Managerial Accounting Stresses Accounting Concepts And Proce

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?

Sales Cost of ingredients Salaries Debtors

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: Sunland’s Salsa Production Costs April 2020 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. Assume that production will increase to 24,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign. Sunland's Salsa Budgeted Production Costs May 2020 Production 24,000 Jars of Salsa Ingredient cost $enter a dollar amount Labor cost enter a dollar amount Rent enter a dollar amount Depreciation enter a dollar amount Other enter a dollar amount Total $enter a total dollar amount

10. The Riverview Hotel is a deluxe four-star establishment. Late on Friday, it had 20 of its 300 rooms available when the desk clerk received a call from the Pines Hotel. The Pines Hotel made a booking error and did not have room for 4 guests (each of whom had a “confirmed” room). The Pines wants to send its customers to the Riverview but pay the rate the guests would have been charged at the Pines ($190 per room) rather than paying the normal rate of $320 per room at the Riverview. (a) If the Riverview accepts the guests, what will be the incremental revenue? Incremental Revenue $enter incremental revenue in dollar

11. Sanchez Sweets is in the process of preparing a production cost budget for May. Actual costs in April for production of 7,000 batches of cookies were: Ingredients cost $ 7,200 Rent 1,100 Labor cost 3,300 Depreciation 900 Other fixed costs 700 Total $13,200 The company is currently producing and selling 80,000 batches of cookies annually with each batch sold for $8.00. The company is considering lowering the price to $7.50 per batch for which management estimates this will increase sales to 90,000 batches. Ingredients and labor are the only variable costs. What is the incremental cost associated with producing an extra 10,000 batches of cookies? (Do not round intermediate calculations, round final answer to 0 decimal places, e.g., 2,520.) Incremental cost $enter incremental cost in dollars What is the incremental revenue associated with the price reduction? Incremental revenue $enter incremental revenue in dollars Should Sanchez Sweets lower the price of its cookies? select an option Yes/No, lowering the price will result in incremental select an option profit/loss of $enter a dollar amount.

12. Sterling Auto Detail is currently open Monday through Friday. In the past year, income before taxes was as follows: Numbers of cars detailed 2,080 Revenue $468,000 Less operating expenses: Supplies (polish, wax, etc.) $5,824 Salaries of detailers 104,000 Water and other variable costs 12,480 Supervisor’s salary 65,000 Rent 36,000 Depreciation 5,000 Other fixed costs 1,354 Income before taxes $238,646 Quincy Davis, the owner of Sterling, is considering extending the workweek through Saturday. If he takes this action, he’ll hire a part-time employee for $300 per day to act as the Saturday manager so the supervisor still can have Saturday off. Quincy estimates that his company will detail an additional 10 cars per Saturday, 52 weeks per year. (a) Calculate the annual incremental revenue associated with being open on Saturday. Annual incremental revenue $enter a annual incremental revenue in dollar (b) The parts of this question must be completed in order. This part will be available when you complete the part above. (c) The parts of this question must be completed in order. This part will be available when you complete the part above.

13. The production cost information for Sunland’s Salsa is as follows: Sunland’s Salsa Production Costs April 2020 Production 28,000 Jars of Salsa Ingredient cost (variable) $16,800 Labor cost (variable) 11,760 Rent (fixed) 4,000 Depreciation (fixed) 6,200 Other (fixed) 1,100 Total $39,860 The company is currently producing and selling 392,000 jars of salsa annually. The jars sell for $7.00 each. The company is considering lowering the price to $6.30. Suppose this action will increase sales to 448,000 jars. (a) What is the incremental cost associated with producing an extra 56,000 jars of salsa? Incremental Cost $enter incremental cost in dollar

Sample Paper For Above instruction

Managerial accounting plays a vital role in providing internal management with pertinent information necessary for effective decision-making, planning, and control. It differs significantly from financial accounting, which focuses primarily on external reporting and adheres to standardized accounting principles. This paper explores the fundamental concepts of managerial accounting, its objectives, and its applications, with particular emphasis on cost behaviors, budgeting, performance evaluation, and decision-making processes within organizations.

