Management Accounting Information Analysis

This assignment focuses on analyzing management accounting information. Students need to analyze an Income Statement for July and August, calculating percentage changes for key figures. They then calculate the Overhead Recovery Rate based on budgeted fixed and variable costs. Finally, students are asked to reflect on their learning from the 'course W - Provide management accounting information' and how it benefits their role as a bookkeeper. The assignment also includes a feedback section for self-evaluation.

Provide Management Accounting Information
This course is based on the nationally recognised unit of competency:
● FNSACC507 Provide Management Accounting Information
It covers the skills and knowledge required to prepare, document and
manage budgets and forecasts, and encompasses forecasting estimates
and monitoring budgeted outcomes.
ASSESSMENT WORKBOOK
Participant Name:
Learner ID/Username:

Assessment Workbook W: Provide Management Accounting Information
Assessment Workbook W
Provide Management Accounting Information
V1.0
Produced 1 February 2016
Copyright © 2016
All rights reserved. No part of this publication maybe reproduced or distributed in any form or by
any means, or stored in a database or retrieval system other than pursuant to the terms of the
Copyright Act 1968 (Commonwealth).
Date Summary of Modifications
Made
Version
1/02/16 Version 1 produced following
assessment validation
V1.0
Page 1

Assessment Workbook W: Provide Management Accounting Information
Page 2

Assessment Workbook W: Provide Management Accounting Information
Getting Started
Instructions
There is one (1) workbook for this unit and it contains one (1) assessment
made up of:
● Written Questions – A set of generic questions testing the student’s
general knowledge and understanding of the general theory behind
the unit.
● Exercises - A set of exercises to test the student’s knowledge,
analytical skills in problem solving and performing numerical
calculations.
● Case Study – A hypothetical exercise to test the student’s knowledge,
analytical skills in problem solving and performing numerical
calculations.
The following questions are divided into the following categories.
The first part of the assessment covers generic underpinning knowledge of
tax law and concepts. These questions are all in a short answer format. The
longer questions requiring creative thought processes are covered in the
second part of the assessment and the case study and involve the
calculation of tax transactions. You must answer all questions using your
own words. However you may reference your learner guide, the PMBOK
guide and other online or hard copy resources to complete this
assessment.
The second part of the assessment covers exercises relating to the
calculation and processing of taxation information. Ideally you should be
able to answer these questions based on the processes that are currently
in place in your workplace. If this is not the case, then answer the
questions based on processes that should be implemented in your
workplace.
The final part of the assessment is based on a case study involving the
completion of a tax return for an individual.
Requirements for satisfactory completion
Page 3

Assessment Workbook W: Provide Management Accounting Information
For a ‘satisfactory’ result for each component of this workbook, all tasks
must be addressed to a ‘satisfactory’ standard. It is important you;
1. Provide responses using complete sentences, making direct
reference to the question.
2. Specifically address all parts of the question providing examples
where appropriate.
Competency Based Assessment
Competency based assessment focuses on whether you are able to
perform the task to the standard expected in the workplace. It relies on
you providing evidence that supports your claim of competence. This
evidence is in the form of your completion of the assessments set for each
unit.
Once you have submitted your completed assessments, your instructor will
assess your submission to determine your competence. To be deemed
competent in each course, you are required to achieve a satisfactory result
for all of the assessment components that make up that unit. Where a ‘not
yet satisfactory’ judgement is made, you will be given guidance on steps to
take to improve your performance and provided the opportunity to re-
submit evidence to demonstrate competence. Once a ‘satisfactory’
judgement has been made on all components for a unit, you will be
deemed ‘competent’ in that unit.
Submission
Only submit your workbook once all activities inside are complete. Should
you have any questions regarding your assessments, or not understand
what is required for you to complete your assessment, please feel free to
ask your instructor.
Keep your answers succinct and make sure you are answering the
question. Re-read the question after you have drafted up your response
just to be sure you have covered all that is needed.
Your final assessment result will either be ‘Competent’ or ‘Not Yet
Competent’.
When submitting your assessments please ensure that
1. All assessment tasks within the workbook have been completed
Page 4

Assessment Workbook W: Provide Management Accounting Information
2. You have proof read your assessment
Candidate Declaration
Submission of this workbook means you agree to abide by the terms of the
candidate declaration below.
By submitting this work, I declare that:
● I have been advised of the assessment requirements, have been
made aware of my rights and responsibilities as an assessment
candidate, and choose to be assessed at this time.
● I am aware that there is a limit to the number of submissions that I
can make for each assessment and I am submitting all documents
required to complete this Assessment Workbook.
● I have organised and named the files I am submitting according to
the instructions provided and I am aware that my assessor will not
assess work that cannot be clearly identified and may request the
work be resubmitted according to the correct process.
● This work is my own and contains no material written by another
person except where due reference is made. I am aware that a false
declaration may lead to the withdrawal of a qualification or
statement of attainment.
● I am aware that there is a policy of checking the validity of
qualifications that I submit as evidence as well as the
qualifications/evidence of parties who verify my performance or
observable skills. I give my consent to contact these parties for
verification purposes.
Page 5

