Question 1
• Explain the difference between variable and full costing.
• Explain why income calculated under full absorption costing will be greater than income calculated under variable costing when production exceeds sales.
• Explain how a manufacturing company can "bury" fixed manufacturing costs in ending inventory under full absorption costing.
• If the fixed manufacturing overhead cost per unit under full costing is multiplied by the change in inventory between the beginning and ending of the period, what does the resulting number represent?
Respond to this...The full costing is the collecting of data and presentation of propositions for the business, while the variable costs are the expenses in the company for its activities and productions.
Under absorption costing system, the product cost consists of all variable as well as all fixed manufacturing costs i.e., direct materials, direct labor and factory overhead (FOH). But when variable costing system is used, the fixed cost (both manufacturing and non-manufacturing) is treated as a period or capacity cost and is, therefore, not included in the product cost.
Question 2
Read the following case and then discuss your thoughts with classmates:
An imaginary new country called Mazoa is attempting to create a capitalistic society with free markets but maintain some discretion over price control and market regulation. Since the country is new, private enterprise is generally not controlled by the government and accounting standards do not currently exist. Leaders of the private sector and government officials are meeting in an attempt to determine the best course of action in regard to accounting standards. Some have suggested adopting international accounting standards while others want the country to develop their own standards because IFRS is not suitable for Mazoa's fragile economy. Regardless of what step is taken, accounting standards must be developed to show the rest of the world that Mazoa has a stable economy and to encourage foreign investment.
Based on the above scenario, what type of accounting system would you recommend for Mazoa? Discuss the factors that would influence your decision.
Respond to this..."Obstacles faced in emerging markets are extensive. Because many of these countries are just beginning to set up their accounting standards, the integrity and transparency of their financial reports are subject to question. Even though the World Bank and the International Federation of Accountants do their best to facilitate development in these countries, emerging markets are being left behind in the creation of international accounting standards" (Radebaugh, Gray, Black, 2005, p 79). Since the country is new chances are that does not have the means to establish accounting standards themselves because it is facing more pressing needs. One challenge is that most IFRS are only applicable to the largest firms in developing countries. They need standards that are adapted to small- and medium-sized entities in order to reap the full benefit of the global standards. Furthermore, each country needs to understand the meaning of each standard and have a way to enforce correct application.
I would suggest that they set up their own accounting system. Possibly research what accounting systems other countries of their similar size are using. This would give Mazoa the time to grow their economy into a more suitable position to gain more resources where the strain of keeping up with rules and regulations would not destroy their economy.
Radebaugh, L. H., Gray, S. J., Black, E. L. (2005-12-15). International Accounting and Multinational Enterprises, 6th Edition. [Bookshelf Online]. Retrieved from https://online.vitalsource.com/#/books/9781119140061/
Question 3
SWOT begins with an analysis of the general business environment. It then identifies the strengths and weaknesses of the firm. This part of SWOT involves internal analysis, which can normally be done fairly easily because it deals with areas within the company.
Besides the SWOT analysis, name a couple of other internal analyses that could be used to help improve your business or marketing plan. Also explain a couple different tactics, within these internal analyses, that can be applied in preventing your strengths from becoming weaknesses.
Respond to this...Two other forms of internal analysis include Core Competencies Assessment and Internal Audits. The Core Competencies Assessment analyzes the organizations resources and how they make the organization unique. An Internal Audit assesses the organizations resources and capabilities from the perspective of different sectors in the business.
A couple tactics to prevent strengths from becoming weaknesses in the Core Competencies Assessment might be to embrace a certain work environment or culture. Maybe what makes the organization unique is that it offers scheduling freedom or flexible participation. The culture and productivity among employees may be better in this organization so the tactic would be to continue looking for ways to improve employee morale in a way that leads to better performance. Another tactic to prevent weaknesses might be to state employment requirements and qualifications before hiring, complete background checks for new hires, provide thorough training to employee, and commit to their continuing education. This will help to assure a committed workforce which is better equipped to meet customer needs instead of mediocre or unknowledgeable staff who force customers to the competition.
Two tactics to prevent weaknesses in the Internal Audit analysis might be IT efficiency and clear organizational goals which can be easily measured. First, the organization should continually monitor their information technology to ensure it continues to work efficiently and effectively. A response team should also be ready in the case of deficiencies as IT is vital to business success and poor use of IT can slow performance and productivity. Another tactic might be to establish clear goals, expectations, and disciplines for employees and management, where performance can be easily measured and corrected.
References
Coulter, M. (2012).Strategic Management in Action, 6th Edition.[Bookshelf Online].
Tools to Assess the Internal Environment.(n.d.). Retrieved from https://knowhownonprofit.org/organisation/strategy/internalanalysis/tools-to-assess-the-internal-environment.