Solutions to Managerial Accounting

Standard Costing

Standard costing is an essential aspect of accounting and in management and is mostly carried out in manufacturing firms when determining direct material, production overhead and direct labor. Standard costing assigns standard or projected costs to direct material, labor and production overhead. Standard costing values products or goods based on standard costs and do not reflect the actual costs (Parkinson, 2009). The difference between standard cost and actual cost incurred is what is referred to as variances.

Introduction to linear models

An organization incurs two types of costs that include fixed and variable costs. Variable costs depend on the amount of products produced and thus the need to utilize linear models in order to calculate total cost (Grondskis & Sapkauskiene, 2011). Also profits are dependent on volume of sales generated thus require the use of a model. Linear cost model is used to calculate total cost while a linear profit model provides profit made. Linear models provide costs, profit and are used to determine break even point thus the models can be applied when making decisions.

Manufacturing cost classification

Period Cost Product Cost Direct Labor Direct Materials Overhead

Advertising expenses for DVD  

Depreciation on PCs in marketing  

Fire Insurance on Corporate headquarters  

Fire Insurance on plant  

Leather carrying case for the DVD  

Motor drive (externally sourced)  

Overtime premium