Accounting Case Study - Essay Example

Case Study: CCP Publishers The concern of CCP Publishers CEO is about profitability of the organization, how to control the developmental cost, determine the cost of each book and match that profitability with estimated by the editor during the signing of the contract. The company obtains most services such as artwork, layout, photography, and copyediting and index development, through contract. The issue in the case study involves the cause of variation in actual profitability and the estimated profitability at the time of signing a contract.

Considering the income statement, the company seems to be incurring a lot of expenses on salaries and wages. In order to increase profitability of the business, the company should reduce the cost of salaries and wages (Maher, Stickney, & Weil 139). Also, miscellaneous expenses are too high and thus the manager should establish the cause of such an extreme cost. Furthermore, the CEO can control development cost of producing books by apportioning production cost to the number of books at various stages (Maher, Stickney, & Weil 142).

They should differentiate between direct and indirect cost. All the direct costs associated with each unit produced should be added directly at each production stage while the indirect cost incurred at each stage of production in each department should be distributed to respective department (Maher, Stickney, & Weil 158). Apportioning the production cost at different stages will enable the CCP Publishers to establish the actual cost of finished products instead. The estimated profitability of books at the time of signing contract is an estimate of finished goods while actual cost may be inclusive of work in progress and unsold stock.

The company should determine the factors responsible for high cost and establish measures to reduce the cost. For example, the salaries and wages may have increased due to contracting out of most its activities. The management can decrease the value by offering such services internally instead of contracting out (Maher, Stickney, & Weil 174). Works CitedMaher, Michael; Stickney; Clyde and Weil, Roman, “Managerial Accounting: An Introduction to Concepts, Methods and Uses” (Cengage Learning, 2011): 1-178.