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BM1915 BM1915 INTRODUCTION TO MANAGERIAL ACCO...

BM1915 BM1915 INTRODUCTION TO MANAGERIAL ACCOUNTING 2. To assist managers in directing and controlling operational activities 3. To motivate managers and other employees toward the organization’s goals Definition and Objectives of Managerial Accounting 4. To measure the performance of activities, subunits, managers, and other employees within the organization. Managerial accounting, also known as management accounting, is the process of identifying, measuring, 5. To assess the organization’s competitive position and work with other managers to ensure the analyzing, interpreting, and communicating information in pursuit of an organization’s goals. It is a field of organization’s long-run competitiveness in its industry. accounting that provides financial information for managers and other internal users to make sound economic decisions. Management Accounting vs. Financial Accounting Managers make decisions during the day-to-day operations of the business, and managerial accounting Accounting information should address three (3) different functions: provides information used for these decisions. To achieve the organization’s goals, it acquires resources (e.g., 1. Estimating the cost of products or services (cost accounting) funds, equipment, buildings), hires people, and then engages in an organized set of activities. The day-to-day 2. Providing financial information to external users (financial accounting) work of the management includes the following activities (Hilton & Platt, 2017): 3. Providing information to management for decision-making (management accounting). 1. Decision making Given the objectives of managerial accounting, it can be perceived that the focus in each of these objectives 2. Planning is on managers. Thus, managerial accounting focuses on the needs of the managers within the organization 3. Directing operational activities rather than the interested parties outside the organization (Hilton & Platt, 2017). On the other hand, financial 4. Controlling accounting is a field of accounting that uses accounting information for reporting to parties outside the In this regard, managerial accounting is considered an integral part of the management process because organization. knowing managerial accounting is not only for managerial accountants but also for managers, as they are all There are many similarities between managerial accounting information and financial accounting information part of the management team. With the use of the tools of managerial accounting, the organization can because they both draw upon data from an organization’s accounting system (a system of procedures, achieve its goals effectively and efficiently. personnel, and computers used to accumulate and store financial data in the organization). One part of the overall accounting system is the cost accounting system that accumulates data about the costs of producing Objectives of Management Accounting goods and services (Hilton & Platt, 2017). Managers need information about the managerial activities enumerated above. That information comes from a variety of sources like economists, financial experts, marketing and production personnel, accountants, and Cost accounting creates an overlap between financial accounting and managerial accounting. It integrates with the organization’s managerial accounting system. Managerial accounting systems supply all kinds of financial accounting by providing product costing information for financial statements. Production cost data information to management in support of management’s role in directing the organization’s activities. are also used in helping managers evaluate the pricing of different products and services (see Figure 1). Some examples of managerial accounting information which will be discussed are as follows: Classifying manufacturing and other costs and reporting them in the financial statements (cost Accounting System concepts) (one part of the organization’s management information system) Analyzing and interpreting financial statements with the use of different analytical techniques Accumulates data for use in financial and managerial accounting (financial statement analysis) Cost Accounting System Evaluating the impact of cost allocation on pricing products and services and allocating product costs (one part of the organization’s overall accounting system) Accumulates cost information using activity-based costing (activity-based costing) Estimating the behavior of costs for various levels of activity and assessing cost-volume-profit relationships (cost-volume-profit analysis) Managerial Accounting Financial Accounting Evaluating performance using cost behavior relationships (product costing / variable costing) Information for decision making, Published financial statements and Evaluating special decision-making situations by comparing differential revenues and costs directing, planning, and controlling other financial reports (differential cost analysis / relevant costing) an organization’s operations. Evaluating manufacturing costs by comparing actual with expected results (standard costing) Internal users of information External users of information Planning for the future