..."USEFULNESS OF COST VOLUME PROFIT ANALYISI AS AMANGERIAL Concept" By samya Alakhdar , Dr . Moade Shubita , NYIT –AMMAN –JORDAN FALL-2011. Key words :managerial accounting , cost accounting , CVP. o "USEFULNESS OF COST VOLUME PROFIT ANALYISI AS AMANGERIAL CONCEPT" 1 DR.MOADE SHUBITA "USEFULNESS OF COST VOLUME PROFIT ANALYISI AS AMANGERIAL Concept" By samya Alakhdar , Dr . Moade Shubita , NYIT –AMMAN –JORDAN FALL-2011. Key words :managerial accounting , cost accounting , CVP. TOPICS TO COVER: ABSTRACT INTRODUCTION PROBLEM ASSUMPTION UNDERLYING CVP ANALYSISI THE CONTRIBUTION MARGIN. CONTRIBUTION MARGIN INCOME STATEMENT DEFINE THE BREAKEVEN POINT WHAT IS THE C.M RATIO. THE IMPORTANCE of UNIT CONTRIBUTION MARGINE DETERMINATI SOME APPLICATIONS OF CM “WHAT IF “ANALYSIS ON OF TARGET INCOME AND TAXES MOS- MARGINE OF SAFETY CHOOSING THE COST STRUCTURE TO DECREASE COST ULTIMATELY DEGREE OF OPERATING LEVERAGE DEGREE OF OPERATING LEVERAGE IMPORTANCE FOR MANAGERS SALES MIX . CASE TO STUDY. LIMITATION OF CVP CONCLOUSION REFERENCES 2 DR.MOADE SHUBITA "USEFULNESS OF COST VOLUME PROFIT ANALYISI AS AMANGERIAL Concept" By samya Alakhdar , Dr . Moade Shubita , NYIT –AMMAN –JORDAN FALL-2011. Key words :managerial accounting , cost accounting , CVP. ABSTRACT: In order to cope with many planning decisions managers use cost volume profit analysis , They find it an extremely useful measurement in a variety of ways . The present...
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...What is management accounting? Management accounting or managerial accounting is the process of identifying, analyzing, recording and presenting financial information that is used for internally by the management for planning, decision making and control. In contrast to financial accounting, managerial accounting is concerned with providing helpful information and reports to internal users such as managers and entrepreneurs, so that they can control and plan the business activities. According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities". For fulfilling the purpose of management accounting there are already many techniques and tools prevail in the market. The first management accounting tools and techniques contribute to the attainment of organizational objective is standard costing. Standard costing is an accounting system designed to properly allocate costs of direct labor, indirect labor, materials, overhead, and selling / general / administrative accounts on a unit basis for the purpose of accurately...
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...outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an): | | | Student Answer: | | Income statement | | | | Statement of retained earnings | | | | Balance sheet | | | | Statement of cash flows | | | | Report of management | | Instructor Explanation: | Chapter 9 | | | | Points Received: | 5 of 5 | | Comments: | this is correct | | | 2. | Question : | (TCO 2) Which method(s) of financial reporting does (do) not recognize the impact of changes in purchasing power? | | | Student Answer: | | HC | | | | HC-GPL | | | | CV | | | | CV-GPL | | | | Both A and C | | | | B and D | | | | A and B | | Instructor Explanation: | Chapter 10 | | | | Points Received: | 5 of 5 | | Comments: | | | | 3. | Question : | (TCO 2) The _____ is a way for organizations to improve the collection and communication of financial and operating information. | | | Student Answer: | | Performance dashboard | | | | Financial bottom-line | | | | Holistic perspective | | | | Performance perspective | | Instructor Explanation: | Chapter 11 | | | | Points Received: | 5 of 5 | | Comments: | | | | 4. | Question : | (TCO 2) What should be a firm's primary long-term financial objective? | | | Student Answer: | | Profit growth | | | | Debt growth...
