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Managerial Accounting and Cost Accounting

Essay by   •  March 8, 2013  •  Research Paper  •  1,008 Words (5 Pages)  •  1,599 Views

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Abstract

This paper discusses the differences between managerial accounting and cost accounting. While cost accounting is an aspect of managerial accounting; managerial accounting provides more information for financial reports. Furthermore, this paper confers about lean production. Lean production is a new manufacturing tool that focuses on eliminating wasteful spending while empowering employees. Lastly this paper talks about how to prepare for a reduction in budget. This most sensitive issue when reducing a budget is exactly how the reduction is going to be communicated to employees while still maintaining employee morale.

Cost Management

Spreadsheet

Program Area Cost Best Case: Worst Case:

Administration Salaries: Committed Amount Cut Committed Amount Cut

Administrator $60,000 $60,000 $0 $60,000 $0

Assistant $35,000 $35,000 $0 $35,000 $0

Two Secretaries $42,000 $42,000 $0 $21,000 $21,000

Supplies $35,000 $25,000 $10,000 $20,000 $15,000

Advertising and Promotions $9,000 $9,000 $0 $9,000 $0

Purchased Services:

Accounting and Billing $15,000 $15,000 $0 $15,000 $0

Custodial $13,000 $13,000 $0 $13,000 $0

Security $12,000 $12,000 $0 $12,000 $0

Consulting $10,000 $10,000 $0 $10,000 $0

Community Mental Health Services:

Two social workers $46,000 $46,000 $0 $23,000 $23,000

Transportation $10,000 $10,000 $0 $10,000 $0

Outpatient Mental Health Treatment:

Psychiatrist $86,000 $86,000 $0 $86,000 $0

Two Social Workers $70,000 $35,000 $35,000 $35,000 $35,000

Totals: $443,000 $398,000 $45,000 $349,000 $94,000

Cost Management

Managerial accounting is recording, regeneration, planning, and analysis of incomes and expenses. Managerial accounting provides mathematics to support managerial decisions. Managerial accounting entails comparisons, analysis, and business logic (Cost Accounting vs. Managerial Accounting, 2012).

Cost accounting consists of forecasting the unit cost of products or services. Per unit cost computes expenses of running a line of production and calculates the materials that are consumed by resources. The different expenses that are computed involve production per every unit. Managerial accounting and cost accounting are internal accounting principles that are analytical (Cost Accounting vs. Managerial Accounting, 2012).

Managerial accounting involves financial transactions that are reported on a firm's financial statement. Cost accounting is technically a part of managerial accounting. Cost accounting utilizes production costs to products sold to consumers. While managerial accounting must adhere to GAAP guidelines; cost accounting methods are determined by management. Managerial accounting accumulates financial data within a specific time frame. Cost accounting is an uninterrupted process that employs the cost of materials as the products or services are sold

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