Question

As a management accountant, you are required to read the given two past newspaper excerpts (as given in the Presentation Information document) and discuss a general statement within that context. You will be using the knowledge and skills you have from material in Relevance of Management Accounting, Cost Types: Terms and Concepts and Cost Types: Behaviour, Drivers, and Estimation of this unit.

A brief discussion on the key concept(s) underlying the topic as it applies to the presentation task.

Answer 1

Explicit costs are out-of-pocket expenses, while implicit costs are opportunity costs. Understanding cost-volume-profit analysis is crucial to analyzing the relationship between cost and revenue in management accounting.

Step-by-step explanation:

Key Concepts: Explicit Costs, Implicit Costs, and Cost-Volume-Profit Analysis

Explicit costs are the out-of-pocket expenses incurred by a business that can easily be identified and quantified. Examples of explicit costs include wages, rent, materials, and utilities. On the other hand, implicit costs are the opportunity costs of using resources in a particular way. These costs are not reflected in the accounting records but represent the value of the next best alternative foregone.

The relationship between cost and revenue is an essential concept in management accounting. Cost-volume-profit (CVP) analysis helps businesses understand how changes in cost, volume, and selling price affect profitability. By identifying fixed costs, variable costs, and contribution margin, businesses can calculate breakeven point, target profit, and assess the impact of different business decisions on profitability.