Managerial V. Financial Accounting

1. Explain the difference between financial accounting and managerial accounting.

Management accounting is presented internally, whereas financial accounting is meant for external stakeholders. Although financial management is of great importance to current and potential investors, management accounting is necessary for managers to make current and future financial decisions. Financial accounting is precise and must adhere to Generally Accepted Accounting Principles (GAAP), but management accounting is often more of a guess or estimate, since most managers do not have time for exact numbers when a decision needs to be made.

2. If a company makes 100 units of product, the allocated fixed cost per unit is $5 and the variable cost per unit is $6. What will be the per-unit total cost (fixed plus variable cost) if the company makes 200 units?

$1000 + $1200 = $2200 / 200 units = $11 per unit cost

3. At a production and sales level of 1,000 units, the company’s costs are as follows:

Variable manufacturing costs per unit $20

Allocated fixed manufacturing cost per unit $10 

Variable selling costs per unit $ 5

Allocated fixed selling costs per unit $ 3

How much would the company have to spend in total (total cash outlay for both fixed and variable costs), if it makes 1,200 units and sells 200 units (so that 1,000 units are in ending inventory at the end of the period)?

$12000 + $24000 = $36000 / 1200 = $30 per unit cost

$1000 + $600 = $1600 / 200 = $8 per unit sales

  3.  Describe each of the following costs as either fixed, variable, or semi-variable (i.e., mixed)

A) The cost is $500 per unit at a production level of 50 units, and $500 per unit at a production level of 100 units.

Fixed

B) The cost is $500 in total at a production level of 50 units, and $1,000 in total at a production level of 100 units.

Variable

C) The cost is $500 in total at a production level of 5 units, and $100 per unit at a production level of 10 units....