Managerial Accounting Manufacturing Company

Question :

• Select a manufacturing company and become familiar with its products. Describe the company, its products, and the specific manufacturing costs it incurs. Categorize each cost into the three manufacturing cost categories and state if the costs are variable, fixed, or mixed. Explain how you came to your conclusions.

Answer :

Portfolio Activity

Toyota Motor Corporation incurs selling cost, general cost, and administrative costs that are included in the overall cost of the organization. The selling cost of the organization includes the cost of advertisement, sales promotion, salaries and wages of salespeople, commissions, etc. (Mishra, 2018). Generally, selling cost is the cost that is incurred by the organization to persuade the potential customer of the organization to purchase the product of the organization rather than the product of the competitors. 

The general cost of Toyota Motor Corporation includes employee benefit expenses, freight outward, power and fuel, amortization, repair, and maintenance. General cost is the cost that is incurred by the organization on a day to day activities in order to produce a product. General cost is the independent cost and it is different from the cost incurred by the organization on the production of the product.

The administrative cost is also an essential cost that is necessary to understand. Toyota incurs an administrative cost in the form of building rent, insurance, office supplies, consulting expenses, etc. These are the expenses that are incurred by the organization for controlling and directing the activities of the organization (Kim et al., 2019). These are not directly identifiable with production cost, marketing cost, and finance cost. 

The overall cost of the organization includes production cost, marketing cost, finance cost, general cost, selling cost, administrative cost, etc. The organization runs in the market to make a profit. Thus, the organization can make a profit only when it makes money more than the cost incurred by the organization throughout the process of production and delivering the final product to the end-user (Walther et al., 2009). Hence, the organization sum-up its total cost that is incurred to produce a unit of the product and set the price of the product so that it can make a profit. So, the organization includes selling cost, general cost, as well as administrative cost in the total cost and then assign a price to the product that a customer pays to purchase the product.

Reflection 

The concept of cost is very important for me as it helps in understanding the production function of the organization. It is essential to understand because it is necessary for decision making related to price and output. With the help of cost analysis, I will be able to allocate various resources among different alternatives can be done easily and effectively. Learning the cost concept is also important for me to understand how the costing of a product is done. An organization incurs several types of costs on different activities. Thus, it is essential to learn different types of costs so that the cost of the organization can be categorized in different category and strategies could be developed to recover these costs. There are several costs that are hidden or unknown. Thus, if the concept of cost is not known, the organization cannot recover the hidden cost and hence it would be very tough to make a profit. Therefore, by studying the concept of cost, I will be able to better manage the resources of the organization and take strategies decision. 

References 

Kim, J. B., Lee, J. J., & Park, J. C. (2019). Internal control weakness and the asymmetrical behavior of selling, general, and administrative costs. Journal of Accounting, Auditing & Finance, 0148558X19868114.

Mishra, U. (2018). Optimizing a three-rates-of-production inventory model under market selling price and advertising cost with deteriorating items. International Journal of Management Science and Engineering Management, 13(4), 295-305.

Walther, L. M., & Skousen, C. J. (2009). Managerial and cost accounting. Bookboon.