MBA FPX 5010 Assessment 2

Financial vs. Managerial Accounting Financial Accounting 

Financial accounting reflects the overall financial position of the firm. Financial accounting is primarily prepared for use by outside users such as investors, shareholders, and banks. They take their decisions on the basis of this report. These will be weekly, monthly, quarterly, or annually. These will be needed to adhere to Generally Accepted Accounting Principles (GAAP) and those laid down by the Financial Accounting Standards Board (FASB).

Accounting Standards Board (FASB)

MBA FPX 5010 Assessment 2:Managerial Accounting

On the other hand, managerial accounting focuses more on the in-house function of an organization and is likely to focus on specific operating units of the company (Marshall, McManus, & Viele, 2017). Managerial accounting data is used by in-house personnel to decide on production and operational process operations. Managerial accounting reports could also be prepared on a day-to-day basis, weekly, monthly, or yearly but do not have to follow any kind of report requirements.

 Acme Pickle Company: Production Analysis 

Acme Pickle Company currently produces 9,000 units, which sell for $20.00 each. The cost per unit is calculated at $10.00. Acme is considering an offer to produce 2,000 additional units at a significantly lower price. Of note, the company can increase production to 12,000 units without new equipment or personnel. The company does not yet separate fixed and variable costs in calculating profit margins.

Variable vs. Fixed Costs

Variable Costs 

Variable costs change proportionally with the level of production (Wilkinson, 2013). In the case of Acme Pickle Company, some of these are cucumbers, spices, vinegar, jars, lids, and direct labor that is paid on a per-case basis.

Fixed Costs

However, fixed costs remain constant despite the level of production (Wilkinson, 2013). Acme’s fixed costs include line supervisors’ salaries, factory depreciation, property taxes, and insurance.

Profit Analysis: 9,000 vs. 11,000 Cases 

By manufacturing the extra 2,000 units, Acme Pickle Company can raise its profit to $94,337 from $90,000 even with the reduced price for the additional units.

Plan of Action

The ultimate goal for Acme Pickle Company is to attain the maximum profit. Managerial accounting will play a crucial role in setting the financial objectives and making sound operating decisions to achieve desired outcomes in financial accounting.