Task Team of FUNDAMENTAL ACCOUNTINGSchool of Business, Sun Yat-sen University
Lesson NotesLesson 14 Managerial Accounting: ApplicationsLearning objectives
Describe segmented reporting and responsibility accounting system2.
Explain the main aspects of Cost-volume-profit analysis3.
Analyze budgeting and budgetary control4.
Describe standard costs and variance analysis5.
Explain the use of managerial accounting in decision making
Students major in accounting 0 hoursOther students 6 hours
Let’s look at the XYZ Company exa
A manager at XYZ Company wants to replace anold machine with a new, more efficient machine. New machine:List price 900000Annual variable expenses 800000Expected life in years 5Old machine:Original cost 720000Remaining book value 600000Disposal value now 150000Annual variable expenses 1000000Remaining life in years 5
XYZ’s sales are $2000000 per year.
Fixed expenses, other than amortization, are $700000 per year. Should the manager purchase the new machine? The manager recommends that thecompany not purchase the new machine since disposal of the old machine would result in a loss:Remaining book value 600000Disposal value -150000Lossfrom disposal 450000
1Is it correct?2
What’s your comment to the manager’s decision?
After learning this chapter, you will know how to employ the tools of managerial accountingand make decisions correctly.
Segmented Reporting and Responsibility Accounting Systems
Organizations may break down their operations into various segments,such as divisions, stores, services, or departments. Thus, management needs reports on each