Management Accounting for Cost and Control

This project report covers various topics related to management accounting such as panopticism, control, checklist, manufacturing statement, income statement, labour cost concept, material control account, accrued payroll account, and payroll entries. It explains the importance of controlling in business, the concept of perpetual inventory stock, and the use of checklists. It also includes examples of manufacturing statements, income statements, and journal entries for payroll. The report is relevant for students studying management accounting in any college or university.

Running Head: Management Accounting
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Project Report: Management Accounting for cost and control

Management Accounting
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Contents
Question 1: Panopticism...................................................................................................3
Question 2: Control...........................................................................................................3
Question 3: Checklist........................................................................................................4
Question 4: Manufacturing statement and income statement...........................................4
Question 5: Labour cost concept......................................................................................9
Question 6: Material control account.............................................................................10
Question 7: Accrued payroll account.............................................................................11
Question 8: Payroll entries..............................................................................................13
Question 9:Activity based costing..................................................................................21
Question 10: Service department cost allocation............................................................21
References.......................................................................................................................26

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Question 1: Panopticism
Panopticism is a hypothetical jail which has been projected by Jeremy Bentham. It
have round tires of cell adjacent a central surveillance tower. Panopticism is a process of
panopticon in which cost are controlled and reduced by the companies to maintain the
performance and the position of the company in the industry. Panopticism requires less staff
and the main motto of this process is to set the goals and achieve the goals in no cost. It
explains that the virtual and hypothetical control should be there in the organization to
maintain the performance of the staff and it would make a control over all the cost of the
company due to hypothetical perseverance (Garrison et al, 2010). Panopticism process
controls and monitors the activity of a business to manage the entire activities of the
company. It enhances the overall business and the management of the company to reduce and
manage the cost of the company.
Question 2: Control
Controlling is a significant part of business which extends the performance and the
management of an organization. The way toward controlling includes supervising, proposing,
monitoring and analyzing corrections in the business activity and the process of the company.
The administration bookkeeping framework controls the business procedures and exercises in
order to guarantee that the business goals are accomplished. For instance, the exception
reporting and variance analysis is gotten through the management accounting framework,
which help administration in assessing the slip by at the workplace. Further, the controls are
likewise set down to decrease the wastage and in this way, the general cost of manufacturing
(Ittner, Lanen & Larcker, 2002). The variance analysis assists in finding the reasons for
rebelliousness and shatter of controls, alongside giving answer for the same. Along these,
management accounting assists the administration in giving the controlling capacity in the
association, which is significant for the accomplishment of the gaols.

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Question 3: Checklist
Checklist is a list of total items and things which are required to done the things or the
points which are required to be considered and used as a reminder. It is a type of job aid
which is used by the companies and the individuals to reduce the failure through
compensating the potential limits of attention and human memory. Van Halen’s checklist
theory explains that the band has been successful due to their checklist. The bank always used
to maintain a checklist before any concert so that the things could be managed and
performance could be at its best. It is quite tough for a band to manage such as big
equipments in smaller place but it used to easier for Van Halen’s due to their policy and the
checklist management (Weygandt, Kimmel & Kieso, 2015). However, it has also been found
that a checklist is only successful when it is properly followed.
Question 4: Manufacturing statement and income statement
Normal Solution:
a)
Tendulkar Manufacturing Co
Manufacturing statement for the year ending at 30
September, 20X7
Particulars Amount Amount
Direct material
Beginning raw materials 11,000
Purchase of raw materials 8,42,000
Less: Ending raw material -26,000
8,27,000
Direct Expenses
Inward Charges on raw
materials 25,340
Direct labor 4,56,780
4,82,120
Factory Overhead
Manufacturing expense 3,70,000
Salaries (Factory) 3,80,400
Depreciation on Machinery 12,900
Insurance 9,225
Rates 9,425
7,81,950

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Total Manufacturing Cost 20,91,070
Add: Beginning WIP 66,000
Less: Closing WIP 34,000
Cost of goods manufactured 21,23,070
b)
Tendulkar Manufacturing Co. Ltd
Income statement for the year ending at 30 September,
20X7
Particulars Amount Amount
Sales of finished goods 38,56,000.00
Other Income (Discounts from
creditors) 5,320.00 38,61,320.00
Less: Cost of goods sold
Closing Finished Goods 32,000.00
Cost of goods
manufactured 21,23,070.25
Less: Beginning Finished
Goods 50,000.00
21,05,070.25
Gross Profit 17,56,249.75
Less: Expenses
Advertising 24,000.00
Audit Fee 12,000.00
Discounts to debtors 3,450.00
Cartage Outwards 6,543.00
Insurance 3,075.00
Light and power (Office) 23,000.00
General Expenses 54,320.00
Rates 3,141.75
Salaries (Office) 37,340.00
Sales Commission 47,600.00
2,14,469.75
Profit Before Tax Profit 15,41,780.00
Less: Tax 56,740.00
Profit After Tax 14,85,040.00
Formula view:

