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Grace Johnson posted Apr 20, 2023 8:15 PM

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Hello everyone! My name is Grace Johnson and I currently live in St. Augustine in Florida, but I am originally from Washington! I am relatively new to the world of accounting, I studied French for my bachelors but when I was promoted to the role of Rental Manager at the resort I worked at, I was introduced, on a basic level, to the world of accounting. This along with the encouragement of manager prompted me to begin the MS in Accounting program here at SNHU. As a manager I have already practiced many cost accounting principles without realizing what they were. For example, I helped to create the budget for our multi-million-dollar rental program by analyzing our yearly costs and determining what budget lines needed updating. I look forward to diving deeper into the world of cost accounting to better understand my current role and learn new skills that I can apply to my future positions.

I agree with the authors stance that the cost-volume-profit analysis is only useful under certain circumstances. As with any scientific hypothesis, there must be certain controls in place in order for the study to have validity. In the case of the cost-volume-profit analysis, there must be certain circumstances that remain unchanged in order to verify if the results are useful. If the only changing factor is the number of units created, if the revenue or costs change outside of the impact of the quantity of units then it creates an entirely new equation that is not applicable to the current situation. There must be constants in order to test for something. Without the constant of the cost per item, the number of items will render a revenue results that is not applicable to the current analysis. Additionally, no information can be decided upon with the current information because no true analysis has been made, no test has been performed, only the plugging of numbers into an equation.

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View profile card for Traci West

Traci West

Sun at 10:14 AM

Grace,

I am glad to hear that you are new to the world of accounting. Doing something new must be very interesting and rewarding. Do you enjoy working as a Rental Manager?

Thanks for sharing your thoughts and perspective. Here's one of my thoughts. Cost accounting is so unusual for most students. At some point, a more significant student population has been exposed to financial accounting. I want to summarize the difference between managerial accounting and financial accounting. In a nutshell, managerial accounting focuses on internal users, and financial accounting focuses on external users. You can check out my announcement this week for a more detailed explanation.

CVP helps managers understand the implementation of products and/or services. Also, CVP analysis helps managers forecast profits at various output levels and make cost-effective moves for a company. Yes, if fixed cost changes within a relevant period, it will cause the model to be inaccurate.

What are your thoughts about variable costs if it is outside of the relevant range?

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