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Fixed Cost is constant up to 350,000 units and then doubles to 2000,000 up to 800000 units and thereafter increases to 5000,000.
Variable Cost dips from 30 to 15 when 400000 units are produced and increases to 17 when the production increases to 900000
Total Cost per unit is lowest at 17.50 per unit when 800,000 units are produced. It increases thereafter owing to increase in FC.
The best price is 79 per unit at 400,000 units which also results in highest profit of 59 per unit at 400,000 units
ii. From the chart it is evident that though per unit profit is highest at 400000 units, but it is not the best strategy. This clearly defines the role of strategic management accounting / accountant
iii. Scenario 1: When Fixed Cost is incurred once every year
The firm should produce 1000,000 units and sell at 50 to maximize profits.
Scenario 2: When Fixed Cost is a Capex and would be incurred only once in many years
Case 1: If the firm has sufficient liquidity, then it should produce 800,000 units
Case 2: If the firm has somewhat tight liquidity, then it should produce 400,000 units
Practitioners of management accounting and financial management have an obligation to the public, their profession, the organization they serve, and themselves, to maintain the highest standards of ethical conduct. In recognition of this obligation, the Institute of Management Accountants has promulgated the specific standards of ethical conduct for practitioners of management accounting and financial management. Adherence to these standards, both domestically and internationally, is integral to achieving the Objectives of Management Accounting. Practitioners of management accounting and financial management shall not commit acts contrary to these standards nor shall they condone the commission of such acts by others within their organizations (Strategic Finance, 1999).
Ruth wants to sell materials to the Cake4u corporation. Hence, to get the deal done, she is trying to pay a bribe to me, the management account of the firm. It is difficult to see what Black has done which libertarian law should consider as illegal. If I accept the indirect bribe by Ruth, I would be breaking the Standards of Ethical Conduct for Management Accountants. The dishonest action here is exclusively the fault of me, the potential taker of the bribe (if taken). As a management accountant, my service contract with my company as well as the Management Accounting Professional Body, to which I am a member, unconditionally necessitate me to always act ethically and to the best of my ability in the interests of my firm.
However, I would infringe my contract with the Cake4U firm by not acting as their proper agent: since of the bribe I took from an individual representing an organization which I would not have dealt with otherwise. In whichever case, I would breach my contract and act un-ethically against my employers, if I took Ruth's bribe.
It can be said that in the case of bribes, consequently, there is nothing unlawful about Ruth's actions, but there is much that is illegal about me (taker of the bribe, if I do go ahead and accept Ruth's offer. Some people are inclined to have the view that the bribe giver acts as by some means more guilty, as in some way corrupting the taker. Hence, they reject the free will and the accountability of each person for his/her own actions.
Accounting bodies has issue standards of ethical conduct for managerial accountants. Managerial accountants must maintain competence, confidentiality, integrity, and objectivity. The steps that accountants can take to resolve ethical conflicts include following the policies of the organization in dealing with ethical issues, discussing the issue with a superior, and having a confidential discussion with an objective advisor. Accountants may need to resign if they cannot resolve the conflict after using all of the levels of internal review (Institute of Management Accountants, 1991).
It can be said that all goals/aims are filtered by our own values. If somebody is obsessed with self-indulgence alone then ethics may not be considered. though, that individual will still be required to think about timescale. If one takes the short term argument, a manager may put off repairs on equipment so that it can carry on to create but not have the outlay of the repairs. Thus, increasing profits or the bottom-line in that accounting period. However, what about a scenario if doing so causes permanent damage to the equipment, and that would imply that the equipment would in future have to be replaced several years earlier than what would have been the case. Hence, it is fair to say that in the long term the firm's profit is reduced even though increase in profits it was enjoyed by the firm in the short term.
Hence, even somebody who does not value ethical conduct should alter their idea of what the maximum and adequate profit is in the short term giving due contemplation to the long-term.
It can be said that when someone's values mean that they bring ethical conduct into the equation one is required to plan for the price of acting in a different way. This implies that the maximum profit attainable from un-ethical conduct will frequently in the short term be lower than from behaving ethically. Nevertheless, in the long term the profits may be more.
Take the example of banks and their acts in the recent past. The hunt for maximum profits directed them to act unethically in lend to public who were never going to able to pay back the loan. A custom of large bonuses fueled this actions and the populace never thought that the growth would ever cease to end.
In my view, the bankers/ regulators / politicians who thought that profit maximization, devoid of any other deliberation, was a good thing should be ashamed of themselves.
Acts of manipulation of accounting data and financial numbers by managers, typically contained by the letter of the law and accounting standards, however, very much in opposition to their spirit and certainly not providing the true and fair view of a corporations by managers, who are supposed to do so.
A characteristic plan of creative accounting/window dressing/account manipulation will be to blow up profit figures. Certain firms may also decrease reported profits in excellent years to flatten results over time. Assets and liabilities figures may also be influenced by managers un-professional conduct, either to stay within confines such as debt covenants, or to conceal specific problems the firm might be facing.
Distinctive creative accounting/window dressing/account manipulation by managers comprise off balance sheet financing, inflating revenue figures and deflating costs etc to show more profits.
The methods of creative accounting/window dressing/account manipulation by managers change over time. However, the incentives of managers to do so remains constant over time. Managers incentives are primarily monetary gains or professional/career growths by show-casing their companies in a good light. Hence, it can be said that that as accounting standards change over time, the methodology used by managers for manipulating accounting data in un-ethical ways to increase profits will change. A lot of modifications in accounting standards are supposed to stop meticulous ways of manipulating accounts, which implies managers try to find new creative accounting/window dressing/account manipulation techniques. However, manipulation of accounts by managers is not an ethical practice, and external auditors and government bodies to curtain any such un-ethical and un-professional practice by managers.