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Particulars Amount Amount
Direct material
Beginning raw materials 11000
Purchase of raw materials 842000
Less: Ending raw material -26000
=SUM(C8:C10)
Direct Expenses
Inward Charges on raw materials 25340
Direct labor 456780
=SUM(C13:C14)
Factory Overhead
Manufacturing expense 370000
Salaries (Factory) =12600+367800
Depreciation on Machinery 12900
Insurance =12300*0.75
Rates =12567*0.75
=SUM(C17:C21)
Total Manufacturing Cost =D11+D15+D22
Add: Beginning WIP =23000+17000+26000
Less: Closing WIP =15000+11000+8000
Cost of goods manufactured =D24+C25-C26
Particulars Amount Amount
Sales of finished goods 3856000
Other Income (Discounts from creditors) 5320 =SUM(C34:C35)
Less: Cost of goods sold
Closing Finished Goods 32000
Cost of goods manufactured =D27
Less: Beginning Finished Goods 50000
=C38+C37-C39
Gross Profit =D35-D40
Less: Expenses
Advertising 24000
Audit Fee 12000
Discounts to debtors 3450
Cartage Outwards 6543
Insurance =(16000-3700)*0.25
Light and power (Office) 23000
General Expenses 54320
Rates =(12567*0.25)
Salaries (Office) =35000+2340
Sales Commission 47600
=SUM(C43:C52)
Profit Before Tax =IF(D41>=D53,"Profit","Loss")=D41-D53
Less: Tax 56740
Profit After Tax =D54-D55
Tendulkar Manufacturing Co
Manufacturing statement for the year ending at 30 September, 20X7
Tendulkar Manufacturing Co. Ltd
Income statement for the year ending at 30 September, 20X7
a)
b)

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Manual:

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Question 5: Labour cost concept
The perpetual inventory stock deals with constant recording and tracking of the stock
in an organization. In this way, the arrangement of perpetual inventory records consequently

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inventory and update the inventory system of the company. Since, the stock evidences are
reorganized on continuous premise, accordingly, it is required for the companies to update
and tally the inventory system to manage the performance of the company. It epxlians about
the cost of goods sold of the company (Coper and Kaplan, 2012).
Further, it explains that the overtime payment should be treated as overhead as this
cost could be controlled by the company.
Question 6: Material control account
Normal View:
Material Control Account
Date Particulars Debit Date Particulars Credit
01.08.2016 Balance
60,000.0
0
WIP control
account
60,000.0
0
Account
payable
80,000.0
0
Indirect
Material
30,000.0
0
31.08.2016 Balance
50,000.0
0
Total
1,40,000.0
0 Total
1,40,000.0
0
Journal Entry of indirect Material
Debit Credit
Profit and
loss a/c
30,000.0
0
Indirect
Material 30,000.00
Formula view:

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Date Particulars Debit Date Particulars Credit
01.08.2016 Balance 60000 WIP control account 60000
Account payable 80000 Indirect Material =F8-F5-F7
31.08.2016 Balance 50000
Total =SUM(C5:C6) Total =C8
Debit Credit
Profit and loss a/c =F6
Indirect Material =C14
Material Control Account
Journal Entry of indirect Material
Manual view:
Question 7: Accrued payroll account
Normal View:
Accrued Payroll Account
Date Particulars Debit Date Particulars Credit
01.03.2016 Balance
18,000.0
0
Salary and
wages
50,000.0
0
Cash
70,000.0
0
Direct
labor
22,000.0
0

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31.03.2016 Balance
20,000.0
0
Total
90,000.0
0 Total
90,000.0
0
Formula view:
Date Particulars Debit Date Particulars Credit
01.03.2016 Balance 18000
Salary and wages 50000
Cash 70000 Direct labor 22000
31.03.2016 Balance 20000
Total =F9 Total =SUM(F5:F8)
Accrued Payroll Account
Manual view:

