Module 3 Case Assignment Example | Topics and Well Written Essays - 750 words

Module 3 Case - Assignment Exampleal Production monetary value 3,100,000 Total Production Units 50,000 Production Cost Per Unit 62 Performance for the 2nd Quarter As far as the improvements are con expressionred for the 2nd quarter, the sagaciousness for Mr. Rosen is not under right direction. The information that they had provided, gives the same amount of net income under both onslaughtes. Sales are same for both these approaches. However, the costing side is affected by these two approaches such that the cost are broken up on different methods under the two approaches. For instance, under absorption costing, costs are divided into two main categories which are 1) costs directly attributable to units sold, and 2) costs which are not directly related to the manufacturing process (Jordan and Harris, 2008). Conversely, if region margin costing approach is taken into consideration, the overall costs of the company are divided into 1) variable cost, and 2) fixed cost. Variable costs are the ones which increases of decreases with the subprogram of units sold but remain constant on per unit basis. However, fixed costs are the ones that remain same regardless of the number of units sold, but for a certain capacity (Kinney and Raiborn, 2009). Cumulatively, the net effect of these two approaches has found to be the same under the given information. However, the breakup of the costs under both approaches mountain be observed in a distinct manner. The second quarter performance for the division is same because number of units sold is same as the pass away year. Although, the overall production cost has been increased because of increasing the number of units, but since the sales units are the same, therefore production cost pertaining to units that are actually sold, has been taken into account which has caused the same result for both approaches under both quarters. Suggestion on Appropriate Reporting System From the given information, there are fewer suggestion s to be made. The clear difference between absorption and marginal costing approach can only be observed clearly if there is encompassing information provided especially regarding the level of inventory. In that case, it would be a rather better approach to make a clear point regarding which costing approach provides the better results. For better results, Mr. Roses is advised to not only increase the production units but also increase the sales volume as well. This will avow better performance rather than focusing on the reporting approach to demonstrate better results which is not more than a complacent view. Shortcomings of Absorption cost Approach There are various shortcomings of absorption costing as a method of internal