MA9902C00 Study Guide - Final Guide: Marginal Cost, Management Accounting, Fixed Cost

The following data relates to 20X8. Actual sales: 1,000 units @ $650 each Budgeted output and sales for the year: 900 units Standard selling price: $700 per unit Budgeted contribution per unit: $245 Budgeted profit per unit: $205 Required: Calculate the sales volume variance (under absorption and marginal costing) and the sales price variance. Radek Ltd has budgeted sales of 400 units at $2.50 each. The variable costs are expected to be $1.80 per unit, and there are no fixed costs. The actual sales were 500 units at $2 each and costs were as expected. Calculate the sales price and sales volume variances (using marginal costing). Standard costing

How can producers maximize their profit? check all that apply.

a. They can work to increase their marginal cost.

b. They can work to decrease their marginal cost.

c. They can raise prices to increase marginal revenue.

d. The can lower prices to decrease marginal revenue.

e. They can keep marginal costs below marginal revenues. They can keep marginal revenues below marginal costs.

How to reply to the below Discussion response.

Managerial accounting provides internal managers the use ofaccounting to plan and control business operations(Pearsoncustom.com, n.d). The internal nature of managerialaccounting is opposite to financial accounting which is used inregards to external entities (investors, creditors and government).Management accounting focuses on the cost-benefit analysis tooperating procedures within an organization.

Associated with the two forms of accounting are two coststructures used in an income statement: absorption and variable.The two cost structures identify the cost of a product butabsorption costing includes the fixed manufacturing overhead.Variable costing identifies fixed manufacturing overhead as aperiod cost thus not including it in the price of a unit produced(EducationUnlocked, 2014). Absorption costing is typically utilizedin financial accounting for external entities. Variable costing istypically used in managerial accounting because they focus on onlyvariable costs which eliminate skewed results from fixed overheadin unused inventory. In the short-run managers don’t need toinclude fixed costs because they are regarded as sunk costs nomatter how many units are produced or sold.

A variable costing income statement generates a contributionmargin. The contribution margin reflects the sale price of aproduct less all variable costs (EducationUnlocked, 2014). The contribution margin gains insight into costs thatcan be calculated in units. The contribution margin can helpmanagers understand profit per unit based on the variable expensesincurred. As the contribution margin doesn’t include fixed expensesit can quickly identify if a company is going to be profited ableby subtracting the fixed expenses from the contribution margin.