The types of information that Murphy needs to run his business more effectively are whether the business expenditures incurred, are in accordance to the previously prepared accounting budgets. The equipment financing and maintenance taxes required to be based upon a twelve month or year format in accordance to the months when these expenses are most incurred. The information regarding the product offers made by the competitor businesses and the strategies owned by them in order to earn more revenue is also crucial. The information regarding the fact that whether the strategic solution of adding fishing and camping equipment to compensate for low seasonal sales is in real proving to be effective for business or whether it is adding to the loss incurred.
No, this statement is not at all agreeable. This is because the primary job role of an accountant revolves around the fact that they are responsible for recording the financial proceedings of the firm. Then utilizing such recorded information in the preparation of the financial statements of the firm and then in turn, analyzing such statements in order to identify the potential areas where business is doing well and most importantly the areas where business could improve. Therefore, the only reason that an accountant’s primary job is to look after the money side of business is, so that it can be understood and analyzed whether the employed techniques and strategies are in real adding up to the profitability of the firm. Thus, the statement made by the accountant is wholesomely wrong.
Murphy should much seriously engage into the preparation of budgets. Therefore, the accountant should be assigned with the task of preparation of budgets. This will help in controlling or in identifying the unnecessary or unaccounted costs that are increasing the cost of financing. Enough survey should also be done in order to get an idea about the strategies adopted by the fellow firms. The prices and other offers made by the online business stores should also be looked into. This will give Murphy an idea about the current trend that is going on in the ski equipment market. Thus, these are the actions to be undertaken by Murphy.
The straight-line depreciation of $30,000 is a fixed cost as it has to be incurred by business mandatorily. The charitable contributions of $12,000 are discretionary fixed costs as the incurrence of such cost is very dependent upon the discretion of management. The mining labor is a variable cost. The reason for such a decision has been shown below.
As it can be seen in the table, the labor cost does not contain any fixed cost. Thus, it is a variable cost.
The trucking and hauling costs are step-fixed cost as these are the costs are ranged, as mentioned in the case study.
In order to understand whether the hauling of 1500 tonnes in respect to OML’s trucking/hauling cost is cost effective or not, the following table has been prepared.
As it can be understood from the above table, the trucking or hauling cost for 1500 tonnes reflect per unit cost of $187. However, when the total materials to be transported are reduced by 1 ton that is 1499 tonnes, the cost per unit becomes $160. Therefore, as it is apparent from the table a variance of one ton results in the reduction of cost by $27. Therefore, as it can be deduced from the analysis the hauling of 1500 tonnes is not at all cost effective. It might be further recommended that in order to improve the cost effectiveness of the company, the fixing of the hauling amount somewhere between the ranges of 1800 to 1900 tonnes would prove to be cost effective for business (Banker et al., 2014).
A Discretionary Fixed Cost is a cost that is expended for a specific time regulated cost. This means that it is incurred for a fixed asset or any other period specific cost that can be removed or eliminated without having it affect the profitability of business. An example of a discretionary fixed cost is advertisement campaign.
A committed cost on the other hand refers to the cost that has to be incurred by business over a certain time-period. Committed costs are the costs that mandatorily will obligate business and removal of such costs will definitely affect its profitability. The example of a committed cost is lease on an office building (Holzhacker, Krishnan and Mahlendorf, 2015).
Banker, R.D., Byzalov, D., Ciftci, M. and Mashruwala, R., 2014. The moderating effect of prior sales changes on asymmetric cost behavior. Journal of Management Accounting Research, 26(2), pp.221-242.
Holzhacker, M., Krishnan, R. and Mahlendorf, M.D., 2015. The impact of changes in regulation on cost behavior. Contemporary Accounting Research, 32(2), pp.534-566.