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...Chapter 18 Comparison of Management and Financial Accounting The role of management accounting Management accounting differs from financial accounting in many respects: * Primary users * Management accounting information: managers, employees, supply chain partners * Financial accounting information: owners or stockholders, lenders, customers, government agencies * Report format * Management accounting: flexible format, driven by user’s needs * Financial accounting: based on generally accepted accounting principles * Purpose of reports * Management accounting: to provide information for planning, control, performance measurement, and decision making * Financial accounting: to report on past performance * Nature of information * Management accounting: objective and verifiable for decision making; more subjective for planning (relies on estimates) * Financial accounting: historical, objective, and verifiable * Units of measure * Management accounting: dollars at historical, current market, or projected values; physical measures of time or number of objects * Financial accounting: dollars at historical and current market values * Frequency of reports * Management accounting: prepared as needed; may or may not be on a periodic basis * Financial accounting: prepared on a periodic basis (minimum of once a year) Management accounting provides relevant information at each stage of...
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...Fundamentals of Cost Accounting 3e William N. Lanen University of Michigan Shannon W. Anderson Rice University Michael W. Maher University of California at Davis FUNDAMENTALS OF COST ACCOUNTING Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2011, 2008, 2006 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 WVR/WVR 1 0 9 8 7 6 5 4 3 2 1 0 ISBN MHID 978-0-07-352711-6 0-07-352711-4 Vice president and editor-in-chief: Brent Gordon Editorial director: Stewart Mattson Publisher: Tim Vertovec Director of development: Ann Torbert Development editor: Emily A. Hatteberg Vice president and director of marketing: Robin J. Zwettler Marketing director: Sankha Basu Marketing manager: Kathleen Klehr Vice president of editing, design and production: Sesha Bolisetty Senior project manager: Susanne Riedell Senior production supervisor: Debra R. Sylvester Interior designer:...
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...http://ocw.mit.edu ____________ MIT OpenCourseWare 15.963 Management Accounting and Control Spring 2007 For information about citing these materials or our Terms of Use, visit: ________________ http://ocw.mit.edu/terms. 15.963 Managerial Accounting and Control Spring 2007 Prof. Mozaffar Khan MIT Sloan School of Management Wilkerson Why is Wilkerson examining its costs now (what is the catalyst)? Its competitive environment: Declining overall profitability, price pressures on one product line, but apparent price inelasticity of demand for other product lines. How many overhead cost pools does Wilkerson currently have? One. Allocation base is direct labor dollars. Rate is 300%. Why do pumps have low profitability? They use more labor and machine hours, so this seems appropriate? 15.521 [Spring 2006] Managerial Accounting & Control 2 Wilkerson Under what circumstances is refining the costing system likely to be beneficial? Multiple products, including commodity and specialized products, with large differences in volume and resource consumption. Price pressures and declining margins. Mature product market with limited opportunities for innovation. Low entry barriers in product market. High overhead costs. Wilkerson meets most of these criteria. 15.521 [Spring 2006] Managerial Accounting & Control 3 Wilkerson Activity-based costing (ABC) is one tool for refining...
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...Accounting System in a Company Almost all the countries in the world allow foreign companies to compete with domestic firms nowadays, which make the costs of spending in the international trade plummet over the past decades. However, global markets provide more potential for the competitive companies. In other words, the companies have to face more challenges. If they can’t win the game, they will vanish from the global market. It is not a game winning by the capital; it is a competition with wisdom, good customer service, and in-time decision and so on. If they can get some useful information, selecting them among a great deal of data, papers, reports or something else to help them make a right decision on one project, they will get benefits from it and win in the commercial battle. Do you think the accounting information is important for you to make the right decision? The accounting sources can show you a lot of valuable information which are the right things you are looking for. You can make use of these resources to make a suitable financial planning for the coming action of the company, analyze through the data to determine how much money you should spend in different units and how many products you need to sell to reach your target profits, and broaden your vision and your strategies into specific goals. Why does a company need accounting? In the intense competition between rival companies, a corporation needs to gain more market and increase more profits...
