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BUS 535 WU Wk 1 Managerial Accounting & Public Accounting Examples

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Accounting

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westcliff university

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WEEK 1 DQ
Rushikesh Ajay Ambildhok
Managerial Accounting BUS 535
5/8/2021
Dr, Yvan Nezerwe
Westcliff University
1. Explain the difference between public accounting and managerial accounting. Provide a
hypothetical example of an income statement for public reporting. Provide a hypothetical
example of managerial accounting income statement in process costing format. Explain your
examples in detail.
The primary goal of managerial accounting is to provide useful information for the company’s
internal use. Managerial accounting assists in decision making such as setting up realistic goals,
strategic planning, and efficient usage of company’s resources. It relies on a variety of different
techniques such as margin analysis, constraint analysis, capital budgeting, inventory valuation,
forecasting and trend analysis.
On the other hand, public accounting is much more concerned with informing the financial
situation of the company to those outside the company. It is designed to disclose the company’s
business performance and financial health. Public accounting is all about disclosing a
company’s revenue report (or the balance sheet) to the public and perform audit to locate
possible exceptions.
Example:
Sales Revenue
$57,050.68
Cost of Goods Sold (COGS)
$24,984.79
Gross Profit
$32,101.89
General Expenses
$11,049.55
*Rent
$9,000.00
*Bank & ATM Fee Expenses
$9.43
*Equipment Expenses
$742.40
*Marketing Expenses
$503.53
*Merchant Fees Expenses
$794.19
Operating Earnings
$21,052.34
Interest Expense
$5,000.00
Earnings Before Income Tax
$16,052.34
Income Tax Expense
$10,000.00
Net Profit
$6,052.34

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2. Explain operating cost classifications in managerial accounting, namely, manufacturing vs.
selling/admin, variable vs. fixed, direct vs. indirect, and variable overhead vs. fixed overhead.
Include examples for all.
Manufacturing cost vs Selling cost:
Manufacturing costs are the costs incurred during the production of the product. Manufacturing
costs include direct labor costs, direct material costs and fixed overhead costs.
Costs incurred while selling the products are called selling costs. These costs include the
salaries of the salespersons and advertising costs,
Variable costs vs fixed costs:
Variable costs are the costs that change with the production output of a company. That include
the costs of raw material, the shipping costs, wages of the employees depending on the number
of hours they work.
On the other hand, fixed costs are the costs which do not change with the production output.
That include the fixed salaries of the employees, rent payments, insurance payments, etc.
Direct vs indirect costs:
Direct costs are the costs you can directly apply to the production of goods or service. That
would include direct labor cost, direct material cost, and manufacturing expenses.
Unlike direct costs, indirect costs cannot be applied to specific cost objects. Both, direct and
indirect costs can be fixed or variable. Examples of indirect costs are rent, utilities, selling
expenses, administrative salaries, etc.
Variable overhead costs vs fixed overhead costs:
The variable overhead costs are the costs that varies with the manufacturing output of the
company. An increase in the production activity will naturally increase the variable overhead
costs and vice versa. Examples include, raw material costs, sales commissions for workers,
production supplies, utilities or maintaining the equipment, etc.
Fixed overhead costs do not change with the change in the production output of a company.
Examples include, insurance, taxes, mortgage or rent, salaries of administrative staff, etc.

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WEEK 1 DQ Rushikesh Ajay Ambildhok Managerial Accounting – BUS 535 5/8/2021 Dr, Yvan Nezerwe Westcliff University 1. Explain the difference between public accounting and managerial accounting. Provide a hypothetical example of an income statement for public reporting. Provide a hypothetical example of managerial accounting income statement in process costing format. Explain your examples in detail. The primary goal of managerial accounting is to provide useful information for the company’s internal use. Managerial accounting assists in decision making such as setting up realistic goals, strategic planning, and efficient usage of company’s resources. It relies on a variety of different techniques such as margin analysis, constraint analysis, capital budgeting, inventory valuation, forecasting and trend analysis. On the other hand, public accounting is much more concerned with infor ...
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