Managerial Accounting and Organizational Controls - Case Study Example

Managerial Accounting and Organizational Controls Unit Problem Part A Volume 1000 units Fixed Cost $9000.00 Variable Cost $650.00 Fixed Costper Unit $9.00Variable Cost per Unit $0.65Cost per Unit $9.65Problem Part BVolume 6000 unitsFixed Cost $9000.00Variable Cost $3900.00Fixed Cost per Unit $1.50Variable Cost per Unit $0.65Cost per Unit $2.15Problem Part AVolume 8000 unitsFixed Cost $9000.00Variable Cost $5200.00Fixed Cost per Unit $1.125Variable Cost per Unit $0.65Cost per Unit $1.

775The rent is a fixed cost because it does not change as volume increases or decreases. The raw material cost is variable and varies with the volume.Managerial accounting produces financial information that is for internal company use and the reports are usually written for each company's individual requirements. They generally involve cost estimating, budgeting, forecasting, and resource allotment. These reports are used by directors and management to make decisions on how to run the day to day business of the company and which direction it should take.

A decision to enter a long-term contract for material would be based on the analysis and projections that were provided by the managerial accountant. External accounting is used by people outside the company that have an interest in the financial condition of the company. This is done by standard reports that are generated at regular intervals. They may be generated monthly, quarterly, or annually and adhere to standard guidelines that are accepted by the accounting industry. The reports tell the amount of business, cost of sales, debt, and assets that a company has.

The reports are used by creditors, bankers, investors, and shareholders to make financial decisions in regard to the company. Government agencies use these reports to calculate taxes and fees. These reports are routinely audited by outside parties to assure that proper accounting methods are being used and that the reports contain accurate information. This helps to safeguard investors and shareholders from financial loss and keeps investors and creditors apprised of the condition of the company's finances.

Legal and ethical issues arise when the external accounting is faulty and presents an incorrect view of the company's financial situation. If it is done intentionally, it is a grave legal issue as has been seen with some companies in the news recently. If it is done in error, or because of bad judgment, it is a serious violation of ethics and may also be criminal. The importance placed on these reports being correct can not be overstated. Inaccurate reporting for any reason can ruin a business and end a career.

The best way to prevent this type of problem is to thoroughly understand the business of accounting, the regulations that govern it, and the expectations of the people that will use these reports. Certification by a professional accounting organization is mandatory and continued education is needed to maintain a high standard. The accountant must, at all times, be honest and truthful and present the information in the clearest possible way. BibliographyPiana, V. (2003). Costs: A key concept in economics.

Retrieved June 7, 2006, from http://www.economicswebinstitute.org/glossary/costs.htm#costWilliams, J. R., Haka, S.F. & Bettner, M.S.. (2005). Financial and Managerial Accounting: The Basis for Business Decisions. (13 ed.) New York: McGraw-Hill.