MANAGEMENT ACCOUNTING

Management Accounting



Management Accounting

Answer 1

It was important for Michael Woods to stipulate his four criteria for the business because it gave him the general guideline in stating up his own business. Since, it was mentioned in the initial paragraphs of the case study that Michael was disappointed for not securing the job in his respective field; the idea of starting up his own business was a good idea under such situation. The reason because of which he would have stated a goal of net income of $25000 was to convey a bright future for his business. In many cases, any individual who looks to start his own business always aims for a high objective that can turn out to be an important motivating factor for his business. This also provides an opportunity to the entrepreneur in setting up the goals and objectives of the business in a proper manner (Feltham, 1995, 731).

This is a common practice for any businessman to have a plan before starting their business. They can simply not just start their business without having any specific plan. It is not a very wise idea for any new entrepreneur. The creation of stipulations by having the four objectives made it easier for Woods to have a perfect plan for his business. It created an ideal opportunity for him to make a suitable strategy for starting his own business. The absence of such goals would have created a negative impact on his idea of setting up a business. This would have also made him of not having any sort of vision and mission for this business which is certainly not acceptable for any businessman. These issues do matter and cannot be taken lightly under any circumstances. The idea of keeping a certain amount also helps the investors in making the right decision for their business. Therefore, these are the reasons that made Woods to create four options for setting up a business (Penman, 2002, 264).

Answer 2 SWEATS GALORE

High Low Method-Maintenance

Maintenance Units

Cost

September (High Activity Level)

8,000

$1,914.00

January (Low Activity Level)

2,000

$1,716.00

Difference

6000

$198.00

Fixed cost per Unit (Cost/Unit)

$0.033

This category referred to the high low method for maintenance calculations. The calculations comprised of September period and the maintenance units were 8000. The cost per unit was calculated as $1914. The productions of the units were totally dependent on the high level activity. The production units were much lower in the month of September ...