financial stake in the organization’s affairs – creditors, investors, employees etc. On the other hand the second category of accounting is primarily concerned with providing information relating to the conduct of the various aspects of a business like cost or profit associated with some portions of business operations to the internal parties viz., management. This category of accounting is called as Management accounting. In order to perform the primary task of decision making managers of business
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units Direct-material cost $25 per unit $40 per unit Direct labor per unit 3 hours at $12 per hour 4 hours at $12 per hour Ontario's overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow:
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operating income and what do these figures represent? 4. What are prime and conversion costs? 5. What is customer-profitability analysis? 6. Understand how changes in volume impact cost behavior. 7. What does the relevant range mean? 8. What are the attributes of an ABC method? 9. Determine gross margin. 10. Apply overhead to production using a predetermined overhead rate. 11. Compute the cost of job. 12. How is under or overapplied overhead adjusted at the end of an accounting period
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was with a view of minimizing the cost of operation relative to its income levels. By outsourcing, Super Bakery could control the flow of the activities that yielded its revenue. This was without necessarily acquiring to take the immense responsibility of bearing the risks involved with each stage of production and transaction. This explains the realization of its goal in reduction of expenses. Otherwise, it would incur the expenses through the acquisition of relevant assets for the various processes
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CHAPTER 7 Cost-Volume-Profit Analysis ANSWERS TO REVIEW QUESTIONS 7-1 a. In the contribution-margin approach, the break-even point in units is calculated using the following formula: [pic] b. In the equation approach, the following profit equation is used: |[pic] |fixed expenses |[pic] | This equation is solved for the sales volume in units.
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funding is an immediate priority. Slide 3. * The formula for contribution margin is the selling price of a product less its associated variable cost. * In other words, calculating the contribution margin determines the sales amount left over after adjusting for the variable costs of selling additional products. * Examples of variable costs are direct labour and direct materials. Slide 4. Appendix 1: A table of observed consumption patterns, showing sales patterns by product mix. Each
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pricing Tutorial Questions Overall Theme In previous weeks we have focused our attention on the use of management accounting information for costing purposes (e.g. ABC), processes improvement (e.g. ABM, process analysis), and for budget control (standard cost analysis). This week we switch our attention to another aspect of management accounting by exploring the concept of responsibility accounting. We look at how management accounting system can be designed to encourage desirable (goal-congruent) managerial
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considerations are measurement issues. Financial measures, in particular, cost measures, are needed to evaluate alternate strategies on whether to introduce a new product or service line, to determine the appropriate sale price and the consequent market position for the firm’s product. Question 1) “Contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. To compute profit contribution that can be earned by carrying
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quality - fitness for purpose adding value for the customer extent to which different types of customers receive services which are tailored to their particular needs number of services and variations of services offered to customers costs of servicing each type of customer cost of providing each service offered number dollars dollars 213911_1 how often each service is used by customers within a given time period active pursuit new customers attributes of services which customers like and dislike
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Direct Costs vs. Indirect Costs Direct costs are any costs that are paid directly towards the material, labor, etc. of a product or service. Any cost associated with administrative needs, or ‘behind-the-scenes’ type costs, are known as indirect costs. Almost every venue of manufacturing, healthcare, or business in general has some form of indirect costs. Many times, these costs are overlooked when paying for a service or product. They are costs wrapped into the total cost of an item or service
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