Management Accounting Assesment Report

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................3
Answer to question 5:.................................................................................................................4
References and bibliography:.....................................................................................................6

2MANAGEMENT ACCOUNTING
Answer to question 1:
The predetermined overhead rate is the rate of overhead allocation to the products or
service unit which is calculated based on the estimated total overhead and total use of a key
activity. In the given case, the predetermined overhead rate was $47.60 per direct labour
hour. Based on the revised costs and revised labour hour the predetermined overhead rate can
be recalculated as follows.
Statement showing computation of Predetermined overhead
rate
Estimated manufacturing overhead $ 24,75,000
Annual lease cost of the milling machine $ 3,00,000
Technician/programmer's salary $ 45,000
Revised total manufacturing overhead $ 28,20,000
Estimated direct labour hours 52,000
Less: Expected savings in direct labour hour 6,000
Revised total labour hours 46,000
Predetermined overhead rate (2,820,000/46,000) $ 61.30
Answer to question 2:
Based on the given direct materials costs, direct labour costs and taking the revised
overhead allocation rate the total cost of production for the particular job has been calculated
as follows.
Statement showing computation of total production cost of the Job
Direct materials costs $ 45,800
Direct labour costs $ 8,400
Prime costs $ 54,200
Add: Manufacturing overhead (400*61.30) $ 24,522
Total production cost of the job $ 1,32,922