Cost Accounting and Management Decisions Assignment

Cost Accounting and Management finales - Assignment Example1). Management of this company believes in ranking the locomotes by the quantity of contribution circumference earned for internal decision-making purposes. They view direct labor, direct material, and the variable manufacturing overhead as product costs while fixed manufacturing overhead as goal costs (Hicks, 2002, p. 36). A major change in the companys manufacturing has been conversion of most of the plants to produce smaller cars instead of the bigger cars that are seen as fuel inefficient. In the recent past, Ford Motor Company has concentrated of doing and sell of small cars that achieve higher mileage on slight fuel. This strategy has been influenced by the desire to cut on the global air pollution, something responsible for the global warming. The current global challenges have made the company go into on manufacturing varieties of the automobiles to ensure that the costs are balanced. For this reason, managemen t has lately discouraged any drudgery of goods that do not produce adequate sales to embrace up its variable manufacturing costs (Weygandt, Kimmel andKieso, 2011, p. 23). The company has maintained the main manufacturing lines of cars, trucks, buses, tractors, and their spare parts. Fords success motorsport has been evident in their ability to manufacture resile cars, stock cars, formula one, sports cars, as well as touring cars. It is also important to note that the company has maintained its presence in all parts of the world, having concourse lines in many countries in order to serve many regions. Changes in the Variable/Fixed Cost Structure of the Company on Cost-Volume Analysis Decision by Managers First, it is important to note that fixed costs do not change as a whole but register changes per unit when production volume changes, and on the other hand, variable cost indicates constant unit cost but changes in total when a decrease or an ontogenesis in production is regist ered. Fords fixed costs may include rents for the plants and machinery while variable costs may include direct labor. This convey that fixed cost is as important as variable cost and monitoring the changing trends stands to help managers make informed decisions. World over, absorption cost is commonly used for both internal and external information in an organization. Most companies use absorption approach entirely because of its attention on overflowing costing of units of a particular product. In order to make informed choices, most managers assume that fixed manufacturing overheads directly vary in relation to the automobile units sold, something that never works (Weygandt, Kimmel andKieso, 2011, p. 103). Managers who make this mistake may assume that since costing is done per unit base, an extra manufactured should cost the same, while reality shows an additional expense. Ford Motor Company is a multinational manufacturer, employing very many employees in all the plants acros s the globe. Labor has been an important factor in ensuring that production consistency is achieved in this company. In the current economic uncertainties, managers in this company are sometimes faced with the dilemma of laying of workforce in an begin to maintain profitability. Such a decision is informed by the notion that direct labor is variable cost, something that is disputable because most of its workers are highly experienced and are under employment contracts. For this reason, any decision made by the