Document Related to Management Accounting

Added on - 28 May 2020

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Running Head: Management AccountingManagement Accounting
Management Accounting2Question 1ParticularsXtremeWtremeUnits Sold32001800Selling Price$ 125.00$ 200.00Sales Revenue(units sold x selling price)$ 4,00,000.00$ 3,60,000.00Direct material cost per unit$ 30.00$ 45.00Direct manufacturing labour cost per hour$ 16.00$ 16.00Direct manufacturing labour hours per unit1.52.25Production runs4085Material Moves72168Machine set ups45155Machine-hours55004500Number of inspections250150ActivityActivity costActivity cost driverProduction Scheduling$ 95,000.00Production RunsMaterial handling$ 45,000.00Material Movesmachine set-up$ 25,000.00Machine set-upsAssembly$ 60,000.00Machine hoursInspection$ 8,000.00Number of inspectionMarketing Cost*$ 22,800.00Number 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)ParticularsCostDriverXtremeWtremeDirect Material Cost(Per unit cost x unitssold)No. of unitssold(32:18)$ 96,000.00$ 81,000.00Direct labour Cost(Cost per hour x hoursper unit x no. of units sold)No. of unitssold(32:18)$ 76,800.00$ 64,800.00Indirect costNo. of unitssold(32:18)$ 1,63,712.00$ 92,088.00Total Cost$ 3,36,512.00$ 2,37,888.00÷ No. of Units Sold32001800Cost per unit$ 97.97$ 144.95
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 CostProductionSchedulingProduction Runs(40:85)$ 30,400.00$ 64,600.00Material handlingMaterial Moves(72:168)$ 13,500.00$ 31,500.00Machine set-upMachine Set-ups(45:155)$ 5,625.00$ 19,375.00AssemblyMachineHours(5500:4500)$ 33,000.00$ 27,000.00InspectionNumber ofinspection(250:150)$ 5,000.00$ 3,000.00Marketing CostNo. of unitssold(3200:1800)$ 14,592.00$ 8,208.00Total Cost$ 2,74,917.00$ 2,99,483.00÷ No. of Units Sold32001800Cost per unit$ 85.91$ 166.38Part (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$ 166.38As we see the per unit cost as per traditional costing is higher in Xtreme segment ascompared to activity based costing and the per unit cost of Wtreme segment is higher as peractivity based costing as compared to traditional costing.The cost per unit under traditional and ABC differ because of the allocation of the indirectcost as under traditional costing system the allocation of cost is in the ratio of no. of unitssold and under ABC costing the allocation is as per the cost drivers is respect of the nature ofthe cost.Part (4)The Hard Yakka will use the Activity Based Costing System as the cost per unit under ABCsystem is less as compared to traditional costing and will result in higher profits. The costinvolved is less so company can also increase the production units and ultimately that leads toincrease the profit.
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