by preparing budgets (short-term budgeting) Evaluating decentralized operations by comparing actual and budgeted costs as well as computing Figure 1. Managerial accounting, cost accounting, and financial accounting various measures of profitability (responsibility accounting, transfer pricing, pricing decisions) Source: Managerial Accounting, 2017. p. 12 Evaluating alternative proposals for long term investments in fixed assets (capital budgeting). These sets of tools and perspectives add value to an organization by supporting the following major objectives of managerial accounting: 1. To provide information for decision making and planning 01 Handout 1 *Property of STI 01 Handout 1 *Property of STI  [email protected] Page 1 of 11  [email protected] Page 2 of 11  BM1915 BM1915 Managerial Accounting Financial Accounting b. Provide all relevant information that could reasonably be expected to influence an intended user’s Users of reports Managers and other internal users Shareholders, creditors, regulators and understanding of the reports, analyses, or recommendations. (within the organization) other external users (outside the c. Report any delays or deficiencies in information, timeliness, processing, or internal controls in organization) conformance with organization policy and/or applicable law. Purpose To provide internal users with To provide external users with d. Communicate professional limitations or other constraints that would preclude responsible judgment information that may be used by information about the organization’s or successful performance of an activity. managers in carrying out the functions financial position and financial Cost Concepts, Classification, and Segregation of planning, controlling, decision- performance making, and performance evaluation When notified by a term that defines the purpose, cost becomes operational (e.g., selling cost, variable cost, Focus of reports Reports often focus on sub-units or Financial reports focus on the business etc.). The point is that different cost concepts and classification are used for different purposes. There are segments within the organization as a whole many types of costs because these costs are classified differently based on the needs of the management. Types of reports Management reports (budgets, Financial statements Definition of Terms financial projections, cost analyses, etc.) Cost – It refers to a measurement, in monetary terms, of the amount of resources used for some Regulation/Standards Optional and unregulated since it is Required and must conform to the purpose. of presentation only intended for management use generally accepted accounting Cost pool – It is an account in which a variety of similar costs are accumulated prior to allocation to Management can set its own rules in principles (GAAP), PFRS (Philippine cost objects. It is a group of costs associated with an activity (e.g., overhead account). producing information that is most Financial Reporting Standards), and Cost object – It is the intermediate and final disposition of cost pools (e.g., product, job, process). relevant to its needs PAS (Philippine Accounting Standards) Cost driver – It is a factor that causes a change in the cost pool for a particular activity. It is used as a Period covered Reports may cover any period as Reports usually cover a year, quarter, basis for cost allocation (any factor or activity that has a direct cause-effect relationship). required by the management or month Cost behavior – It describes how a cost behaves or changes as the amount of cost driver changes. Table 1. Comparison of managerial accounting and financial accounting Cost function – It is the formula to which the total cost of the firm will be computed. It is an algebraic equation used by managers to describe the relationship between a cost and its cost driver. Standard of Ethical Conduct for Management Accountants Activity – It refers to any event, action, transaction, or work sequence that incurs costs when Management accountants are responsible for complying with and upholding the standards of competence, producing a product or providing a service. confidentiality, integrity, and credibility. Failure to comply may result in disciplinary action (Institute of Relevant range – It is a range of activity that reflects the company’s normal operating range. Within Management Accountants, 2017). the relevant range, the cost behavior is valid. 1. Competence Classification of Costs a. Maintain an appropriate level of professional leadership and expertise by enhancing knowledge and 1. As to traceability (assigning costs to cost objects) skills. Direct cost – It is a cost that can be traced to a particular plant or department. b. Perform professional duties in accordance with relevant laws, regulations, and technical standards. Indirect cost – It is a cost that is not directly traceable to a particular department or sub-unit. c. Provide decision-support information and recommendations that are accurate, clear, concise, and timely. 