Management Accounting Assignment - Doc

Added on - 21 Jul 2020

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Introduction to managementaccounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK...............................................................................................................................................1a) Calculation of cost using conventional method......................................................................1b) Calculation of cost of each activity.........................................................................................1c) Calculation of per unit cost using ABC method.....................................................................2d) calculation of price to be charged...........................................................................................2e) Mispricing of product due to conventional method................................................................3f) Advantages of ABC.................................................................................................................4g) Disadvantage of activity based costing...................................................................................4CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
INTRODUCTIONIn business, it is very important that cost shall be calculated in an appropriate manner andfor that, various decisions will be made under management accounting (DRURY, 2013). By this,the cost that can be avoided will be identified and this will lead to cost saving. In this report,conventional and activity based costing will be discussed in context with Jackson limited whichis involved in the production of two products.TASKa) Calculation of cost using conventional methodIn the earlier times, method with the help of which cost was calculated is conventional. Inthis method, all the direct costs will be taken into consideration. Overheads incurred will becalculated in total and then will be allocated among various products that are manufactured.Below is provided calculation of cost with the help of this method.ParticularsMarthaFredDirect material cost6040Direct labour cost4530Manufacturing overheads136136Cost per unit241206Manufacturing cost per unit = 816000/6000= 136b) Calculation of cost of each activityIn any business, there are various costs which are incurred and all of them are classifiedin different groups which are known as cost pools (Lambert and Sponem, 2012). The productioncost will be calculated in proper manner as total cost that is incurred is divided on the basis of theactivities that are undertaken.ParticularsSetup andinspectioncostMachinerelated costPlant relatedcostEngineeringACost driverNumber ofproductionTotal machinehoursSpace in sqfootNumber oforder changes1
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