Management Accounting for Cost and Control

This article discusses the concept of Panopticism in management accounting, functions of management accounting, the importance of checklists, and the ABC costing method. It also provides solutions to various questions related to cost accounting. The subject is management accounting for cost and control, and the course code and college/university are not mentioned.

Running head: MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Management Accounting for Cost and Control
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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................4
Answer to question 5 A:.............................................................................................................7
Answer to question 5 B:.............................................................................................................7
Answer to question 6:.................................................................................................................7
Answer to question 7:.................................................................................................................8
Answer to question 8:.................................................................................................................8
Answer to Part A:.......................................................................................................................8
Answer to Part B:.......................................................................................................................8
Answer to Part C:.......................................................................................................................9
Answer to question 9:...............................................................................................................10
Answer to question 10:.............................................................................................................11
Reference List:.........................................................................................................................14

2MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question 1:
Panopticism is referred as the social theory which is named after the “Panopticon”
that was initially founded by Michael Foucault a French philosopher. The expression
“Panopticism” is referred as the laboratory for experiment of power that assist in changing
the behaviour as the mark of showcasing the society investigation.
The term Panopticism in respect of management accounting requires attention in the
areas of management and accounting elements anti-corruption project. Panopticism helps in
detailing the concepts of auditing and accounting with the objective of placing focus on
detecting and preventing the corruption (Lanen, 2016). Panopticicms acts as the tool of
implementing control on the accounting records and helps in acting as the tool for
reformation that stresses on the financial controls as the anti-corruption. The concept of
Panopticism is to reduce the conflict of interest between the management and control by
applying strong auditing programs.
Panoticism helps in applying the transparency in data as this would help in promoting
better synoptically system. Adopting the Panoptical approach would assist in durable
application of control for private companies (Eldenburg et al., 2016). For instance, applying
the concept of panoptical system in an organization would assist in defining the raw type of
the data derived and would assist in side-lining the professional auditors.
Answer to question 2:
The functions of management accounting are as follows;
Planning: Planning refers to the formulation of short and long term plans along with actions
to achieve a particular end. A budget represents the financial planning that represents how the
resources are to be obtained and used over a particular time period (Rajan et al., 2015). The
functions of management accounting is closely woven in planning since it gives information

3MANAGEMENT ACCOUNTING FOR COST AND CONTROL
relating to decision making. As a result of this the entire budget is revolves around
accounting of related products.
Controlling: Controlling refers to the process of monitoring, measuring, evaluating and
modifying the actual results to make sure that the goal of business enterprise is attained
(Salako & Yusuf, 2016). Control is attained with the help of feedback. Management
accounting assist the functions of control by generating performance reports and control
reports that highlight variances among the anticipated and actual performance. The reports
serve as the basis of taking necessary corrective actions to control operations.
Decision Making: Decision making as the too, of management accounting refers to the
process of choosing from the competitive analysis. Decision making is inherited in the other
functions of management accounting namely planning, organizing and controlling. A
manager of an organization will not be able to plan without taking decision and has to choose
from the competing elements to execute the selected purposes.
Answer to question 3:
In the words of Schaltegger & Burritt, (2017), the routine and responsibilities have
turned out to be a difficult element in the current world. This is because mistakes are virtually
considered inevitable in the modern world. As stated by the Van Helen Rock Band, checklist
is regarded as the most vital tool for implementing control. Checklist helps in careful
composition and application of control. The rock band realised that checklist is regarded as
the vital element of control since it helps in assuring that each person that are engaged in
work are capable of understanding the aims and goals by adhering to the prescribed process.
As per the rock band they would gain advantage from the use of checklist since it is
highly portable to carry around (Bennett & James, 2017). With the use of checklist, the rock
band helps in ensuring that a thoroughness is maintained together with the supply of

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inventory consistency and are generally time saving by accounting for the required records
among the other list of items. During the situation of complexity checklists not only serve as
the tool for assistance but they are also required for gaining success.
Answer to question 4:
Normal View

5MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Formula View:
In the Books of Tendulkar Manufacturing Co.
Manufacturing Statement
for the period ended 30 September 3017
Particulars Amount (in $) Amount (in $)
Raw Materials Purchased 842000
Add: Opening Stock of Raw Materials 11000
Less: Closing Stock of Raw Materials 26000 =D7+D8-D9
Labour 456780
Inward Charges on Raw Materials 25340
Prime Cost =SUM(E9:E11)
Manufacturing Overhead:
Manufacturing Expense 370000
Depreciation on Machinery 12900
Factory Salaries 367800
Add: Accrued Salaries 12600 =D16+D17
Insurance =(16000*3/4)

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Add: Prepaid Insurance 3700 =D18+D19
Rates =(12567*3/4)
Factory Cost =SUM(E12:E20)
Add: Opening Work-in-Process
Material 23000
Labour 17000
Overhead Expenses 26000 =SUM(D23:D25)
=E21+E25
Less: Closing Work-in-Process
Material 15000
Labour 11000
Overhead Expenses 8000 =SUM(D28:D30)
Cost of Goods Manufactured =E26-E30
Add: Opening Stock of Finished Goods 50000
Less: Closing Stock of Finished Goods 11000
Cost of Goods Sold =E31+E32-E33
Formula View:
In the Books of Tendulkar Manufacturing Co.
Income Statement
for the period ended 30 September 3017
Particulars Amount (in $) Amount (in $)
Sales of Finished Goods 3856000
Cost of Goods Sold ='Q4(1)- Normal View'!D6
Gross Profit =E6-E7
Operating Expenses:
Advertising 24000
Audit Fee 12000
Discount Expense 3450
Discount Revenue -5320
Freight Outwards 6543
Insurance =16000*25%
Less: Prepaid Insurance =(3700*25%) =D15-D16
Light and Power 23000
General Expenses 54320
Rates =(12567*25%)
Office Salaries 35000
Add: Accrued Office Salaries 2340 =D20+D21
Sales Commission 47600
Total Operating Expenses =SUM(E10:E22)

