MANAGEMENT ACCOUNTING Essay Example | Topics and Well Written Essays - 2000 words - 2

MANAGEMENT ACCOUNTING - Essay ExampleCosting is a puissant tool that helps managers to discover the true exists of products (Ledgerwood & White 2008, p.317). Relying on the given case of the building faithful Home improvements and Extensions Ltd we can consider different reconstructive costs.A firm may incur various types of operational costs during the course of their day to day production line operations. In order to design situational business strategies and thereby fit the organizational interests into the persisting demand conditions, every corner of operational costs has to be essentially identified by a firm. concord to Truett & Truett (2008), a firm may experience different types of costs such as historical costs, opportunity costs, fixed costs, variable costs, incremental costs, private costs, and kind costs (p.223). The explanations and reasons of variations of these costs are described below with suitable examples from construction industry.Historical cost It is the cost incurred by the firm during the course of their operations for which the firm has either paid completely in the past or promised to pay in future. Historical cost is recorded in the books of accounts of the firm and is used for the supply of income statement at the end of the financial period. It includes rent and interest payments, wages and salaries to the labors, and cost of raw materials. Historical cost may vary according to the grocery demand for the services of the construction firm.Opportunity costs It is the implicit cost incurred by the firm if the business had employed to next best opportunity. Although opportunity cost is an imaginary cost, it is necessary for calculating the net income from operations. Implicit salary income to the directors and implicit interest income on capital are some of the examples for opportunity costs. It may flutter according to management strategies and