Cost and Management Accounting

Running head: COST AND MANAGEMENT ACCOUNTING
Cost and Management Accounting
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Author’s Note:

1COST AND MANAGEMENT ACCOUNTING
Executive Summary:
Cost and management accounting is a special branch of accounting which helps the management
with the meaningful information for various important decision making process. This report is
prepared to understand and apply the cost and management accounting tools and techniques in
real life business situations. In this report, some of such cost and management accounting tools
and techniques have been applied and its usefulness has been illustrated. The report also exhibits
the financial statement analysis techniques for interpreting the information reported in the
financial statement and its implications on the decision-making process. Lastly, the report
concludes with some recommendations and suggestions for improvement and adoption of the
cost and management accounting process for better information creation and decision-making
process.

2COST AND MANAGEMENT ACCOUNTING
Table of Contents
Introduction:....................................................................................................................................3
Step 1: Analysis of the 5 Years Income Statement:........................................................................3
Step 2: Pattern in expenses item:.....................................................................................................6
Step 3: High Low Activity Level:...................................................................................................7
Step 4: Computation of Cost Equations:.........................................................................................7
Answer to question 1:..................................................................................................................8
Answer to question 2:..................................................................................................................8
Answer to question 3:..................................................................................................................8
Answer to question 4:..................................................................................................................8
Step 5: Findings from the analysis:.................................................................................................8
References and bibliography:........................................................................................................10

3COST AND MANAGEMENT ACCOUNTING
Introduction:
Cost and management accounting is the process of ascertaining product and service
related cost information in detailed and analysis of such information which can help in making
various important business decisions. The cost and management accounting information helps in
taking decision whether to make a component or to outsource it or whether to continue a
particular business segment or to shut down (Collis & Hussey 2017). In this report, some of such
cost and management tools and techniques have been applied and analyzed with the help of some
real-life information of the Motomart as given in the case study. In the first part the five years
income statement has been reviewed and analyzed and in the second part, the behavior of
expenses and its level of activities have been discussed. The cost equation has been formulated
using the excel spreadsheet model for projection and analysis of cost structure and lastly, the
findings have been summarized for recapitulation of the whole analysis.
Step 1: Analysis of the 5 Years Income Statement:
In the case study, the income statement of Motomart has been given for the year 1984 to
1988. Some of the key measures of the income statement and some exhibit of the income
statement have been given in the case study, which will help us in analyzing the financial
performance and financial position of the Motomart. The company registered highest variable
revenue in the year 1988 with the highest sales volume. The contribution margin per unit is
calculated as the difference between the sales price per unit and the variable cost per unit. The
contribution margin per unit in the year 1984 was $1,605.10 and it reached the highest in the
year 1987 for an amount of $2,717.79, thereafter it slips down to $2,226.08 in the year 1988. In
the initial years, the company was able to manage their operating activities and was efficient