Managerial accounting Essay Example | Topics and Well Written Essays - 1000 words - 1

Managerial accounting - Essay ExampleThis concept states that seam is valued at lower of NRV or cost. Since NRV is not given in this case, we lead include the purchase price or the cost of stock which is 750 in this case.The cost of skilled employees The cost of skilled employees is the direct cost of the order. As a result, there wages can easily be wholeocated to this order because we deal that they have worked on this particular order during the week we can easily apportion this to the order and since it is the line of accountants to allocate all the recognizable be to the enamour cost centers, this order is the cost center and the cost activity of the workers is rightly apportioned to this order.The extra cash lost Accountants are only concerned with the pellucid costs and they are least concerned with the implicit cost. Implicit costs are the opportunity cost like this one. These are not the real costs but are based on economic assumption of the next best alternative. Si milarly, since these costs are based on assumptions, we cannot tell the accurate issue forth of these costs. However, economists do use these costs when calculating normal profit of a project or of an item. But, since cost statement is done by accountants and not the economists, we will ignore these costs in the job order cost statement. We are only going to include those costs that have factual evidence as the concept of materiality states. As a result, when preparing the job order cost statement, I have not included the implicit tot as it is of undersize value to the accountants. Machinery depreciation Machinery depreciation is a fixed cost. It means that irrespective of the operations performed by the machinery, a depreciation charge will be levied. much(prenominal) costs do not vary with the output or the operations performed and hence we call them the fixed costs. In this case, since we have made a divert adjustment of the fixed overheads, it will lead to double addition i f we add this cost separately. In other words, the depreciation charge is already included in the fixed overheads and it will lead to distortion of the cost statement if we include a separate head for machinery depreciation. In more professional terms, these will windows get along the financial statement and hence will give a different picture to the cost statement than it is in reality. For the reasons given above, I have excluded the amount for machinery depreciation from the cost statement. Electricity The statement in the question tells us whether the order is received or not, the machinery will be in continuous use. Since all machinery is run on electricity, we can slang that the charge of electricity is also fixed. The entire costs related to machine are fixed as it is orthogonal to the order and hence these costs will also be included in the fixed overheads. Hence by adding them separately, we will again be do a mistake of double debiting our cost statement. This again wi ll distort the cost of the order in reality and will make us assume that we are incurring more costs than we really are. This is called as window dressing and should be avoided from both the ethical and legal point of view. Hence, this amount is excluded from the job order cost statement. Fixed overheads Certain indirect costs are incurred when a company is working on a