StudentShare solutions
Triangle menu

Managerial accounting - Essay Example

Not dowloaded yet

Extract of sample
Managerial accounting

This concept states that stock is valued at lower of NRV or cost. Since NRV is not given in this case, we will include the purchase price or the cost of stock which is 750 in this case.
The cost of skilled employees: The cost of skilled employees is the direct cost of the order. As a result, there wages can easily be allocated to this order because we know that they have worked on this particular order during the week we can easily apportion this to the order and since it is the job of accountants to allocate all the recognizable costs to the appropriate cost centers, this order is the cost center and the cost activity of the workers is rightly apportioned to this order.
The extra cash lost: Accountants are only concerned with the explicit costs and they are least concerned with the implicit cost. Implicit costs are the opportunity cost like this one. These are not the real costs but are based on economic assumption of the next best alternative. Similarly, since these costs are based on assumptions, we cannot tell the accurate amount of these costs. However, economists do use these costs when calculating normal profit of a project or of an item. But, since cost statement is done by accountants and not the economists, we will ignore these costs in the job order cost statement. We are only going to include those costs that have factual evidence as the concept of "materiality" states. As a result, when preparing the job order cost statement, I have not included the implicit amount as it is of little value to the accountants.
Machinery depreciation: Machinery depreciation is a fixed cost. It means that irrespective of the operations performed by the machinery, a depreciation charge will be levied. Such costs do not vary with the output or the operations performed and hence we call them the fixed costs. In this case, since we have made a separate adjustment of the fixed overheads, it will lead to double addition if we add this cost separately. In other words, the depreciation charge is already included in the fixed overheads and it will lead to distortion of the cost statement if we include a separate head for machinery depreciation. In more professional terms, these will windows dress the financial statement and hence will give a different picture to the cost statement than it is in reality. For the reasons given above, I have excluded the amount for machinery depreciation from the cost statement.
Electricity: The statement in the question tells us whether the order is received or not, the machinery will be in continuous use. Since all machinery is run on electricity, we can assume that the charge of electricity is also fixed. The entire costs related to machine are fixed as it is indifferent to the order and hence these costs will also be included in the fixed overheads. Hence by adding them separately, we will again be making a mistake of double debiting our cost statement. This again will distort the cost of the order in reality and will make us assume that we are incurring more costs than we really are. This is called as window dressing and should be avoided from both the ethical and legal point of view. Hence, this amount is excluded from the job order cost statement.
Fixed overheads: Certain indirect costs are incurred when a company is working on a ...Show more

Summary

b) Preparation of Tender: This cost is not related to the production or manufacturing of the cabinet. Instead, it is an admin cost. According to accounting concept, admin costs are not charged to the manufacturing cost statements and instead they are included in the profit and loss account or the income statement…
Author : nathenwilliamso
Managerial accounting essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Managerial accounting"
with a personal 20% discount.
Grab the best paper

Related Essays

Managerial Accounting
In order to remedy this situation, a company would likely use short-term loans to pay employees what they are owed. This would then take wages and salaries out of liabilities and replace them with debt. On the other hand, it is sometimes possible that a company has money to pay their employees before they actually have to do so.
4 pages (1000 words) Essay
Managerial accounting
Manufacturing overhead for application to jobs during December Manufacturing overhead for December= total manufacturing overhead – manufacturing overhead till November =2400000- 2200000 =200000 Optic Vision would apply $ 200000 of manufacturing overhead during December.
4 pages (1000 words) Essay
Managerial accounting
The conventional accounting impact uses the basic accounting principle of “Matching”. The Matching concept is basically a “fundamental concept of accrual basis accounting that offsets revenue against expenses on the basis of their cause-and-effect relationship.
11 pages (2750 words) Essay
Managerial Accounting
The objective of the internal accounting system is to generate financial information that will streamline operational costs. As a result the operations can be made more efficient. In order to meet the objective of cost control, the accounting system provides information in several areas: cash receipts, cash disbursements, petty cash, payroll and fixed assets (Hill and Jones, 2007).
3 pages (750 words) Essay
Managerial Accounting
As a marketing manager for the Crunchy Cookie Company, I would not underestimate sales for a number of reasons. Cookies are frequently eaten edibles and underestimating its sales might create a shortage of products. If the budget is inappropriate, materials are ordered in accordingly and will not result in an increase in sales.
2 pages (500 words) Essay
Managerial accounting
Yet our experience since the early part of this decade has shown this to be an illusion. Massive accounting irregularities and scandals, involving large
8 pages (2000 words) Essay
Managerial accounting
It states that, in measuring net income for an accounting period, the costs incurred in that period should be matched against the revenue generated in the same
11 pages (2750 words) Essay
Managerial Accounting
The outflows are calculated multiplying 200 times $500 which equals $100,000. The 200 is the days the lodge is open and $500 are the daily expenses. The 20
3 pages (750 words) Essay
Managerial accounting
Management accountants seem to be moving from their traditional roles of being scorekeepers and controllers in an organization to playing a strategic role. This essay will analyze the changing role of management accountants in modern day businesses by looking at the
9 pages (2250 words) Essay
Managerial Accounting
To determine the effect that Machine Hours has on the total cost of production, a relationship needs establishing through the straight line passing through the coordinates. Where this
3 pages (750 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
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation