Managerial Accounting: Stresses Accounting Concepts And Proc

Managerial Accounting Stresses Accounting Concepts And Procedures T

1. Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for investors and banks. internal users of accounting information. shareholders and creditors. the Securities and Exchange Commission (SEC).

2. The goal of managerial accounting is to provide information that managers need for planning, control, and financial reporting. control, evaluation, and financial reporting. planning, control, and decision making. preparing reports for external users.

3. The financial plans prepared by managerial accountants are referred to as budgets. financial statements. treasurer’s reports. controller’s opinions.

4. Performance reports often compare current performance with a competing company’s performance. shareholders’ expected level of performance. industry standards. performance in a prior period or budgeted performance.

5. Below is a performance report that compares budgeted and actual profit of Atlanta Enterprises for the month of June: Budget Actual Difference Sales $182,000 $180,000 ($2,000) Less: Cost of ingredients 145,000 Salaries 24,000 Controllable profit $ 13,000 $ 16,000 $ 3,000 In evaluating the department in terms of its changes in sales and expenses, what will be most important to investigate?

Salaries, because they are controllable expenses and strongly influence profit fluctuations.

6. The fundamental difference between managerial and financial accounting is that all financial accounting information is audited by Certified Public Accountants whereas managerial accounting information is audited by the IMA. managerial accounting is concerned principally with budgets, whereas financial accounting is concerned with a wider range of the organization’s activities. managerial accounting provides information for decision-makers within the organization, whereas financial accounting provides information for individuals and institutions external to the organization. financial accounting information follows U.S. Generally Accepted Accounting Principles, whereas managerial accounting information generally follows rules set forth by the Institute of Management Accountants.

7. Variable cost per unit increases when the number of units produced increases. does not change when the number of units produced increases. decreases when the number of units produced increases. decreases when the number of units produced decreases.

8. Which of the following is most likely to be a fixed cost? Cost of wheels for a lawn mower manufacturer Rent on a factory building Cost of labor for cashiers at a retail store Supplies used by the housekeeping staff that cleans hotel rooms.

9. Sunland’s Salsa is in the process of preparing a production cost budget for May. Actual costs in April were: Production 20,000 Jars of Salsa, Ingredient cost (variable) $12,000, Labor cost (variable) $8,400, Rent (fixed) $5,000, Depreciation (fixed) $6,000, Other (fixed) $1,000, Total $32,400. (a) Using this information, prepare a budget for May with an anticipated increase to 24,000 jars.

10. The Riverview Hotel is reviewing incremental revenues from accepting additional guests on a busy night. With 20 rooms available and the guests paying $190 per room, how much revenue would be gained if the hotel accepts the guests from Pines Hotel at that rate, compared to its regular rate of $320?

11. Sanchez Sweets is considering lowering its cookie price from $8.00 to $7.50 per batch, increasing sales from 80,000 to 90,000 batches. What is the incremental cost of producing the extra 10,000 batches? Should the company lower the price based on incremental profit/loss calculations?

12. Sterling Auto Detail owner considers extending the workweek to Saturday. What is the annual incremental revenue if the company details an additional 10 cars each Saturday at $100 per car?

13. Sunland’s Salsa is contemplating lowering the price from $7.00 to $6.30, expecting sales to rise from 392,000 to 448,000 jars. What is the incremental cost associated with this increase in production of 56,000 jars?

14. Using a three-period moving average, forecast demand for week 13 DVD players based on past weekly sales. Calculate the MSE for this method and determine if weighted moving averages or linear trend models would improve forecast accuracy.

15. Susan Armstrong aims to forecast her Fall semester GPA using a three-period moving average based on her last nine semesters of GPA data. Calculate the forecast and MAD for her senior year semester. Also, develop a linear trend forecast based on her GPA data, and evaluate which method offers better accuracy.

16. Using monthly gasoline prices data over several years, develop a linear trend model to forecast the price for January 2002. Determine the trend equation, forecast value, and MAPE. Compare the accuracy of this method with exponential smoothing.

17. For the Gross National Product quarterly data, identify the optimal alpha for exponential smoothing to minimize MAD. Forecast the GNP for Q1 2002 and evaluate the forecast accuracy.

18. The Backyard Magazine publisher seeks the optimal mix of two magazines, Backyard and Porch, to maximize revenue given certain constraints on demand, production time, and costs. Determine the quantity of each magazine to produce to maximize revenue, considering the constraints and costs involved.

Paper For Above instruction

Managerial accounting plays a pivotal role in providing internal management with critical information for effective decision-making, planning, and control. Unlike financial accounting, which emphasizes accuracy and compliance with external standards, managerial accounting focuses on timely, relevant data tailored to the needs of managers and internal stakeholders. This paper explores key concepts in managerial accounting, contrasting it with financial accounting, and demonstrates its application through various practical examples including budgeting, performance analysis, cost behavior, pricing decisions, and forecasting models. Emphasis is placed on understanding how managerial accounting concepts facilitate strategic planning, operational efficiency, and profitability analysis within organizations.

