Cost and Management Accounting: Calculation, Distortion, and Decision Making

Cost and management
accounting
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Calculation of the unit manufacturing cost of the Serta and the Tempu bed..............................4
Calculate the unit manufacturing cost of the Serta and the Tempu using activity-based costing.
.....................................................................................................................................................4
3. Is the cost of the Tempu bed distorted by the use of machine hours to allocate total
manufacturing overhead to production, and, if so by how much per unit...................................4
4. Assume that the current selling price of the Tempu bed is $280 and the marketing director
has proposed to offer a $30 discount to increase sales. Is the discount advisable? Advise
management. Show supporting calculations................................................................................4
Explanation of Conventional costing will always distort product costs costin...........................4
TASK 2............................................................................................................................................5
Decision Adam Smith should take with regards to the supplier and raw material......................5
Advise Santana Corporation on suggested activities and activity drivers, explaining to
management why you consider these appropriate.......................................................................6
Explanation of why management of Santana Corporation on the potential benefits and costs
associated with implementing an Activity Based Costing system.zed business activities in......8
CONCLUSION................................................................................................................................8
REFRENCES...................................................................................................................................8
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INTRODUCTION
Cost and management accounting both are the vital part of accounting. Business organization
uses these branches for reducing their cost and enhances profit to achieve their goal. In this
report use of activity based costing for reducing cost and taking business decision and its
importance has been define in brief manner.
TASK 1
Calculation of the unit manufacturing cost of the Serta and the Tempu bed
Calculation of material cost of Serta and Tempu by using traditional costing Amount
Product
Annual out-
put
Serta 15000
Tempur 30000
Calculate the unit manufacturing cost of the Serta and the Tempu using activity-based costing.
Calculation of material cost of Serta and Tempu by using Activity based budget-
ing
Particular Serta
Rate per ac-
tivity Tempur
Direct material 600000 40 195
Direct labor 525000 35 105
Prime cost 1125000 300
Set up cost 13440 100 2
Outgoing shipping cost 5600 250 2
Machine overheads 1270000 142.24 228
3. Is the cost of the Tempu bed distorted by the use of machine hours to allocate total
manufacturing overhead to production, and, if so by how much per unit
No in this case the cost of Tempu will be not distort by machine hour rate (McLaren,
JAppleyard, and Mitchell, 2016).
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