Question

I.  How does managerial accounting differ from Financial Accounting?

II.  What effect does an increase in the activity level have on:

      a.  Unit fixed costs?

      b.  Unit variable costs?

      c.  Total fixed costs?

      d.  Total variable costs?

Answer 1

1.)

• Information of Financial accounting are used by both internal and external parties, such as shareholders,employees, government, lenders etc.Managerial accounting produces information that is used within an organization, by managers and employees.
• The main objectives of financial accounting is to disclose the end results of the business, and the financial condition of the business on a particular date( Preparation of both income statement and Balance sheet. )The main objective of managerial accounting is to help management by providing information that they need.
• Financial accounting is a postmortem analysis, because reports on the prior quarter or year is considered.Managerial accounting focuses on the present.
• Financial accounting is compulsory by law and managerial accounting is prepared to help management.
• Financial accounting is prepared on a period basis,eg. Yearly, quarterly, etc. But managerial accounting can be done at any time as they needed.

2.)

a.) If activities increases fixed cost per unit decreases.

b.)Units variable cost remains unchanged if the activities are increased.

c.) Total fixed costs remain unchanged.

d.)Total variable cost increases.