considering that there is an increasing attention in regards to health issue. In this respect, the company expects its sales to grow consistently. 2.0 Target selling price and cost card The selling price of the company’s products is targeted to be low-priced relative to other similar products on the market. However, the company would take into consideration the costs associated with labor, raw materials, direct expenses and other variable costs, as well as fixed costs in calculating reasonable prices for both toothbrush and toothpaste. The use would use the marginal costing with an intention of calculating easily the break-even point (Siegel, & Shim, 2010). The company’s direct material cost for every product is expected to be ?0.15 and ?0.1 for toothbrush and toothpaste respectively. The direct labor cost is anticipated to be ?0.05 and ?0.1 for toothbrush and toothpaste respectively. Direct expenses are expected to stand at ?0.05 for every product. Other variable costs would also stand at ?0.05 for toothbrush and toothpaste. ...
This would ensure that toothbrush and toothpaste are priced at ?0.5 and ?0.6 correspondingly. In relation to the market prices, the company’s prices would be slightly higher relative to Fluoridine Active Fresh of ?0.45 and Tubes High Quality of ?0.3. Conversely, it would be relatively lower with respect to Aquafresh of ?6 and Natural Paste of ?7. Additionally, the company’s toothbrush prices would comparatively lower to that of other firms on the market. 3.0 Breakeven point In order to calculate the breakeven point, there was a need to calculate the contribution margin per product using the marginal costing principle. In this regard, the company calculated the total variable costs, which was estimated at ?0.3 for each of the product (toothbrush and toothpaste). Moreover, the company subtracted the total variable costs for every product from the selling price to arrive at the marginal contribution for both toothbrush and toothpaste. Given that the selling price of toothpaste is ?0.5; its contribution margin per product is bound to be ?0.2. Similarly, considering that the selling price of toothpaste is ?0.6, then, the contribution margin per product would be ?0.3. For an individual to arrive at the breakeven point, one should calculate the number of products that may result in the profits of a firm being zero (Kieso, Weygandt, & Warfield, 2012). In this regard, it is estimated that 2,000 pieces of toothbrushes should be sold to meet the total fixed costs of ?400. On the other hand, it is expected that 1,500units of toothpastes should be sold to pay the total fixed costs of ?450. The company’s average contribution margin is estimated at ?0.25, while the total fixed costs are ?850. As a result, the company would breakeven by selling a total ...Show more


Financial Analysis Your City and State of the institution 1.0 Introduction The new company is intending to sell toothpaste and toothbrush products to consumers in the United Kingdom. However, the company is intending to locate its selling points at Manchester United, London and Birmingham…
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Introduction to management accounting essay example
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