MBA FPX 5010 Assessment 2 Product Pricing Recommendation – Acme Pickle Company

Student Name

Capella University

MBA-FPX5010 Accounting Methods for Leaders

Prof. Name

Date

Managerial Versus Financial Accounting

As the financial controller and sales manager at Pickles Company, this report analyzes the company’s financial and managerial accounting practices in light of a sales offer from Super Deals Store. The offer proposes an Acme price of $9.5 per case, significantly lower than the organization’s normal selling price. The report aims to delineate the distinctions between fixed and variable production costs, providing insights for management to assess the advantages of recalculating pickle production costs. Ultimately, the report will devise a plan for the future, aiding management in evaluating Super Deals’ offers.

Why Some Production Costs Are Fixed and Some Are Variable

Costs incurred during business operations, known as expenses, are inevitable for both manufacturing and service organizations like Pickles. As a manufacturing entity, Pickles produces goods with the goal of offering value for the money spent on raw materials and selling items to customers. According to Gul (2018), organizations deal with two types of costs: fixed and variable. Variable costs fluctuate with transaction volume and production levels, including expenses, utility costs, raw materials, and employee salaries and commissions. In contrast, fixed costs, such as insurance, depreciation, property taxes, and rent, remain constant irrespective of production levels. Hence, production costs can be classified as either fixed or variable based on the nature and volume of production.

The Benefit of Recalculating the Cost of Pickle Corporation

The Super Deals store has proposed producing an additional 2000 units at a price of $9.5 per case. However, the current profit analysis reveals that this offer may result in lower profits compared to the standard selling price of $20 per case. The organization can increase production to 12,000 units without additional resources, prompting a reconsideration of its costing method. The current cost per unit fails to differentiate between variable and fixed costs. By recalculating the costs and considering the low-price offer, the company can potentially increase profits from $90,000 for 9000 units to $199,000 for 12,000 units.

Financial Versus Managerial Accounting

Pickles Company follows financial accounting methods, which differ from managerial accounting. Financial accounting focuses on collecting information to create statements like income statements, cash flow statements, and balance sheets, providing an overview for external stakeholders. Managerial accounting, on the other hand, analyzes real-time financial data to aid managers and decision-makers in making informed judgments, enhancing internal processes, and improving business plans for long-term profitability.

The Future Strategy or the Plan

The company aims to overcome current financial practice weaknesses by integrating management accounting principles. Utilizing managerial accounting alongside financial accounting will enable the preparation of timely reports, enhancing financial goals and supporting operational decisions. This dual approach is crucial for achieving sustainability and long-term profitability.

References

Belkacem, B. E. N. A. L. L. A. L., & Mohamed, P. B. Journal of Financial, Accounting and Managerial Studies.

Gao, J. (2022). Research on the Corporate Financial Transformation with Big Data Technologies. International Journal of Progressive Sciences and Technologies, 32(2), 08-12.

Gardi, B., Abdalla Hamza, P., Sabir, B. Y., Mahmood Aziz, H., Sorguli, S., Abdullah, N. N., & Al-Kake, F. (2021). Investigating the effects of financial accounting reports on managerial decision making in small and medium-sized enterprises. Bawan Yassin and Mahmood Aziz, Hassan and Sorguli, Sarhang and Abdullah, Nabaz Nawzad and Al-Kake, farhad, Investigating the Effects of Financial Accounting Reports on Managerial Decision Making in Small and Medium-sized Enterprises (April 28, 2021).

MBA FPX 5010 Assessment 2 Product Pricing Recommendation – Acme Pickle Company

Gul, F. A., Khedmati, M., Lim, E. K., & Navissi, F. (2018). Managerial ability, financial distress, and audit fees. Accounting Horizons, 32(1), 29-51.