Question

Your friend has just started a retail clothing store in Kamloops. She will be purchasing inventory to make her own clothing (one style) and she will also be buying ready to sell items. She has come to you to help her set up an internal financial reporting system.

What Managerial accounting techniques would you suggest to your friend to better control her costs and why?

Required:

Respond to your friend’s question. Reflect on all the things we covered in this course. A strong answer will:

1. Identify what managerial accounting document / procedure / technique / policy you would use in the business, and
2. How this document / procedure / technique / policy will help manage your business
3. I’m looking for 5 strong points

(Hint: I’m not looking for paragraph answers. A couple sentences for each document / procedure / technique / policy you would use in the business is more than enough. Be concise with your answers. I’m looking for you to answer “what” you would use and “why” or “how” it would help monitor your small business.)

Answer 1

Since Unit consit production activity and trading activity in same line of business following mangirial accounting techniques can be advised to owner of the business.

1. Marginal Analysis: Margin analysis is primarily concerned with the incremental benefits of increased production. Margin analysis is one of the most fundamental and essential techniques in managerial accounting. It includes the calculation of the breakeven point that determines the optimal sales mix for the company’s products.

2. Financial planning: Its an investment plaing depends on profitabiltity and opportunity benifits assess the which product can be invested more.

3.Capital budgeting: Capital budgeting is concerned with the analysis of information required to make the necessary decisions related to capital expenditures. In capital budgeting analysis, managerial accountants calculate the net present value (NPV) and the internal rate of return (IRR) to help managers to decide on new capital budgeting decisions.

4. Inventory valuation and product costing: Inventory valuation involves the identification and analysis of the actual costs associated with the company’s products and inventory. The process generally implies the calculation and allocation of overhead charges, as well as the assessment of the direct costs related to the cost of goods sold (COGS).