Financial Accounting Business Report Essay

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

The company has been functioning well in terms of generating profit and demand so far. However, there will be a 20% increase in demand for the next month of operations as predicted by management, and the production and supply management's problems may come as a problem they can no longer afford.

We adjusted focus to our niche market, sold off capacity in the low end and traditional markets, and proceeded to decrease our production going into the next round. While selling capacity was the correct financial decision to combat our emergency loan, we were then left with stock outs in all of our product lines. As a result, we continued to struggle with overproduction and avoiding stock outs, but made improvements resulting in less drastic inventory swings in the later

Lastly, the company suggest to expand their current inventory through increasing production and capacity. With the increase in production rate the company can gain more consumers as a whole through supply and demand. Doing this would give the company an opportunity for more exposure and perhaps better brand recognition.

The second and final option is to analyze marginal revenue and marginal cost. This process is done by comparing the amount each additional unit of output is costing and adding it to the total revenue and total cost. Unfortunately, this information was not made available for this

Profit maximisation in the short run occurs when marginal revenue is equal to marginal cost. This means the firm produces until the last unit produced has revenue equal to its cost and is shown in the diagram below.

However, there are several factors for the company to choose its pricing strategy. In this case, it may be better if the company choose to sell its product at $21.50 instead of $15.50. This is due to the fact that price-cutting appears to be not a good strategy in this industry. If every player in the same industry starts to lower the price of their products, every company will end up having the low price, which in turns lead to a low profit margin. Moreover, referring to the calculation in a below table, it also implies that if the price is lower than $12, sales will not be able to cover the variable cost incurred, thus it will bring about a loss in net profit.

‘Thinking at the margin’ means to consider what benefits are gained for additional actions taken. The “marginal cost” of adding one extra unit is weighed against the price of production. This is different to “average cost” as it analyses incremental costs. For instance, knowing that the average cost of a television is $104.55 doesn’t reveal much or inform decision-making. However, knowing that the average cost of 10 televisions is $100 each, while the 11th one requires the hiring of an extra truck for deliveries at $50, allows stores to make a decision: if the marginal cost of one additional TV is $150, but the marginal cost for one more TV goes back to $100, it would be more fiscally responsible to purchase 20 TVs than only 11.

Marginal costing is a traditional financial technique which is used by companies for short term decision making within the music & entertainment industry. The concept of marginal costing is concerned with the treatment of fixed costs and the relationship that exists between sales, variable costs and contribution. This technique is often used by record labels to estimate the costs which they will incur & profits they will earn per unit which is manufactured and sold.

Per Thomas & Maurice fixed costs do not affect the decision to produce or not to produce. If the fixed cost should double, marginal revenue still intersects marginal cost at the same level of output (2010). If Star's total fixed costs were to double to $7000 for some reason, 4000 units is still the profit-maximizing level of output for

The last several decades have been a turbulent period for management accounting in the United States. Many U.S. businesses failed in the international market, and the management accounting profession recognized that some of the blame rests upon shortcomings in the information provided to managers. A continuous flow of articles dating back to the mid-1980's such as Kaplan (1986) or Chalos and Bader (1986) has criticized contemporary management accounting systems. On the other hand, Reider and Saunders (1988) offered a defense of contemporary management accounting methods asserting that the methods are adequate but have not been used appropriately.

SEGMENT DISCLOSURE ARE WIDELY REGARDED AS SOME OF THE MOST USEFUL DISCLOSURE IN FINANCIAL REPORTS BECAUSE OF THE EXTENT TO WHICH THEY DISAGGREGATE FINANCIAL IMFORMATION INTO MEANINGFUL AND OFTEN REVEALING GROUPS.DISCUSS

To begin with, Marginal Costing which is formally defined as the cost accounting in which variable costs are charged to cost units (product costs) and the fixed costs of the period are written-off in full against the aggregate contribution (thus, the difference between

Thus, while incremental cost should not determine a product’s price, they should set a “floor” and demand conditions a “ceiling” –within which the range of many profitable pricing decisions should be made. “Fully distributed” cost, on the other hand, is an economically invalid criterion types of short-run decisions, since it is based on arbitrary apportionments of un allocable costs among various products, departments, and divisions. it is manifestly absurd and illogical to hold a certain products or group of products economically responsible for any given share of un allocable costs. whether the particular price of a product is above or below its fully distributed cost is of no economic significance as far as its minimum price is concerned in a particular short-run pricing decision. in the long run, however, all costs must be recovered.

Even though loyal customers tended to stay with the products, this company’s share of its markets was neither growing nor shrinking as it was staying steady. Hence the company wants to maximise its profitability. In its pursuit for increased profitability, the organisation had made significant reduction in manpower and other areas of the company, including supply chain management. Management was looking for additional cost