(Doc) Management Accounting Assignment
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Added on 2020-03-28
(Doc) Management Accounting Assignment
Added on 2020-03-28
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Running head: INTRODUCTION TO MANAGEMENT ACCOUNTINGIntroduction to management accountingName of the studentName of the universityAuthor note
1INTRODUCTION TO MANAGEMENT ACCOUNTING Table of ContentsAnswer A - Calculation of cost as per conventional approach..................................................2Answer B - Cost per activity......................................................................................................2Answer C - Calculation of cost of product as per activity based costing..................................3Answer D – Price under ABC....................................................................................................4Answer E – Mispricing under conventional approach...............................................................4Answer F – Advantages associated with activity based costing................................................5Answer G - Disadvantages associated with activity based costing approach............................7Reference....................................................................................................................................9
2INTRODUCTION TO MANAGEMENT ACCOUNTING Answer A - Calculation of cost as per conventional approachParticularTotal costFredMarthaUnits produced10005000Direct costsDirect material cost per unit $ 40.00 $ 60.00 direct labour cost per unit $ 30.00 $ 45.00 Total material cost $ 40,000.00 $ 3,00,000.00 Total labour cost $ 30,000.00 $ 2,25,000.00 Total direct cost $ 70,000.00 $ 5,25,000.00 Overhead costMachine related cost $ 4,50,000.00 $ 75,000.00 $ 3,75,000.00 Set up and inspection cost $ 1,80,000.00 $ 30,000.00 $ 1,50,000.00 Engineering $ 90,000.00 $ 15,000.00 $ 75,000.00 Plant related cost $ 96,000.00 $ 16,000.00 $ 80,000.00 Total over head cost $ 8,16,000.00 $ 1,36,000.00 $ 6,80,000.00 Total cost $ 2,06,000.00 $ 12,05,000.00 Cost per unit $ 206.00 $ 241.00 Selling price per unit $ 247.20 $ 289.20 Profit per unit $ 41.20 $ 48.20 Answer B - Cost per activityAllocation rate Total overheadMachine related cost $ 4,50,000.00 Set up and inspection cost $ 1,80,000.00 Engineering $ 90,000.00 Plant related cost $ 96,000.00 Total $ 8,16,000.00 Total labour hoursFred2000Martha15000Total17000Rate of allocation 48.00 Amount allocated to per unit of Fred 96.00 Amount allocated to per unit of Martha144.0
3INTRODUCTION TO MANAGEMENT ACCOUNTING Answer C - Calculation of cost of product as per activity based costingParticularFredMarthaUnits produced10005000Direct costsDirect material cost per unit $ 40.00 $ 60.00 direct labour cost per unit $ 30.00 $ 45.00 Total material cost $ 40,000.00 $ 3,00,000.00 Total labour cost $ 30,000.00 $ 2,25,000.00 Total direct cost $ 70,000.00 $ 5,25,000.00 Required dataFred MarthaUnits produced10005000Machine hours required 40005000Production runs2020Engineering activity (Quarter)31Square foot for plant1536384Overhead costTotalFredMarthaMachine related cost $ 4,50,000.00 $ 2,00,000.00 $ 2,50,000.00 Set up and inspection $ 1,80,000.00 $ 90,000.00 $ 90,000.00 Engineering cost $ 90,000.00 $ 67,500.00 $ 22,500.00 Plant related cost $ 96,000.00 $ 76,800.00 $ 19,200.00 Total overhead cost $ 8,16,000.00 $ 4,34,300.00 $ 3,81,700.00 Total direct cost $ 70,000.00 $ 5,25,000.00 Total cost $ 5,04,300.00 $ 9,06,700.00 Cost per unit $ 504.30 $ 181.34 Selling price per unit $ 605.16 $ 217.61 Profit per unit $ 100.86 $ 36.27 The cost per unit as per the activity based costing for Martha is $ 181.34 and for Fredis $ 504.30.
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