Commercial companies are in business to make
profits for their shareholders. They do this by selling their products or
services for more than it costs to make/provide those products or services.
However, raising prices only works to the point at which consumers are still
willing to purchase the products or services. In order to continue to make
profits, then, companies must control their costs of production.
In this unit we learn about the different
types of costs that companies incur and how those costs behave. The types of
costs are categorized as direct, indirect, and overhead costs. The way these
costs behave determines if they are fixed, variable, or a combination of both
(“mixed”). Once the type and behavior are identified, the costs can be analyzed
on a per-unit basis. This is needed because we can see the total costs for a
period of time by reviewing the financial statements of a business; however, in
order to control costs, managers must understand those costs at the unit level.
Finally, we look at how costs are accumulated
and accounted for across different types of businesses. These cost methods are
job-costing, process costing, and activity-based costing. Once managers
understand the costs of production, they can use that information for various
analyses, which will be the subject of the next unit.1. Walther, L. M. &
Skousen, C.J. (2009). Managerial and Cost Accounting. Bookboon.com
- Chapter 3 – 4
- Chapter 12
- Chapter 18
- Chapter 21
This text provides an overview of the different
cost behaviors. It also explains the cost methods in detail.
2. Heisinger, K., & Hoyle, J. B.
(n.d.). Accounting for Managers. Retrieved from https://2012books.lardbucket.org/books/accounting-for-managers/index.html[KM1]
- Chapter 1 – What is Managerial Accounting? Sections:
- Cost Terminology
- Chapter 5 – How Do Organizations Identify Cost Behavior
- Chapter Introduction
- Cost Behavior Patterns
Note: if you do not have work experience, you
may select a company with which you are familiar and apply the discussion
assignment to it.”
Written Assignment #2- Instructions:
The paper should be double spaced in Times
New Roman (or its equivalent) font, which is no greater than 12 points in
size. The paper should cite at least three sources in APA
In this paper, please discuss the three
costing methods of job order costing, process costing, and activity-based
- Define each method and explain when it is best suited to be
- Compare and contrast the methods and consider their benefits
- Use the information provided to propose which cost method
should be used to allocate costs.
Wet Suit World is
a company that manufactures wet suits for use with water sports such as
snorkeling and scuba diving. The suits are made in sizes small through 3x
extra-large with levels of insulation layers of 2 millimeters, 5 millimeters,
and 7 millimeters. They come in black with the Wet Suit World logo imprinted
across the chest. The materials are the same for all of the suits, though they
vary in thickness. All suits undergo the same production and quality
There is no one “correct” answer to the
proposed cost allocation method as long as the answer is well-supported based
on the week’s learning.
Superior papers will include the following when responding to the
- Define the three costing methods.
- Explain when each is most appropriately used.
- Compare and contrast the methods, considering both benefits and
- Provide a well-supported proposal for the cost method Wet Suit
World should use.
Be sure to use APA formatting in your
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