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Question 8: Payroll entries
Normal View:
A: Total amount to be credited to Accrued Payroll in respect of sept
earnings
Gross payroll per
day 8,000.00
Less: PAYG taxes 2,400.00
For credited to
Accrued Payroll per
day 5,600.00
Total accrued days
on 30 Sept 8
For credited to
Accrued Payroll for
Sept 44,800.00
B: If balance day adjustments are performed at the end of each month
Gross payroll per
day 8,000.00
Less: PAYG taxes 2,400.00
For credited to
Accrued Payroll per
day 5,600.00
Total accrued days
on 31 Sept 8
For credited to
Accrued Payroll for
Sept 44,800.00
C (i): Weekly Journal Entry
Date Particulars Debit Credit
sept,
05 Payroll Expense 28,000.00

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Cash 28,000.00
Sept,
12 Payroll Expense 39,200.00
Cash 39,200.00
Sept,
19 Payroll Expense 39,200.00
Cash 39,200.00
Sept,
26 Payroll Expense 39,200.00
Cash 39,200.00
Sept,
30 Payroll Expense 28,000.00
Accrued Payroll 28,000.00
Sept,
30 Payroll Expense 72,000.00
PAYG Taxes 72,000.00
Sept,
30 PAYG Taxes 72,000.00
Cash 72,000.00
Sept,
30 Income Summary 2,40,000.00
Payroll expense 2,40,000.00
C (ii): Ledgers
Payroll Expense
Date Particulars Debit Date Particulars Credit
sept,
05 Cash 28,000.00 July, 31
Income
Summary 2,40,000.00
Sept,
12 Cash 39,200.00

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Sept,
19 Cash 39,200.00
Sept,
26 Cash 39,200.00
Sept,
30 Accrued Payroll 28,000.00
Sept,
30 PAYG Taxes 72,000.00
Total 2,45,600.00 Total 2,40,000.00
Accrued Payroll
Date Particulars Debit Date Particulars Credit
Sept, 30
Payroll
Expense 28,000.00
Total - Total 28,000.00
PAYG Taxes
Date Particulars Debit Date Particulars Credit
Sept,
30 Cash 72,000.00 Sept, 30
Payroll
Expense 72,000.00
Total 72,000.00 Total 72,000.00
Cash
Date Particulars Debit Date Particulars Credit
sept, 05
Payroll
expense 28,000.00
Sept, 12
Payroll
expense 39,200.00
Sept, 19
Payroll
expense 39,200.00
Sept, 26
Payroll
expense 39,200.00
Sept, 30 PAYG Taxes 72,000.00
Total - Total 2,17,600.00

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Formula view:

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Gross payroll per day 8000
Less: PAYG taxes 2400
For credited to Accrued Payroll per day =C5-C6
Total accrued days on 30 Sept 8
For credited to Accrued Payroll for Sept =C7*C9
B: If balance day adjustments are performed at the end of each month
Gross payroll per day 8000
Less: PAYG taxes 2400
For credited to Accrued Payroll per day =C15-C16
Total accrued days on 31 Sept 8
For credited to Accrued Payroll for Sept =C17*C19
C (i): Weekly Journal Entry
Date Particulars Debit Credit
sept, 05 Payroll Expense =5*C17
Cash =C27
Sept, 12 Payroll Expense =7*C17
Cash =C30
Sept, 19 Payroll Expense =7*C17
Cash =C33
Sept, 26 Payroll Expense =7*C17
Cash =C36
Sept, 30 Payroll Expense =5*C17
Accrued Payroll =C39
Sept, 30 Payroll Expense =C6*30
PAYG Taxes =C42
=A42 PAYG Taxes =C42
Cash =C45
=A45 Income Summary =C5*30
Payroll expense =C48
C (ii): Ledgers
Date Particulars Debit Date Particulars Credit
=A27 Cash =C27 July, 31 Income Summary =C48
Sept, 12 Cash =C30
Sept, 19 Cash =C33
Sept, 26 Cash 39200
Sept, 30 Accrued Payroll =C39
Sept, 30 PAYG Taxes =C42
Total =SUM(C56:C62) Total =SUM(F56:F61)
Date Particulars Debit Date Particulars Credit
Sept, 30 Payroll Expense =C61
Date Particulars Debit Date Particulars Credit
A: Total amount to be credited to Accrued Payroll in respect of sept earnings
Payroll Expense
Accrued Payroll

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Manual solution:

