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At this moment, the strategies that are to be applied in this case are related to the performance of the company are no longer connected to the profitability of the company (Shaffer, 23). Thus, as the strategy to compare overhead costs and overall productivity of the company, it is clear that the company is operating at net loss and strategies should aim at reducing the burden on operating losses. Thus, a strategy to increase performance would consider cutting back on losses an improvement plan. Following the calculations below, the performance of the company depends on the use of available resources in the production of pipes.
Based on the cost of raw material and the units produced it is clear that non-overhead costs remained the same at $0.15 considering 10,000,000 feet of pipe costing $1,500,000 and/or 6,000,000 feet costing $900,000.
If the company is to trade the new batch of pipes at $0.35, then the company would be gaining $0.1 as profit for every foot of pipe sold. Based on the table below, decreasing the price of the pipes would be the best decision for the company to cut back on losses and acquire an economies of scale strategy.
There are various levels of costs involved in the case of Riverside Hotel. These involve fixed, variable, and sunk costs. In terms of the fixed costs, all overhead costs are fixed and include the cost of acquiring the equipment for preparing meals, the premises, power, and heat. Specifically, one of the fixed overhead costs include the price of the oven which is priced at $20,000. On the other hand, non-overhead costs include the price of the salad which is $1 and the prime rib which costs $7. The fixed price of the prime rib and the salad make up the cost of materials. However, for every meal made, the used ingredients add up to the final price. In this case, the price of making dinner using the prime rib and salad is fixed at $8 assuming that there is no labor, equipment, and power
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Accountability 12 Conclusion 13 Reference 15 Abstract This study represents one of the most important areas of management accounting i.e. desirability and effectiveness of accounting for management control. Accounting is the most effective device used by managers and management for organizational control.
This is even though production costs and sales income were the same. If production costs had increased and sales income increased then raw material stocks would not be affected because the production costs and sales income is a factor only of finished goods.
The main purpose of the operating statements of income statement is to help the companies to evaluate their performance on the basis of sales and expenses. The income statement reflects strongly upon the profit and loss occurred in the company according to the sales and expenses of the firm.
The management process is dynamic consisting of various activities, elements and functions (Hermanson 2010). The key major management functions involve planning, controlling, decision making and communicating. It is notable that management accounting information is very vital in executing these management functions in an organization.
The main reason for doing this is that, these investments involve commitment of large sums of funds; they take a long time, require much commitment from the management and are irreversible. The four major techniques used for evaluating investment in capital projects include: accounting rate of return (ARR), Payback period technique, net present value (NPV) technique, and internal rate of return (IRR) (Gotze, et al., 2007).
The decisive issue in management accounting is whether the government, organization or consumer is more contented with the transaction or dealing made. Civic actions will tend to generate either more benefits or demerits that determine
The cost driver in a particular group is selected depending on the cause effect link in the cost object and the firm’s ability to have overhead costs. The Institute of Management Accounting indicates that ABC is advantageous