1. What is Profit?

How does an accountant formulate the means to arrive at maximum

profit? Compare and contrast the accountant and the economist approach to planning
profit.
Profit is a financial gain of the company through selling of goods or services. It is the
remaining revenue after the deductions of all the expenses of the company, sometimes it is
called as income. Accountant is responsible for recording of costs of the company, they deduct
all the expenses or costs that the company made to all the income or revenue that the
company gain will result to maximum profit of the company. The accountants prepare a
Financial Statements to know the profits of the company and also to track its operations while
the economist uses an optimization approach where in they determine the optimum
combination of revenue and cost.
2. What is optimization? How does it blow up the myth about profit being a result of a
mere increase-decrease interplay between cost and revenue?
Optimization is an approach that firms estimates or determines the output level and
maximizes its total profits. Optimization shows us that costs are not constant and so do
revenue. Cost does not always decrease as revenue rises. As revenue and costs increase
together at different rates, optimum combination yields maximum profit.
3. Define mark-up pricing. Comment on its reliability in any profit planning activity.
Mark-up pricing is a pricing strategy where in the price of a product or service is determined
by calculating the sum of the products and a percentage of it as a markup. I think that markup is
a good strategy in pricing because even though goods or services being offered is not in
demand, they will still have a profit.
4. What is the concept of marginalism? How does it work in the profit planning activity of a
firm?
Marginalism an economic principle that economic decisions are made and economic
behavior occurs in terms of incremental units rather than categorically. Because of marginalism
it makes it easy to know the level of inventory to keep during any given period. Also known as
“Economic Order Quantity” or “Inventory lot-size problem”.
5. What is the concept of marginal physical product? (MPP) of a production factor? How
does it aid the firm to find the right combination of its resources so as to produce the
maximum output at the least cost.
Marginal Physical Product (MPP) of a production factor is the increase in total output
brought by an increase of one unit of the factor with the other factors constant. When an
advantage is gained in a factor of production, the marginal productivity will typically diminish as
production increases, the cost advantage usually diminishes for each additional unit of output
produced.
6. Differentiate production from productivity. How can an enterprise increase its
production? Productivity?
Production is about the maximum output or how much output or goods is produce. It is
about the effectivity while the Productivity is about the efficiency of the outputs or goods that
was produced. Production is increased when the needed inputs are sufficiently present while
Productivity can only be increased when more output is produced without increasing the input.
Same output is produced with less input.
 7. One important measurement of productivity is based on the value-added concept. Give
the significance of this concept and its practical use to a business
Value-Added or also called as Contributed Value can help explain why businesses are
able to sell their goods or services for more than they cost to produced. It provides the
customer an incentive to make purchases. It also represents all of the efforts and resources the
firm contributes to final product.
8. Define the role of an accountant in cost control functions. What are the disadvantages
of having a historical cost as the sole basis for certain business decisions? Of what
specific use is historical cost to a decision maker?
Accountants provide the top management with information on how the different
divisions or sections of the firm are performing against standards. It helps the managements
or third parties to evaluate the operations of the company. The disadvantages of historical
cost, it is a poor guide in predicting the future costs. Historical Cost can only be used as a
check to other methods of forecasting.
9. What are the three (3) main categories of cost of production? Cite the significance of
studying how above costs behave against production output other factors.
The three main categories of cost of production is Direct materials wherein it is all raw
materials which form part of the finished product; direct labor refers to the salaries and wages
paid to workers who directly work on the goods being produced and last, factory overhead it is
about all the factory costs which cannot be identified distinctively as having formed part of the
product. Its significance: In order to reduce the costs of direct materials, the business may
purchase in bulk in order to avail bigger discounts in a cheaper price. In direct labor, they have a
labor-saving devices that can be useful specially in large scales productions. Factory overhead,
there’s an examination of different items that can reveal that some are fixed, others are
variable and others are semi-fixed relative to the quantity produced.
10. State the significance of the law of diminishing returns to cost analysis. What
alternatives can a full capacity firm’s take to increase production without incurring
excessive losses.
Law of diminishing returns significance to cost analysis is when a worker have reached its
peak capacity of producing, workers can be exhausted in return productions are slower which
will result in limited produced goods and it will affect the probable cost of the goods. The
company can arrive at an optimal combination by determining the prices and the marginal
physical products of its resources.