Managerial Accounting: Assignment Solution
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Added on 2021-02-21
Managerial Accounting: Assignment Solution
Added on 2021-02-21
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MANAGERIALACCOUNTING
Table of ContentsINTRODUCTION..........................................................................................................................3PART A..........................................................................................................................................31. Different types of costs along with examples........................................................................32. What is relevant and irrelevant information related to purchasing decision of appliance.....43. The cost of laundering the clothes from different alternatives..............................................54. Decision regarding hiring additional employees....................................................................65. Calculation for making decision to enrol more children in day care ...................................7PART B...........................................................................................................................................91. components of management accounting system and their importance in making decisionseffectively and efficiently..........................................................................................................92. Contribution of management accounting in the innovation process .................................113. Lesson learned from the article ..........................................................................................12CONCLUSION.............................................................................................................................12REFERENCES.............................................................................................................................13
INTRODUCTIONManagement accounting is that branch of accounting which deals with the preparation ofmanagerial reports for the purpose of assisting decision-makers within an organisation. It isconcerned with preparing budgets, performing management of cost and asset. The reportsderived by the way of applying management accounting helps managers in forecasting thateventually aids in improving the efficiency of the company (Smith and Driscoll, 2017). Thepresent project report will highlight different types of costs along with some examples fromFrank's business of child day care. The couple is engaged in business of day care of 6 children.They are now stuck with the problem that whether they should hire additional employee, shallthey admit more children and how to get their laundry done.It will cover what is relevant information for the business owners in relation to theirdecision making regarding the purchase of appliances and what is irrelevant information. Thissection of the report will also include calculations related to the purchase of washing machine,employing of additional staff and how much children shall be kept Frank. Further, in othersection of the report, components of management accounting will be discussed in relation to thecase studies of Cannon and Apple. How managerial accounting contributes in the innovationprocess and what are the things which can be learned by a management accountant from thefindings of the case studies.PART A1. Different types of costs along with examplesNumber of costs exists in a business that are required to be incurred for operating abusiness entity. Different types of business costs are described below:Variable costs: These are those costs whose level changes with the change in productionlevel. This means that as the production increases, the costs will also increase in thesame proportion. This change is however, constant (Manyaeva, Piskunov and Fomin,2016).Example: Meal cost per child which is $3.20 in the business of Frank can considered tobe a variable cost because as the number of child in day care will rise, the cost of meal will alsorise.
Fixed cost : These are the costs which does not changes with the change in productionlevel. It remains constant no matter what the level of production is. Rent, taxes,insurance are some fixed cost in a business (Holzhacker, Krishnan and Mahlendorf,2015).Example : Insurance cost $ 3840 is a fixed cost which the couple have to pay, no matter whatnumber of children they admit in their day care home.Opportunity costs : These are such costs which can be defined as the cost of foregoingthe advantage of next best alternative. It is one of the main in management accountingwhich aids decision makers in better evaluation of different alternatives (Various Typesof Cost in Managerial Accounting, 2019). Example : For Frank, the opportunity costs in their business would be the costs that ithave to forego for choosing a particular option for laundering the clothes. Like if the coupleselects the option of getting its laundering done from Red Oak for $52 per month, then theywould have to let go the benefit of laundering from another option which costs $ 57.16 permonth.2. What is relevant and irrelevant information related to purchasing decision of applianceRelevant information : An information is said to be relevant or material in a decisionmaking if it has the potential of affecting the mind set of decision makers. This implies that ifsuch material information is omitted or ignored, it could result into bad decision making for thebusiness (Bahrami, Yuan and Boeing 2015). In the study, information related to the purchase ofappliance that needs to be considered by the couple would be the cost of laundering fromdifferent alternatives. It will closely evaluate which will be the most cost effective alternative bycomparing each of them. For example, if the couple chooses to launder their clothes from RedOak, then they will have to incur $50 per month in which there is no extra cost of supplies,transport as compared to another alternative in which they can get their laundry done formLaunder mat. It would cost them $57.16 per month. Depreciation, increase in energy costs dueto buying of washing appliance are examples of relevant information which must be consideredby Douglas and Pamela Frank.Irrelevant information : These are such information which does not make any materialdifference in the decision making process if ignored or omitted. Also, it is advisable that
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