Managerial accounting emphasizes short-term profit analysis, so the income statement is very important. Consequently, we’ll examine and discuss income statements in this first case. The assignment for this module is divided into two parts:
Use the background material and Internet to answer the questions below.
Discuss and analyze the difference between managerial and financial accounting. Pay particular attention to:
- How is managerial accounting different from financial accounting?
- Comment on the different needs and use of financial information for internal purposes.
- The managerial accounting profession and its role in today’s business environment. How has it changed over time?
- Comment on the Certified Management Accountant (CMA) designation. How is it different from the CPA certification?
You may want to complete the SLP before addressing the questions below.
- Explain the main differences between the absorption and contribution (behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.
- Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company gleam from this approach which is helpful as a tool in the decision making process.
- Explain situations in which break-even analysis can be a useful tool. Explain the break-even formula and provide a specific example using numbers for a product with which you are familiar. Reasonable estimates are adequate. Don’t forget to include the source of the information.