Management Accounting for Cost & Control

This article discusses the concept of Panopticim and its role in management accounting. It also covers the three roles of management accounting, the use of checklists as a control device, and provides formula views for manufacturing and income statements. Additionally, it includes answers to questions related to perpetual inventory, overtime as an overhead cost, journal entries, and accrued payroll.

Running head: MANAGEMENT ACCOUNTING FOR COST & CONTROL
Management Accounting for Cost & Control
Name of the Student:
Name of the University:
Author’s Note:

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Table of Contents
Answer to Question No 1................................................................................................................2
Answer to Question No 2................................................................................................................3
Answer to Question No 3................................................................................................................5
Answer to Question No 4:...............................................................................................................6
Normal View:..............................................................................................................................6
Manufacturing Statement:.......................................................................................................6
Income Statement:...................................................................................................................7
Formula View:.............................................................................................................................8
Manufacturing Statement:.......................................................................................................8
Income Statement:...................................................................................................................9
Answer to Question No 5..............................................................................................................10
Answer to Question No 6:.............................................................................................................10
Answer to Question No 7:.............................................................................................................11
Answer to Question No 8:.............................................................................................................11
Requirement a:...........................................................................................................................11
Requirement b:...........................................................................................................................11
Requirement c:...........................................................................................................................12
Reference List................................................................................................................................14

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 1
Panopticim is a communal or a social theoretical framework that is named on Panopticon
and was established by Michel Foucault who is a French philosopher. Panopticon explains the
tentative laboratory related with the authority with the help of which the attitude can be
transformed or amended and panopticon is considered to be a sign of disciplinary method of
surveillance (Taleb et al., 2015). It is even known as the function of the disciplinary method like
in case of a prison and addresses the role of discipline as a tool of authority. It is even an
observable prisoner and suggests that it is a source of data and not a subject of communication.
For example, the theory of panopticon has widespread effective impacts for the purpose
of surveillance in the era of technology and it is observed that surveillance has an allure of
culture. The development in the observable data is made available to the organizations and the
individuals from the tools of data mining that has led to the development of the surveillance of
the data which can be addresses as the mode of surveillance that tries to point out any distinct
source of transactions by taking assistance of the algorithmic manufacturing.
In this aspect, Panopticim assists in the process of management accounting as this process
keeps track of every single transaction and the figures so that any mistakes and errors in the
recording of the transaction can be detected and rectified so that the process of accounting
remains authentic.

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 2
The three role of management accounting are as follows:
Planning
Planning is the method of creating short and long term plans and actions in order to attain
a distinct outcome. Management accounting is closely associated with planning as it gives out
the data for the intention of making decisions and due to the fact that the overall method of
budgeting is established all around the reports that are related to accounting (Hopper, & Bui
2016).
For example, the management accounting method establishes the information that assists
the managers to discover the products that are profitable. In the same way, the effects of
alternative prices and the selling efforts can be ascertained by the management accountant.
Organising
It is the method of establishing a business model and assigning the obligations to the
workers performing in the firm for attaining the goals and the objectives of the company.
Management accounting helps the managers in organising the process by providing statements
and documents that are significant data in order to control and adjust the operations and the
processes with respect to the transforming conditions (Wagenhofer, 2016). For example, the
statements that are in the management accounting system can be created on the product lines
over which the managers can undertake decisions of either adding or reducing a product line in
the current product mix.

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Controlling
Controlling is the method of evaluating, administering, constructing and amending the
real outcome in order to ensure that the objectives and the plans of the business are
accomplished. The process of controlling is undertaken with the help of feedback. The process of
management accounting assists in the controlling function by computing control and
performance reports which defines the real and the anticipated performances.
Answer to Question No 3
Rock band Van Halen has made use of checklist as a key process of control device. This
is observed in the story and the case of the rocker David Lee Roth who created an agreement of
Van Halen with the music concert promoters and the contract contained a clause that addressed
that a M&M bowl had to be provided in the backstage of the concert and every individual brown
candies cover had to be removed, during the penalty of the pain of undertaking the show; with
the overall remuneration to the band (Klychova et al., 2015). This process acted as a checklist
acting as a control device.

