Essay on Exxon Mobil's Managerial Accounting: Inventory Costing & Shareholder Wealth Maximization

Introduction

Managerial accounting refers to the process of examining organization costs and operations to help communicate the financial particulars to the managers to aid in decision-making. Exxon Mobil, an energy company, keenly uses management accounting in its services to ensure the achievement of the company's goals. This paper will discuss Exxon's managerial accounting key factors and its impact on shareholder's wealth maximization (Abubakar and Yelwa 26).

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1. What inventory costing method does the company use (LIFO/FIFO, etc.)? Do you think it is appropriate?

Exxon Company uses the last-in, first-out (LIFO) method in costing its inventory. Under this method, goods and materials manufactured or acquired lately are sold first. Therefore, the technique aims to match current selling prices to current market prices resulting in gross earnings that revolve with the current margins. While prices rise, this method usually leads to lower profits. I think this method is not appropriate for Exxon Company that operates in a market with fluctuations. Exxon inventories would be estimated at $ 9700 in excess if FIFO were adopted, as reported in December 2019 (Serafeim, George, Shiva and Freiberg n.d.).

2. What are the key raw materials?

Exxon Mobil produces technologies in the energy sector that reduces carbon emissions. As a result, their primary vital raw materials are petrochemicals, plastics, and crude oil used to manufacture auto parts, electronics, and housing materials. For example, Exxon Mobil produces lightweight plastic packaging products that help in the reduction of waste and emissions.

3. Are there supply or price change risks associated with the raw materials?

Exxon's raw materials are bound to fluctuate according to market conditions. The respective impact on chemical operations is varied. In a competitive market, revenues are primarily determined by margin capture before prices of products are considered. This price depends on the global raw materials supply or price change (Abubakar and Yelwa 33).

4. What "product" costing method does the company use (Job Order/Process/Activity Based, etc.)? Do you think it is appropriate?

Exxon uses activity-based costing for product costing. This method assigns overhead and indirect costs of activities on a product cost. I think this method best works for Exxon in measuring activities, including their value, to indicate effective ways to decrease product cost.

5. What is the company's gross profit percentage?

Exxon's gross profit percentage for the fiscal year 2019 is estimated at 32.2%.

6. What is the percentage of selling and administrative expenses to revenue?

Exxon selling and administrative expenses to revenues for the year ending 2019 amounted to 4.99% representing $11,398 Million.

7. What is the company's overall profit margin?

Exxon's gross profit margin hit its five- years low in 2019, with a 30.2% overall gross profit margin (Abubakar and Yelwa 28).

Works Cited

Abubakar, Musa Yelwa, et al. "Performance Measurement and Management in the Upstream Oil and Gas Sector."IOSR Journal of Business and Management 18.08 (2016): 26-33. https://pdfs.semanticscholar.org/c6b9/371d804fa2d8a2413cbbb7ab41507c1520ae.pdf

Serafeim, George, Shiva Rajgopal, and David Freiberg. "ExxonMobil: Business as Usual? (A)." (2017): n.d https://www.hbs.edu/faculty/Pages/item.aspx?num=275