ACCOUNTING FOR MANAGERS
The use of Managerial Accounting in Planning and Control
Mr. Jackie Russell, JD
May 11, 2013
This summary paper is to speak about systems designs and incorporate job order costing,
activity based costing and process costing as I discuss these different elements. I will also
discuss cost volume profit and its relationship between cost, profit and volume.
Approaches to break-even analysis will also be apart of this summary. Benefits to be gain
from budgeting , the impact of ideal versus practical and methods of capital budgeting.
When labor, material and overhead are applied to products that are different, because of
how much each production material is used, it is called Job Order Costing. This type of
costing is used in hospitals, production of clothing, and places where things are repaired.
As work is performed, direct and indirect labor cost is charged to each job. Instead of
being directly traced to each job, manufacturing overhead are allocated to jobs. Activity
Based Costing works just like the job order costing, the purpose is to accurately assign
overhead cost for financial reporting and other use. Process Costing, is an individual
manufacturing process. It is a system where a single product is produced for a long
period. The production of goods like flour through repeated process would be an example
of process costing.
Many jobs are worked on during the period of job order costing. During process costing
one product is produced for along time. Cost are accumulated by individual jobs when we
talk about job ordering costing and cost are accumulated by department when it comes to
process costing. With job order costing, unit cost are computed and produced by job and
process costing unit costing are computed by department or a particular operation.
Cost, volume and profit is a vital tool in many business decisions, like what to sell or
Manufacture, what the price should be, how to market and what type of facilities to
aquire. Cost is what you pay on the product, volume would be the amount of product and
profit would be the amount you made over cost. The breakeven point is just that, you
didn’t lose but you didn’t gain anything. The breakeven point can be a helpful tool to use
to know the sales needs to attain a specified amount of profit. This point has a lot to do
with what your cost are how much you have on hand and your gross fit. Cost, volume,