Question

Q.5 An organization cannot be profitable if it does not have a clear understanding of the

difference between its fixed and variable costs. Why is this important for management? [4]

Q.6 Explain the Planning and Control Cycle [4]

  

Q.7 Why is it necessary to have a pre-determined overhead application

rate in manufacturing? [3]

Q.8 Assume you have just been hired as a management accountant at a manufacturing

plant, list some of the tasks you can be expected to perform [2]

Answer 1

Following is the answer :-

5 Ans As Fixed cost are one that do not change with the change in activity level in the short run. Conver conversely, Variable cost refers to the cost of element which tend to change with the change in level of activity. So, management is the one who have major riole in decision making. E Therefore, working on cost on cost of produ- -ction mangement should know the difference between fixed and Variable cost. Ans CONTROL CYCLE i The control cycle is the iterative process of planning, monitoving outcome, assessing susults, and making revisions. The control cycle is commonly applied to the ongoing revision of corporate budget and process flowe The conterol cycle work best for process flowes, since they tend to Change less than business models - that is there will still be a need to pay supplier issue invoices, ship goods. ető, ivrespective of change in business model.

PLANNING CYCLE Define objectives Determine tracking & Develop evaluation method Premises Establish tasks Evaluate altvinatives Identify resources Define objectives The first step in the planning Process is to determine what is to be accomplished during the Planning period Develop premises + Planning requires making some assumptions about the future. We know that conditions will change as plans auce implemented and manageus need to make forecast about what the changes will be.

° Evaluate alternative there may be more than one way achiene goal Managers need to identify possible alternatäies and evaluate how difficult it would be to implement each one and how likely each one would lead to success. Identify resowices seesources + Neact, managers must determine the resou- - uces needed to implement the plan. They must examine the resources the organisation cuently has what new resources will be needed, when they will come from. o plan and implement task + Management will next create a road map that takes the organisation from where it is goal. Determine tracking and evaluation methode very important that managers can track the progress of the plan. The plan should determine which tasks are most critical, which task are most likely to encounter problems and which could Cause bottlenecks that could delay the overall plan. It is

Anst. Overhead cost are ongoing expenses a business incurs to operate many expenses aue consideruel overheed costs, including sent, utility, depreciation and labor An overhead rate on pre-determined Ovecheael reate is an equation that allocates a certain amount of manuf -acturing overhead to each direct labou on machine hour. This mate helps business allocate resowues and set pricing. Thats why it is necessary to have a pre-determined overhead kate in manufactwing gathering and analyzing financial information you internal use Suppout budgeting and funding its o Assist the company in managing investment poutfolio. • Assume responsibility of accounting procedure. Advest on problems and suggest Ands o improvement. supervise lower-level personnel.