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Principles of Managerial Accounting

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Need help with the concepts of a paper discussing the principles and concepts of managerial accounting. Below are the concepts that must be included.

These concepts must be discussed within the paper: an overview of managerial accounting and the business environment, cost term concepts and classifications; cost behavior analysis and use; cost-volume-profit relationships; variable costing (a tool for management); activity based costing (a tool to aid decision making); profit planning, standard costs and the balanced scorecard; flexible budgets and overhead analysis; relevant costs for decision making; financial statement analysis (how well am I doing).

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1. Managerial Accounting:
Managerial accounting relates to giving information to managers. The managers are people in an organization who have the authority to direct and control it. Managerial accounting identifies, analyzes, interprets, and communicates information for helping managers achieve the firm?s goals. It provides vital data with which the firm is run. For example, managerial accounting provides managers with indicators such as order backlog, capacity utilization, and sales. Managerial accounting helps managers make decisions. It also updates them on the current operations.

2. Business Environment:
Business Environment refers to the external factors that impact the functioning of the business. These are social, legal, economic, political factors, or institutional factors that cannot directly be controlled by the business. These factors are important because they directly impact the functioning of the business. The business environment is divided into the micro environment which consists of channels of distribution, customers, competitors, public, and suppliers. These are close to business and affect its working directly. The macro environment consists of factors such as the economy, political environment, technological environment, natural environment, demographic environment and socio-cultural environment. The macro environment is responsible for creating threats and opportunities for the business.

3. Cost term concepts and classification:
There are cost terms that are important these include the manufacturing costs which is also the product cost. This comprises direct materials costs, direct labor costs, and manufacturing overhead, the direct material and direct labor costs are together classified as prime costs, and the direct labor costs and manufacturing overheads are together called the conversion costs. Non manufacturing costs have two components mainly selling costs and administrative costs. One of the important concepts used in cost accounting is the cost of goods sold. This is the beginning merchandize inventory, plus purchases less ending merchandize inventory. Cost classification is carried to prepare external financial statements, to predict cost behavior in response to changes in activity, assigning costs to cost objects such as departments or products, and making decisions. Common examples of cost classifications are product costs, period costs and variable costs.

4. Cost behavior analysis and use:
Cost behavior analysis is the examination of variable costs to determine their response to changes in production or sales volume. Broadly, what is examined is the manner in which costs react to changes in the ...

Solution Summary

Managerial decision making using accounting information is explained in a structured manner in this response. The answer includes references used.

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See Also This Related BrainMass Solution

Managerial Accounting - JIT, TQM, CI, CO

Following are three separate events affecting the managerial accounting systems for different companies.
Match the management concept(s) that the company is likely to adopt for the event identified.
There is some overlap in the meaning of customer orientation and total quality management and, therefore, some responses can include more than one concept.

Event
_______ 1. The company starts measuring inventory a. Total quality management (TQM)
turnover and discontinues elaborate
inventory records. Its new focus is b. Just-in-time (JIT) system
to pull inventory through the system.
_______ 2. The company starts reporting measures c. Continuous improvement (CI)
on customer complaints and product
returns from customers. d. Customer orientation (CO)
_______ 3. The company starts reporting measures
such as the percent of defective products
and the number of units scrapped.

a. Total quality management (TQM)
b. Just-in-time (JIT) system
c. Continuous improvement (CI)
d. Customer orientation (CO)
------------------------------------------------------------------------

The following calendar year-end information is taken from the December 31, 2005, adjusted trial balance
and other records of Plaza Company.

Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . $ 30,750
Depreciation expense?Office equipment . . . . . . . . . 9,250
Depreciation expense?Selling equipment . . . . . . . . . 10,600
Depreciation expense?Factory equipment . . . . . . . . 35,550
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . 104,600
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . 9,350
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Inventories
Raw materials, December 31, 2004 . . . . . . . . . . . . 168,850
Raw materials, December 31, 2005 . . . . . . . . . . . . 184,000
Goods in process, December 31, 2004 . . . . . . . . . 17,700
Goods in process, December 31, 2005 . . . . . . . . . 21,380
Finished goods, December 31, 2004 . . . . . . . . . . . 169,350
Finished goods, December 31, 2005 . . . . . . . . . . . 138,490
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,480
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . 235,725
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,875
Miscellaneous production costs . . . . . . . . . . . . . . . . 10,425
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . 65,000
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 927,000
Rent expense?Office space . . . . . . . . . . . . . . . . . . 24,000
Rent expense?Selling space . . . . . . . . . . . . . . . . . . 28,100
Rent expense?Factory building . . . . . . . . . . . . . . . 78,800
Maintenance expense?Factory equipment . . . . . . . . 37,400
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,527,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,500
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . 394,560
Check (1) Cost of goods
manufactured, $1,955,650
Problem 18-9A
Sales and costs estimation;
contribution margin analysis
C3 A1
King grocery chain, a market leader, wants to increase sales to its existing customers by creating a
customer orientation to better meet buyer needs and wants. Assume that King hires you as a consultant
to analyze its operations and suggest improvements. King's goal is to increase its contribution
margin by $40,000.
Required
1. To increase King's sales and contribution margin from existing customers, offer three improvements
that you have observed in other stores and believe would be successful here.
2. What level of increase in sales is necessary for King to increase contribution margin by $40,000?
(Hint: With each suggestion in part [1], identify the expected sales dollars and the contribution
margin ratio to meet the $40,000 increase in contribution margin.)
PROBLEM SET B
Problem 18-1B
Managerial accountant's role
C1 C3
This chapter discusses the purposes of managerial accounting and the current business environment.
You are to look through the home electronics section of your local newspaper; the Sunday paper is
often best. Review advertisements of home electronics and note how many manufacturers offer these
products and the factors on which they compete.
Required
Discuss the potential contributions and responsibilities of the managerial accounting professional in
helping a home electronics manufacturer succeed. (Hint: Think about information and estimates that
a managerial accountant might provide new entrants into the home electronics market.)

1. Prepare the company's 2005 manufacturing statement.
2. Prepare the company's 2005 income statement that reports separate categories for (a) selling
expenses and (b) general and administrative expenses.
--------------------------------------------------------------
Resources: Fundamental Accounting Principles, pp. 739 and 745

? Complete Exercise 18-5 on p. 739 and questions 1 and 2 of Problem 18-8A on p. 745.
? Post your answers as an attachment.

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