StudentShare solutions
Triangle menu

Finance and Management - Essay Example

Not dowloaded yet

Extract of sample
Finance and Management

Product cost involves the determination of the cost incurred in the manufacturing of goods or provision of services. Manufacturing organizations, just as Worplestrop Partnership has to determine their products costs for two reasons. First is for decision-making and for the reason of external reporting. In manufacturing their products, Worplestrop Partnership would incur material costs, labor costs and other overhead costs that are associated with the manufacturing of the products (Hansen, Mowen & Guan, 2009). In determining the product cots for decision purposes, an organization will only use relevant costs to arrive at the cost of a product. This form of costing method is referred to as direct costing method. In this case, only the variable costs will be included since they are the ones that can influence the management decisions. Management has control on the costs and can formulate and implement decisions that can reduce the cost elements and increase the returns of the company (Baginski & Hassell, 2003). On the other hand, Worplestrop Partnership has to determine the product costs for the purposes of external reporting. Here product costs are determined to help arrive at the best price to charge for the manufactured products. All the costs that are incurred by the company including the overhead costs and other fixed costs are apportioned in order to charge them on the consumers’ of the manufacturing company’s products. This form of costing is referred to as absorption costing or total costing in which all costs direct and indirect, sunk, and future costs are used in settling at the selling price of the products. Absorption costing has the advantage of considering all the costs incurred by the business since even the fixed costs are incurred for the purposes of manufacturing (2002). Worplestrop Partnership should therefore calculate the product costs using the two approaches for the realization of the two different objectives i.e. management use and external decisions. for the purpose of setting the product prices, Worplestrop should use absorption costing because it incorporates all the costs incurred by the business hence elaborate. Apart from the two costing methods, Worplestrop partnership could also use the activity based costing method or throughput method. In activity-based method, the organization will charge the overhead costs to the departments depending on the level of activity and the cost drivers. Here, Worplestrop would determine all the activity that increase the costs and determine the factors that increases the costs of the activities. From there, the management will allocate the overhead costs to the centers. This method will make managers control the costs and eliminate the unnecessary activities that do not add value to the business hence increasing the efficiency and effectiveness of the business (Hansen, Mowen & Guan, 2009). The method has widely been used by many organizations despite the fact that it is complex. The last accounting method is the throughput method in which the product price is determined by adding only the material costs used in the manufacturing of the products. All the other costs are expensed and are not included in the calculation of the final price. This method is easy to simple to use. However, the method is not recommended by the generally accepted accounting principles and should therefore not be employed. This ...Show more


Date Companies in the manufacturing of their products have to control the total costs incurred in order to ensure that they maintain their profit margin. Material costs, labor costs, and overheads are some of the cost elements incurred in the manufacturing process…
Author : akris
Finance and Management essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Finance and Management"
with a personal 20% discount.
Grab the best paper

Related Essays

Finance and Management
Cost accounting, the branch of accounting that is charged with the determination of costs and analysis of different cost elements is therefore used in achieving this objective. Moreover, organizations have to develop plans that act as guidelines and benchmarks of reviewing performance.
6 pages (1500 words) Essay
Finance and Management
Cost accounting and information systems offer benefits to many companies; cost accounting is normally a method of accounting in any organization that is concerned with manufacturing of goods and goods sold at the same time. Cost accounting systems offers a means for performing an accurate inventory valuation of the inventory at hand.
7 pages (1750 words) Essay
Finance and Management Accounting
The R & D manager has to justify the money spent on research by coming up with new products and processes which would help to reduce costs and increase revenue. If the R & D department is like a bottomless pit only swallowing more and more money but not giving any positive results in return, then the management would have no choice but to close it.
9 pages (2250 words) Essay
Finance and Management
The Criteria include Executive Summary & Company Overview, Product or Service, Market Need, Market Potential for the Product or Service, Competitive Advantage, Management, Financial Forecasts, Long term Profitability, Collateral. The Business plan of BBC is analyzed against each criterion and the interpretations and recommendations are given accordingly.
12 pages (3000 words) Essay
Finance and Management
The Criteria include Executive Summary & Company Overview, Product or Service, Market Need, Market Potential for the Product or Service, Competitive Advantage, Management, Financial Forecasts, Long
12 pages (3000 words) Essay
Economics, Finance and Management
The one non-economic factor that has may have a positive impact on the company is their commitment towards the conservation of the natural environment. This is because it highlights the better
4 pages (1000 words) Essay
Degree in Economics, Finance and Management - Managerial Accounting
Once the management makes good decisions, the future of the business becomes more certain and it also ensures that the profitability of the business is guaranteed (Epstein & Lee, 2004). The role of the management accountants have been changing and advancing
10 pages (2500 words) Essay
International finance and management
The exchange rate risks are classified into three categories, that is, the economic exposure, transactional exposure and translation exposure. The
6 pages (1500 words) Essay
Management Finance
Currently, Berry Ltd is using the traditional absorption costing system in which the organization uses single allocation base (machine hours). However, this mechanism has failed to generate accurate costing information relating to the products. Based on this premise,
9 pages (2250 words) Essay
Management finance
the proponents of ABC, it is justifiable to allocate overheads to production units based on cost drivers, which take into account the costs absorbed by individual products as opposed to using an absorption rate that allocates costs to products using a pre-determined figure
10 pages (2500 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation