Accounting Task
Review in Turnitin.com and achieve less than a 20% rating before posting to the course.
Be sure to include reference sources. Use APA guidelines.
In the Reflections Forum, in 200 words or more, please comment on the topic coverage this
week that was of most interest to you. Please state how this knowledge could
be applied at your current or a prior position and how you or your employer could benefit.
Managerial Accounting
In week one the role and functions of managerial accounting are widely discussed. The
major objective of managerial accounting is to provide the right information to managers that aid
in making the right decisions on matters touching on the management of the company. These
decisions are based on analyzed reports that have been received from different departments and
presented in a way that the management can assess the performance of the departments over a
defined period of time. This information is also used in planning; controlling costs or prices of
items. Management accounting also enables the preparation of the budgets for different
departments by comparing different costs for different period’s verses the revenue received for
the respective financial periods. (Noreen, Brewer and Garrison, 2013)
The components of costs play a big role in management accounting. Costs classification
forms the basis of managerial decision making processes. Historical cost analysis assist the
management in assessing the future needs of the company. Classification of costs is very crucial
Accounting Task 2
in management accounting as it identifies and influences effective cost controls. There are
basically two types of costs, fixed and variable. Fix costs do not change over time. They neither
increase nor decrease. Examples of fixed costs include rent and rates. Variable costs depend on
the level production. They increase proportionally with the output. They are mostly related to
direct materials. (Drury, 2000)
Managerial accounting deals with the relevant costs that are critical to decision making
processes like capital budgeting and project funding. These costs are also relevant when planning
and designing control procedures for the company. The other costs like direct and indirect costs
are applicable in the production processes. (Drucker, 1999) When managing a firm its
comparative to manage the variable costs as they form the bulk of the expenses. The breakeven
costs are largely determined by the contribution margin and the fixed costs. The number of units
to be produced in order to break even is given by the formula; CM /fixed costs. To get the value
in monetary terms the figure obtained in the formula is multiplied by the price of the products.
The breakeven units are important as it sets the minimum amounts of the units to be
produced and the company targets can be easily worked out. If the company produces less than
the breakeven units then it will not be able to recover its production costs hence operate at a loss.
Reflection
The classification of costs which include, prime costs, overheads, value addition,
conversion costs and other direct and indirect costs are much clearer to me. The value addition
concept of increase in realizable product value and the categorization of other costs are a major
part of the managerial accounting processes. They form the primary basis of major managerial
decisions that border on pricing, sales and production levels. Identification and classification of
Accounting Task 3
costs has helped me to understand the importance of accurate classification of costs and the
relevance of accurate information in management. These skills are applicable in all aspects of my
life including my professional career as a potential manager. The need to certify all the
information received which has been backed with reliable and accurate figures. Most decisions
once made are irreversible or some losses have to be incurred in order for them to be revoked
hence the need to have a good background on decision making processes. Managerial accounting
provides the basis for adequate training in management decision making and provides the
necessary skills to assess the performance of several functional departments in an organization.
Effective and efficient managers must grasp the concepts of costs and its components in order to
be successful in their careers.
Accounting Task 4
Reference
Drury, C. (2000) Management and Cost Accounting, 5 th Edition, Thomson Business Press
Noreen, E., Brewer, P. and Garrison, R. (2013) Managerial Accounting for Managers, 3 rd Ed.
Irwin, McGraw-Hill Publishing Company.
Drucker, P. F. (1999) Management Challenges of the 21st Century, New York: Harper Business.