Assessment Workbook W: Provide Management Accounting Information
Written Questions
Instructions
The following assessment is divided into three (3) categories.
The first part of the assessment covers generic underpinning knowledge of
the principles and application of management accounting and concepts.
These questions are all in a short answer format. The longer questions
requiring creative thought processes are covered in the second part of the
assessment and the case study. You must answer all questions using
your own words.However you may reference your learner guide, and
other online or hard copy resources to complete this assessment.
The second part of the assessment covers exercises relating to the
management, application and accounting for costs in a manufacturing or
service industry. Ideally you should be able to answer these questions
based on the processes that are currently in place in your workplace. If this
is not the case, then answer the questions based on processes that should
be implemented in your workplace.
The final part of the assessment is based on a case study involving the
management of financial information and monitoring performance in an
organisation.
Questions
WQ1: List the three (3) main functions of management.
The three main functions of management are as follows:
 Planning – planning is one of the main functions of management.
The planning is done by the management in order to facilitate
smooth running of the organization. The management of a
particular organization adopts the method of planning in order to
establish a particular goal and then finding out the most suitable
method of achieving that goal.
 Organizing – the function of organizing is exercised by the
management in order to designate tasks and responsibilities to the
individual or groups of employees that have the required skill or
knowledge that is required to complete the assigned task. The
function of organizing specifically deals with the leadership control
that exists within an organization.
 Staffing – the third major function of the management deals with
the human resources that is required by an organization. The
Page 6

Assessment Workbook W: Provide Management Accounting Information
function of staffing essentially deals with the recruitment and other
needs of the organization related to staff or personnel. The function
of staffing also involves activities like training, transfer and
promotion of the staff inside an organization.
WQ2: Explain how cost accounting systems differ between manufacturing
and service organisations.
The cost accounting system for a manufacturing organization differs from
a service organization in many aspects. The output produced in a
manufacturing organization is a tangible good that is its cost can be
measured in terms of quantity produced, but in case of a service
industry, the output is always intangible in nature that is its cost cannot
be calculated in terms of quantity produced , therefore a particular cost
allocation method is adopted in order to measure the cost of service.
Another major difference between the cost accounting system in a
manufacturing and service organization pertains to the area of labor. In a
manufacturing organization the entire process of production can be
automated thus depending on a technology intensive workforce than
manual workforce but in an service organization the entire workforce is
generally manual labor intensive that is the process of serving a
particular customer cannot be automated. Therefore the cost of
employing a specific technology can be easily calculates in a
manufacturing organization but in case of a service organization the cost
of manual labor has to be calculated by following a complex system of
cost allocation. In some cases the cost of service is calculated by certain
pre determined percentages.
Page 7

Assessment Workbook W: Provide Management Accounting Information
WQ3: In your own words distinguish between “cost” and “cost driver”.
Briefly describe and provide one(1) example for the following types of
costs:
WQ3A product cost;
WQ3B direct cost;
WQ3C period cost;
WQ3D indirect cost;
WQ3E fixed cost.
Distinguish between “cost” and “cost driver
Cost refers to the wholesome value of the resources utilized in order to
produce a certain good or execute a certain service.
Cost driver on the other hand refers to the unit or amount of an activity
that results in the change in the cost of a certain product or service.
Type of Cost Description Example
WQ3A Product
cost;
Product cost refers to the
cost of labor that is used to
create a product.
Direct material,
direct labor
WQ3B Direct cost; Direct cost is the cost that is
totally attributed to the
production of a particular
good or service.
Direct labor, direct
material
WQ3C Period cost; Period cost refers to a cost
that is primarily associated
with the passage of time
rather than a single
transaction.
Selling expenses,
advertising
expenses
WQ3D Indirect
cost;
Indirect costs are the costs
that cannot be directly
attributed to a cost object.
These may be fixed or
variable costs.
Rent and utilities
WQ3E Fixed cost. Fixed cost is the cost that
remains the same
irrespective of the changes in
the levels of production of a
Insurance premium
and loan payments.
Page 8

Assessment Workbook W: Provide Management Accounting Information
particular product.
WQ4: Fill in the missing figures (“?”) for the following income statements:
Statement A Statement B Statement C
Fixed costs $50,000 $45,000 ?
Variable costs $55,000 ? ?
Sales $150,000 $200,000 $320,000
Contribution margin ? ? ?
Contribution margin ratio ? ? 40%
Net profit or loss ? $90,000 $88,000
Statement
A
Statement
B
Statement
C
Fixed costs $50,000 $45,000 $40,000
Variable costs $55,000 $65,000 $192,000
Sales $150,000 $200,000 $320,000
Contribution
margin $95,000 $135,000 $128,000
Contribution
margin ratio 63.33% 67.50% 40%
Net profit or loss $45,000 $90,000 $88,000
Page 9

Assessment Workbook W: Provide Management Accounting Information
WQ5: Calculate the selling price for each of the following costs and mark
ups:
WQ5A $250 markup 60%;
WQ5B $45,000 markup 120%;
WQ5C $75 markup 150%
WQ5D $150,000 markup 75%
WQ5E $580 markup of 40%.
WQ5A: $[250 + (250 x 60%)] = $400
WQ5B: $[45,000 + (45,000 x 120%)] = $99,000
WQ5C: $[75 + (75 x 150%)] = $188
WQ5D: $[150,000 + (150,000 x 75%)] = $262,500
WQ5E: $[580 + (580 x 40%)] = $812
WQ6: Describe appropriate system procedures to manage, record and
safeguard inventory and materials including:
● the storage of inventory;
● the purchase of new materials;
the issue of new stock.
WQ6A The appropriate system procedure to manage record and
safeguard inventory and materials including the storage of inventory and
the purchase of new materials and the issue of new stock is the perpetual
inventory system. The perpetual inventory system maintains and records
the continuous inflow and outflow of stock in a business, therefore it is
appropriate for recording the above mentioned components.
WQ7: During the month of March XXXX a manufacturer records the
following movements of stock:
March 1 Balance on hand 20 kg purchased at $4 per kg $80
March 5 Purchase of new stock 20 kg @$4 per kg $80
March 6 Purchase of new stock 30 kg @$4.20 per kg $126
March 19 Purchase of new stock 40 kg @$4.50 per kg $180
March 30 Purchase of new stock 20kg @4.25 per kg $85
Page 10