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 4:
Normal View:
Manufacturing Statement:
Particulars Amount Amount
($) ($)
Direct Materials:
Raw Materials 1/10/X6 11000
Raw Materials Purchased 842000
Inward Charges on Raw Material 25340
878340
Less: Raw Materials 30/09/X7 26000
Raw Materials to Production 852340
Add: Work in Process 1/10/X6 23000
875340
Less: Work in Process 30/09/X7 15000
Raw Materials in Goods Manufactured 860340
Direct Labor:
Direct Labor 456780
Add: Work in Process 1/10/X6 17000
473780
Less: Work in Process 30/09/X7 11000
Direct Labor in Goods Manufactured 462780
Prime Cost 1323120
Manufacturing Overhead:
Manufactring Expense 370000
Salaries (Factory) 380400
Insurance 9225
Rates 9425
Depreciation on Machinery 12900
781950
Add: Work in Process 1/10/X6 26000
807950
Less: Work in Process 30/09/X7 8000
Manufacturing Overhead in Goods
Manufactured 799950
Cost of Goods Manufactured 2123070
Tendulkar Manufacturing Co.
Manufacturing Statement
for the year ended 30th September 20X7

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Income Statement:
Particulars Amount Amount Amount
($) ($) ($)
Sale of Finished Goods 3856000
Cost of Goods Sold:
Finished Goods 1/10/X6 50000
Cost of Goods Manufactured 2123070
Cost of Goods Available for Sale 2173070
Less: Finished Goods 30/09/X7 32000
Cost of Goods Sold 2141070
Gross Profit 1714930
Add: Other Operating Revenue
Discount Revenue 5320
1720250
Selling Expenses:
Advertising 24000
Freight outwards 6543
Sales Commission 47600 78143
Administrative Expenses:
Salaries (Offi ce) 35000
General Expenses 54320
Light & Power (Offi ce) 23000
Rates 3142
Insurance 3075
Audit Fee 12000 130537
Financial Expense:
Discount Expense 3450 212130
Net Profit 1508120
Tax Expense 56740
Net Profit after Tax 1451380
Tendulkar Manufacturing Co.
Income Statement
for the year ended 30th September 20X7

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Formula View:
Manufacturing Statement:
Particulars Amount Amount
($) =B6
Direct Materials:
Raw Materials 1/10/X6 11000
Raw Materials Purchased 842000
Inward Charges on Raw Material 25340
=SUM(B8:B10)
Less: Raw Materials 30/09/X7 26000
Raw Materials to Production =B11-B12
Add: Work in Process 1/10/X6 23000
=B13+B14
Less: Work in Process 30/09/X7 15000
Raw Materials in Goods Manufactured =B15-B16
Direct Labor:
Direct Labor 456780
Add: Work in Process 1/10/X6 17000
=B20+B21
Less: Work in Process 30/09/X7 11000
Direct Labor in Goods Manufactured =B22-B23
Prime Cost =C17+C24
Manufacturing Overhead:
Manufactring Expense 370000
Salaries (Factory) =367800+12600
Insurance =(16000-3700)*75%
Rates =12567*75%
Depreciation on Machinery 12900
=SUM(B27:B31)
Add: Work in Process 1/10/X6 26000
=B32+B33
Less: Work in Process 30/09/X7 8000
Manufacturing Overhead in Goods Manufactured =B34-B35
Cost of Goods Manufactured =C25+C36
Tendulkar Manufacturing Co.
Manufacturing Statement
for the year ended 30th September 20X7

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Income Statement:
Particulars Amount Amount Amount
($) =G6 =H6
Sale of Finished Goods 3856000
Cost of Goods Sold:
Finished Goods 1/10/X6 50000
Cost of Goods Manufactured =C38
Cost of Goods Available for Sale =H9+H10
Less: Finished Goods 30/09/X7 32000
Cost of Goods Sold =H11-H12
Gross Profit =I7-I13
Add: Other Operating Revenue
Discount Revenue 5320
=I14+I16
Selling Expenses:
Advertising 24000
Freight outwards 6543
Sales Commission 47600 =SUM(G19:G21)
Administrative Expenses:
Salaries (Offi ce) 35000
General Expenses 54320
Light & Power (Offi ce) 23000
Rates =B30*(25/75)
Insurance =B29*(25/75)
Audit Fee 12000 =SUM(G24:G29)
Financial Expense:
Discount Expense 3450 =SUM(H19:H32)
=IF(I33>0,"Net Profit","Net Loss") =I17-I32
Tax Expense 56740
=IF(I35>0,"Net Profit after Tax","Net Loss after Tax") =I33-I34
Tendulkar Manufacturing Co.
Income Statement
for the year ended 30th September 20X7

