1. Managerial Accounting
Ishik University
Business Department
3rd stage
Managerial Accounting
Chnar Abdullah Rashid
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2. Introduction to Managerial Accounting:
Managerial Accounting Assumption:
It is a set of modalities and different styles which is adopted by the accountant with a higher level of scientific and practical efficiency, to help management to achieve biggest amount of efficiency and potency in using available economic potentials and resources.
Managerial Accounting Objectives:
Provide necessary information for the company’s management for making decision and planning process.
Helping managers in directing company’s operations and controlling it.
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3. 3) Helping managers and employees to achieve company’s objectives.
4) Assessing performance and doubtlessness of the employees’ efficiency to achieve the goals by the lower level of costs.
5) Evaluating the company’s competition situation and working with the other managerial groups for ensuring continuity of company for a long term.
6) Contributing in setting investment decision and planning for necessary funds and monitoring on it in which achieved profits can be secured.
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4. 3) Helping managers and employees to achieve company’s objectives.
4) Assessing performance and doubtlessness of the employees’ efficiency to achieve the goals by the lower level of costs.
5) Evaluating the company’s competition situation and working with the other managerial groups for ensuring continuity of company for a long term.
6) Contributing in setting investment decision and planning for necessary funds and monitoring on it in which achieved profits can be secured.
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5. Contribution Margin and Breakeven Analysis:
Analyzing relationship between cost, size and profit:
Equalized analysis considers to be the most important analyzing way which is using by the company’s management in the operation of planning and decision making.
Breakeven point: is the point that the total revenue of sales is equal to total costs of sales, or sales is equal to costs, consequently net profit will equal to zero.
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6. Contribution Margin and Breakeven Analysis:
Analyzing relationship between cost, size and profit:
Equalized analysis considers to be the most important analyzing way which is using by the company’s management in the operation of planning and decision making.
Breakeven point: is the point that the total revenues of sales is equal to total costs of sales, or sales is equal to costs, consequently net profit will equal to zero.
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7. Factors which influence on the profit: Sales price of the product.
Number of sold unit.
Level of costs.
Variable costs for unit.
Total fixed costs.
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8. Factors which influence on the profit: Selling price of the product.
Number of sold unit.
Level of costs.
Variable costs for unit.
Total fixed costs.
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9. The ways of determining breakeven point:
General way (budget equation method):
Net profit = sales revenue – total costs
Net profit = sales revenue – (variable + fixed costs)
To facilitate the process of analyzing we assume that there is no any other revenues, just revenue sales. And there is no any expenses, just operation expenses, hence, the meaning of net profit in the above equation is net of profits of the operational process.
In breakeven point, net profit is equal to zero.
Here, we can find it by making sales to be equal to total costs.
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10. Net profit = (sales unit × selling price) – (sales unit ×V.C + F.C.)
In the BEP Net profit = 0
0 = sales revenue - (variable costs + fixed costs)
sales revenue = variable costs + fixed costs
(sales unit × selling price) = (sales unit ×V.C. + F.C.)
Example 1:
Danyal company is producing and selling 5000 units, and the selling price per unit is $9, and the variable cost per unit is $4, but fixed costs is $15000.
Required:
find the breakeven point for the mention company by using the budget equation method.
Find net profit or loss, if 5000 units produced and sold.
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11. Find net profit or loss, if 4000 units produced and sold.
Example 2:
Danyal company is producing and selling 4000 units, and the selling price per unit is $8, and the variable cost per unit is $3, but fixed costs is $12500.
Required:
find the breakeven point for the mention company by using the budget equation method.
Find net profit or loss, if 4000 units produced and sold.
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12. Find net profit or loss, if 4500 units produced and sold.
Example 3:
Danyal company is producing and selling 4500 units, and the selling price per unit is $10, and the variable cost per unit is $6, but fixed costs is $16000.
Required:
find the breakeven point for the mention company by using the budget equation method.
Find net profit or loss, if 4500 units produced and sold.
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13. 2) Contribution Margin Method:
This method is quite close to the previous method which is about “ how much sales unit can cover the fixed costs” because, basically sales unit is responsible to cover variable costs, so any left amount after covering variable cost consider to be contribution margin, which is: the difference between selling price per unit and variable cost per unit.
We can find the number of units should be produced and sold to achieve breakeven point by this method:
fixed costs
Breakeven point by unit =
contribution margin unit
Contribution margin for unit = selling price per unit – variable cost per unit.
Breakeven point by amount = Breakeven point by unit × selling price per unit.
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14. 2) Contribution Margin Method:
This method is quite close to the previous method which is about “ how much sale unit can cover the fixed costs” because, basically sale unit is responsible to cover variable costs, so any left amount after covering variable cost consider to be contribution margin, which is: the difference between sale unit price and variable cost unit.
We can find the number of units should be produced and sold to achieve breakeven point by this method:
fixed costs
Breakeven point by unit =
contribution margin unit
Contribution margin for unit = sale price per unit – variable cost per unit.
Breakeven point by amount = Breakeven point by unit × sale price per unit.
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15. Determine the contribution margin in unit.
Example 1: the following information has given from Chra company for October: sales , F.C , selling price per unit $4, V.C 54000
Required:
Determine the contribution margin in unit.
Find breakeven point in unit and amount.
Account net profit or loss for the company during the month.
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16. 3) Drawing Method:
By this method, we are drawing the relationship between cost and size of production and profit.
That’s through drawing two lines, first line show the total revenue and the second line show the total cost, and the intersect (junction) point of the two lines will be breakeven point.
Horizontal line show the active level or size of sales by units, while vertical line show the total costs or revenues by amount.
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17. Required: find breakeven point by drawing method? Classwork:
Example: one of the companies are producing and selling (X) product. Sale price per unit is $250 and V.C per unit is $150, F.C is $50000.
Required: find breakeven point by drawing method?
Classwork:
one of the companies are producing and selling (X) product. Sale price per unit is $4 and V.C per unit is $2, F.C is $15000.
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18. Percentage of Safety Margin = × 100% actual sales
Safety Margin: is the excess in the budgeted or actual sales over the breakeven point.
Safety Margin in unit = budgeted or actual sales in unit – breakeven point in unit
Safety Margin in amount = budgeted or actual sales in amount – breakeven point in amount
Safety Margin
Percentage of Safety Margin = × 100%
actual sales
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19. The actual sold unit during the period is 40,000 unit. Required:
Example:
one of the manufactured company producing and selling (X) product by selling price ($50) per unit and the V.C. per unit is $35 and the F.C. is $150,000.
The actual sold unit during the period is 40,000 unit.
Required:
Percentage of S.M.
S.M. in unit and in amount.
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