International Management Accounting and Control

In: Business and Management

Submitted By netsayi
Words 3117
Pages 13
University of Zimbabwe
Faculty of Commerce
Department of Accountancy and Business Studies



Name Gweme .J. Netsayi

Manufacturing Industry
With reference to the manufacturing industry critically review the academic literature and identify conflicting perspectives on the following costs and cost behaviours, select an appropriate ;;approach and justify your choice. a) The definition of fixed overhead and relevant range and the short-run and long-run behaviour of fixed overhead.

Fixed overhead is the cost of manufacturing that does not change with volume but changes with passage of time or much higher quantity .it is fixed for a certain defined relevant range I n the short run but will change in long run. De Costa (1996) describes fixed costs as those costs which volume can be spread and identifies equipment and plant as limiting factors of production. When volume increase fixed costs remain unchanged up to a certain point that is the level accommodated by the available plant and equipment .Edwards J. D (1965)on the other hand gives two perspectives on fixed costs where direct costing treats fixed costs as period costs and are excluded from product costs. He goes on to note that depreciation is assumed fixed by direct costing but in the long run it is variable. The other perspectives noted by accounts who just measure and match revenue and expenses hence the definition and classification of fixed costs is the same in the long run . Ali Fekrat M(1972)explains that the division of costs into fixed and variable makes sense in the short run. He goeson to explain the two viewsof accounts and microeconomics whobndefine factors of production and services yielded by those factors. He echoes the same sentiments as above about direct costing and fixed…...

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