2. As to controllability 2. Confidentiality Controllable cost – It is a cost that the manager can significantly or heavily influence its incurrence. a. Keep information confidential except when disclosure is authorized or legally required. For example, from the perspective of a department manager, controllable costs include salaries of b. Inform all relevant parties regarding the appropriate use of confidential information. Monitor to supervisors, supplies, electricity, and other similar costs that are controllable by the said department ensure compliance. manager. c. Refrain from using confidential information for unethical or illegal advantage. Uncontrollable cost – It is a cost that the manager cannot significantly or heavily influence its 3. Integrity incurrence. Examples include allocated costs that are received from other segments or departments. a. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid 3. As to functional areas in the organization to which the costs relate apparent conflicts of interest. Advise all parties of any potential conflicts of interest. Manufacturing cost – This is the cost incurred in the production of the product or service (converting b. Refrain from engaging in any conduct that would prejudice carrying out duties ethically. raw materials into finished goods) and is composed of three (3) elements: c. Abstain from engaging in or supporting any activity that might discredit the profession. o Direct materials – raw materials that become an integral part of, and is directly traceable to, d. Contribute to a positive ethical culture and place integrity of the profession above personal interests. the finished product 4. Credibility o Direct labor – consists of labor costs that can be easily traced to individual units of product. a. Communicate information fairly and objectively. o Manufacturing overhead – consists of manufacturing costs other than direct materials and direct labor 01 Handout 1 *Property of STI 01 Handout 1 *Property of STI  [email protected] Page 3 of 11  [email protected] Page 4 of 11  BM1915 BM1915 Prime cost = Direct materials + Direct labor Conversion cost = Direct labor + Manufacturing overhead Total Variable Cost Line 150 Nonmanufacturing cost – This cost is incurred in administering the operations of the business and Total cost (Pesos) 100 commercializing the product. It is commonly called operating expenses, which are charged to 50 revenues for the period. 0 o Selling costs – include all costs incurred to secure customer orders and get the finished 1 2 3 4 5 6 product to the customer Volume of Production (Units) o Administrative costs – include all costs associated with the general management of an organization rather than with manufacturing or selling. Figure 2. Total variable cost line 4. As to timing of charges to revenue in an accounting period (in preparing financial statements) ILLUSTRATION: Product cost – Also known as inventoriable cost, it is a cost assigned to goods or services until sold. ABC Expeditions is a small company that provides a daylong whitewater rafting excursion on the rivers of Product costs “attach” to a unit as it is purchased or manufactured, and they stay attached to each Palawan. The company provides all the necessary equipment and experienced tour guides and serves gourmet unit of product as long as it remains in inventory awaiting sale. When goods are sold, it will be released meals to its guests. The meals are purchased from a caterer for PHP 500 for a daylong excursion. The behavior from inventory as expenses (called cost of goods sold) matched against sales revenue. of this variable cost is shown below: Period cost – This cost is matched against revenue in the time in which it is incurred. Number of guests Cost of meals per guest Total cost of meals 5. As to relevance in decision making 200 PHP 500 100,000 Differential cost – Also known as incremental costs, it is the amount by which the cost differs under two (2) alternative actions. 400 PHP 500 200,000 Relevant cost – It is the cost incurred in one (1) alternative but will not be incurred in another 600 PHP 500 300,000 alternative. As costs are incurred in both alternatives, such costs would be irrelevant in decision- 800 PHP 500 400,000 making. Standard cost – It refers to the predetermined cost based on some reasonable basis such as past Variable cost experiences, budgeted amounts, and industry standards. It is estimated based on actual capacity. 400,000 Opportunity cost – It refers to the benefit forgone or given up when an alternative is chosen over Total costs of meals (in pesos) the other/s. For instance, if a business decides to use its building for production rather than renting 300,000 out to its tenants, the opportunity cost will be the rental income that would be earned had the 200,000 business decide to rent out the building. Sunk costs – It refers to the historical costs that will not make any difference in making a decision. 