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Introduction to Management Accounting (Solution)

   

Added on  2021-06-16

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Introduction to Management Accounting1
Introduction to Management Accounting (Solution)_1
ContentsSolution 1:..................................................................................................................................3Solution 2:..................................................................................................................................4Solution 3:..................................................................................................................................6Solution 4:..................................................................................................................................9Solution 5:................................................................................................................................11Bibliography.............................................................................................................................142
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Solution 1:The following table shows the calculation for cost per unit for both basic and advance model under traditional method of costing:Statement of Cost- Traditional ApproachParticulars Basic Model Advance ModelUnits produced and sold 1,600 1,500Direct Material cost per unit 325 560Direct Labour cost per unit 150 260Total Material Cost 5,20,000 8,40,000Total Labour cost 2,40,000 3,90,000Total Allocated Overhead cost 1,43,750 1,06,250Total Cost 9,03,750 13,36,250Cost Price Per unit 565 891Allocation of Overhead-Traditional approachParticulars Amount Inspection 20,000Assembly 90,000Production Scheduling 1,05,000Machine set-up 35,000Total Overhead to be allocated 2,50,000Total Machine Hours consumed 8,000Overhead per Machine Hour 31 - Overhead Allocated to Basic Model 1,43,750 - Overhead Allocated to Advance Model 1,06,250From the above table we can see that the cost per unit of basic model under traditional costing is $565 per unit and that of advance model is $891 per unit. In calculation of above cost per unit we have not included other indirect cost. 3
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Solution 2:The following table shows the calculation for cost per unit for both basic and advance model under activity based costing:Statement of Cost- ABC approachParticulars Basic Model Advance ModelUnits produced and sold 1,600 1,500Direct Material cost per unit 325 560Direct Labour cost per unit 150 260Total Material Cost 5,20,000 8,40,000Total Labour cost 2,40,000 3,90,000Total Allocated Overhead cost 75,506 1,74,494Total Cost 8,35,506 14,04,494Cost Price Per unit 522 936Allocation of Overhead-ABC ApproachParticularsInspectionAssemblyProductionSchedulingMachineset-upTotal CostCost20,000 90,000 1,05,000 35,000 2,50,000 Units 950 8,000 550 350 Cost per unit 21 11 191 100 Units for Basic Model 200 4,600 50 100 Units for Advance Model 750 3,400 500 250 Total Overhead for Basic Model4,211 51,750 9,545 10,000 75,506 Total Overhead for Advance Model15,789 38,250 95,455 25,000 1,74,494 From the above table we can see that the cost per unit of the basic model under activity basedcosting is $522 per unit and that of advance model is $936 per unit. In calculation of above cost per unit we have not included other indirect cost.4
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