A. The gross profit margin for each product produced based on the ABC data can be determined by the selling price minus the ABC cost per unit multiplied by the units produced (Edmonds, Tsay, & Olds, 2011). Product GS-157, selling price per unit $19.30 minus ABC cost per unit $12.50 equals $6.80 multiplied by the units produced 120,000 equals the ABC gross profit margin $816,000 (Edmonds, Tsay, & Olds, 2011). Product HS-241, selling price per unit $17.50 minus ABC cost per unit $11.67 equals $5.83 multiplied by the units produced 90,000 equals the ABC gross profit margin $525,000 (Edmonds, Tsay, & Olds, 2011). Product OS-367. Selling price per unit $15.10 minus ABC cost per unit $13.75 equals $1.35 multiplied by the units produced 40,000 equals …show more content…
P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill Irwin.
Narong, D. K. (2009). Activity-Based Costing and Management Solutions to Traditional Shortcomings of Cost Accounting. Cost Engineering, 51(8), 11-22.
C. Under traditional costing, costs that were incurred to produce OS-367 were being allocated to GS-157 and HS-241 (Edmonds, Tsay, & Olds, 2011). The more accurate allocations of the ABC system shows that OS-367 actually cost more than previously determined (Edmonds, Tsay, & Olds, 2011). The higher costs result in lower profits (Edmonds, Tsay, & Olds, 2011).
References
Edmonds, T. P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill Irwin.
D. If the management of Drilling Innovations wishes to maintain a profit margin of thirty percent based on the ABC costs as opposed to the traditional cost method, they would need a raise the selling price of OS-367 to at least $19.65 (Edmonds, Tsay, & Olds, 2011). This would yield a gross profit of $4.95, $19.65 minus $13.75 equals $5.90, and a gross profit margin of thirty percent, $5.90 divided by $19.65 equals thirty percent (Edmonds, Tsay, & Olds, 2011). The target-selling price is obtained by dividing the unit cost, $13.75 by 1.0 minus the desired profit margin, $13.75 divided by .70 equals $19.65 (Edmonds, Tsay, & Olds,
The most suitable costing method Yeltin should adopt is the practical capacity in order to remove the factor of uncertain budgeted sales figure. For this approach and the practical capacity of 65000-22000 units, then the revised overhead costs come out to be $30. With the inclusion of material and labor costs, the cost of the cartridge stand at $52 and the additional royalty expense of $10 raises the overall per unit cost to $62. The selling price of the cartridge is fixed at $150. With this selling price, the gross margin is equal to $88. The gross margin percentage is equal to 59%. In comparison to the budgeted volume, the gross margin has increased by 14%. See below
In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial
By Thomas Ahrens (London School of Economics), and Christopher Chapman (University of Oxford), from The Contemporary Accounting Research Vol. 21 No. 2 (Summer 2004) pp. 271–301.
Edmonds, T., Tsay, B., & Olds, P. (2011). Fundamental Managerial Accounting Concepts (6th ed.). New York, NY: McGraw-Hill/Irwin.
Hilton, R. (2011). Managerial accounting: Creating value in a dynamic business environment (9th Ed.). McGraw-Hill. Hardcover ISBN: 9780073526928.
S., & Hassan, M. K. (2012). The domination of financial accounting on managerial Commerce & Management, 22(4), 306-327. doi:10.1108/10569211211284502
This course provides a framework for financial accounting concepts and practices used by internal and external users in businesses. Topics presented include the accounting cycle, financial reporting, financial statements analysis, ratio calculation and interpretation, and management decision making based on financial results.
As for activity based costing, it identifies activities within an organization and assigns the cost of each activity. Only companies with a thin margins focus on this managerial accounting technique. The company would have to be pretty cost conscience, to use activity based costing. The companies he worked for didn’t really use activity based costing, since their profits were decently large that they could take small hits financially. It was also a time consuming effort for the accountants to do activity based accounting.
Rich, J., Jones, J., Heitger, D., Mowen, M., & Hansen, H. (2012). Cornerstones of Financial & Managerial Accounting. Mason, OH: South-Western/Cengage
Based on the ABC method, anytime a product is made there are several costs associated with the production of the product and the costs are assign to unit level centers (Edmunds, Tsay, & Olds, 2011). For example in assembling the drills there are machinery costs, inspection costs, utility costs, and supply costs; if the costs for producing the OS drill is higher than producing the GS drill using the ABC method that explains the why the OS is higher in the ABC method than the GS. Tradition method is based on volume and in these case the machine hours used to produce the products, if more machine hours were used to produce the GS they were charged more than the OS
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
The author thanks Professors Martha Howe, Donna McConville, Ari Yezegel, participants at the 2013 North American Case Research Association Annual Conference, the 2013 American Accounting Association Northeast Region Annual Meeting, and 2014 American Accounting Association Annual Meeting for their comments and suggestions on the earlier versions of the case. Comments and suggestions of the editor, associate editor, and two anonymous reviewers are also gratefully acknowledged. Supplemental material can be accessed by clicking the links in Appendix A.
Accounting is the art of measuring and communicating financial information. To maintain uniformity and consistency in preparing and maintaining books of accounts, certain rules or principles have been evolved. These rules or principles are classified as concepts and conventions. One of the important concept in accounting is “Measurement” (Mattessich, 1977)
Contact information: Baruch Lev (blev@stern.nyu.edu), Stern School of Business, New York University, New York, NY 10012. The authors are indebted to the editor and reviewers of the Review of Accounting Studies for suggestions and guidance, and to Louis Chan, Ilia Dichev, John Hand, James Ohlson, Shiva Rajgopal, and Stephen Ryan for helpful comments, as well as to participants of seminars at Athens University of Economics and Business, London Business School, Penn State University, Purdue University, University of Illinois
This assignment represents a new emphasis in managerial accounting. It is According to the premise that managerial accounting must explicitly consider strategic issues and concerns. The discussion will focus the notion that modern management accounting tools and technology are just ‘old wine in new bottles’.