Variable and Fixed Costs (CASE Assignement)

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Variable and Fixed Costs

Case Assignment

Managerial accounting emphasizes short-term profit analysis, so the income statement is very important. Consequently, we will examine and discuss income statements in this Case.

Keep the analysis from the SLP in mind when addressing the questions below.

  • Explain the main differences between the absorption and contribution (behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.
  • Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company glean from this approach which is helpful as a tool in the decision-making process?
  • Explain situations in which break-even analysis can be a useful tool. Provide a specific example.

The submission should be 2 to 4 pages and needs to include answers to all the questions listed above. Include references in APA format

Required Materials

Click the presentation: Contribution Margin and Net Income

Agrawal, N. K. (2010). Principles of Management Accounting, Global Media (read chapter 5), from library portal.

Martin, J. R. (n.d.) Management Accounting: Concepts, Techniques, and Controversial Issues - Chapter 1: Introduction. Management And Accounting Web Home Page. Retrieved from http://maaw.info/Chapter1.htm

Madegowda, J. (2007). Management Accounting, Global Media (read chapter 8), from library portal.

Introduction to Managerial Accounting (2007, July 25) [Video File]. Retrieved from http://www.youtube.com/watch?v=pBCRmjnwWgo

Analyzing Variable Costing and Absorption Costing (2015) Pearson Learning Solution, New York

Analyzing Variable Costing and Absorption Costing: Interactive Tutorial (2015) Pearson Learning Solution, New York

Read one of the following:

Walther, L. M. (2010). Principles of Accounting: A Complete Online Text, chapter 23 (the section titled Variable costing versus absorption costing) and chapter 18. Retrieved from http://www.principlesofaccounting.com/

or

Hermanson, R. H., Edwards, J. D., & Invacevich, S. D. (2011). Accounting Principles: A Business Perspective. First Global Text Edition, Volume 2 Managerial Accounting, 73-87. http://textbookequity.com/oct/Textbooks/TBQ_PA_Accounting_managerial.pdf

Optional Resource(s)

Accounting for Management (n.d.). Managerial or Management or Cost Accounting Terms and Definitions. Retrieved from http://www.accounting4management.com/managerial_accounting_defintions.htm

 

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