MASTERS IN PROFESSIONAL ACCOUNTANCY STUDENT NAME : Shilpa Thakran
STUDENT ID : 17909848
UNIT NUMBER : 530
REPORT :
MANAGERIAL ACCOUNTING
TUTOR NAME : CHEOW WING WONG
DUE DATE : September 12, 2014
TABLE OF CONTENT INTRODUCTION……………………………………………………………………………….3
1.0 PRODUCT COSTING………………………………………………….……………………4
1.1 JUST IN TIME APPROACH……………………………………...........................................4
1.2JUST IN TIME APPROACH IS DISTINCT FROM PRODUCT COSTING………………..4
1.3 USES OF PRODUCT COSTING…………………………….................................................5
1-4 IMPORTANCE OF
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Product costing emphasizes on cost allocation which incurred at the time of manufacturing to the final product and Just in time approach involves ordering of material as per need and have no inventories at the end. Traditional costing based on manufacturing and assumptions. Activity based costing is time consumable and is suitable for both manufacturing and non-manufacturing businesses.
If companies reports are showing less profit for most efficient products and more profit for the product the company is not efficient in making then there is a need to adopt product costing.
The report also covers how managerial accounting and financial accounting differ and why managerial accounting cannot be replaced by financial accounting. These branches of accounting differ in various ways like managerial accounting is more future-oriented while financial accounting based on past records. Also, managerial accounting is made for internal users like managers while financial accounting focus more on external users.
The purpose of the report is mainly to through light on various aspects of managerial accounting like the uses and purpose of managerial accounting and how its different approaches helps in increasing profits and controlling costs and wastages that incur during production. The company in the given issue is not following product costing due to which the company has little influence over the product price and in a competitive environment
Overhead costs are not in proportion to the production output because of the method they are using. This leads to inaccurate pricing and costing decisions. An Activity Based Costing System would help find the real relationship between the products produced and overhead.
Activity-based costing can be defined as the managers allocate costs depending on the quantity of resources a product or service consumed in the manufacture of goods and services. The activity based
Activity-based costing is a system of accounting that puts emphases on activities performed to produce products or services (Schneider, 2012). In this costing system every activity is assigned a cost (Schneider, 2012). The goal of activity-based costing is not to allot common costs to products but to measure and then price out all the resources used for activities that sustain the production and delivery of products and services to customers (Mazumder, 2007). Activity-based costing is a cost system that is useful in business because of the fact that it does account for the cost of the products, resources used to produce the product and delivery of the product.
“The accounting system generates the information that satisfies two reporting needs that coexist within an organization: financial accounting and managerial accounting” (Schneider, 2012, ch 1.1, para 1). Managerial accounting is the process of preparing reports and accounts required by management to make business decisions for daily, weekly, monthly, and yearly projects. Financial accounting is the branch of accounting that organizes accounting information for presentation to interested parties outside of the organization. Financial accountants produce annual reports for external
The essential difference between managerial accounting and financial accounting is that managerial accounting attends the needs of managers inside the organization, while financial accounting serves the needs of those outside the organization. There are also specific guidelines that are used (GAAP/IFRS) in financial accounting and is mandatory whereas there are no guidelines in managerial accounting and is not mandatory.
Activity-based costing is more accurate because it takes important factors into account before assigning a cost to a product. It's also more thorough and considers nonmanufacturing expenses as well, such as administrative and managerial costs. The ABC method is accurate, however it’s expensive to
The two categories are financial accounting and managerial accounting. Financial accounting are for those outside the business and managerial accounting is inside the business. Financial accounting information relates to the company as a whole, while managerial accounting focuses on the parts or segments of the company. Managerial accounting can use some of the external accounting (Financial) for its statements. With financial accounting,
There are two main fields you can go into. The first is financial accounting. Financial accounting focuses on the external users. This includes stockholders, agencies, suppliers, and creditors. When they prepare their reports such as the income statement and the balance sheet, they focus on the business as a whole. Managerial accounting serves internal users.
Typically, produce more diverse product entails more overheads and costs to the whole manufacturing process, for example, products which require more timing consumption in the production stage needs to assign more cost and overheads regarding other short-term production time product and incurrence more wages, electricity, storing, supplies .as such the firms required to assign more costs for the allocation base to these activities measured. In addition, some other cost driver influence another cost like the administrative and the selling costs. This charge would contribute in raise the total overheads cost insurance in the production. applying the activity based costing assist the organization to charge back these expenses for the consumer of the product.
Chapter 18 was modified to include discussions of customer-related and business-related cost drivers and recent evidence about the usage and success of activity-based cost systems.
This particular approach is reliable in determining the cost of a product because it consist of all required equipment and labor essential for producing the product. Basically, a manufacturer will obtain a further precise depiction on the cost of making a product when employing activity-based method of
With ever-increasing attitude for product diversity, the practice of using a single overhead rate to allocate costs to products will result in inaccurate cost results. Hence, the necessity arises to invent costing system to suit the needs of manufacturing concerns producing a variety of products. Activity-based costing system is a new technique which is aimed at the absorption of overheads in firms that produce a variety of products.
Product costing is the key to inventory valuation and pricing (Alnestig & Segerstedt, 1996). Inventory valuation, which is usually prepared for accounting purposes, simply focuses on costs incurred within the manufacturing of the products (Jiao & Tseng, 1999, as cited in Sheldon et al., 1991). However, for longer-term decisions such
A major difference between financial accounting and managerial accounting is their differing uses in regards to present and future data for decision-making. Financial accountants prepare data from transactions that have already occurred and managerial accountants prepare statements in regards to future decision making for their company. According to countingtools.com, the economy is always changing and not everything can be predicted, therefore, managerial accounting could only be useful to a certain degree.
Management accounting is described as “a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organisations strategy” (Blocher, et al., 2009). Many Changes in the business environment have occurred in recent years which have caused substantial adjustments in cost management practices leading to a contemporary business environment. These changes in the business environment have caused management accountants to respond by implementing and innovating specific management techniques to better implement strategy in these dynamic times. Also in looking at