Management Accounting: Fixed Cost vs Variable Cost, Product Cost vs Period Cost, Strategic Management Accounting Case Study, and Case Study Analysis

This Management Accounting study material from Desklib covers the differences between fixed cost and variable cost, product cost and period cost, and strategic management accounting through a case study analysis. It also includes solved assignments, essays, and dissertations for your course.

Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

Table of Contents
Answer to Question No 4................................................................................................................3
Difference between fixed cost and variable cost.........................................................................3
Difference between product cost and period cost........................................................................3
Answer to Question No 5 (Strategic Management Accounting Case Study)..................................5
Requirement i:.............................................................................................................................5
Requirement ii:............................................................................................................................5
Requirement iii:...........................................................................................................................6
Answer to Question No 5 (Case Study).......................................................................................6

Answer to Question No 4
Difference between fixed cost and variable cost
Fixed Cost Variable Cost
Fixed cost is addressed as the expenditure or the
expenses that is always fixed irrespective of the
degree of output that is the final product
manufactured by a firm.
Variable cost is expressed as the expenditure of the
cost that alters and changes according to the degree
of output that is manufactured by a firm.
Fixed cost can be explained as the blend of the
several overheads and costs that are fixed in nature
that includes production cost, selling and
distribution expenses and the administrative costs.
Variable on the other hand, is a combination of the
costs that are variable in nature and they are direct
labour, direct expenses, production cost, direct
material and selling and distribution overheads.
Fixed cost can be understood with the help of the
examples like the costs related to salaries, rents,
depreciations and taxes.
On the other hand, variable costs are inclusive of
the examples like the materials consumed, wages
and salaries, packaging costs and sales commission.
Difference between product cost and period cost
Product Cost Period Cost
In case of product cost the product is purchased
when the products are produced.
Period cost attained even in scenarios when there
are mo production process or purchase of inventory
Product cost is looked upon as one of the vital
components that is related with the manufacturing
expenses.
On the other hand, periodic cost is not significantly
a manufacturing process part.

The extensive or precise range is associated to the specific level of activities that is
limited by the lowest amount and the optimum value or amount. There are various expenses and
revenues that can take place within the specific restrictions and this is disclosed by the relevant
range. The relevant range is considered to be vital and essential qualities during the time of
allocating and resourcing the fixed costs.

Answer to Question No 5 (Strategic Management Accounting Case Study)
Requirement i:
i) Analysis of Empire's Group:
Particulars Cost p.u. Amount Amount Cost p.u. Amount Amount
Total Sales Volume 3000000 3900000
Gross Sales Value $15.00 $4,50,00,000 $15.00 $5,85,00,000
Less: Rebate $0.00 $0 -$0.80 -$31,20,000
Net Sales Value $15.00 $4,50,00,000 $14.20 $5,53,80,000
Prime Costs -$5.00 -$1,50,00,000 -$5.00 -$1,95,00,000
Manufacturing Costs:
Fixed -$5.58 -$1,67,40,000 -$4.29 -$1,67,40,000
Variable -$0.62 -$18,60,000 -$0.62 -$24,18,000
Total Manufacturing Costs -$6.20 -$1,86,00,000 -$4.91 -$1,91,58,000
Logistic Costs:
Fixed -$1.35 -$40,50,000 -$1.04 -$40,50,000
Variable -$0.15 -$4,50,000 -$0.15 -$5,85,000
Total Logistics Costs -$1.50 -$45,00,000 -$1.19 -$46,35,000
Total Costs -$12.70 -$3,81,00,000 -$11.10 -$4,32,93,000
GROSS PROFIT $2.30 $69,00,000 $3.10 $1,20,87,000
Tootbrush Factory Total Assets $4,00,00,000 $4,00,00,000
ROTA 17.25% 30.22%
Before Strategy Implication After Strategy Implication
Requirement ii:
ii) Analysis of Death Star Manufacturing:
Particulars Cost p.u. Amount Amount Cost p.u. Amount Amount Cost p.u. %
Total Sales Volume 2400000 1725000
Prime Costs $5.00 $1,50,00,000 $5.00 $86,25,000 $0.00 0.00%
Manufacturing Costs:
Fixed $5.58 $1,33,92,000 $7.76 $1,33,92,000 $2.18 39.13%
Variable $0.62 $14,88,000 $0.62 $10,69,500 $0.00 0.00%
Total Manufacturing Costs $6.20 $1,48,80,000 $8.38 $1,44,61,500 $2.18 35.22%
Logistic Costs:
Fixed $1.35 $32,40,000 $1.88 $32,40,000 $0.53 39.13%
Variable $0.15 $3,60,000 $0.15 $2,58,750 $0.00 0.00%
Total Logistics Costs $1.50 $36,00,000 $2.03 $34,98,750 $0.53 35.22%
Total Costs $12.70 $3,34,80,000 $15.41 $2,65,85,250 $2.71 21.35%
Before Strategy Implication After Strategy Implication Increase/(Decrease)

Requirement iii:
This document is created in order to summarize the key results and end results and the
discoveries that have been generated from the strategies and the plans that is implemented by the
“Empire’s Group” with respect to the application of the costs and the revenues that relates to cost
accounting. It is ascertained from the evaluation of the strategic implications that the entire
volume of the Star Wars electronic sales has amplified from “3000000 unit volume to 3900000
unit volume”. It is seen that there has been an augmentation of the total expenses and it is seen
with the rise in the cost from “$38100000 to $43293000”. However, the gross profit for the firm
has been rising from “$6900000 to $12087000” and thereby it has been able to explain the
essential rise in the return on the total assets and the rise has been 30.22%.
After the introduction of the policies and the strategies, there has been a reverse impact in
the sales volume for the manufacturing of death star. In the same manner, there has been a fall in
the total expenses that is related to production and the figures have been “$14461500” in
accordance to “14880000”. In addition, there has been a decline in the total expenses. Thus, it is
seen that there is a positive impact on the sales volume and the return on the total assets of the
toothbrushes that are manufactured by Star Wars. Thus, it is advisable to the committee that
frames strategies in order to move ahead with the alterations and the changes that have been
framed and prepared.
Answer to Question No 5 (Case Study)
In accordance to the case study that has been taken into consideration, it is advisable that
Burdon undertakes the performance and the actions that are related to objectivity that is expected
and desired from the management accountant and this should be in line with the obligations for
communicating and interacting the data and the information in a precise manner although this

kind of information and data is not supportive with the personnel and the entities who are
demanding the same. Therefore, Burdon can be suggested and recommended to explain and
highlight the treatments related to accounts to the management who are positioned at the top
level.
Therefore, Burdon is advised to incorporate the steps and the actions and these actions have
been explained as follows:
 It is desired and essential for Burdon to establish the information of the condition and
thereafter discovering the ethical elements that are associated with the present condition
 The values that are related to the situation requires to be addressed and identified
 Create a new and another action course and this course has to be explained
 Potential outcomes of each and every course of the actions that requires to be addressed.