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Question 9:Activity based costing
Refer to other file.
Question 10: Service department cost allocation
Normal view:
Direct method
Statement of cost reallocation
Department (Amount in $)
Particulars P1 P2 S1 S2
Direct material and labour 60000 45000 20000 25000
60000 45000 20000 25000
Department S1
Reallocation 15000 5000 -20000 -
Department S2
Reallocation 10294 14706 - -25000
85294 64706 0 0
Step method
Statement of cost reallocation
Department (Amount in $)
Particulars P1 P2 S1 S2
Direct material and labour 60000 45000 20000 25000
60000 45000 20000 25000
Department S2
Reallocation 3750 8750 12500 -25000
Department S1
Reallocation 24375 8125 -32500
88125 61875 0 0
Reciprocal method
Statement of cost reallocation
Department (Amount in $)
Particulars P1 P2 S1 S2

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Direct material and labour 60000 45000 20000 25000
60000 45000 20000 25000
24485 23673
Department S2
Reallocation 9747.7 13925.294
Department S1
Reallocation 18363.75 6121.25
88111 65047
Matrix
Linear Departments
Pre-
allocation
Equation S1 S2 P1 P2 dollars
S1 1 -0.2 0 0 20000
S2 -0.25 1 0 0 25000
P1 -0.375 -0.2 1 0 60000
P2 -0.375 -0.5 0 1 45000
Linear Departments
Equation S1 S2 P1 P2
S1 1 -5 0 0
S2 -4 1 0 0
P1
-
2.666667 -5 1 0
P2
-
2.666667 -2 0 1
Algerbric Method
S1= 20000+ 0.15 S2
S2 = 25000+ 0.2 S1
S1 = 20000+ 0.15 (25000+ 0.2 S1)

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S1 = 20000+3750+0.03S1
0.97 S1= 23750
S1 = 23750/0.97
S1= 24485
S2 = 20000+(0.15*24485) = 23673
Formula view:

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B C D E F G
Direct method
Particulars P1 P2 S1 S2
Direct material and labour 60000 45000 20000 25000
=C7 =D7 =E7 =F7
Department S1 Reallocation=-E9*60/80 =-E9*20/80 -20000 -
Department S2 Reallocation=-F10*35/85 =-F10*50/85 - =-F8
=SUM(C8:C10) =SUM(D8:D10) =E8+E9 =F8+F10
Step method
Particulars P1 P2 S1 S2
Direct material and labour 60000 45000 20000 25000
=C19 =D19 =E19 =F19
Department S2 Reallocation=F20*15% =F20*35% =F20*50% =-F20
Department S1 Reallocation=-E22*60/80 =-E22*20/80 =-(E20+E21)
=SUM(C20:C22) =SUM(D20:D22) =(E20+E21+E22) =(F20+F21+F22)
Reciprocal method
Particulars P1 P2 S1 S2
Direct material and labour 60000 45000 20000 25000
=C31 =D31 =E31 =F31
24485 23673
Department S2 Reallocation=F33*35/85 =F33*50/85
Department S1 Reallocation=E33*60/80 =E33*20/80
=SUM(C32:C35) =SUM(D32:D35)
Matrix
Linear Pre-allocation
Equation S1 S2 P1 P2 dollars
S1 1 -0.2 0 0 20000
S2 =-20/80 1 0 0 25000
P1 =-30/80 -0.2 1 0 60000
P2 =-30/80 -0.5 0 1 45000
Linear
Equation S1 S2 P1 P2
S1 =MINVERSE(C44) =MINVERSE(D44) 0 0
S2 =MINVERSE(C45) =MINVERSE(D45) 0 0
P1 =MINVERSE(C46) =MINVERSE(D46) =MINVERSE(E46) 0
P2 =MINVERSE(C47) =MINVERSE(D47) 0 =MINVERSE(F47)
Departments
Departments
Statement of cost reallocation
Department (Amount in $)
Statement of cost reallocation
Department (Amount in $)
Statement of cost reallocation
Department (Amount in $)
Manual:

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References:
Cooper, R., & Kaplan, R. S. (2012). Activity-based systems: Measuring the costs of resource
usage. Accounting Horizons, 6(3), 1.
Garrison, R. H., Noreen, E. W., Brewer, P. C., & McGowan, A. (2010). Managerial
accounting. Issues in Accounting Education, 25(4), 792-793.
Ittner, C. D., Lanen, W. N., & Larcker, D. F. (2002). The association between activity‐based
costing and manufacturing performance. Journal of accounting research, 40(3), 711-
726.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting.
John Wiley & Sons.