Question

For each situation, discuss how managerial accounting information could be used.

1. The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates.

2. By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run.

3. The division controller of West Coast Supplies needs to determine the cost of products left in inventory.

4. The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures.

Answer 1

ANSWER1 :-in the first situation management wishes to determine the selling price of various lunch plates therefore management need to know to costs associated with such lunch plates in advance ( management needs to have a good knowledge of cost accounting) so that it could fix a price in such a way that covers both costs and profits margin over and above the costs.

ANSWER 2:- ratio analysis is a good tool to determine the operating efficiency of a plant by calculating ratios such as control ratios of inventory .

ANSWER3:- in this situation,cost accounting played a crucial role to determine the cost of products left in inventory using methods such as cost sheet which indicates the cost of production , cost of goods sold , opening and closing inventory.

ANSWER4:-to forecast the expenditures of next year , budgeting is a good tool , forecasting can be done by analyzing the past trends of cost schedule of a respective department.