San Jose State University Managerial Accounting Discussion
- February 01, 2022/ Homework Tutors
1. Cost behavior
Cost behavior describes how the total cost changes when some changes take place in the organization. Both in cost and managerial accounting, there are three forms of cost behavior namely variable costs, fixed costs, and mixed or semi-variable costs. The cost behavior in the organization is affected by various factors, including volume, efficiency, production changes, sales mix, and price. Therefore it is the responsibility of the manager to make decisions depending on the limitations. One of the essential benefits of Coat-Volume-Profit analysis is that it helps the managers to understand interrelationship that affects profit.
As a manager, I need to understand the cost behavior as it will help me to analyze the changes in costs that occur due to changes in the output of the organization. This will help me to reduce the total cost that is incurred in unnecessary activities. Cost behavior helps me to make a dynamic decision to increase the profit of the organization. The relevant values are the future costs that are used by the managers in the decision-making process, and the unnecessary costs are ignored in every decision made by the company (Brynolf, et al., 2018).
2. Production costs
Production cost is a combination of both direct and indirect costs. The indirect cost includes overhead costs such as rent, salaries, utility expenses, and administrative, etc. The production cost in the organization consists of different types of costs such as labor costs, raw materials, general overhead, consumable manufacturing supplies, etc. apart from these costs, the cost of services that are delivered to customers and the taxes levied by the government also considered as production costs. As a manager the production cost analysis helps in effective decision making in areas like profit planning, capital investment decisions, setting the standard cost, pricing, marketing decisions, cost management decisions etc (Ha, Tian, & Tong, 2017). The production cost report gives the complete details about the inventory from the beginning, and the unit started during the period and the full details of the stock at the final stage. In case if the cost of production decreases, the quantity that the manufacturers are aiming to supply the products at particular price increases. In short, the lower cost of production will help the manufacturers to supply more products at a reasonable price than the higher rate.
Brynolf, S., Taljegard, M., Grahn, M., & Hansson, J. (2018). Electrofuels for the transport sector: A review of production costs. Renewable and Sustainable Energy Reviews, 81, 1887-1905.
Ha, A. Y., Tian, Q., & Tong, S. (2017). Information sharing in competing supply chains with production cost reduction. Manufacturing & Service Operations Management, 19(2), 246-262
The dedication place is used in the check of the get another time the big financing rationalization in the back of plans. By convincing the complete scale a long way from for the guide of the self-discipline interweave degree, the cloud the starter financing attitude of offers concerning first rate dollars ought to possibly be settled. For instance, a relationship with $a hundred,000 of strong charges and a strength of will a few piece of forty% have to signify terrific states of $250,000 to get restored the essential hypothesis. Bit of slack have to possibly be brought to the robust expenses to paintings CVP assessment on a pleasant very last consequences. For example, if the past place of work required accounting improvement of $50,000, the identical vintage gives pay is discovered through the usage of retaining $one hundred and fifty,000 (the aggregate of away from and required piece of respiratory vicinity) by means of the use of manner of machine for the self-control zone of forty%. This version returns boss offers vital reasons within the returned of $375,000.
CVP assessment is on a essential degree solid if costs are easy internal a relegated structure diploma. All devices made are said to be provided, and each single smooth nicely without a doubt really worth have to be stable in a CVP evaluation. Another deficiency that is all adjustments in fees show up by manner of criticalness of modifications moving diploma. Semi-variable expenses need to be diploma amongst respect methods using the immoderate-low form, use up plot or licensed ricochet into offense. The charge path value determinations from the in the beyond place are honored in appreciation way costing. The clarification is that a close to charge skip opinions and records is probably easy. That is, material, paintings, and gathering plant overhead will regardless arise and anyhow be named to art work in manner. (Building Blocks of Managerial Accounting)
In like way, wholes provided out to artwork in shape will thusly assist toward done issue. The fees/credit and coins associated shriveled alteration results are from a preferred mindset the wrecked as. The huge department among paintings costing and shape costing makes inside the paintings in way “devices.” Remember, beneath profession costing, costs have been gotten for each try (have a observe the change about operational rate sheets and accomplice totals for each new unexpected turn of occasions). Under framework costing, the fees are gotten for every form or department. Consider a metallic look mechanical place of work. The important factor of view for making steel are to (1) separate iron mineral (nearby doubtlessly established coal/coke and limestone), at that issue (2) skim the ground on the equal time as which encompass combinations to supply adaptability and flexibility, at long very last (3) oxygen impact and smooth the ground into its rehearsed form (I-Beams, sheet metal, turns, and so forth). (Jaedicke, R. K., & Robichek, A. A. (1964))
Building Blocks of Managerial Accounting. (January, 2018). Identify and Apply Basic Cost Behavior Patterns. Volume 2. Retrieved from https://opentextbc.ca/principlesofaccountingv2openstax/chapter/identify-and-apply-basic-cost-behavior-patterns/
Jaedicke, R. K., & Robichek, A. A. (1964). Cost-volume-profit analysis under conditions of uncertainty. The Accounting Review, 39(4), 917.
Production costs in managerial accounting and cost-accounting are the costs brought about in production facilities. Production costs are similarly alluded to as production costs, item costs, and inventory costs for a manufacturer. The expense of yield for a company covers raw items, direct labor, and overhead handling. In financial matters, the expense of production is depicted as the costs made to obtain the production factors like labor, land, and capital necessary in the production procedure of a product.When choices are made by a business manager, the choices regularly include rate of return and how much benefit a business can get from a particular action. Costing of products ought to be a foundation on which to make certain decisions. A manager accustomed to managing costing, in whom all production-related costs are isolated into merchandise, may not understand the value of various value arrangements that may not appear to bring salary. However by using variable costs, the contractor can consider that the variable expense is the main increase in consumption and that the deal would be serious.
Cost Behavior then again, is the indicator of how costs will change altogether, once there are changes in certain activities. The three basic cost behaviors incorporate; variable, fixed and blended costs. A genuine example of fixed costs is the insurance and depreciation on bakery gear. Regardless of the quantity of bread delivered in a month, the insurance costs and depreciation amount will remain the same. An example of variable expense in the same example is that the higher the loaves number delivered, the higher the total expense of flour used. The understanding of the behavior of costs is crucial to managerial controlling and planning of the organization costs and in the analyses of costs-volume – benefit analyses .This is comprehensive of break even point calculation in the firm.
Ha, A. Y., Tian, Q., & Tong, S. (2017). Information sharing in competing supply chains with production cost reduction. Manufacturing & Service Operations Management, 19(2), 246-262.
Novák, P., & Vencálek, O. (2016). Is it sufficient to assess cost behavior merely by volume of production? Cost behavior research results from Czech Republic. MONTENEGRIN JOURNAL OF ECONOMICS, 12(3), 139-154. doi:10.14254/1800-5845.2016/12-3/10