Costing

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  • Avatar of k1christopher
    k1christopher
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    I have this question to answer, but I don not know where to start.

    You have just been appointed to the position of Finance Director for a large multinational corporation. The business operates in about 20 countries around the world and has a very diverse product, service and business portfolio. Some of the businesses within the group buy from one another. You are looking at ways to maximise profits for the corporation as a whole and as such you are investigating different ways to measure the performance of individual managers who each have responsibility for one part of the portfolio. What are the advantages and disadvantages of making individual managers either:

    1) Cost Centre managers; or

    2) Profit Centre managers; or

    3) Investment Centre managers?

    Part b.

    Organisations need to know the cost of products or services they provide for a variety of decision making situations. Critically evaluate the following three approaches to costing products or services:

    1. Marginal or variable costing;

    2. Full or absorption costing;

    3. Activity Based costing (ABC).

    For each approach, identify two managerial decision making situations where that approach is more appropriate than the other two and justify why you have chosen that approach over the other two approaches in a particular decision making situation.


    Avatar of johnmoffat
    John Moffat
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    I cannot put up a full answer to all of this question for you – it would take for ever!!

    However what you need to do is read the course notes and watch the lectures (both on this website) on:
    Divisionalisation (for part (a) )

    And Activity Based Costing (for the third part of part (b).

    Marginal (or variable) costing, and absorption (or full) costing are bother Paper F2 topics and you can read up about these in the Paper F2 course notes on this website.


    Avatar of k1christopher
    k1christopher
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    Thanks so much, but are there specifics things i need to include for the part(a). I still need some two managerial decision making situations for part (b).


    Avatar of johnmoffat
    John Moffat
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    We will try and help with specific problems that you have with the syllabus for the F5 exam, but we cannot write answers for you to questions that you have to answer.


    Avatar of k1christopher
    k1christopher
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    Thanks much again

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