The extract above is a journal article entitled “How cost accounting distorts product costs” published by Robin Cooper and Robert S. Kaplan. As the course instructor of the course of Managerial Accounting, you discussed the issues related to cost accounting with your students. After the first class, your students raised the following questions.

Required:

a)     Companies implements cost accounting, particularly from the perspectives of the value (supply) in improving their customer profitability. We do not agree with the statement that cost accounting distorts product costs. Discuss TWO (2) factors that result in successful delivery from the initial acquisitions of materials, labor and factor overhead to the sales of products and/or services to customers.

b)    After discussing introduction to cost accounting with your students, one of them asked you about electrical costs (utilities expenses). Explain in TWO (2) points regarding electrical costs (utilities expenses), which is an example that you gave them about factory overhead, from the perspective of cost behavior.

c)     Your students submitted a group project with the following information related to revenues and expenses for a period of three months.

	July	August	September
Sales in units	3,000	3,750	4,500
Sales revenue	Dh 420,000	Dh 525,000	Dh 630,000
Cost of goods sold	168,000	210,000	252,000
Gross margin	252,000	315,000	378,000
Selling and administrative expenses:
Shipping expense	44,000	50,000	56,000
Advertising expense	70,000	70,000	70,000
Salaries and commissions	107,000	125,000	143,000
Insurance expense	9,000	9,000	9,000
Depreciation expense	42,000	42,000	42,000
Total selling and administrative expense	272,000	296,000	320,000
Net operating income (loss)	(20,000)	19,000	58,000

Determine which expense(s) are mixed and separate each mixed expense into variable and fixed elements. (Show your workings)

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Answer rating: 100% (QA)

a Yes the cost accounting who are using the traditional allocation of the overheads or indirect cost... View the full answer