Explain the terms break-even point and margin of safety as used in cost-volume-profit (CVP) analysis in short term decision marking. b) Kack Ltd is a company which uses cost-volume-profit analysis for planning and control decisions. You have been given the following information for the just ended operational period: Total revenue GH¢3,600,000 The annual total cost GH¢3,510,000 Variable cost GH¢2,700,000 Required: As the Management Accountant, calculate the following for the use of management in decision making for the forthcoming period: i) Variable cost/sales ratio. (1 mark) ii) Contribution/sales (C/S) ratio. iii) Break-even sales (in value). ( iv) Margin of safety (in value). (1 mark)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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