Document Related to Management Accounting

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Added on 2020-05-28

Document Related to Management Accounting

Added on 2020-05-28

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Running Head: Management AccountingManagement Accounting

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Management Accounting2Question 1ParticularsXtremeWtremeUnits Sold32001800Selling Price $ 125.00 $ 200.00 Sales Revenue(units sold x selling price) $ 4,00,000.00 $ 3,60,000.00 Direct material cost per unit $ 30.00 $ 45.00 Direct manufacturing labour cost per hour $ 16.00 $ 16.00 Direct manufacturing labour hours per unit1.52.25Production runs4085Material Moves72168Machine set ups45155Machine-hours55004500Number of inspections250150ActivityActivity costActivity cost driverProduction Scheduling $ 95,000.00 Production RunsMaterial handling $ 45,000.00 Material Movesmachine set-up $ 25,000.00 Machine set-upsAssembly $ 60,000.00 Machine hoursInspection $ 8,000.00 Number of inspectionMarketing Cost* $ 22,800.00 Number of units soldTotal Indirect Cost $ 2,55,800.00 *Marketing Cost =3% of sales revenue= $ 22,800.00Part (1)Statement of cost (based on traditional costing)ParticularsCost DriverXtremeWtremeDirect Material Cost(Per unit cost x units sold)No. of unitssold(32:18) $ 96,000.00 $ 81,000.00 Direct labour Cost(Cost per hour x hours per unit x no. of units sold)No. of unitssold(32:18) $ 76,800.00 $ 64,800.00 Indirect costNo. of unitssold(32:18) $ 1,63,712.00 $ 92,088.00Total Cost $ 3,36,512.00 $ 2,37,888.00÷ No. of Units Sold 3200 1800Cost per unit $ 97.97 $ 144.95

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Management Accounting3Part (2)Statement of cost (based on Activity-Based Cost)ParticularsCost DriverXtremeWtremeDirect Material cost $ 96,000.00 $ 81,000.00Direct labour cost $ 76,800.00 $ 64,800.00Indirect CostProduction SchedulingProduction Runs(40:85) $ 30,400.00 $ 64,600.00 Material handlingMaterial Moves(72:168) $ 13,500.00 $ 31,500.00 Machine set-upMachine Set-ups(45:155) $ 5,625.00 $ 19,375.00 AssemblyMachine Hours(5500:4500) $ 33,000.00 $ 27,000.00 InspectionNumber of inspection(250:150) $ 5,000.00 $ 3,000.00 Marketing CostNo. of units sold(3200:1800) $ 14,592.00 $ 8,208.00 Total Cost $ 2,74,917.00 $ 2,99,483.00 ÷ No. of Units Sold 3200 1800Cost per unit $ 85.91 $ 166.38 Part (3)Comparison of Cost of ClothingXtremeWtremePer unit cost as per traditional costing $ 97.97 $ 144.95Per unit cost as per activity based costing $ 85.91 $ 166.38 As we see the per unit cost as per traditional costing is higher in Xtreme segment as compared to activity based costing and the per unit cost of Wtreme segment is higher as per activity based costing as compared to traditional costing.The cost per unit under traditional and ABC differ because of the allocation of the indirect cost as under traditional costing system the allocation of cost is in the ratio of no. of units sold and under ABC costing the allocation is as per the cost drivers is respect of the nature of the cost.Part (4)The Hard Yakka will use the Activity Based Costing System as the cost per unit under ABC system is less as compared to traditional costing and will result in higher profits. The cost involved is less so company can also increase the production units and ultimately that leads toincrease the profit.

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