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...understanding of cost effectiveness, selling, pricing, and budgeting. The organization must be able to accurately budget for variable cost as well as fixed cost while maintaining an increase in profit and revenue. In this paper, I will discuss the different view-points of decision making across the organization. I believe that when looking at the behavior of analysis cost it allows me to think of it in the prospect of how my uncle explains the real estate business. This is the study of how the specific cost of an item is a direct effect of the business model. Looking at today’s economics, times and housing market conditions, interest rates have gone up. Last year, you could get a 30 year fixed loan at a 3.5%. In today’s market the same 30-year fixed is going to be at a 4.5%. The housing interest rates have gone up, due to the fact of the economy becoming better. With the economy in a better state, money now is more expensive to borrow because more people are able to borrow it. In today’s market, it is becoming harder for people to find help with their mortgages and a low interest rate. This is an example of Cost behavior analysis. The Martinez Company had decided to introduce a new product. However, the new product can be manufactured by either two methods; they are capital intensive method and labor intensive method. I believe that the best method is labor-intensive method. In order for Martinez Company to succeed, it is important for managers to gain knowledge on accounting. Accounting...
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...Cost-Volume-Profit Analysis Stephanie Bowens, Janette Cruz, Noelle Lang, Velavan Nedunchezhiyan, and Judy Robertson ACC/561 Accounting November 11, 2013 Grace Kalil Managerial accounting is key part of manager's jobs. Part of it is that managers need to forecast monthly, quarterly and yearly expenses, tracking their actual expenses at the end of each cycle and determine if they stayed within their budget. Typically managers in several departments need to report their expenses to an accounting department and managerial account will be maintaining these information. Business can use this information to find out their operational cost such as labor, raw material, manufacturing, advertisement, distribution and miscellaneous and will help them to stay in with their budgets, incase if they are over the budget it will help managers to make an educative decision on where to cut the cost and tally the budget. The expenses can be classified into two parts fixed cost and other as variable cost. Managers need the skills to identify them and manage them. Cost-Volume-Profit analysis, CVP analysis, helps in understanding the relationship of these two costs, volume of product sales required to cover manufacturing or servicing cost, and net profit. CVP analysis is used in managerial accounting to use the relationships between cost, volume and profit quickly to calculate metrics that provide insight into the current and future performance...
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...make the costs of spending in the international trade plummet over the past decades. However, global markets provide more potential for the competitive companies. In other words, the companies have to face more challenges. If they can’t win the game, they will vanish from the global market. It is not a game winning by the capital; it is a competition with wisdom, good customer service, and in-time decision and so on. If they can get some useful information, selecting them among a great deal of data, papers, reports or something else to help them make a right decision on one project, they will get benefits from it and win in the commercial battle. Do you think the accounting information is important for you to make the right decision? The accounting sources can show you a lot of valuable information which are the right things you are looking for. You can make use of these resources to make a suitable financial planning for the coming action of the company, analyze through the data to determine how much money you should spend in different units and how many products you need to sell to reach your target profits, and broaden your vision and your strategies into specific goals. Why does a company need accounting? In the intense competition between rival companies, a corporation needs to gain more market and increase more profits. How does it get it? Using accounting information to decide how to allocate its resources can give this corporation a chance to gain more profits over its...
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...UNIVERSITY MICHAEL J. GILLIARD ACC 501, Accounting for Decision Making MODULE 2: Case, A Revised Income Statement, The Contribution Margin Approach Anthony Culpepper, PHD In the 21st century the business environment is changing very rapidly. These changes are reflected in global competition, rapidly advancing technology, and improved communication systems, such as the Internet. The activities that make an enterprise successful today may no longer be sufficient next year. A crucial role of managerial accounting is to continually assess how an organization stacks up against the competition. I do agree with the notion of value costing for the 21st Century organizations. Traditional accounting systems distribute indirect costs on the basis of direct labor hours, machine hours, or material costs. This leads to a distorted picture. The costs of products and services must be accurate, or management can be misled. In the last 15 years value costing has been at the forefront for businesses in the 21st century. New cost concepts allocates costs to the things people are doing in companies and assures that these costs are paid by the products that generated them. Virtual enterprise and efficient supply chain management systems will shape the future of these enterprises. Organizations are trying to become agile enterprises with the help of strategic alliances of firms and integration using information technologies. Traditional performance and cost measures are no longer suitable for developing...
