Management Accounting and how it can be defined Essay

Management Accounting and how it can be defined - Essay Example In other words a more complex definition of Management Accounting expands the simple one and states that the process of providing the information required by management for planning, Organizing and controlling for goals such as: ïÆ'  Recording, Analyzing and reporting on the actual cost and inputs of products, services and processes in which we are very much concerned and which is also our first question ïÆ'  Working with starting cost, function, standard of performance, revenue and quantity budgets, which is related to our second and third questions, ïÆ'  Evaluating Alternative Opportunities, this is last and fourth question. Starting with our first question and second question simultaneously, we will find out the Total Fixed Cost, Contribution Margin, variable cost and Brake Even Point Andre is running a hair cutting saloon in which 5 Barbers work for him 40 hours/week, 50 weeks/year and being paid $9.90 per hour regardless of the number of the haircuts and every one who has a h air cut gets his hair washed so the charger for the shampoo or hair wash is assumed to be already included in it which will come under fixed cost by which his Fixed Cost per year will be $99,000 and $1,750 is the rent and other fixed expenses per month which again comes under Fixed cost by which his Total Fixed Cost per year will increase by $21,000 and the Total Fixed Cost will be $120,000/year and $10,000/month (this calculation is done on yearly ¬Ã‚ ¬Ã‚ ¬Ã¯Æ'  monthly basis). ... Yearlymonthly basis (this calculation is done generally). As we now have our T.F.C i.e. $120,000 we have to calculate Break Even Point i.e. how many haircuts should be done so that we get $120,000 and i.e. 10,000haircuts/year should be done so that we don't get a loss and that is our B.E.P in units. Here there is no Variable cost i.e. no such sort of charges which will increase or decrease the total cost.Moving to our 3rd question i.e. if 20,000 haircuts are performed what will be the Operating income (profit), as we have calculated before our T.F.C i.e. $120,000 which will not change if we do either 1or 10,000 Haircuts/year. Assuming that the cost for one hair cut $12 and if we do 20,000 haircuts our income will be $240,000 and now subtracting the total expenses or T.F.C i.e. $120,000 we get an Operating income i.e. a profit of $120,000. As we have assumed $12/haircut we have included the taxes, Wages, rent, all the fixed expenses, the cost of shampoo and other required material in it. After all this we get a good profit of $120,000 if the saloon works as mentioned i.e. 50weeks/year and the barbers work for 40hours/week. Now for supporting this statement one barber works 2000hours/year as per the calculation and has to do a Minimum of 2haircuts/hour, 80haircuts/week if he works 8hours/day, 5days/week which is again 40hours/week and in 50weeks he can do 4000haircut, if similar calculation is done for the other 4 Barbers our task for 20,000 haircuts will be achieved. In our 4th and last question Andre decides to pay in a revised or in a different way i.e. by decreasing the Wages/hour and giving money/haircut. Andre decides to pay $4/hour i.e. fixed cost and $6/haircut which is