100,000 Examples include the acquisition cost of office equipment and the manufacturing costs of finished goods on hand. - 200 400 600 800 Out of pocket cost – It is a cost that requires the payment of cash or other assets in the future as Number of guests a result of their incurrence. Figure 3.Variable cost behavior 6. As to cost behavior Variable cost – Within the relevant range and time period under consideration, it is a cost that Fixed cost – Within the relevant range and time period under consideration, the total amount is changes, in total, directly proportional to changes in the level of activity (or cost driver). For constant, but the per-unit amount varies inversely or indirectly as the level of activity (or cost example, if the level of activity increases by 15%, total variable costs will increase by 15%. If the driver) changes. level of activity decreases by 20%, total variable costs will also decrease by 20%. It may also be o Committed fixed costs – It refers to the costs resulting from an organization’s structure defined as a cost that remains constant per unit in every level of activity. or the use of its facilities. Examples include property taxes, salaries of management personnel, and cost of renting facilities. o Discretionary fixed costs – It refers to the costs resulting from a management decision to spend a particular amount of money for a specific purpose. Examples include the amount of money to spend on research and development, contributions to charitable institutions, and advertising. 01 Handout 1 *Property of STI 01 Handout 1 *Property of STI  [email protected] Page 5 of 11  [email protected] Page 6 of 11  BM1915 BM1915 Within the relevant range, the aforementioned cost behavior is valid. See the information below: Fixed Cost Line Total amount Per cost driver 15 Varies proportionately Variable cost Constant Total cost (Pesos) 10 with the cost driver 5 Varies inversely with the Fixed Cost Constant 0 cost driver 1 2 3 4 5 6 Volume of Production (Units) Here is a summary of the classification of costs: Figure 4. Fixed cost line Purpose Cost Classification Examples ILLUSTRATION: Assigning costs to cost Direct (can be easily traced) Direct materials, direct labor To continue the ABC Expeditions example, assume the company rents a building for PHP 25,000 per month to objects Indirect (cannot be easily traced) Manufacturing overhead, indirect store its equipment. The total amount of rent paid is the same regardless of the number of guests the company materials, indirect labor takes on its expeditions during any given month. The concept of fixed cost is shown graphically below. As to controllability Controllable cost The controllability of a cost is Uncontrollable cost dependent on the authority assigned to a specific manager. Fixed Cost Accounting for costs in Manufacturing costs Direct materials, direct labor, Monthly rental cost (in 30,000.00 manufacturing manufacturing/factory overhead 25,000.00 companies 20,000.00 Nonmanufacturing costs Selling costs, administrative costs, pesos) 15,000.00 research and development 10,000.00 As to timing of charges Product costs (inventoriable) Direct materials, direct labor, variable 5,000.00 overhead, fixed overhead - Period costs (expensed) Administrative expenses, selling 200 400 600 800 expenses, distribution expenses Number of guests Making decisions Differential cost (differs between Variable production costs (i.e., direct alternatives) materials, direct labor, variable Figure 5. Fixed cost behavior overhead) and variable expenses Mixed Cost – This cost has both fixed and variable components. Examples include electricity, inter- Relevant cost In a decision to rent or construct an department services, water and sewage, maintenance and repairs, and employer contributions to office building, the rent expense is a government agencies. relevant cost from both alternatives Standard cost Assuming the planned or budgeted capacity is 5,000 units, the standard Chart Title unit cost is PHP20, and the actual capacity is 6,000 units. The standard 30.00 costs would be P120,000 (i.e., 6,000 x 20.00 PHP20). Opportunity cost (benefit A company is evaluating whether to 10.00 foregone) sell product A and earn PHP20,000 or sell product B and earn PHP25,000. - 1 2 3 4 5 If the company decides to sell product Variable cost Fixed cost A, its opportunity cost is PHP25,000 Figure 6. Mixed cost because it is the potential income foregone for not selling product B. Sunk cost (should be ignored) Depreciation expense Out-of-pocket cost Salaries, rent, electricity, insurance 01 Handout 1 *Property of STI 01 Handout 1 *Property of STI  [email protected] Page 7 of 11  [email protected] Page 8 of 11  BM1915 BM1915 Purpose Cost Classification Examples ILLUSTRATION: Variable costs (proportional to Direct materials, direct labor, variable ABC Expeditions is preparing a flexible budget for next year and requires a breakdown of the maintenance activity) manufacturing overhead (e.g., cost into the fixed and variable components. indirect materials, indirect labor, repairs, and supplies), variable selling The maintenance costs and machine hours are as follows: expenses (e.g., sales commissions, Maintenance costs Machine hours and delivery expenses), and variable January P15,450 1,800 administrative expenses (e.g., general February 10,720 1,166 supplies, overtime costs, and Predicting cost behavior March 15,000 1,770 communications expenses) in response to changes in April 15,840 2,190 Fixed costs (constant in total) Committed fixed cost: rent, insurance, activity May 14,900 1,702 real property taxes June 10,620 1,300 Discretionary fixed cost: advertising expense, research and development Using the high-low method of analysis, compute for the variable and fixed component. expense Electricity, inter-department services, Step 1. Find the highest and lowest activities. Mixed costs (has variable and fixed elements) water and sewage, maintenance and repairs, and employer contributions Machine Hours and Maintenance Costs to government agencies. 