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...Introduction Managerial accounting: decision making and control The internal accounting system, an important component of a firm’s information system, includes budgets, data on the costs of each product and current inventory and periodic financial reports. Internal accounting systems serve two purposes: v Provide some of the knowledge necessary for planning and decision making; v Help motivate and monitor people in organizations (control). The most basic control use of accounting is to prevent fraud and embezzlement. Design and use of cost systems An internal accounting system should have the following characteristics: v Provide the information necessary to identify the most profitable products and the pricing and marketing strategies to achieve the desired volume levels; v Provide information to detect production inefficiencies to ensure that the proposed products and volumes are produced at minimum costs; v When combined with the performance evaluation and reward systems, create incentives for managers to maximize firm value; v Support the financial accounting and tax accounting reporting functions; v Contribute more to firm value than it costs. Economic Darwinism (strong organizations will survive) Two caveats must be raised concerning too strict an application of economic Darwinism: v Some surviving operating procedures can be neutral mutations. Just because a system survives does not mean that its benefits exceed its costs. Benefits less costs might be close to zero...
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...Contents Introduction 2 LO1. Understand the importance of cost, volume and profit for management decision making in the travel and tourism 2 1.1 Importance of Cost and Volume 2 1.2 Pricing Methods 4 1.3 Factors Affecting Profit 5 LO2. Understand the use of management accounting information as a decision making tool in travel and tourism businesses 7 2.1 Types of Management Accounting Information 7 2.2 Decision Making Tool 8 LO3. Be able to interpret financial accounts to assist decision making in travel and tourism businesses 10 3.1 Interpret Financial Accounts 10 LO4. Understand sources and distribution of funding for public and non-public tourism development 12 4.1 Sources of Funding 12 Conclusion 14 References 15 Figure 1: Costs Classification 3 Figure 2: Accounting for Travel Companies 7 Figure 3: Management Information for Decision Making 9 Figure 4: Financial Accounts 10 Figure 5: Sources of Finance 12 Introduction Management decision making is a crucial part for not only regular companies but even for travel and tourism companies. The report here thus highlights and discusses different financial practices as observed and applied at the micro level, i.e. specifically in the travel and tourism industry. The company that has been chosen for analysis and reference study here, is Cox and Kings. Cox and Kings is one of the longest established travel companies around the world. Founded in 1758, the company is headquartered in India and...
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...MANAGEMENT ACCOUNTING Introduction: Accounting may be broadly classified into two categories – accounting which is meant to serve all parties external to the operating responsibility of the firms and the accounting which is designed to serve internal parties who take care of the operational needs of the firm. The first category which is conventionally referred to as financial accounting, looks to the interest of those who have primarily a 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 enterprises need information about the past, present and future in the functional areas of management such as personnel, finance, marketing and production. Right decision making has to be based on quantitative and qualitative information. The management thus constantly needs accounting information to base its decisions upon. Thus management accounting provides the information needed by management personnel. Definition: The Institute of Chartered Accountants of England has defined management accounting as: “Any form of accounting which enables...
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...CVP ANALYSIS When we consider about an accounting, there two kinds of accounting practices in business environment which are known as financial accounting and managerial accounting. The financial accounting specially prepared for external users such as shareholders, creditors, investors and government authorities. The managerial accounting is consider and focus on internal operations and it is being used by managers to prepare budgets, evaluate operation performances and pre-organized to face for new trends in the business environment. The cost-volume-profit analysis does vital role in managerial accounting as the CVP analysis can be used both products and services, and answers various questions pertaining to profitability of the company products or services. Its deals with three elements. The first factors is cost which incurred to make product or services, the second factors is volume which focus on number of units of product sold in a specific period of time The third factors is profit which basically selling price minus cost (materials, labor, overhead etc.). As a new business entrepreneur, cost-volume-profit analysis will help to determine and forecast important business factors as discuss below. The CVP analysis is very crucial tool for business entrepreneurs and managers as it can analyses a single product, a group of products with fixed cost or with a variable cost. Finally, it can evaluate the entire business as a whole. Though, it provides many advantages to...
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