Assessment Workbook W: Provide Management Accounting Information
March 31 Stock on hand 15kg
You are required to record the value of stock on hand at 30 June
XXXX using:
WQ7A FIFO method;
WQ7B weighted average method.
Page 11

WQ7A:
FIFO Method:-
Date
Purchases Sales Balance
Units Unit cost Total Units Unit cost Total Units Unit cost Total
1-Mar 20 $ 4 $ 80
5-Mar 20 $ 4 $ 80 20 $ 4 $ 80
20 $ 4 $ 80
6-Mar 30 $ 4.20 $ 126.00 20 $ 4 $ 80
20 $ 4 $ 80
30 $ 4.20 $ 126.00
19-Mar 40 $ 4.50 $ 180.00 20 $ 4 $ 80
20 $ 4 $ 80
30 $ 4.20 $ 126.00
40 $ 4.50 $ 180.00
30-Mar 20 $ 4.25 $ 85.00 20 $ 4 $ 80

Assessment Workbook W: Provide Management Accounting Information
20 $ 4 $ 80
30 $ 4.20 $ 126.00
40 $ 4.50 $ 180.00
20 $ 4.25 $ 85.00
31-Mar 20 $ 4 $ 80 15 $ 4.25 $ 63.75
20 $ 4 $ 80
30 $ 4.20 $ 126.00
40 $ 4.50 $ 180.00
5 $ 4.25 $ 21.25
Page 1

WQ7B:
Weighted Average Method:-
Date Details Number Price per unit Value
1-Mar Balance on hand 20 $ 4 $ 80
5-Mar Purchase of new stock 20 $ 4 $ 80
6-Mar Purchase of new stock 30 $ 4.20 $ 126
19-Mar Purchase of new stock 40 $ 4.50 $ 180
30-Mar Purchase of new stock 20 $ 4.25 $ 85
130 $ 4.24 $ 551
31-Mar Sale of stock 115 $ 4.24 $ 1,022
31-Mar Stock on hand 15 $ 4.24 $ 63.58
WQ8: List three (3) factors and one (1) associated activity that will
influence the application of the overhead rate.
Factor 1: project location
Factor 2:project size
Factor 3:regional economic condition
Activity: In case of a poor economic condition prevailing in a certain
country, the management of an organization may take the decision to
reduce the rate of overhead in order to increase the chances of survival
of that particular organization in such a condition.
WQ9: A business has developed a formula for estimating the overhead
recovery rate over a relevant range of production. Fixed costs are
$46,800 and variable costs are $2.80 per direct labour hour. Direct
labour is estimated at 54,000 hours. You are required to:

Assessment Workbook W: Provide Management Accounting Information
WQ9A Calculate the total expected overhead;
WQ9B If it takes one and half (1½) hours to produce one unit,
calculate the number of units produced for the estimated direct
labour hours and the cost per unit;
WQ9C If 60,000 units are produced estimate the number of units
produced and the cost per unit.
WQ9A:
Particulars Units
Fixed costs $ 46,800
Variable cost per unit $ 2.80
Direct labour hours 54,000
Total variable cost $ 151,200
Total expected
overhead $ 198,000
WQ9B:
Particulars Units
Hours to produce one unit 1.5
Direct labour hours 54,000
Number of units
produced 36,000
Cost per unit $ 0.67
WQ9C:
Particulars Units
Direct labour hours 54,000
Page 1

Assessment Workbook W: Provide Management Accounting Information
Number of actual units produced 36,000
Number of units of produced 60,000
Additional units produced 24,000
Cost per unit $ 1.11
WQ10: Brassall Industries is required to create a flexible budget formula
for semi variable costs for the year. Records show that the highest
number of hours of production over the past four years is 60,000 hours at
a cost of $50,000. The lowest level of production was 52,000 hours at a
cost of $44,400. You are required to:
WQ10A Calculate the variable rate per direct labour hour using the
high/low method;
WQ10B Calculate the fixed component of the cost;
WQ10C Calculate the flexible budget formula based on 65 direct labour
hours.
WQ10A:
Particulars Units
Highest cost $ 50,000
Highest production
hours 60,000
Lowest cost $ 44,000
Lowest production
hours 52,000
Variable rate per
labour hour
$ 0.75
Page 2

Assessment Workbook W: Provide Management Accounting Information
WQ10B:
Particulars Units
Highest cost $ 50,000
Variable rate per labour
hour $ 0.75
Highest production hours 60,000
Fixed cost component $ 5,000
WQ10C:
Particulars Units
Variable rate per labour hour $ 0.75
Number of direct labour
hours 65
Fixed cost component $ 5,000
Flexible budget formula $ 5,048.75
WQ11: The budget for Grenville and Fraser Accountants for the year is
estimated as follows:
$
Direct salaries 450,000
Overhead costs:
Salaries – administration 144,000
Page 3

