Product pricing recommendation

The cost per unit of the product can be calculated using the overall costs that were incurred during the production stages. This product pricing technique is also essential for budgeting for the small business. This report explains why some production costs are variable and other fixed, analyzes the benefits of recalculating the cost of production, how it can be recalculated, the result after recalculation, and the benefits of cost recalculation. Further, the paper will assess how financial accounting of production cost differs from managerial accounting, explain the differences between the two accounting methods, identify the benefits and drawbacks of each method, and recommend a plan of action to the management regarding Super Deals’ offer. Fixed and Variable Costs In product cost accounting, some expenditure is constant while others are variable.

In addition, recalculating product cost assists in the periodic benefits of the revenues. Based on the calculation, we have established that the price for each case is $9. This price is worthwhile because it includes all the costs incurred during the process of production. The company benefits from this analysis through enhanced profits and effective pricing of products before they are released to the market. It also forms a foundation for re-analyzing the prices. Financial accounting uses precise overhead costs. Therefore, there will be a difference in the taxes and profits on product costs determined using managerial accounting and financial accounting because of the different overhead costs used. Differences of Managerial and Financial Accounting There are numerous differences between the two major accounting techniques (Bragg, 2018).

These differences are as outlined below: - Financial Accounting Managerial Accounting Reports on the results of an entire business Reports on a more detailed level such as profit by products Reports on profitability and efficiency of a business Reports on what causes problems and how to address them Requires precise record-keeping Deals with estimates rather than proven and verifiable figures Focuses on financial reports Focuses on operational reports Advantages and Drawbacks of Financial and Managerial Accounting There are numerous advantages and disadvantages of the two accounting methods as outlined below: - Advantages Drawbacks Financial Accounting Maintains business records Records only monetary transact ions Prepares financial statements No consideration for price level changes Comparison of results No realistic information Managerial Accounting Enhances company efficiency Based on manual records Increases profitability Biased interpretation Simplifies decision making in financial statements Does not recommend particular action Assist in completion of goals Not ideal for small-scale organizations Recommendations The plan of action is ensuring that the management is capable of understanding all the major factors affecting the cost of products offered.