Fundamentally, managerial accounting serves internal users by emphasizing detailed and flexible information that supports planning, controlling, and decision-making processes. The primary tools in managerial accounting include budgets, performance reports, cost-volume-profit analyses, and various costing methods, such as activity-based costing and standard costing. These tools help managers evaluate operational performance and identify areas for improvement. In contrast, financial accounting centers around preparing financial statements like income statements, balance sheets, and cash flow statements, which are intended for external stakeholders such as investors, creditors, and regulators (Drury, 2018).

One of the core differences between these two accounting disciplines relates to auditing and compliance. Financial accounting information must adhere to U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), and such reports are subject to auditing by Certified Public Accountants (CPAs). Conversely, managerial accounting information lacks such external verification and might follow rules set by professional bodies like the Institute of Management Accountants (IMA), emphasizing relevance and timeliness over strict adherence to GAAP (Weygandt, Kimmel, & Kieso, 2019).

Cost behavior analysis is fundamental in managerial accounting, especially distinguishing between fixed and variable costs. Variable costs, such as direct materials and direct labor, change in proportion to production volume, while fixed costs, like rent or salaries of administrative staff, remain constant regardless of output levels. Understanding these behaviors helps managers forecast costs accurately and make decisions regarding pricing, outsourcing, and process improvements (Horngren et al., 2019).

Budgets are central to managerial planning. For example, when Sunland’s Salsa prepares its production budget for May, it estimates costs based on past data and projected changes. For the increase from April to May, variable costs such as ingredients and labor will rise proportionally, while fixed costs like rent and depreciation remain unchanged. For instance, if April’s ingredient costs for 20,000 jars were $12,000, the budgeted ingredient cost for 24,000 jars in May would be $14,400, reflecting a linear relationship (Garrison, Noreen, & Brewer, 2018).

Performance reports are used to compare actual results against budgets or prior periods, providing insight into operational efficiency. For example, Atlanta Enterprises’ performance report indicates a favorable variance of $3,000 in controllable profit due to higher sales or lower expenses. It is crucial to analyze changes in sales and controllable expenses, such as salaries, as they directly impact profitability.

Cost-volume-profit (CVP) analysis forms the basis of many managerial decisions, particularly pricing. The example of Sanchez Sweets demonstrates how lowering a selling price from $8.00 to $7.50 affects revenue and incremental costs. The key is to analyze whether the additional sales volume offsets the decrease in price, resulting in a net increase or decrease in profit (Williams, 2020).

Decision-making scenarios often involve incremental analysis, such as evaluating the profit impact of extending business hours or accepting overflow guests. For example, Sterling Auto Detail can evaluate the additional revenue from detailing extra cars on Saturday by calculating the incremental revenue generated through expanded operations. Fixed costs associated with new decisions are typically ignored unless they change directly with the decision (Hilton & Platt, 2017).

Forecasting techniques such as moving averages, weighted moving averages, exponential smoothing, and linear trend analysis assist managers in predicting future demand and economic indicators. For example, forecasting DVD sales or gasoline prices involves selecting the appropriate method based on data patterns. Moving averages smooth out fluctuations, weighted models assign importance to recent data, and trend analysis captures underlying movements over time (Makridakis, Wheelwright, & Hyndman, 2018).

In the context of the magazine publishing example, the optimal production quantities can be derived by maximizing revenue within existing constraints on demand, production capacity, and labor. Linear programming techniques or strategic modeling assist in determining the best product mix to meet demand while adhering to operational limits, enabling the publisher to optimize profitability (Sivadasan, 1994).

In conclusion, managerial accounting provides essential insights that facilitate strategic and operational decision-making. Its focus on relevant, detailed, and timely information empowers managers to optimize resource utilization, forecast future conditions, and improve organizational performance. The alternatives and techniques discussed herein—budgets, performance reports, cost behavior analysis, forecasting models—are integral to effective managerial control and success in today's competitive environment.

References

• Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education.
• Hilton, R. W., & Platt, D. E. (2017). Managerial Accounting: Creating Value in a Dynamic Business Environment (11th ed.). McGraw-Hill Education.
• Horngren, C. T., Datar, S. M., Rajan, M. V., & Farrell, D. (2019). Cost Accounting: A Managerial Emphasis (16th ed.). Pearson.
• Makridakis, S., Wheelwright, S. C., & Hyndman, R. J. (2018). Forecasting: Methods and Applications (4th ed.). Wiley.
• Sivadasan, S. (1994). Strategic Management of Resources. Journal of Management Studies, 30(4), 635–648.
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial & Managerial Accounting (11th ed.). Wiley.
• Williams, S. (2020). Pricing Strategies and Cost Analysis. Journal of Business Economics, 78(2), 235–250.