20,000 2,500 Table 2. Summary of cost classifications 15,000 2,000 Analysis of Mixed Costs 1,500 10,000 Classifying costs as to variable or fixed is very useful in planning and budgeting. The manager must be able to 1,000 5,000 anticipate what will happen to these costs in case of changes in activity; if a cost is expected to change, the 500 manager must know how much or up to what extent. 0 0 January February March April May June Mixed cost is composed of the total variable costs and total fixed costs. However, the variable cost is measured on a per-unit basis and the total cost will vary depending on the level of activity. In this case, the firm must Maintenance costs Machine hours develop a cost function. Figure 7. Machine hours and maintenance costs 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏𝑏𝑏 Where: Highest activity level April 2,190 machine hours Y = total costs Lowest activity level February 1,166 machine hours a = total fixed costs Note: It is the highest and lowest activity levels that need to be identified first rather than the b = variable cost per unit highest/lowest cost. The number of hours (1,166) does not correspond to the lowest cost (P10,620). x = level of activity or cost driver or the number of units produced In this case, the cost driver or activity level prevails. ILLUSTRATION: Assuming for the month of January, ABC Expeditions had 500 guests who availed of the meals during the Step 2. Calculate variable cost per unit. daylong excursions. The total cost could be determined at this level as: 𝐻𝐻𝐻𝐻𝐻𝐻ℎ𝑒𝑒𝑒𝑒𝑒𝑒 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 − 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏𝑏𝑏 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑝𝑝𝑝𝑝𝑝𝑝 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 = 𝐻𝐻𝐻𝐻𝐻𝐻ℎ𝑒𝑒𝑒𝑒𝑒𝑒 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 − 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 = 𝑃𝑃25,000 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚ℎ𝑙𝑙𝑙𝑙 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 + 𝑃𝑃500(500 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔) 𝑃𝑃15,840 − 𝑃𝑃10,720 = 𝑃𝑃25,000 + 𝑃𝑃250,000 Variable cost per unit = 2190 − 1166 = 𝑷𝑷𝑷𝑷𝑷𝑷𝑷𝑷, 𝟎𝟎𝟎𝟎𝟎𝟎 High-Low Method 𝑃𝑃5,120 Variable cost per unit = This is a cost segregation technique that is based on the premise that a change in costs is attributed to the 1,024 change in variable cost—fixed cost being assumed to be constant. The high-low method involves taking the Variable cost per unit = 𝑷𝑷𝑷𝑷. 𝟎𝟎𝟎𝟎 highest level of activity and the lowest level of activity and comparing the total costs at each level. 01 Handout 1 *Property of STI 01 Handout 1 *Property of STI  [email protected] Page 9 of 11  [email protected] Page 10 of 11  BM1915 Step 3. Calculate fixed cost. After computing for the variable cost per unit, calculate the fixed cost by subtracting the total variable cost at a specific activity level from the total cost at that activity level. 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 = 𝐻𝐻𝐻𝐻𝐻𝐻ℎ𝑒𝑒𝑒𝑒𝑒𝑒 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 − 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑝𝑝𝑝𝑝𝑝𝑝 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 (𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙) or 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 = 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 − 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑝𝑝𝑝𝑝𝑝𝑝 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 (𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑙𝑙) High Low Total cost P15,840 P 10,720 Less: Total variable cost P5 x 2,190 hours 10,950 P5 x 1,166 hours 5,830 Monthly fixed cost P4,890 P4,890 To check using the cost function: 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏𝑏𝑏 𝑃𝑃15,840 = 𝑃𝑃4,890 + 𝑃𝑃5(2190) 𝑷𝑷𝑷𝑷𝑷𝑷, 𝟖𝟖𝟖𝟖𝟖𝟖 = 𝑷𝑷𝑷𝑷𝑷𝑷, 𝟖𝟖𝟖𝟖𝟖𝟖 or 𝑃𝑃10,720 = 𝑃𝑃4,890 + 𝑃𝑃5(1,166) 𝑷𝑷𝑷𝑷𝑷𝑷, 𝟕𝟕𝟕𝟕𝟕𝟕 = 𝑷𝑷𝑷𝑷𝑷𝑷, 𝟕𝟕𝟕𝟕𝟕𝟕 Step 4. Calculate the total variable cost for new activity. Multiply the variable cost per unit (Step 2) by the activity level to compute for the total variable cost for that month. Assuming the company will be consuming 1,500 machine hours for July, the computation will be as follows: 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 = 𝑏𝑏(𝑥𝑥) = 𝑃𝑃5(1,500) = 𝑷𝑷𝑷𝑷, 𝟓𝟓𝟓𝟓𝟓𝟓 Step 5. Calculate the total cost. Add the computed total variable cost (Step 4) to the total fixed cost (Step 3). Using the cost function, the total cost at 1,500 level is: 𝑌𝑌 = 𝑃𝑃4,890 + 𝑃𝑃5(1,500) = 𝑷𝑷𝑷𝑷𝑷𝑷, 𝟑𝟑𝟑𝟑𝟑𝟑 References: Hilton, R. W., & Platt, D. E. (2017). Managerial accounting: Creating value in a dynamic business environment (11th Ed.). 2 Penn Plaza, New York, NY: McGraw Hill Education. Institute of Management Accountants. (2017). IMA Statement of Ethical Professional Practice. Retrieved, November 14, 2019, from https://www.imanet.org/-/media/b6fbeeb74d964e6c9fe654c48456e61f.ashx Weygandt, Ph.D., CPA, J. J., Kimmel, Ph.D., CPA, P. D., Kieso, Ph.D., CPA, D. E., & Aly, Ph.D., I. M. (2018). Managerial accounting: Tools for business decision-making. Canada: John Wiley & Sons, Inc. 01 Handout 1 *Property of STI  [email protected] Page 11 of 11