Assessment Workbook W: Provide Management Accounting Information
Photocopying expenses 12,200
Printing expenses 13,300
Stationery 18,800
Electricity 22,000
Lease of premises 96,000
Insurance 20,200
Telephones 10,000
Postage 13,000
Miscellaneous expenditure 10,500
$360,000
A client is quoted $5,600 for accounting services. The direct salary
recorded for performing the service is $2,800.
You are required to:
WQ11A calculate the overhead application rate;
WQ11B the profit/loss made from performing the service.
WQ11A:
Particulars Amount (in $)
Direct salaries 4,50,000
Overhead costs:
Salaries- Administration 1,44,000
Photocopying expenses 12,200
Printing expenses 13,300
Stationery 18,800
Electricity 22,000
Lease of premises 96,000
Insurance 20,200
Telephones 10,000
Postage 13,000
Page 4

Assessment Workbook W: Provide Management Accounting Information
Miscellaneous expenditure 10,500
Total overhead costs 3,60,000
Overhead allocation rate 80%
WQ11B:
Particulars Amount (in $)
Revenue from accounting
services 5,600
Direct salaries 2,800
Profit 2,800
WQ12: A product accumulates the following costs: direct materials $2.50;
direct labour costs $3.00; variable factory overhead $1.20 and fixed
factory overhead $2.00. Calculate:
WQ12A the total product cost of making 20,000 units using
absorption costing;
WQ12B the total product cost of making 20,000 units using direct
costing;
WQ12C the value of closing inventory of 500 units using both the
absorption costing and direct costing methods;
WQ12D What method must be used in accordance with Accounting
Standard AASB 102 Inventories for use in external reporting -
absorption or direct costing method?
WQ12A
Absorption costing:
Particulars Amount (in $)
Page 5

Assessment Workbook W: Provide Management Accounting Information
Direct materials per unit 2.50
Direct labour per unit 3.00
Variable factory overhead per
unit 1.20
Fixed factory overhead per unit 2.00
Unit product cost 8.70
Product cost of 20,000 units 174,000.00
WQ12B
Direct costing:
Particulars Amount (in $)
Direct materials per unit 2.50
Direct labour per unit 3.00
Variable factory overhead per
unit 1.20
Unit product cost 6.70
Product cost of 20,000 units 134,000.00
WQ12C
Absorption costing:
Particulars Units
Closing inventory 500.00
Unit product cost $ 8.70
Page 6

Assessment Workbook W: Provide Management Accounting Information
Value of closing inventory of 500
units $ 4,350.00
Direct costing:
Particulars Units
Closing inventory 500.00
Unit product cost $ 6.70
Value of closing inventory of 500
units $ 3,350.00
WQ12D
According to AASB 102 Inventories, absorption costing is superior
compared to direct costing, since it is needed for reporting to the Internal
Revenue Service (IRS). Even if a firm prefers to use direct costing for in-
house accounting purposes, it still needs to compute absorption costing
for filing taxes and issuing other official reports. In addition, it considers
the production costs, which provides a full picture to the management of
an organisation in assessing profitability and ascertaining product prices.
WQ13: In your own words describe the comparisons between job,
operation and process costing.
Job costing refers to that process of costing in which the various costs of
a job are recorded in a job card or may be manually entered into a
computer for the purpose of recording. In job costing the final cost of a
finished good is determined by adding up all the costs in a job card.
Operation costing refers to that process of costing that involves
calculation of costs of producing homogeneous goods or similar goods in
batches. Operation costing is usually utilized by organizations that
Page 7

Assessment Workbook W: Provide Management Accounting Information
manufacture the same product in batches. It involves both process and
job costing. This means that the direct materials component of the cost is
accounted in the same way as in job costing and the conversion costs are
treated in the same way as in process costing.
Process costing refers to the method of costing or calculating the costs of
similar products on the basis of their production processes. These costs
are recorded by the different departments of an organization by noting
down the processes that they go through. The final cost is arrived at by
allocating the cost to the inventories in accordance to the number of
units finished by each department.
WQ14: A failure to take appropriate steps to protect electronic data can
have disastrous consequences for an organisation. Explain how you
could:
WQ14A exercise control over documentation to ensure only current
documents are utilised;
WQ14B protect the file server and hard drives of computers against
hackers and viruses;
WQ14C control access to files and folders on the network;
WQ14D ensure file data is not lost and can be retrieved if destroyed
or corrupted;
WQ14E backup files are securely stored.
WQ14A
This can be ensured by saving the files with proper date and numbers in
order to highlight and record the most current or updated version of the
Page 8

Assessment Workbook W: Provide Management Accounting Information
file
WQ14B
The file server and hard drives of computers can be protected against
hackers and viruses by installing antivirus software and by locking the
server with required codes and passwords. Regular backing up of data
should also be done in order to minimize loss of crucial information.
WQ14C
The access and sharing has to be limited by individuals or groups of users
in order to restrict unauthorized access to the files and folders.
WQ14D
In order to ensure that no data is lost in case of file distortion or
corruption periodical backing up of files should be done.
WQ14E
In order to store the backed up files securely the external devices such as
USB Flash drive or CD may be used.
WQ15: What are four (4) factors that need to be taken into consideration
when preparing budgets?
Factor 1: the level of sales and trend in the past years.
Factor 2: economic trends.
Factor 3: the recent actions undertaken by the competitors
Factor 4: the remedial actions taken.
WQ16: Qualitative as well as quantitative factors play an important part
in the planning process of an organisation. Conduct research of relevant
Page 9