Introduction to Managerial Accounting

Managerial accounting is concerned with furnishing internal managers and decision-makers with customizable information that aids in strategic planning and operational control. Unlike financial accounting, which is governed by external standards such as Generally Accepted Accounting Principles (GAAP), managerial accounting emphasizes relevance and flexibility. Its primary goal is to support managers in making informed decisions that enhance organizational efficiency and effectiveness (Garrison, Noreen, & Brewer, 2020).

Role and Objectives of Managerial Accounting

The core purpose of managerial accounting is to provide relevant data for planning, controlling, and decision-making processes. Managers rely on budgets to forecast future operations, measure performance, and identify variances from expected results (Hilton & Platt, 2019). Performance reports compare actual results to budgets or industry standards to assess departments’ effectiveness and overall organizational health. These reports help identify areas requiring corrective actions and facilitate resource allocation (Drury, 2018).

Cost Behavior and Types of Costs

Understanding cost behavior is fundamental in managerial accounting. Variable costs fluctuate directly with production volume, such as raw materials and direct labor, while fixed costs remain unchanged regardless of output, including rent and depreciation (Weygandt, Kimmel, & Kieso, 2021). Recognizing which costs are variable or fixed enables managers to prepare accurate budgets and analyze the incremental impact of operational decisions.

Costing and Budgeting

Budgets are financial plans that outline expected revenues, costs, and cash flows for a future period. In managerial accounting, budgets serve as benchmarks for measuring performance and making tactical adjustments (Garrison et al., 2020). For example, Sunland’s Salsa prepared a production cost budget based on anticipated sales increases, adjusting variable costs proportionally and maintaining fixed costs as constant (Sunland’s Salsa, 2020).

Performance Evaluation and Variance Analysis

Performance reports are essential tools for managerial control. They compare actual results against budgeted figures, highlighting variances that require managerial attention (Hilton & Platt, 2019). For instance, Atlanta Enterprises’ June report revealed a higher controllable profit due to better-than-expected sales and cost management. Investigating significant variances helps managers understand underlying causes and take corrective actions to optimize operations (Drury, 2018).

Decision-Making in Managerial Accounting

Decisions such as accepting special orders, discontinuing products, or expanding operations rely heavily on incremental analysis—the evaluation of additional revenues and costs associated with a decision (Weygandt et al., 2021). For example, the Riverview Hotel’s potential for accepting Pines Hotel’s overflow guests involves calculating incremental revenue based on the differential room rate, aiding in revenue optimization decisions (Riverview Hotel, 2020).

Cost Management and Strategies

Effective cost control involves distinguishing between controllable and uncontrollable costs and implementing strategies to optimize resource utilization (Garrison et al., 2020). Fixed costs like rent and depreciation provide stability, whereas variable costs respond to operational changes, requiring diligent management for profitability enhancement (Hilton & Platt, 2019).

Conclusion

Managerial accounting is indispensable for internal decision-making, strategic planning, and operational control. Its focus on relevant, real-time information empowers managers to make informed choices that align with organizational goals. Through cost analysis, budgeting, performance evaluation, and strategic decision-making, managerial accounting fosters organizational efficiency and competitive advantage.

References

  • Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2020). Managerial Accounting. McGraw-Hill Education.
  • Hilton, R. W., & Platt, D. E. (2019). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.
  • Sunland’s Salsa. (2020). Production Cost Budget Report.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2021). Managerial Accounting. Wiley.
  • AccountingTools. (2023). Cost Behavior Analysis. Retrieved from https://www.accountingtools.com
  • Institute of Management Accountants (IMA). (2022). Statement on Management Accounting.
  • Kaplan, R. S., & Atkinson, A. A. (2015). Advanced Management Accounting. Pearson.
  • Horngren, C. T., Datar, S. M., Rajan, M., & Freeman, J. (2018). Cost Accounting: A Managerial Emphasis. Pearson.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2021). Managerial Accounting. Wiley.

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