Managerial accounting and finance Essay Example | Topics and Well Written Essays - 2000 words - 1

Managerial accounting and finance - Essay Example which requires the depreciable period to begin from when equipment is available for use to the period when it is derecognized (International Accounting Standards  Board 2003), the depreciation in the given case has been accounted for four months. Besides, on the basis of the fact that extra use of production line for two more months would reduce its scrap value, one can analogize that the production line would not be as ‘good’ as a new machine even in four months and thus should be depreciated month-wise. The annual salary of production staff is decomposed into monthly salary given that salary will be paid to them up till the month when they are sacked. [That’s why the union might have negotiated notice payments for the staff as they would be loosing the salaries on the remaining months of the year when they will be sacked]. Committed fixed costs are assumed as those expenses, such as electricity charges, which are incurred on monthly basis and so the annual fixed cost in decomposed into monthly fixed cost and is taken up till the period of production in the industrial unit. Rent expense, committed fixed cost, and salary expense for initial four months and variable cost of initial 500 units is also considered as sunk cost since these costs have been incurred before taking any step with respect to any of the two options. All the incremental figures are incremental in comparison with the figures incurred before considering either of the deal. That is, each of the two deals is analyzed in incremental form as compared to the cost incurred before going for any of these two options; its not like that incremental figures of one deal are expressed as incremental in comparison with the base figures of either deal. Instead the initial figures are expressed as base figures for each of the deals. This is meant to smoothly compare each deal from the initial situation separately and then comparing the incremental results of each. Facing with the severe cost of writing