Assessment Workbook W: Provide Management Accounting Information
standards and legislation and explain in your own words the importance
of:
WQ16A maintaining confidentiality of client information;
WQ16B avoiding conflicts of interest;
WQ16C providing adequate disclosure of all financial information;
WQ16D avoiding discriminatory behaviour towards people of different
cultures.
WQ16A
The importance of maintaining the confidentiality of client information
should be ranked the highest in each and every organization. This is
because client information is essentially the foundation upon which an
organization provides the required service or product. Losing or sharing
the client information is regarded as breach of security and a firm can
face serious legal obligation for such a mistake.
WQ16B
The importance of avoiding conflicts of interest is high and is a part of
any corporate ethical code of conduct. Conflict of interest refers to the
situation where a particular employee faces a dilemma to choose
between the welfare of the company and his own personal interest.
Therefore as it can be understood that in such a situation the employee
should always choose the welfare of the company. Thus it is very
important to avoid conflict of interest.
WQ16C
The importance of providing disclosure of all financial information is
important because it mitigates the occurrence of fraud or misstatement
in the books of account. Moreover the stakeholders and the investors get
a clear picture of the financial condition of the company from its
published financial statements thus it is very important to provide all the
disclosures so that the investors get a clarified vision of the company.
WQ16D
The importance of avoiding discriminatory behavior towards people of
different culture is also very important. This is because discrimination on
any ground related to caste, creed, religion, culture or gender is
Page 10

Assessment Workbook W: Provide Management Accounting Information
recognized as a crime and individual or an organization practicing such
policy have to face serious legal obligations.
WQ17: The major objective of responsibility accounting is to ensure
targets and budgets are achieved and managers are accountable for
those items over which they have control:
WQ17A list four (4) procedures that can be employed to ensure staff
involved with the management of finance are adequately provided
with support to competently perform their roles and provide
information that is accurate and comprehensive;
WQ17B provide examples of four (4) main operations of an
organisation that require compliance with documented procedures.
WQ17A
The four procedures are documentation procedures; information based
on intranet; training and briefing sessions and creation of help desks and
facilitation of expert advice.
WQ17B
The examples of four main operations are:
 collection of debts
 maintenance and utilization of a petty cash fund
 banking
 payment of salary and wages
WQ18: Organisations need to develop a structure that includes clear
communication channels and reporting chains to link employees so they
can work together to achieve the organisation’s mission, goals and
Page 11

Assessment Workbook W: Provide Management Accounting Information
objectives:
WQ18A list four (4) communication skills you can employ with respect
to sharing information, listening and understanding in order to
communicate effectively within the organisation and with people of
a different culture;
WQ18B give an example of a questioning technique you can employ
to gather financial information within the organisation;
WQ18C which method do you think would be the most effective with
respect to obtaining information for budgetary requirements in a
large organisation– oral or written? Give reasons for your decision.
WQ18A
The four communication skills that can be employed are:
 explanation of the complex and difficult to comprehend ideas in
simple language
 making sure the tone of voice of the speaker is consistent and his
style of speaking reveals enough empathy and encouragement.
 People from different cultures may need some time to mingle
therefore enough personal space should be given to them while
communication.
 Being utterly respectful towards the religious views of different
cultures.
WQ18B
The questioning technique for employed to gather financial information
should essentially be an open question as because the speaker will be
encouraged to speak about the current situation in the company. An
example may be, “what is the current financial condition of the
company?”
WQ18C
Written communication would be most effective in obtaining information
for budgetary requirements. This is because financial information for
budget preparation essentially require calculations of the past trends and
analysis. Therefore such information is best communicated when written.
Written communication also facilitates automatic record creation of the
shared information.
WQ19: Organisations are required to comply with accounting standards
Page 12

Assessment Workbook W: Provide Management Accounting Information
and corporate governance principles and recommendations. Describe the
purpose of:
WQ19A Incorporating good corporate governance procedures within
an organisation;
WQ19B Australian Accounting Standards - AASB108.
WQ19A
Good corporate governance procedures ensure the smooth working of an
organization. An organization with effective governance procedures result
in preparation of financial statements that reflect a true and fair view of
the company, trust between the employees and management and inter
departmental coordination and harmony within the different sectors of
the organization. Corporate governance procedures also result in the
formation of an effective management and the Board of Directors.
WQ19B
The Australian Accounting Standards specifically the AASB108 establishes
the rules and regulation for the preparation of the financial statements by
an organization. The standard essentially lists the accounting policies
that should be adopted by an accountant while preparing the accounting
statements. Therefore the AASB 108 is of immense importance and is
followed by every accounting entity in Australia. The standard also
explains the procedure that is to be adopted while treating the carrying
amounts or balances of different accounts in the financial statements.
Workplace Exercises
The following exercises involve the calculation and analysis of cost data
within a manufacturing and service organisation.
WE1: Pretori Industries Pty Ltd is a small manufacturing company that
does not use a perpetual inventory system. 15,000 units were produced
in the month of July. The following information was provided with respect
to factory operations for 31 August XXXX:
$
Work in process 1/8/XX 9,300
Machine maintenance 800
Depreciation on machinery 1,500
Page 13

