Managerial Accounting

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note

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MANAGERIAL ACCOUNTING
Table of Contents
Part A: Analysis of Case Study..........................................................................................2
Requirement 1................................................................................................................2
Requirement 2................................................................................................................3
Requirement 3................................................................................................................3
Requirement 4................................................................................................................4
Requirement 5................................................................................................................5
Part B: Journal Article Critique..........................................................................................6
Requirement 1................................................................................................................6
Requirement 2................................................................................................................7
Requirement 3................................................................................................................8
Reference..........................................................................................................................9

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MANAGERIAL ACCOUNTING
Part A: Analysis of Case Study
Requirement 1
The case which is shown in the assessment requires specific examples which is
required to be provided on fixed costs, variable costs, incremental costs and sunk costs
which are associated with a business. The costs are considered as the same are
important for the purpose of taking major decisions relating to the business. In such a
case, the sunk cost of a business is not considered as they are insignificant to decision
making process of the business. The fixed costs of the business do not change with the
change in the production volume for the product and therefore remain constant and
therefore the same are considered for analysis (Fullerton, Kennedy and Widener 2014).
In case of variable costs, the amount which is spent in such a cost varies on the basis of
the production volume which is applied by the business. Incremental costs are costs,
which are used in business planning analysis for obtaining an overview of additional
cost to the organisation. These types of costs are incremental in nature and therefore
must be considered by the management of the company in decision making process of
a business. The examples which can be provided for the three types of costs which
helps in decision making process are shown in the tabular format given below:
Cost Specific Example
Fixed Annual license fee amounting to $225 would be considered to be a
fixed cost of the business as the same is one-time payment for a
year and is constant.
Variable The total amount gathered for child care at a rate of $800 per child
would be covered under variable costs as the same would change
if the number of students who are enrolled changes.
Incremental The increased cost of utilities, which is $50, is fixed. According to
the case information, there would be increase in each month owing
to the day care and thus, the number of children is not a factor.
These costs would be considered as an incremental cost of the
business due to the nature of the expenses which is incurred by
the business.
Requirement 2
The differentiation between costs which are relevant and irrelevant to the cause
of the business is important in the decision which is taken for appliance purchase. The
issues which can be recognized from this situation is that whether the costs are incurred
for the decisions which is to be taken in future and whether it is possible to differentiate
the costs between the alternatives (Fullerton, Kennedy and Widener 2013). These costs
are deemed to be relevant if the same are fulfilling certain criteria which are established
for identification of such costs. Considering the case, if Frank decides to purchase the
appliances than the relevant costs which can be identified are listed below:
 New appliance cost
 Delivery cost related to new appliances
 Installation cost related to new appliances
 Additional utility cost

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MANAGERIAL ACCOUNTING
On the basis of the above costs, Frank would be required to take an appropriate
decision regarding the choice which he would be taking. Any alternative options which is
available to Frank would be considered along with the costs which are associated with
the alternative course of action. Therefore, in the case of alternative product, the
following relevant costs would be identified:
 Delivery cost and pick-up of laundry service
 Self-service laundry expenses like laundering, detergent and mileage
In addition to this, it would also be necessary for Frank to consider the costs which
are not related to the alternatives and which are not in any way associated with future
decisions for Frank. The irrelevant costs which can be identified for the purchase of
taking important decision of purchasing the appliance are listed below:
 Old appliance cost
 Detergent cost would not be relevant, only if the available options do not take into
account delivery and pick-up services
Requirement 3
The cost for laundering the clothes for the couple can be determined on the basis
of the relevant costs which were previously recognized by the couple. The three
alternatives which are available to the couple needs to be properly identified and
analyzed. The fits option which is available to the couple is by taking laundering
services from an outside store named Red Oak Laundry and Dry Cleaning. The second
option which is available to the couple is Laundromat Service while the third option
which is available to the couple is related to purchase of a new dryer and washer. The
first and second option are basically outsourcing the laundering services and therefore
the same would not be requiring any initial investment (Jamil et al. 2015). The third
option is a different case scenario as the couple would be requiring initial investment
and would be incurring on installation, purchase and delivery of the product. In order to
estimate which option is best for the couple, a computation is shown below which also
makes it possible to make comparison among the three options:
Particulars Option 1 Option 2 Option 3
Initial Cost:
Cost of Washer 420
Cost of Dryer 380
Installation Cost 43.72
Delivery Charges of Appliances 35
Total Initial Investment 878.72
Operating Expenses:
Monthly Laundering Cost of Agency 52
Monthly Travelling Charges to Laundromat 14.5488
Monthly Laudering Charges in Laundromat 34.64
Monthly Laundry Supplies for Landromat
11.66666
7
11.6666666
7
Monthly Depreciation of Appliances
9.15333333
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