Ask Managerial Accounting Expert

You are the accounting manager in a medium-sized manufacturing company. The company's first year just ended, and the accounting department is working on closing the books. You plan to present information about unit costs and profits, to the generalmanager (GM) in two different formats. One method uses variable costing, and the other uses absorption costing. The GM will need to choose one or the other for accounting purposes. Whatever method he chooses will have to remain the method going forward as the choice of the method could impact reported profitability and therefore taxes. (The IRS frowns on firms making accounting methodology changes that impact any period's profits.)

You explain to the GM that if you choose to use the absorptive method, it will not only impact the reported profits of the year that just ended but will have an impact on the reported profits of the upcoming year, too. He doesn't understand what this means and asks for a more detailed explanation.

How absorption costing differs from variable costing

How the absorptive method will not only impact the reported profits of the year that just ended but will also have an impact on the reported profits of the upcoming year

Group Portion:

As the accounting manager, you and your staff need to prepare year-ending information to present to the company's general manager.

Part A:

Part A Data

Budgeted and actual fixed costs

$1,000,000

Budgeted unit volume to be produced

10,000

Budgeted unit volume sold

10,000

Actual variable costs

$500,000

Actual unit volume sold

9,000

Beginning of year inventory

0

End of year inventory

1,000

How many units of production were:
produced?
shipped?
left in inventory?

How much of the firm's fixed costs stayed in inventory?
under variable costing?
under absorption costing?

Calculate the unit cost:
using variable costing.
using absorption costing.

Based on how much of the firm's fixed costs stayed in inventory, how much of the firm's fixed costs ended up on the year's COGS and income statement?
under variable costing?
under absorption costing?

Part B:

Part B Data

A firms cost structure is as follows:

Monthly fixed costs

$20,000

Variable cost/unit

$80

Selling price/unit

$100

Using the Part B data:

Calculate the firm's break-even point in units of production.

Predict the firm's profitability if volume is 1,200 units.

Managerial Accounting, Accounting

  • Category:- Managerial Accounting
  • Reference No.:- M9460187

Have any Question?


Related Questions in Managerial Accounting

Instructions for preparation of assignment1 you are to

Instructions for Preparation of Assignment: 1. You are to choose one management accounting topic from the list below for this assignment, and register your chosen topic with your lecturer in class or via email before com ...

Management accounting assessment - research amp analysis

Management Accounting Assessment - Research & Analysis Teamwork Assessment Description - Learning Outcome - Analyse the issues or problems (in a given scenario) using management accounting techniques and tools, and formu ...

Management accounting with a strategic perspective

MANAGEMENT ACCOUNTING with a STRATEGIC PERSPECTIVE Assignment - This Assignment is designed to give students an opportunity to: 1. Integrate traditional, contemporary and advanced theoretical and technical management acc ...

Corporate accounting assignment -assessment task - select

Corporate Accounting Assignment - Assessment task - Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then ...

You need to prepare a paper about lacroix companycompany

You need to prepare a paper about Lacroix company Company: Lacroix Home Work: History & background Page: 1 and half

Managerial accounting assignment -background you are

Managerial Accounting Assignment - Background: You are recently employed as a graduate consultant in a management consultancy firm and are assigned to a team. One of your firm's clients is currently evaluating its budget ...

Managerial accounting assignment -background you have been

Managerial Accounting Assignment - Background: You have been hired by the Board of Directors of your chosen company (ASX Listed) to explain how ABC model can improve the management accounting information available to its ...

Assume you have been hired as a consultant to prepare a

Assume you have been hired as a consultant to prepare a balanced scorecard that will be presented to top management. You will choose a company to research and will provide a professional report that will include the foll ...

Accounting for decision makersproject - appendix

Accounting for Decision Makers PROJECT - APPENDIX A Requirements: 1. Choose a publicly traded company that you currently own/invest in or one that you would like to own / invest in 2. Research the company through the com ...

Task descriptionyou have gained a position as vacation

Task Description You have gained a position as vacation student at the accounting firm T&K Solutions. In your capacity of vacation student you have been asked by the two partners of T&K Solutions to assist them with two ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As