Accounting for Managers Business Cost Calculation

Question: Describe about the Accounting for Managers for Business Cost Calculation. Answer: 1. Calculation of Cost per unit for the variable costs Variable expenses Budget A Budget B Direct materials 260,000 360,000 Direct labor 40,000 60,000 Variable overhead 60,000 75,000 Variable selling and administrative expense 60,000 60,000 Total variable expenses 420,000 555,000 Total units sales 20,000 30,000 Variable cost per unit 21 18.5 Table: Calculation of Variable Cost per unit for Budget A and Budget B (Source: Created by Author) 2. Reasons why Budget A has high costs and low sales forecasts It is the responsibility of the middle as well as lower level management in conducting Budget A. It is for this reason management focus majorly on costs as dedicated by particular business organization. On the other hand, lower level managers manage Budget A and fails in depicting the changes occurred from demand patterns in relation with products of a company (Weil, Schipper and Francis 2013). Addition to that, Low Level Managers fails in collecting adequate information on matters relating to increase in demand that leads towards high cost as well as low sales forecast presented in the budget. Therefore, Budget A considers as cost-centric as well as indicates adequate cost as required by company for continued operations. 3. Reasons why Budget B has low costs and high sales forecasts It is the responsibility of the Senior Management in conducting Budget B as it focus majorly at demand increase for given products for a business organization. In other words, this budgeting system indicates rise in future demand for products as well as fails in addressing change in fixed and variable costs for a particular business organization (Hartley 2014). Therefore, Senior Management aims at detecting the demand change at the time of Budget B preparation. Behavioral Implications of top-down approach Top-down budgeting approaches help business organization in building required allocation for each department. This means the approach aims at reducing the wastage allocation of resources as indicated in the budgeting process (Droms and Wright 2015). Addition to that, Top-level Management should conduct adequate research as well as survey for depicting the adequate budget requirements as well as income generation in the upcoming financial year. Therefore, Top-Down approach helps in reducing the dysfunctional behavior as depicted by particular business organization (Weil, Schipper and Francis 2013). 4. Indicating the ways whereby participants come to consensus to budget and advantage for this approach It has been noticed that both the groups are efficient enough in participating for bringing improvement in the overall budget for a company. This reveals that expenses as part of the budget and derived from Budget A and sales part from Budget B (Collier 2015). Addition to that, mixed budget approach help in reducing the cost of variance for future analysis purpose. Therefore, budget can be divided into low level as well as high level turning into ways for supporting operations for a given company. The above approach is beneficial for a company, as it will help in reducing the excess wastage especially for handling essential resources gathered from unavailability of limited information (Weil, Schipper and Francis 2013). Addition to that, this approach indicates adequate money undertaken from each department for continuing with business operations on smoother terms. Therefore, approach help in developing a bond between low, medium as well as higher level management of a business organization. Reference List Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Droms, W.G. and Wright, J.O., 2015. Finance and accounting for nonfinancial managers: All the basics you need to know. Basic Books. Hartley, W.C., 2014. An introduction to business accounting for managers. Elsevier. Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.