Management Accounting

Management Accounting
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Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Question 2...................................................................................................................................3
Question 3...................................................................................................................................5
Question 4...................................................................................................................................7
Question 6.................................................................................................................................10
Conclusion.....................................................................................................................................12
References .....................................................................................................................................13
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Introduction
Management accounting is a form of accounting which focuses on both financial and non
financial information in a business (Hirsch, Seubert and Sohn, 2015). In the project undertaken,
it was specified that four questions out of six have to be attempted which presents different forms
of financial part of managerial accounting. At first, a schedule of the cost of goods manufactured
is presented and accompanying it is an income statement based on that cost of goods
manufactured. Next part presents a differential analysis in the two forms of costing i.e.
absorption costing and marginal costing. Calculation of cost per unit and income statement has
been prepared for both the forms. Next is the calculation of variance analysis. Demonstration of
material, labour and overhead variances has been presented below. In the final part, calculations
of contribution, break even point have been demonstrated.
Main Body
Question 2
(I) Schedule of cost of goods manufactured for the quarter:
Costs of good manufactured is calculated to gain a knowledge about the production costs
to the company in comparison to revenues it is earning (LIU and PAN, 2018). It helps company
understand whether its production costs are too high or low or requires necessary adjustments or
not.
Schedule of Cost of Goods Manufactured
Particulars Amount (£)
Direct Material used
Opening Stock of Raw material 0
Add: Cost of raw material purchased 310000
Total stock 310000
Less: Closing Stock of raw material -40000
Total raw material used 270000
Direct labour 80000
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Manufacturing Overhead
Indirect materials – cleaning supplies 6000
Indirect labour 135000
Depreciation – production equipment 75000
Insurance – factory 9000
Taxes – factory 0
Maintenance - factory 47000
Rent 48000
Utilities 40500
Total manufacturing overhead 360500
Total manufacturing costs 710500
Add: Opening WIP 0
Less: Closing WIP -30000 -30000
Cost of goods manufactured 680500
Working Note:
Total Factory Overhead Office Overhead
Utilities 45000 40500 (90%) 4500 (10%)
Rent 60000 48000 (80%) 12000 (20%)
(ii) Income Statement
Income Statement
Particulars Amount (£)
Sales 975000
Cost of goods sold
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