This 11 page paper looks at a case study provided by the student and recalculates accounts prepared using absorption costing to making use of marginal costing. The paper also considers u=issues of management information systems such as activity based accounting and the way in which profit may be maximised when there are limited resources. The bibliography cites 3 sources.
Name of Research Paper File: TS14_TEmanac1.rtf
Buy This Research Paper »
Unformatted Sample Text from the Research Paper:
that the loss may be a paper loss as the figures include a high level of overheads (fixed costs apportioned). By using marginal costing it is possible to identify the
contribution that each product range in making and restate the accounts. Wardrobes (?000) Dressing Tables (?000) Chests (?000) Total (?000) Sales Revenue (a) 340 200 300
840 Direct Materials (b) 100 96 90 286 Direct labour (c) 63 48 53 164 Variable overheads (d) 17 16 15 48 Total Manufacturing costs (e) (b+c+d) 180 160 158
498 Contribution (a- e) 160 40 142 342 Fixed Costs 198 Selling and distribution costs 80 Net Profit 64 The net profit is the same, but the way the
figures are viewed is differently due to the later inclusion of the overhead costs. Part b It has been argued that there may need to be the cessation of the
production of dressing table, as with the absorption costing and the apportionment of fixed costs at 70 it looks to make a loss of 30. However, if the same
accounts are prepared without the revenue form the dressing table, it must be remembered that these costs will still remain. If the dressing tables are really a loss maker taking
them out of production should increase profits. The profits restated, with the assumption that demand for other products remains the same and costs remain the same give the following. It
is also assumed that selling ad distribution costs remain the same. Wardrobes (?000) Chests (?000) Total (?000) Sales Revenue 340 300 640 Direct Materials 100 90 190
Direct labour 63 53 116 Variable overheads 17 15 32 Total Manufacturing costs 180 158 338 Contribution 160 142 302 Fixed Costs 198 Selling and distribution costs 80 Net
Back to Research Paper Results