Research Paper on:
Management Accounting and Errors Caused by Fixed Costs

Unformatted Sample Text from the Research Paper:
need, upon which decision will be based. However, like any other information tool, the quality of the decision made will represent the quality of the information that is input into  the system. One area where there is great potential for error is that of the fixed costs. These are used in the forecasts which are an important enlacement of any  management decision making model (Shumsky, 1998). Generally speaking there are two types of costs in accounting, fixed costs and variable costs. Fixed costs are those costs that will remain the  same regardless of how much is produced. For example, the cost of the building, the cost of insurance, rates and other none changing costs (Chadwick, 1998). Variable costs are the  costs that will vary directly in line with the level of production, fir example, the parts that are used in production and transportation costs. There are also some costs that  can be classified as semi variable, as they may vary, but only within set parameters, for example, labour. Now fixed costs have been defined, the next stage is to  consider how they are used in accounting as this will indicate how and why errors may manifest. The use of accounting information may be seen in the way costs are  calculated, this may be by absorption costing, marginal costing or activity based costing. In all cases there is the need to determined what the fixed costs are going to be  in the future, so that they can then be attributed to the relevant departments of goods in order to ensure that all costs are recovered. For example, in marginal  costing the product will be costed out according to the variable costs. The profit on the price attained after the variable cost is then counted as a contribution towards the