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 5
(a) There is no need to undertake a physical stock take in case of the scenario if the perpetual
inventory process is exploited because of the fact that perpetual inventory system keeps
record and upgrades the inventory records as the companies utilise the raw materials and
thereafter sell the final product to the consumer (Coad et al., 2015). For example a retail
shop who is selling finished goods to the customers and after the sales is complete and
the product is scanned in the computer registering system an automatic update of the
inventory is done and there is no need of physical stock take.
(b) Overtime is the amount that is paid for the additional hours of work performed over the
normal labour rate. This amount is looked upon as an overhead expense because of the
fact that this is an unexpected expense of the company over the direct labour expense that
is kept by the organization (Messner et al., 2016). The overtime amount can change
according to the time of hours of worked and therefore it needs to be treated as an
overhead cost.
Answer to Question No 6:
Dr. Cr.
Date Particulars Amount Date Particulars Amount
01-Apr To, Balance b/d 60000 30-Apr By,Work-in-Process A/c. 60000
30-Apr Accounts Payable A/c. 80000 30-Apr By, Manufacturing Overhead A/c. 30000
30-Apr By,Balance c/d. 50000
140000 140000
Material Control A/c.
Journal Entry:
Dr. Cr.
Date Particulars Amount Amount
30-Apr Manufacturing Overhead A/c……Dr. 30000
To, Material Control A/c. 30000

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 7:
Dr. Cr.
Date Particulars Amount Date Particulars Amount
01-Jul To, Bank A/c. 40000 01-Jul By, Balance b/d. 18000
31-Jul By, WIP Control A/c. 50000
31-Jul To, Balance c/d. 50000 By, Overhead Control A/c. 22000
90000 90000
Accrued Payroll A/c.
Answer to Question No 8:
Requirement a:
Period
Nos. of
Days
Gross Payroll
per day
Accrued
Payroll
1/09 to 3/09 3 $8,000 $24,000
4/09 to 10/09 5 $8,000 $40,000
11/09 to 17/09 5 $8,000 $40,000
18/09 to 24/09 5 $8,000 $40,000
25/09 to 30/09 4 $8,000 $32,000
Total Amount credited
to Accrued Payroll 22 $1,76,000
Requirement b:
Period
Accrued
Payroll Payment Balance
1/09 to 3/09 $24,000 $24,000 $0
4/09 to 10/09 $40,000 $40,000 $0
11/09 to 17/09 $40,000 $40,000 $0
18/09 to 24/09 $40,000 $40,000 $0
25/09 to 30/09 $32,000 $0 $32,000
Month End Balance in
Accrued Payroll $32,000
Requirement c:
i) Journal Entries:

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Dr. Cr.
Date Amount Amount
03-Sep Payroll A/c. Dr. $24,000
To, Accrued Payroll A/c. $24,000
05-Sep Accrued Payroll A/c. Dr. $40,000
To, PAYG Withholding A/c. $12,000
To, Bank A/c. $28,000
10-Sep Payroll A/c. Dr. $40,000
To, Accrued Payroll A/c. $40,000
12-Sep Accrued Payroll A/c. Dr. $40,000
To, PAYG Withholding A/c. $12,000
To, Bank A/c. $28,000
17-Jul Payroll A/c. Dr. $40,000
To, Accrued Payroll A/c. $40,000
19-Sep Accrued Payroll A/c. Dr. $40,000
To, PAYG Withholding A/c. $12,000
To, Bank A/c. $28,000
24-Sep Payroll A/c. Dr. $40,000
To, Accrued Payroll A/c. $40,000
26-Sep Accrued Payroll A/c. Dr. $40,000
To, PAYG Withholding A/c. $12,000
To, Bank A/c. $28,000
30-Sep Payroll A/c. Dr. $32,000
To, Accrued Payroll A/c. $32,000
Direct Labor A/c. Dr. $1,05,600
Indirect Labor A/c. Dr. $35,200
Selling Expense A/c. Dr. $24,640
General & Administration
Expense A/c. Dr. $10,560
To, Payroll A/c. $1,76,000
PAYG Withholding Payable A/c. Dr. $48,000
To, Bank A/c. $48,000
Particulars
Journal Entries