Assessment Workbook W: Provide Management Accounting Information
Supervisor’s wages 8,500
Wages for machine operators 36,000
Rent for the factory 4,000
Cleaning costs for the factory 800
Purchases of raw materials 70,000
Freight inwards on raw materials 1,800
Stock of raw materials on hand 1/8/XX 7,500
Stock of raw materials on hand 31/8/XX 8,600
Work in process 31/8/XX 5,800
Accrued wages for machine operators 9,000
Electricity 1,200
You are required to:
WE1A Prepare a manufacturing statement for Pretori Industries Pty
Ltd for month of August XX. Assume that all Direct Materials,
Direct Labour, and Factory Overheads are added to the Work in
Progress Asset account.
WE1B Calculate the cost per unit for the month for:
● Direct materials
● Direct labour
● Factory overhead
WE1C Perform a percentage analysis of each element of production
based on the cost of production.
WE1D Prepare the journal entry to record the transfer of the Assets
“Work In Progress” (WIP) to the Cost of Goods Sold “Transfers from
WIP” account.
Pretori Industries Private Limited
Manufacturing Statement
August 31 XXXX
Particulars
Amount (in
$)
Amount (in
$)
Cost per unit (in
$)
Percentag
e analysis
Direct
materials:
Page 14

Assessment Workbook W: Provide Management Accounting Information
Opening raw
materials
inventory 7,500 37%
Purchases 70,000 345%
Freight inwards 1,800 9%
Inventory
available for
use 79,300 391%
Less: Closing
raw materials
inventory 8,600 42%
Total direct
materials used 70,700 4.71 348%
Direct labour:
Wages for
machine
operators 36,000 177%
Add: Accrued
wages 9,000 44%
Total direct
labour 45,000 3 222%
Factory
overhead:
Page 15

Assessment Workbook W: Provide Management Accounting Information
Machine
maintenance 800 4%
Depreciation on
machinery 1,500 7%
Supervisor's
wages 8,500 42%
Rent for the
factory 4,000 20%
Cleaning costs
for the factory 800 4%
Electricity 1,200 6%
Total factory
overhead 16,800 1.12 83%
Add: Opening
work-in-process
inventory 9,300 46%
Total cost of
work-in-
process
inventory 26,100 129%
Less: Closing
work-in-process
inventory 5,800 29%
Page 16

Assessment Workbook W: Provide Management Accounting Information
Total cost of
goods
manufactured 20,300 100%
Journal entry:
Date Particulars Debit amount (in $) Credit amount (in $)
31/8/XXXX Direct Materials Account…..Dr 70,700
Direct Labour Account………Dr 45,000
Factory Overhead Account……Dr 16,800
To Cost of Goods Sold Account
Chart of Accounts
Assets Revenue
Bank Sales
Accounts Receivable
Raw Materials Inventory Cost of Goods Sold
WIP Materials Finished Goods
WIP Labour
WIP Overheads Expenses
LESS - WIP Finished Goods Salaries and Wages
Liabilities
Page 17

Assessment Workbook W: Provide Management Accounting Information
Accounts Payable
GST Collected
GST Paid
Accrued Expenses
WE2: Oswald Lighting Products Pty Ltd has 20 employees. Fifteen (15)
employees are employed in the factory and five (5) employees are
employed in the administration department. The average wage rate for
each factory employee is $23 per hour. The average wage rate for each
office worker is $30 per hour. Each factory employee works a 40-hour
week and the administration workers work a 37½-hour week. Each
employee is entitled to four (4) weeks’ annual leave plus 17 ½% loading
and two (2) weeks’ sick leave per year. The gross factory wages for the
month of October are $82,387 made up of the following:
Direct labour $55,200
Direct labour overtime $2,300
Indirect labour $22,500
Annual leave for one factory worker for 2 weeks plus 17½% loading
One day’s sick leave for one office worker
Deductions from gross wages are as follows:
PAYG withholding $18,432
Superannuation deductions to Sunsuper $975
Union fees $480
You are required to:
WE2A Calculate (to the nearest dollar amount) the provision for
annual and sick leave for October;
Prepare journal entries for:
WE2B Monthly provision for annual and sick leave for October;
WE2C Allocations to the work in process and factory overhead
accounts (timesheet analysis).
WE2D Accruals, deductions and payroll clearing (Factory payroll for
October).
A
Page 18

Assessment Workbook W: Provide Management Accounting Information
Estimated Provision for annual leave
Particulars Amount
Factory
Number of employee 15
Average Hourly wage rate $23.00
Working hours per week 40
Number of week annual leave entitlement 4
$55,200.00
Add: 17.5% Loading $9,660.00
Estimated provision for annual leave $64,860.00
Administration department
Number of employee 5
Average Hourly wage rate $30.00
Working hours per week 37.5
Number of week annual leave entitlement 4
$22,500.00
Add: 17.5% Loading $3,937.50
Estimated provision for annual leave $26,437.50
Total Estimated Annual Leave provision $91,297.50
Estimated Provision for Sick leave
Particulars Amount
Factory
Number of employee 15
Average Hourly wage rate $23.00
Working hours per week 40
Number of week annual leave entitlement 2
Estimated provision for Sick leave $27,600.00
Administration department
Number of employee 5
Average Hourly wage rate $30.00
Working hours per week 37.5
Number of week annual leave entitlement 2
Estimated provision for Sick leave $11,250.00
Total Estimated Sick Leave provision $38,850.00
Page 19

