ACC203 Management Accounting Proof Reading Services

ACC203 Management Accounting OZ Assignments

ACC203 Management Accounting Proof Reading Services

Introduction:

This assignment relates to various costing techniques and segments. There are different scenarios for management information systems, cost behaviour, operation costing and analysis of the cost of goods sold. There is a thorough analysis of the management information required for improving business productivity. Further, there will be an analysis of high-low cost method and lastly, the application of over and underapplied overhead cost. Thus, there is a thorough analysis of costing techniques and tools.

Question 1:

1 Describe the types of information that Murphy needs to run his business more effectively.

Murphy business has grown tremendously and is also operating through varied product types. The product chains included ski equipment’s, fishing equipment, and camping equipment. Despite such growth and expansion, Murphy was facing a number of issues which includes:

1.Increase level of inventory has reduced the income or cash balances with the company.

2.The competition has arisen to great level due to the internet and online purchases. Customers are increasingly purchasing through online.

3.The organisation was not selling quality products and was also not able to sell reliable, relevant and accurate products in terms of prices (Whitecotton, et. al., 2013).

Types of information required:  

Accounting information: The organisation has invested and blocked a huge amount of inventory which has left with reduced low cash level and raised liquidity problems. Murphy must install inventory management system (like EOQ) and must reduce its cost (Whitecotton, et. al., 2013).  

Management accounting information: Apart from financial and accounting information, Murphy’s need to know the information through management systems likes price-optimising information and inventory management system. It must get better quality products and also assess the reactions of customers at different prices (Whitecotton, et. al., 2013).  

Internet marketing information: As far as marketing information is concerned, the organisation must go through the varied internet marketing techniques such pay per click, SEO, organisation website etc. These will be aid the organisation in enhancing the sales for the organisation (Whitecotton, et. al., 2013).  

2 Murphy approaches the accountant to seek her help in gathering and analysing this information, but she responds: ‘You must be joking—I'm an accountant. My job is to look after the money side of the business!’ Do you agree with this statement?

Yes, I agree with the statement. Financial accountants are professionals who record, collect, analyse and interpret the financial information of the organisation. These professionals do not consider other non-financial information (Warren, et. al., 2013).

Therefore, organisations employ management accountant who is professional partners and assess financial and non-financial information for improving the productivity of an organisation. Management accountant installs various management systems such as cost accounting system, inventory management system, price optimising systems and prepares reports like cost and sales variances, budget reports, investment appraisal reports etc. they also implement number of operational techniques and planning tools which analyses the situation (both internally and externally) and aid ineffective decision making (Drury, 2013).

3 What actions would you recommend that Murphy takes?

The following are the recommendations which can be given to Murphy’s organisation.

1.Murphy must install inventory management system for keeping a proper record of inventory flows. The inventory flow must be maintained so as to avoid obsoletes and excess blockage of funds in inventory. This system would also aid in reducing the cost expenditure over the inventory.

2.It must also install a system to check and improve the quality of its suppliers and products.

3.The organisation must also go with the internet marketing for promoting its supplies and products. It can use the techniques like SEO and pay per click. These techniques will help the organisation to promote its products and increase customer trustworthiness and reliance (Drury, 2013).

ACC203 Management Accounting OZ Assignments

Question 2:

1.Assuming that royalties are a semi-variable cost, classify each of the other four costs listed above in terms of their behaviour.

Type of costs

Behaviour of cost

Royalties

Semi variable cost (as provided)

Mining labour (on costs)

Variable

Trucking and hauling cost 

Step fixed cost

Straight line depreciation

Committed Fixed cost

Charitable contribution

Discretionary fixed cost

Particulars

 Particulars

Mining labour cost

Lower units

1400

315000

Higher units

2700

607500

Increment cost

(607,500-315,000)

292500

Increment units

(2700-1400)

1300

Per unit variable cost

(292,500/1300)

225 per unit

2 Calculate the total cost for next February when 1650 tonnes of ore is expected to be extracted.

Total cost in February (1650 ton)

Particulars

 

Amount

Straight line depreciation

 

30000

Charitable contribution

 

 12000

Mining labour

1650*225

371250

Royalties

49000+(65*1650)

156250

Trucking and hauling

 

280000

Total cost

 

849500

Note:

Royalties calculation

Lower units

 

1400

Higher unit

 

2700

Cost at lower unit

 

140000

Cost at higher unit

 

224,500

Increment unit

2700-1400

1300

Increment cost

224500-140000

84,500

Variable cost per unit

84500/1300

65

Fixed cost calculations at 2700 units

 

 

Total cost

 

224,500

Variable cost

2700*65

175500

Fixed cost

 

49,000

It is assumed that the company has paid the charitable contribution as well. Since it is a discretionary cost.

3 Comment on the cost-effectiveness of hauling 1500 tonnes with respect to OML's trucking/hauling cost. Can the company's cost-effectiveness be improved? How?

Hauling cost

less 1500

240000

 

1500-1899

280000

40000

1900-2299

320000

40000

2300-2699

360000

40000

The hauling cost is the step fixed cost which remains same in certain brackets but once thresholds crossed; there is a sudden increase in the hauling cost. As provided in the scenario, from the production of 1499 units to 1500 units (just increment of 1 ton) will increase the costing by 40,000. This shows that the organisation will have to quite careful in deciding production capacity.

