Management Accounting - Desklib

MANAGEMENT ACCOUNTING
STUDENT ID:
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Question 1
a) Based on the given information, it is apparent that total cost incurred would be the sum
total of costs incurred during mixing and bottling.
Total costs incurred in mixing department (March 2013) = 113000 + 15000 + 32000 = $
160,000
Total costs incurred in bottling department (March 2013) = 17000 + 6000 + 9000 = $ 32,000
Total production costs incurred (March 2013) = 160,000 + 32,000 = $ 192,000
Total production quantity (March 2013) = 160,000 bottles
Cost per bottle for Cool Bay Draught = (192000/160000) = $ 1.2
b) The requisite journal entries are indicated below (Drury, 2016).

Question 2
The objective of this task is to compute selected variances based on the data provided.
a) The requisite formula is indicated below (Damodaran, 2015).
Direct material price variance = (Standard Unit Price – Actual Unit Price)*Actual quantity
used
As per the information provided, standard unit price = $ 7.2/kg, actual unit price = $ 7.4/kg,
actual quantity = (31080/7.4) = 4200 kg
Hence, direct material price variance = (7.2-7.4)*4200 = -$ 840
Since the actual price exceeds the budgeted price, hence the variance is unfavourable.
b) The requisite formula is indicated below (Bhimani, Horngren, Datar & Foster,2017).
Direct material usage variance – (Actual quantity – Standard quantity)*Standard Price
As per the information provided, actual quantity = (31080/7.4) = 4200 kg, standard quantity =
2000*2 = 4000 kg, standard unit price = $ 7.2/kg
Hence, direct material usage variance = (4200-4000)*7.2 = $ 1,440
Since the actual material consumed is greater than the expected material consumption, hence
the above variance is unfavourable.
c) The requisite formula is indicated below (Drury, 2016).
Direct labour rate variance = (Actual Rate – Standard Rate)*Actual Hours
As per the information provided, actual rate = $ 18.30 per hour, standard rate = $ 18 per hour,
actual hours = (118035/18.3) = 6450 hours
Hence, direct labour rate variance = (18.3-18)*6450 = $ 1,935
Since the actual labour rate exceeds the standard labour rate, hence the given variance is
unfavourable.