Assessment Workbook W: Provide Management Accounting Information
Journal Entry
Particulars Debit Credit
B Factory Overhead Control Account $10,845.63
Provision for Annual Leave $7,608.13
Provision for Sick Leave $3,237.50
(Monthly provision charged to factory overhead)
C Work in process $59,887.00
Factory OH control Account $22,500.00
Labor Control Account $82,387.00
(labor time sheet analysis)
D Labor Control Account $82,387.00
Provision for Annual Leave $2,162.00
Provision for Sick Leave $240.00
PAYG $18,432.00
Superannuation $975.00
Union fees $480.00
Payroll Clearing $64,902.00
(payroll for the month of October)
WE3: ACI Computer services has the following income statement for the
Page 20

Assessment Workbook W: Provide Management Accounting Information
year ended 30 June XXXX.
$
Sales 900,000
Less cost of goods sold:
Direct materials 384,000
Direct labour 204,000
Variable factory overhead 88,000
Fixed factory overhead 28,000 704,000
Gross profit 196,000
Less operating expenses:
Selling
Variable expenses 66,000
Fixed expenses 11,040 77,040
Administration 118,960
Variable expenses 50,000
Fixed expenses 23,200 73,200
Net profit 45,760
You are required to:
WE3A Recast the income statement to determine the contribution
margin;
WE3B Perform cost volume profit (“CVP”) analysis to determine the
break even point e.g. the number of units that must be sold in
order to break even and the dollar value at break even point if 180,
000 units are produced;
WE3C Confirm your calculations in (b) are approximately correct by
performing a break even analysis using the contribution margin
ratio method;
WE3D What if net profit increased by $30,000, determine the new
break even point for no of units to be sold;
WE3E If the new net profit figure is required after tax, calculate the
new profit before tax if the company pays income tax at the rate of
30%;
WE3F What is the margin of safety between budgeted sales and
break even sales amounts expressed as a percentage?
WE3G What are three (3) limitations with respect to the
assumptions made in cost volume profit (“CVP”) analysis?
Particulars Amount (in $)
Sales 900,000
Page 21

Assessment Workbook W: Provide Management Accounting Information
Less: Variable factory overhead 88,000
Less: Variable selling expenses 66,000
Less: Variable administration expenses 50,000
Contribution margin 696,000
Less: Fixed factory overhead 28,000
Less: Fixed selling expenses 11,040
Less: Fixed administration expenses 23,200
Net profit 633,760
Break-even point (in units) 16,097
Break-even point (in sales 80,483
Particulars Amount (in $)
Sales 900,000
Less: Variable factory overhead 88,000
Less: Variable selling expenses 66,000
Less: Variable administration
expenses 50,000
Contribution margin 696,000
Contribution margin ratio 77.33%
Fixed factory overhead 28,000
Fixed selling expenses 11,040
Fixed administration expenses 23,200
Total fixed costs 62,240
Break-even point (in sales) 80,483
Page 22

Assessment Workbook W: Provide Management Accounting Information
Particulars Amount (in $)
Sales 900,000
Less: Variable factory overhead 78,000
Less: Variable selling expenses 56,000
Less: Variable administration expenses 40,000
Contribution margin 726,000
Less: Fixed factory overhead 28,000
Less: Fixed selling expenses 11,040
Less: Fixed administration expenses 23,200
Net profit 663,760
Break-even point (in units) 15,431
Break-even point (in units) 77,157
Particulars Amount (in $)
Sales 900,000
Cost of goods sold:
Direct materials 384,000
Direct labour 204,000
Variable factory overhead 78,000
Fixed factory overhead 28,000
Gross profit 206,000
Operating expenses:
Variable expenses (Selling) 56,000
Fixed expenses (Selling) 11,040
Variable expenses (Administration) 40,000
Fixed expenses (Administration)
Page 23

Assessment Workbook W: Provide Management Accounting Information
23,200
Net profit 75,760
Particulars Amount (in $)
Actual sales
900,00
0
Break-even sales
80,48
3
Margin of safety 91.06%
Limitations of CVP analysis:
 It is carried out within a pertinent range of operational activity and
it is presumed that efficiency and productivity of operations would
remain constant. This might not be a valid assumption.
 It assumes that costs could be segregated accurately into variable
and fixed categories, which is sometimes difficult in practice.
 It assumes no variation in the inventory quantities.
Page 24

Assessment Workbook W: Provide Management Accounting Information
WE4: A manufacturer has the following areas of activity, cost drivers and
application rates:
Activity area Cost driver
Application rate
Design of product Changes to design $1,000 per change
Materials No of requisitions $150 per requisition
Assembly Machine hours $100 per machine hrs
Packing Labour hours $60 per labour hour
Sales and distribution No of sales orders $50 per unit
During an accounting period the following cost driver information is
gathered:
No of design changes – 4
No of material requisitions – 40
Machine hours for assembling – 3,000 hours
Labour hours – 1,800 labour hours
Sales orders - 60
If 500 units are produced and using activity based costing (“ABC”)
calculate:
WE4A total cost of production;
WE4B cost per unit for activity level
WE4A
Statement showing total cost of production
Particulars Cost Driver Rate Activity Total Cost
Design of product Changes to design $1,000.00 4 $4,000.00
Materials No of requisitions $150.00 40 $6,000.00
Assembly Machine hours $100.00 3000 $300,000.00
Packaging Labour hours $60.00 1800 $108,000.00
Sales and distribution No of sales orders $50.00 60 $3,000.00
Total Cost $421,000.00
WE4B
Page 25