It can improve its cost-effectiveness through cost-cutting. It can reduce its labour cost by either reducing payment or salaries to employees or can also reduce the number of employees and such other like measures can be implemented (Marshall, 2016).

4 Distinguish between committed and discretionary fixed costs. If OML were to experience severe?

Fixed cost can be ascertained as the cost which is incurred irrespective of the production capacity. This cost is unavoidable and hence, an organisation must recover its fixed cost in order to safeguard itself from shutting down/ close down of business. It can be classified into two costs namely, discretionary fixed cost and committed fixed cost (Fisher, and Krumwiede, 2012).

Basis of distinction

Committed fixed cost

Discretionary fixed cost

Meaning

  1. Committed fixed is a fixed cost which involves certain contractual obligation and cannot be avoided until payment of penalties or serious litigations.

 

  1. It is a fixed cost which is incurred at the discretion of management and

Legal mandating

  1. It is legally mandated to pay such cost.
  1. It does not legally bind the organisation.

Examples

  1. Examples of committed fixed cost are rent, legal settlement payments, straight line depreciation cost.  

 

  1. Examples are training provided to employees, research and development cost, advertisement cost etc. (Huang, et. al., 2012)

If OML faces severe funds difficulties, it can eliminate or avoid its discretionary cost which is “charitable contribution cost” but it cannot eliminate the committed cost which will be incurred even if no operations are carried on (Huang, et. al., 2012).

Question 3:

1 Draw a diagram depicting the Division's batch manufacturing process, using text boxes and arrows.

ACC203 Management Accounting OZ Assignments

2 Calculate the November product cost for each type of basketball.

Batch P25 (Professional basketball)

Direct material cost

19,000

Packaging material cost

1,000

Preparation department (10*1000)

10,000

Finishing department (7*1000)

7,000

Packaging department (1*1000)

1,000

Total product cost

38,000

Batch S33 (Scholastic basketball)

Direct material cost

30,000

Preparation department (10*3000)

30,000

Finishing department (7*3000)

21,000

Packaging department (1*3000)

3,000

Total product cost

84,000

3  Prepare journal entries to record the cost flows during November.

Journal entry for Batch P25:

1.Raw materials inventory a/c Dr.         20,000

            To cash account a/c                                         20,0000

2.Work in process a/c    Dr.                    20,0000

            To Raw materials inventory a/c                      20,000

              (for batch P25)

Journal entry for Batch S33:

1.Raw material inventory a/c Dr.             30,000

            To Cash account a/c                                              30,000

2.Work in process a/c Dr.                       20,000

            To Raw materials inventory a/c                           20,000

                (for batch S33)

Question 4:

1  Calculate the cost of goods manufactured for February.

COGS for the month of February:

Particulars

Amount (in $)

Direct material

26000

Direct labour cost

20000

Manufacturing overhead incurred

32000

COGS

78,000

2 Calculate the amount of over applied or under applied overhead to be close to the cost of goods sold on 28 February.

Calculation of over applied or under applied

Jobs of BS 67 and TR 29

Particulars

Amount

(in $)

Direct material

23200

Direct labour cost

18200

Manufacturing overhead applied

27300

Total

68700

Job GT108

Particulars

Amount

(in $)

Direct material

2800

Direct labour cost

1800

Manufacturing overhead applied

2700

Total

7300

Total over or under applied cost to COGS

Manu over for BS 67 and TR 29

2700

Manu over for Job GT108

27300

Total manufacturing applied cost

30000

Actual incurred

32000

Under applied

-2000

This is a case of under applied as in accordance with estimation through 150% of direct labour cost. The actual cost incurred arrived at 32,000 while only 30,000 was applied, thus, this is a case of underapplied and hence, it will be     

3.Prepare journal entries to record the events described in requirements 1 and 2.

 

Particular

Debit

Credit

1

Cost of goods sold a/c            Dr.

$78000

 

 

              To inventory a/c

 

$78000

 

 

 

 

2

Cost of Goods sold a/c           Dr.

$2000

 

 

     To Manufacturing overhead a/c

 

$2000

 

(for job BS 67 , TR 29 and GT 108 manufacturing overhead are under applied)

 

 

Conclusion:

From the entire assignment, it can be concluded that management and financial accounting are vital topic for understanding and resolving business problems. The high low method of costing is a useful method for analysing the fixed and variable cost. Operation costing is another costing method for distinguishing two different batches. Lastly, there is an analysis of products costs and manufacturing overheads.

References:  

1.Drury, C., 2013. Costing: an introduction. Springer.

2.Drury, C.M., 2013. Management and cost accounting. Springer.

3.Fisher, J.G. and Krumwiede, K., 2012. Product costing systems: Finding the right approach. Journal of Corporate Accounting & Finance, 23(3), pp.43-51.

4.Huang, H.C., Lai, M.C., Kao, M.C. and Chen, Y.C., 2012. Target costing, business model innovation, and firm performance: An empirical analysis of Chinese firms. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l'Administration, 29(4), pp.322-335.

5.Marshall, D., 2016. Accounting: What the numbers mean. McGraw-Hill Higher Education.

6.Plank, P., 2017. Introduction. In Price and Product-Mix Decisions Under Different Cost Systems (pp. 1-5). Springer Gabler, Wiesbaden.

7.Warren, C.S., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage Learning.

8.Whitecotton, S., Libby, R. and Phillips, F., 2013. Managerial accounting. McGraw-Hill Higher Education.