Assignment:
Instructions
Provide a professional-quality response to each of the ten ideas below. Keep your answers to not more than one page, double-spaced, per question. (Some can be answered in a few sentences; others may be a little longer.)
Questions
1. COST CLASSIFICATIONS: Costs have been described as either product costs or period costs. Product costs have three specific classifications. Discuss and give examples.
2. COST FLOWS: Explain how manufacturing costs flow through a manufacturing process. In your discussion relate the three product cost classifications to the cost flows: when are they introduced? How are they tracked? Can a cost classification appear in more than one part of the cost flow?
3. COST BEHAVIORS: Discuss the different cost behaviors: variable, fixed, mixed, and step.
4. Can the cost classifications, flows, and behaviors relate to a nonmanufacturing business such as service companies, retail companies, or foodservice companies? Explain with short examples.
5. Financial accounting and managerial accounting use the same data but for different reasons and with different output. Discuss the general differences, different audiences, intended use, rule-making bodies, and what professional certifications practitioners can attain.
6. A coworker says to you, "We can get our cost per unit down if we just make more." Explain how this might be, and also how it might not be. Include the idea of relevant range in your discussion.
7. What is a contribution margin? What ‘contribution' is it making? How does it differ from gross margin?
8. While discussing future business plans a colleague says, "If we can't make $100,000 operating profit next year, we should cease business." You agree to run the numbers. Based on what we have discussed in class, what types of "numbers" do you need to determine, first, if the company can break-even, and then if they can achieve the profit they want? Discuss conceptually rather than using actual numbers. Use the proper accounting terms in your discussion.
9. Explain why some production costs must be assigned to products through an allocation process.
10. What is/are the purpose(es) of the budgeting process? Describe the process of developing a master budget.