Discussion 3 Question: Process Costing (continued) and Cost Behavior:
-Write an analytical summary of your learning outcomes from chapters 5 and 6. In addition to your analytical summary, address the following:
-As a manager, discuss how you would use or have used the concepts presented in chapters 5 and 6. Provide numerical examples to support your discussion.
Instructions:
Completed the assignment by over 500 words and references.
– Read and respond to at least 3 of your classmates’ posts.(Below posted my classmate discussions) Read a selection of your colleagues’ postings. Respond to at least 3 of your classmates’ posts. (Each response should be 150 words, It should include the stuff like supporting their discussion and
Study Materials Link:
TextBook: https://saylordotorg.github.io/text_managerial-accounting/index.html
Study Resources:
Assigned Reading/Study Materials
Use the following links to study Module 3 topics
Process Costing (continued):
https://saylordotorg.github.io/text_managerial-accounting/s08-how-is-process-costing-used-to.html
Cost Behavior:
https://saylordotorg.github.io/text_managerial-accounting/s09-how-do-organizations-identify-.html
3-Clasmate discussion
Classmate1 Discussion:by Prakash Penikalapati – Friday, 10 April 2020, 12:15 AM
Process costing can be defined as a method in accounting which is used in tracing and accumulating direct costs and therefore ensuring that the indirect costs of the manufacturing process are allocated. It is as a result of the process costing whereby different costs are assigned to the products handled by an organization. The effective use of the process costing enables managers to track the performance of an organization hence ensuring that the rates of production in the business are improved. When changes are made in an organization, the process costing can be used in bringing about flexibility in an organization (Aji, 2019).
Moreover, Cost Behaving is the way in which the changes brought in an organization impact the expenses incurred. However, the Cost Behaving can be used in ensuring that the costs in an organization are evaluated and the right measures brought in place in ensuring that the opportunity cost is used in the decision making processes (Arifin, 2019).
On the other hand, Profit-Cost-Volume Relationship is the analysis used in studying the relationships between factors such as profits, total costs and the manner in which the factors impact the profits made in an organization. Again, Variable costing can be defined as the method used in assigning the variable costs to the inventory. The Variable costing is important in that it ensures that the planning in an organization is carried out accordingly. Moreover, Variable costing can be used in the pricing decisions therefore ensuring that an organization is run in the best way possible (Drobyazko, 2019).
As a manager I would use the concept of Profit-Cost-Volume Relationship in ensuring that the profits made in an organization are calculated in the best way possible.
An example of this is as shown:
ABC Limited has entered into the business of making Electrical fans. The management of the company is interested in knowing the breakeven point at which there will be no profit/loss. Below are the details pertaining to the cost incurred:
| Total sales revenue of the company (@$300 per fan) | $300,000 |
| Variable cost | $240,000 |
| Fixed cost | $60,000 |
| Maximum capacity | 14000 units |
No. of units sold by ABC limited: ($300000/$300) = 1000 units Variable cost per unit= ($240000/1000)=$240
Contribution per unit= Selling price per unit-Variable Cost per unit
= ($300-$240)
= $60 per unit
Break-Even Point= (Fixed Cost/Contribution per unit)
= ($60000/$60) =10000 units
Classmate-2 Discussion: by Premlal Banoth – Wednesday, 8 April 2020, 6:49 AM
Process Costing:
The role of the process costing or the role of the procedure costs is about the information costs which is required for each of the progression of the creation procedure. These are basically checked and also coordinated against the results which are required for the quantification of the general performance of the cashflow and budgeting of the company. This is a kind of strategy which is considered to be valuable for the assisting with the planning and also for the setting of the procedures. These are a kind of strategy which is deemed to be valuable as it will assisted with the planning of setting of the procedure. These are seen to improve the edges for the future. Some of the common process costs are the weighted average costs which is derived after developing from the isolation of the expanses of merchandise which are ready and also based on the quantity of items which are required for the move for the normal expended for each of the unit. The standard costs which needs to be considered is the normal strategy which is used for the utilization of the standard expenses which is used for the opposition of the real expended. It is important as the organization is used for the development of huge clumps which are based on the fluctuated blend of items which cannot be appointed based on the separate costs. The role of the business organizations is required for the production process where they will have the appropriate methods of identifying of the essential costs which will incur and how they need to deal with the profitability.
Cost behavior
The role of this indicates about the changes of the organizational expenses which is owing to the different factors. It is important for the companies to be able to direct and also factoring of the indirect factors. The role of the variable costs is important as the organizations are used for the comprehension of the dynamics of the expenses and also used for the factoring of the costs which needs to be dealt appropriately (Hopper, & Bui, 2016). It is important for the business environment which is used for the increase in the ways which is used for the technologies which is used for the behavior which has allows the companies to gain stability in these long runs (Cooper, Ezzamel, & Qu, 2017). It is important for the manager to be able to use the knowledge and also the insights from the process costing to aid in the organizations.
Total Fixed Cost $32,000 $40,000. $45,000
Units Produced 4,000 10,000 15,000
Fixed Cost per Unit $8.00. $4.00. $3.00
However, the role of the variable costs are seen to vary with time.
Reference
Cooper, D. J., Ezzamel, M., & Qu, S. Q. (2017). Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), 991-1025.
Hopper, T., & Bui, B. (2016). Has management accounting research been critical?. Management Accounting Research, 31, 10-30.
Classmate3 Discussion—by Bindiya Marneni – Wednesday, 25 March 2020, 3:30 PM
Business organizations involved in the production process must have the appropriate methods of identifying the essential costs they incur and how to deal with them for profitability (Lindholm & Suomala, 2017). There are various methods that organizations use, depending on the production they do and the scale of their activities.
Process costing
Process costing is a type of production done by companies that manufacture similar units of a product in batches but using a consistent process (Lindholm & Suomala, 2017). Therefore process accounting is used by an organization for accounting purposes. It helps the organization track all direct costs and allocate all indirect expenses incurred in the production process. Additionally, process costing involves the following five steps. The first step consists in analyzing the inventory flow. Secondly, the organization needs to convert in-process inventory to equal units. The third step includes calculating all the applicable costs. The next step comprises in calculating the cost per unit of both the finished and inventory in- process. The last step involves the organization allocating costs to the finished and in-process inventory units.
Cost behavior
Cost behavior refers to the changes in organizational expenses due to different factors (Gregorio & Soares, 2018). Through cost behavior, organizations bale to analyze the direct and indirect factors that might affect the production process too. Additionally, through cost behavior, an organization can develop mechanisms and frameworks to deal with future changes in cists to ensure that they attain price stability for their products. Therefore, the concept of variable cost is a vital element when it comes to cost behavior.
Through variable costs, the organization can understand the dynamics of expenses and costs and how they can be dealt with most appropriately. Bearing in mind that the business environment is ever-changing today due to the increased ways of new technologies cost behavior has helped many organization attain stability in the long run.
As a manager, I would use the knowledge and insights from the process costing to help my organization attain efficient and reliable ways of dealing with production costs. Secondly, through cost behavior, I would use the ideas to help the organization use variable costing methods to balance the various costs and attain price stability and minimizes unnecessary costs.