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Operating Income =E8-E23
Tax Expense 56740
Net Profit =E24-E25
Answer to question 5 A:
A perpetual system of inventory continuously updates the company records on the
circumstances when the raw materials or products are sold to the customers. Businesses that
uses the perpetual system of inventory is required to introduce the accounting cycle of
physical stock take in the day to day organization inventory account by comparing the
quantity against the records of inventory (Taylor & Nyide, 2014). The system of physical
stock take in this system would help in examining the differences in the inventory records to
determine the reasons for incorrect quantities.
Answer to question 5 B:
Overtime can be defined as the amount of overtime that is paid to each of the
employee during the pay period. Overtime is computed based on the hourly rate of pay and
overtime hours worked. Therefore, in context of the present question the overtime payment is
considered as the indirect labour and it is considered in the overtime costs.
Answer to question 6:

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Answer to question 7:
Answer to question 8:
Answer to Part A:
Answer to Part B:

9MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to Part C:

10MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question 9:
The system of costing are regarded as the system of information. The costing system
usually needs specific information that is direct labour and the total quantity of units
produced. The system of traditional costing helps in allocating the overhead under one single
machine type application of overheads or rates for the operational department that is based on
volume (Otley, 2016). The cost of overhead usually does not vary with the quantity. Hence,
assigning the overhead costs based on the volume would result in distortion amid the costs
that assigned to several lines of product.
As stated by Chiwamit et al., (2017), the activity costs is stated as the refinement of
the traditional costing system for allocating the manufacturing overhead in the number of
units produced. Complying with the analysis, the traditional system of costing constantly uses
the volume based measures such as direct labour hours and the machine hours to allocate the
overhead costs for the goods produced. Conversely the ABC system of costing allocates the
overhead costs to the product relating to the resources of each activities that are indulged in
designing, producing and distributing specific products. This further accompanies by
allocating the cost among the cost pools constituting the specified activities and distributing
the costs by using the correct drivers of costs of the products.
Arguably an assertion can be bought forward by stating that ABC costing method is
more focus based costing and undertakes detailed approach instead of using department or
machinery level for accumulating costs (Maas et al., 2016). The activity based costing

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provides the managers with the adequate information of products leading to improved profits
with strong strategic planning in the areas of price, customers, and market and capital
expenses. The ABC costing methods offers managers with the easy access to necessary costs
for making decision and maintaining competitive position in market.
In spite of the benefits certain arguments against the ABC method of costing has been
bought forward relating to cost allocation (Taylor & Nyide, 2014). There are certain costs
that is required to be allocated in departments and product allocation to decide volume of
particular activity. As a result of this, there are certain costs which may not on some occasion
be regarded as feasible.
The development and application of ABC costing system is regarded as time
consuming and generally needs a year time for implementing the system. Since the ABC
costing system generates large quantity of information and there is some information that
gives misleading results to the management and might compel managers in concentrating on
the incorrect data (Schaltegger & Burritt, 2017). Despite facing criticism ABC method of
costing is regarded as more product concerned and offers managers with ease in the
identification of business costs for making decision to remain competitive. Therefore, the
ABC costing method is regarded as the improvement over the traditional costing system.
Answer to question 10:

12MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Total Cost of S1 Department (x) = Direct Centre Cost of S1 + [20% * Total Cost of S2 (y) ]
Or, x = $20000 + (20% X y)
b) Total Cost of S2 Department (y) = Direct Centre Cost of S2 + [ 15% * Total Cost of S1
(x)]
Or, y = $25000 + (15% X x)
Or, y= $25000 + [15% x ($20000 + 20%y)]
Or, y= $25000 + $3000 + 3%y
Or, y-0.03y = $28000

13MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Or, 0.97y = $28000
Or, y = $28000/0.97 = $28868
x = $20000 + 20%y
Or, x = $20000 + (20% x $28868)
Or. x = $20000 + $5773 = $25773

14MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Reference List:
Bennett, M., & James, P. (Eds.). (2017). The Green bottom line: environmental accounting
for management: current practice and future trends. Routledge.
Chiwamit, P., Modell, S., & Scapens, R. W. (2017). Regulation and adaptation of
management accounting innovations: The case of economic value added in Thai state-
owned enterprises. Management Accounting Research, 37, 30-48.
Eldenburg, L. G., Wolcott, S. K., Chen, L. H., & Cook, G. (2016). Cost management:
Measuring, monitoring, and motivating performance. Wiley Global Education.
Lanen, W. (2016). Fundamentals of cost accounting. McGraw-Hill Higher Education.
Maas, K., Schaltegger, S., & Crutzen, N. (2016). Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner
Production, 136, 237-248.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, 45-62.
Rajan, M. V., Datar, S. M., & Horngren, C. T. (2015). Cost Accounting: A Managerial
Emphasis. Pearson Education, Inc.
Salako, M. A., & Yusuf, S. A. (2016). Cost accounting: A pivotal factor of entrepreneurial
success.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Taylor, P. A., & Nyide, C. J. (2014). Cost Accounting II Module 11.