Assessment Workbook W: Provide Management Accounting Information
Statement showing cost per unit
Particulars Amount
Total Cost of Production $421,000.00
Number of units 500
Cost per unit $842.00
WE5: Pristine Manufacturing produces a product using a process cost
system. Information for December XXXX is as follows: 5,000 units were
commenced at the beginning of the month and at the end of the month
400 are 50% complete. Costs for the month are:
$
Direct materials 250,000
Direct labour 182,400
Factory overhead 288,000
You are required to prepare a cost of production report for the month of
December XXXX to show the physical and equivalent completed units and
the allocation of costs to direct materials, direct labour and factory
overhead.
Particulars Amount (in $)
Direct materials 250,000
Direct labour 182,400
Factory overhead 288,000
Total cost of production 720,400
Page 26

Assessment Workbook W: Provide Management Accounting Information
Case Study
Instructions
This case study is based on a hypothetical situation which will not require
you to have access to the workplace, although your past and present
workplace experiences may help with the responses you provide. Note: In
all instances “XXXX” represents the current year.
WCS1: You are employed in the finance section of Marchioness Industries
Pty Ltd, a small manufacturing company. Your role is to assist the
manager responsible for the performance of the company. This role
involves setting budgets, comparing budgeted figures against actual
results, calculating and preparing performance reports and performing
an overhead analysis. The manager is responsible for ensuring revenues
and costs are in accordance with budget estimates (+ or – 5%) and the
organisation’s business performance objectives.
A summary of budgeted figures for the month of July XXXX is set out
below:
Statement of Income
Net sales $438,000, COGS $252,000, Expenses $145,000
Statement of Financial position
Current assets $236,000, Non-current assets $360,000, Current Liabilities
$195,000, Non-current liabilities $200,000.
Actual results obtained are as follows:
Statement of Comprehensive Income
Net sales $452,000, COGS $262,000, Expenses $150,000
Statement of Financial position
Current assets $240,000, Non-current assets $364,000, Current Liabilities
$205,000, Non-current liabilities $215,000.
Annual budgeted overhead for Marchioness Industries Pty Ltd was
$300,000 consisting of $130,000 fixed overhead and $170,000 variable
overhead. Budgeted direct labour hours are 5,000 hours. Actual
overhead incurred is $295,000 and actual direct labour hours were
5,500.
Page 27

Assessment Workbook W: Provide Management Accounting Information
You are required to:
WCS1A Prepare a statement of income performance report in
summary format for the month of July to show variances and
variance percentages as a percentage of sales. Calculate variance
percentage to two (2) decimal places.
WCS1B Prepare a statement of financial position performance report
in summary format showing variances and variance as a
percentage of sales. Calculate variance percentage to two (2)
decimal places.
WCS1C With respect to the variance analysis you have performed,
summarise any amounts that have deviated significantly from the
budget and need to be investigated. Why do you think the
variance/s occurred?
WCS1D Perform overhead analysis to show the overhead recovery
rates and under or overapplied overhead. Calculate spending and
capacity variances and reconcile amounts with total under or
overapplied overhead. How effective is the cost assignment
process?
WCS1E Prepare a new Statement of Income budget for the month of
August based on the information set out below.
Sales figure of $438,000 to be increased by 4%
COGS figure of $252,000 to be increased by 4%
Selling expenses figure of $30,000 increased by 2%
Administration figure of $104,500 increase by 1%
Financial expenses figure$10,500 increased by 1%
The annual budgeted overhead is $295,000 and the budgeted direct
labour hours are 5,500. Fixed overhead is $130,000 and variable
overhead is $165,000. Calculate the direct overhead recovery rate per
hour for variable and fixed overhead.
(Note: If you are currently employed this information must be prepared in
accordance with organisational policies and procedures. If you are not
currently employed, reports and overhead analysis must be checked and
prepared in accordance with appropriate resource material).
WCS1A
Statement showing Income Performance Report
Particula Budget Actual Variance
Page 28

Assessment Workbook W: Provide Management Accounting Information
rs Amount
% of
sales Amount
% of
sales Amount
% of
sales
Net Sales
$
438,000.00
100.00
% 452000
100.00
%
$
14,000.00 3.20%
Favorabl
e
Less:
COGS
$
252,000.00 57.53% 262000 57.96%
$
(10,000.0
0) -3.97%
Unfavora
ble
Gross
Profit
$
186,000.00 42.47%
$190,000.
00 42.04%
$
4,000.00 2.15%
Favorabl
e
Less:
Expenses
$
145,000.00 33.11% 150000 33.19%
$
(5,000.00) -3.45%
Unfavora
ble
Net
Profit
$
41,000.00 9.36%
$
40,000.00 8.85%
$
(1,000.00) -2.44%
Unfavora
ble
WCS1B
Statement showing financial Position performance report
Particulars Budget Actual
Variance
Amount
%
Variance
Current Assets
$236,000.
00
$240,000.
00 $4,000.00 1.69% Favorable
Non-Current
Assets
$360,000.
00
$364,000.
00 $4,000.00 1.11% Favorable
Total
$596,000.
00
$604,000.
00 $8,000.00 1.34% Favorable
Current Liability
$195,000.
00
$205,000.
00 -$10,000.00 -5.13%
Unfavorabl
e
Non-Current
liability
$200,000.
00
$215,000.
00 -$15,000.00 -7.50%
Unfavorabl
e
Total
$395,000.
00
$420,000.
00 -$25,000.00 -6.33%
Unfavorab
le
Owners’ Equity
$201,000.
00
$184,000.
00 -$17,000.00 -8.46%
Unfavorab
le
WCS1C
Page 29