Management Accounting and the Variable and Operating Costs (Term Paper Sample)

MANAGEMENT ACCOUNTING CASE STUDIES
Executive summary
In this report, management accounting is discussed in relation to innovation process. Management accounting main purpose is the decision making, which is based on accounting information. The different cost, according to case study, is discussed. The case study is about , which is operated by Frank couples. Part A of this report deals with cost types and information which can be considered for purchasing appliances. Calculations are done for business decision making. The calculations help in taking decision about the purchasing of appliances and accepting children in the business. Part B of this report deals with analysis of companies and innovation process according to a given journal. The study discusses the findings which benefit the managers and accountant in their job. Further, this study helps in understanding cost and management accounting in business related to innovation.
Table of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc9267460 \h 3PART A PAGEREF _Toc9267461 \h 3Question 1: PAGEREF _Toc9267462 \h 3Question 2: PAGEREF _Toc9267463 \h 5Question 3: PAGEREF _Toc9267464 \h 6Question 4: PAGEREF _Toc9267465 \h 7Question 5: PAGEREF _Toc9267466 \h 8PART B PAGEREF _Toc9267467 \h 10Question 1: PAGEREF _Toc9267468 \h 10Question 2: PAGEREF _Toc9267469 \h 11Question 3: PAGEREF _Toc9267470 \h 13Conclusion PAGEREF _Toc9267471 \h 14Reference list PAGEREF _Toc9267472 \h 16Appendices PAGEREF _Toc9267473 \h 19
Introduction
Management accounting deals with process of helping management in decision making with the help of decision making. The management accounting in business is related to analysis of different cost and profitability. Management accounting helps the company in planning with consideration of accounting information. The decision is taken by top management, which is made according to accounting information. Management accounting focuses on forecasting and which helps business in identifying problems. The study deals with different types of cost according to case study and innovation in two companies which is given in journal. The companies which are studies in part B are Canon Inc and Apple. Different types of cost are discussed with calculation related to case study of Frank couples.
PART A
Question 1:
Every business has its own operating cost for the products or services it produces. The main objective of business organisation is to make a profit and maximize it. The sustainability of any business depends on the amount of profit it makes by rendering its services or manufacturing its products. In the process of rendering services, different types of cost are incurred in the business. In the functioning of a business organisation, cost is incurred in every step (Muennig and Bounthavong, 2016). The decision making of any business is taken on the basis of profit and considering the cost. In this case, the business is related to service industry as the Frank couples are involved in business of child care. Different types of cost which can be discussed in relation to case study are variable cost, fixed cost and operating cost. The variable cost of the business is the cost which is incurred in variable factors. Variable cost of business varies from the total amount of services rendered in the business. The variable cost which can be related to given case study of business is the cost of daycare and the cost which will incur if Frank couple will give the clothes to laundry services (Tricco et al.2015). This factor can be regarded as the variable cost of the childcare business as the cost of laundry will be equal to the clothes of children and the number of children residing in the childcare.
The next cost which can be stated is the fixed cost. The fixed cost is the amount of cost which is incurred in the fixed factors of business organisation. The fixed cost is fixed and does not change with the changes in level of output. In the given case, fixed factors which can be related is the cost which is incurred in the acquisition of the space and the expenses which were incurred in the renovation of space and utility cost. The other fixed cost which can be considered for the business is the installation cost of the machines if the Frank couples go for new machines.
The last cost which can be discussed is the operating cost of rendering the services. According to the given case study, the operating cost of the business is the cost incurred in the expenses which occur on a daily basis. The operating cost for the childcare business is the utility cost and cost of laundry (eureka.sbs.ox.ac.uk, 2019).
FIG 1: Components of Managerial Accounting
(Source: Self- Created)
Question 2:
The information which can be considered by Frank couples before purchasing the appliances and information which can be avoided are discussed in these answers. The purchasing of any appliances or equipment in the business depends on many factors. The business goes through a detailed analysis of the total cost, which will incur and the benefits which will be achieved after the purchase of appliances in the childcare. Every decision is taken in the business by considering the factors which will increase the profits of the business and reduce the cost. The information related to a case study which can be stated as relevant for deciding on purchase of appliances is the alternative cost and actual cost of appliances and benefits which will be derived from particular decision (Chesson et al., 2016). The alternative cost, which is referred to as the relevant information is the expenses which are incurred if the laundry is given to “Red Oak Laundry”. The costs which will be considered if washing is given to the laundry services is the cost per month of laundry. The other information which must be regarded as is the expenses of taking the clothes to laundry format by self. The Expenses which will be added up in this scenario is fuel expenses and detergent expenses. The purchase of appliances must be done by considering energy consumption, which will increase each year. The information which can be regarded as irrelevant for the business is the cost of transportation as it is free (McHugh et al. 2018). The information which is irrelevant to this case is other information provided, which is directly linked to operating expenses (content.inflibnet.ac.in, 2019).
Question 3:
The cost which will be incurred for Frank couples for different alternatives are given below with calculation:
The couple went for different laundry option because the machines they were using broke down. The first option was to launder to “Red Oak laundry” which will incur a cost of $ 52 per month.
The second alternative was to opt for Laundromat, which has many costs. The calculation is done below:
cost to launder clothes








cost per week to launder clothes