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
ii) Ledger Posting:
Dr. Cr.
Date Particulars Amount Date Particulars Amount
03-Sep To, Accrued Payroll A/c. $24,000 30-Sep By. Direct Labor A/c. 105600
10-Sep To, Accrued Payroll A/c. 40000 By, Indirect Labor A/c. 35200
17-Sep To, Accrued Payroll A/c. 40000 By. Selling Expenses A/c. 24640
24-Sep To, Accrued Payroll A/c. 40000
By, Geneal &
Administrative Expense
A/c. 10560
30-Sep To, Accrued Payroll A/c. 32000
$1,76,000 $1,76,000
Dr. Cr.
Date Particulars Amount Date Particulars Amount
30-Sep To, Payroll A/c. $1,05,600 03-Sep By, Work-in-Progress A/c. $14,400
10-Sep By, Work-in-Progress A/c. $24,000
17-Sep By, Work-in-Progress A/c. $24,000
24-Sep By, Work-in-Progress A/c. $24,000
30-Sep By, Work-in-Progress A/c. $19,200
$1,05,600 $1,05,600
Dr. Cr.
Date Particulars Amount Date Particulars Amount
30-Sep To, Payroll A/c. $35,200 03-Sep By, Factory Overhead A/c. $4,800
10-Sep By, Factory Overhead A/c. $8,000
17-Sep By, Factory Overhead A/c. $8,000
24-Sep By, Factory Overhead A/c. $8,000
30-Sep By, Factory Overhead A/c. $6,400
$35,200 $35,200
Indirect Labor Cost A/c.
Payroll A/c.
Direct Labor Cost A/c.
Answer to Question No 9:
Traditional costing and activity based costing are two different processes for assigning
the indirect expenses to the products. These two processes project the overhead costs that is

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
associated to production and then allocate the expense to the products by looking at the cost
driver rate. The differences in these two processes are in the complexity and the accuracy of the
two processes (Bromwich, & Scapens 2016). Traditional costing is a less precise and simple
process that activity based costing and generally allocates the overhead expense to the products
based in the random aggregate rate. On the other hand activity based costing is a more precise
and complex process than traditional costing and this process initially allocate the indirect
expense to the operations and then allocates the costs to the products by depending on the usage
activities of a product (Suomala et al., 2014).
The benefits of ABC costing are:
 Improves the organizational processes
 Recognition of the products that is wasteful
 Precise costing method
 Easy to understand
 It is good for business
The disadvantages of ABC costing are as follows:
 It is a costly implementation process
 Chances of data misinterpretation
 Product margins are odd

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question 10:
Direct Method:
Particulars P1 P2 S1 S2
% Allocation of S1 60% 20% 20%
% Allocation of S2 35% 50% 15%
Indirect Cost 60000 45000 20000 25000
Total Departmental Cost 60000 45000 20000 25000
Cost Allocation of S1 15000 5000 -20000
Cost Allocation of S2 10294 14706 -25000
Total Manufacturing Cost 85294 64706 0 0
Overhead Allocation under Direct Method:-
Step Method:
Particulars P1 P2 S1 S2
% Allocation of S1 60% 20% 20%
% Allocation of S2 35% 50% 15%
Indirect Cost 60000 45000 20000 25000
Total Departmental Cost 60000 45000 20000 25000
Cost Allocation of S1 12000 4000 -15000 4000
72000 49000 5000 29000
Cost Allocation of S2 11941 17059 0 -14500
Total Manufacturing Cost 83941 66059 5000 14500
Overhead Allocation under Step Method:-
Reciprocal Method:
As per the allocation process,
a) Total Cost of S1 Department (x) = Direct Centre Cost of S1 + [20% x Total Cost of S2 (y) ]

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Or, x = $20000 + (20% X y)
b) Total Cost of S2 Department (y) = Direct Centre Cost of S2 + [ 15% x 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
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
Particulars P1 P2 S1 S2
B C
% Allocation of S1 60% 20% 20% 1 -0.2 x 20000
% Allocation of S2 35% 50% 15% 0.15 1 y 25000
Indirect Cost 60000 45000 20000 25000 B C
Total Departmental Cost 60000 45000 20000 25000 x 1 -0.2 20000
Cost Allocation of S1 15464 5155 -25773 5155 y -0.15 1 25000
75464 50155 -5773 30155
Cost Allocation of S2 10103 14433 4330 -28866 B
x 25773
Total Manufacturing Cost 85567 64588 -1443 1289 y 28866
=
A^-1
*
=
Overhead Allocation under Reciprocal Services Method:-
A
*
Matrix Algebra:
=

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Reference List
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Hopper, T., & Bui, B. (2016). Has management accounting research been critical?. Management
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reflective analysis of conducting interventionist research in management
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Taleb, M. A., Gibson, B., & Hovey, M. (2015). Fifty years of Sustainability Accounting: does
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MANAGEMENT ACCOUNTING FOR COST & CONTROL