Managerial Accounting Concepts Techniques Essay

Question:

Discuss About The Managerial Accounting Concepts Techniques?

Answer

Introduction

The issue presented in the question is that advice that is required for the particular way in which the customer A and customer B should be approached has been asked. In order to determine the proper approach that should be utilized while reaching out to the particular customers A and B, the particulars of the Activity Based Costing has to be determined. This means that the activities have to be segregated on the basis of total cost per activity. Next, the cost drivers have been allocated to the different activities. The activity of storage has been allocated with the cost driver of cartons in inventories. The activity of requisition handling has been allocated with the cost driver of requisitions. Moreover, the activity of basic warehouse stock selection has been allocated on the basis of carton lines. It can be naturally assumed that the pick pack activity has been allocated on the basis of pick pack lines. Next, the activity of data entry has been allocated on the basis of number of cartons and the delivery of the desktops is allocated on the basis of orders. The service costs further have been calculated by dividing the total cost per activity by the driver-planned capacity.

Activities

Total Cost per activity

Cost driver

Driver planned capacity

Service costs

Storage

$ 1,550,000.00

Cartons in Inventory

350,000

4.43

Requisition handling

$ 1,801,000.00

Requisitions

310,000

5.81

Basic warehouse stock selection

$ 761,000.00

Carton Lines

775,000

0.98

Pick Pack Activity

$ 734,000.00

Pick Pack Lines

700,000

1.05

Data entry

$ 612,000.00

Carton

775,000

0.79

Desktop Delivery

$ 250,000.00

Order

8,500

30

Customer A

Customer B

Storage

1554

3108

Requisition handling

2114.84

4589.9

Basic warehouse stock selection

891.8

2450

Pick Pack Activity

955.5

2625

Data entry

718.9

1975

Desktop Delivery

0

780

Freight

2250

7500

Inventory Financing

1950

6500

Total

10435.04

29527.9

The above computation reveals the fact that the cost for manufacturing the product for Customer A has been $10435.04 and that for Customer B has been $29527.9. This means that under the current activity based costing system customer A costs less money than customer B. This information reveals the fact that the company shall charge more than the existing price for Customer B and less in the case of Customer A. Thus, the particular approach by which the Customer A should be reached out to is that more orders should be acquired from them on the basis that the service charge required for this particular customer is less than what is assumed. Moreover, in case of Customer B more revenue should be incurred from this particular customer on the grounds that the service charged utilized for this product is high.

References

Caplan, D. (2016). Managerial Accounting Concepts and Techniques.

McGuffin, M., Merino, T., Keller, B., & Pignol, J. P. (2017). Who should bear the cost of convenience? A cost-effectiveness analysis comparing external beam and brachytherapy radiotherapy techniques for early stage breast cancer. Clinical Oncology, 29(3), e57-e63.

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