Management Accounting for Cost and Control - Desklib

This article discusses the concept of Panopticism, functions of management accounting, checklist as a tool for control, manufacturing statement, perpetual inventory system, material control account, accrued payroll account, and journal entries. It also includes answers to various questions related to these topics. 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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1MANAGEMENT ACCOUNTING FOR COST AND CONTROL
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:.................................................................................................................7
Answer to 5 A:...........................................................................................................................7
Answer to question B.................................................................................................................8
Answer to question 6:.................................................................................................................8
Answer to question 7:.................................................................................................................8
Answer to question 8:.................................................................................................................9
Answer to requirement A:..........................................................................................................9
Answer to requirement B:..........................................................................................................9
Answer to requirement C:........................................................................................................10
Answer to question 9:...............................................................................................................11
Answer to question 10:.............................................................................................................13
Reference List:.........................................................................................................................15

2MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question 1:
French philosopher named Michel Foucault developed a social theory that was known
as the Panopticism. The definition of the term Panopticon is referred as the tentative
laboratory theory of power which takes into the consideration the behaviour of an individual
(Rickman & Bowker, 2015). According to the French philosopher the theory of Panopticism
is regarded as the mark disciplinary society of surveillance.
In the age of rising technology the example of Panopticon theory is viewed as the
process of surveillance that comprises of appeal to the culture. The expansion was presented
to the organization and the individuals from the tools of data mining (Fiddler, 2017). This has
given rise to the expansion of surveillance data that can address the medium of surveillance
in reflecting the distant businesses sources by considering the algorithmic production.
Panopticism as the tool of management accounting provides assistance in maintaining
the record of all the transactions along with the necessary business figures derived from the
activities. Therefore, Panopticism helps in locating the mistakes and error with the help of
correct measures for modifying the accounting process and making sure that authenticity is
maintained.
Answer to question 2:
Management accounting has certain noteworthy functions which are as follows;
Planning: An important function of management accounting is planning. This refers to
making short term and long term business plans with the objective of attaining particular
business goals (Wild, 2015). A budget under the planning process reflects that how a business
is about obtain fund and how the funds will be used over the period of time. The functions of
planning is related with the management accounting since it helps in rendering required
information in the decision making process.

3MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Controlling: Another functions of management accounting is controlling that which
implements monitors, measures, assess and modifies original results to assure that the
business firms make their goals and plan to achieve this goals. Under this functions reports
are generated that are associated to performance (Salako & Yusuf, 2016). These reports
forms the basis for taking necessary actions to implement control on operations.
Decision making: A noteworthy functions of management accounting is the process of
selecting best available alternatives for business. An inherent functions of management
accounting is decision making and a manager would not be able to make any decisions
without making plan and controlling functions.
Answer to question 3:
Checklist is viewed as the important tool that helps in listing all the necessary things
which a person is required to take into the account or information an individual would like to
take account off or make sure that they don’t miss out anything. As per the statement of Van
Helen Rock band the checklist comprised of all the necessary things to consider. The rock
band views checklist as the noteworthy instrument of applying control (Wiffen, 2016). The
rock band views checklist as the controlling instrument since it assist in assuring that each
and every person that are indulged in the activity are capable of understanding the goals and
adhering with the required procedure.
As per the statement made by the rock band checklist helps in serving as the
advantageous tool since the rock band has considered checklist as the highly portable tool to
carry. The checklist enable the members of rock band to administer the consistency of supply
such as inventories. Additionally checklist helps in saving time for the rock band by taking
account of necessary records among the other required things. Therefore, for the rock band

4MANAGEMENT ACCOUNTING FOR COST AND CONTROL
checklist is not only regarded as the vital tool of maintaining the required records by also
helps in gaining required access.
Answer to question 4:
Normal View:
Particulars Amount (in $) Amount (in $)
Raw Materials Purchased 8,42,000
Add: Opening Stock of Raw Materials 11,000
Less: Closing Stock of Raw Materials 26,000 8,27,000
Labour 4,56,780
Inward Charges on Raw Materials 25,340
Prime Cost 13,09,120
Manufacturing Overhead:
Manufacturing Expense 3,70,000
Depreciation on Machinery 12,900
Factory Salaries 3,67,800
Add: Accrued Salaries 12,600 3,80,400
Insurance 12,000
Add: Prepaid Insurance 3,700 15,700
Rates 9,425
Factory Cost 20,97,545
Add: Opening Work-in-Process
Material 23,000
Labour 17,000
Overhead Expenses 26,000 66,000
21,63,545
Less: Closing Work-in-Process
Material 15,000
Labour 11,000
Overhead Expenses 8,000 34,000
Cost of Goods Manufactured 21,29,545
Add: Opening Stock of Finished Goods 50,000
Less: Closing Stock of Finished Goods 11,000
Cost of Goods Sold 21,68,545
In the Books of Tendulkar Manufacturing Co.
Manufacturing Statement
for the period ended 30 September 3017

5MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Particulars Amount (in $) Amount (in $)
Sales of Finished Goods 38,56,000
Cost of Goods Sold 21,68,545
Gross Profit 16,87,455
Operating Expenses:
Advertising 24,000
Audit Fee 12,000
Discount Expense 3,450
Discount Revenue (5,320)
Freight Outwards 6,543
Insurance 4,000
Less: Prepaid Insurance 925 3,075
Light and Power 23,000
General Expenses 54,320
Rates 3,142
Office Salaries 35,000
Add: Accrued Office Salaries 2,340 37,340
Sales Commission 47,600
Total Operating Expenses 2,09,150
Operating Income 14,78,305
Tax Expense 56,740
Net Profit 14,21,565
In the Books of Tendulkar Manufacturing Co.
Income Statement
for the period ended 30 September 3017

6MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Formula View:
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)
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
In the Books of Tendulkar Manufacturing Co.
Manufacturing Statement
for the period ended 30 September 3017

7MANAGEMENT ACCOUNTING FOR COST AND CONTROL
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)
Operating Income =E8-E23
Tax Expense 56740
Net Profit =E24-E25
In the Books of Tendulkar Manufacturing Co.
Income Statement
for the period ended 30 September 3017
Answer to question 5:
Answer to 5 A:
The perpetual inventory system is known as the process of accounting relating to
inventory that records the immediate sale and purchase of inventory with the help of
computerised system of sale such as point of sale or the business software management.
Companies using the perpetual inventory system is under obligation of implementing
physical count of stocks in the day to day organization of inventory and related the value
against the inventory costs (Berlemann & Wesselhöft, 2014). The physical stock system is
viewed as the vital for assessing the discrepancies of inventory records in order to ascertain
the incorrect quantities.

8MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question B
Overtime is known as the excess amount of money that is paid to the worker for the
excess amount of hour worked than the standard labour hours. The overtime payment is
calculated by using the total hourly wage rate and total number of overtime worked by the
employee. The overtime payment made to the worker is considered as indirect labour cost
and the same is recorded under the heads of overhead expenditure.
Answer to question 6:
Date Particulars Amount Date Particulars Amount
1st April To Balance b/d 60,000 30th April By Work-in-Process Account 60,000
30th April To Accounts Payable Account 80,000 30th April By Accounts Payable A/c 50,000
30th April By Balance c/d 30,000
1,40,000 90,000
Material Control Account
Cr.Dr.
Particulars Amount ($) Amount ($)
Manufacturing Overhead A/c……….Dr 30,000$
To Material Control …………A/c 30,000$
Journal Entry:
Answer to question 7:
Date Particulars Amount Date Particulars Amount
1st July To Bank A/c 40,000 1st July By Balance b/d 18,000
31st July To Balance c/d 50,000 By Work-in-Process A/c 50,000
By Overhead Control A/c 22,000
90,000 90,000
Accrued Payroll Account
Dr. Cr.

9MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question 8:
Answer to requirement A:
Period Total Number of Days Gross Payroll Per Day Accrued Payroll
1-09 to 3-09 3 8000 24000
4-09 to 10-9 5 8000 40000
11-09 to 17-09 5 8000 40000
18-09 to 2-09 5 8000 40000
25-09 to 30-09 4 8000 32000
Total amount credited to accrued payroll 22 176000
Answer to requirement B:
Period Accrued Payroll Payment Balance
1-09 to 3-09 24000 24000 0
4-09 to 10-9 40000 40000 0
11-09 to 17-09 40000 40000 0
18-09 to 2-09 40000 40000 0
25-09 to 30-09 32000 0 32000
Total amount credited to accrued payroll

10MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to requirement C:
Date Particulars Amount ($) Amount ($)
3rd September Payroll A/c…………………………..Dr 24000
To Accrued Payroll ……………A/c 24000
5th September Accrued Payroll A/c…………….Dr 40000
To PAYG Witholding ……………. A/c 12000
To Bank ………………………………A/c 28000
10th September Payroll A/c…………………………Dr 40000
To Accrued Payroll………….A/c 40000
12th September Accrued Payroll A/c…………..Dr 40000
To PAYG Witholding ……………. A/c 12000
To Bank ………………………………A/c 28000
17th July Payroll A/c…………………………Dr 40000
To Accrued Payroll………….A/c 40000
19th September Accrued Payroll A/c…………..Dr 40000
To PAYG Witholding ……………. A/c 12000
To Bank ………………………………A/c 28000
24th September Payroll A/c…………………………Dr 40000
To Accrued Payroll………….A/c 40000
26th September Accrued Payroll A/c…………..Dr 40000
To PAYG Witholding ……………. A/c 12000
To Bank ………………………………A/c 28000
30th September Payroll A/c…………………………Dr 40000
To Accrued Payroll………….A/c 40000
Direct Labour A/c…………………Dr 105600
Indirect Labour A/c………………Dr 35200
Selling Expenses A/c……………Dr 24640
General and Administrative Expenses A/………Dr 10560
To Payroll………………………A/c 176000
PAYG Witholding A/c……………Dr 48000
To Bank ………………………………A/c 48000
Journal Entries

11MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Date Particulars Amount Date Particulars Amount
03-Sep To Accrued Payroll A/c 24000 30-Sep By Direct Labour A/c 105600
10-Sep To Accrued Payroll A/c 40000 By Indirect Labour 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 General and Administrative Expenses 10560
30-Sep To Accrued Payroll A/c 32,000
1,76,000 1,76,000
Payroll Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
30-Sep To Payroll A/c 105600 30-Sep By W-I-P A/c 14400
10-Sep By W-I-P A/c 24000
17-Sep By W-I-P A/c 24000
05-Aug By W-I-P A/c 24000
30-Sep By W-I-P A/c 19,200
1,05,600 1,05,600
Direct Labour Cost Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
30-Sep To Payroll A/c 35200 30-Sep By Factory overhead A/c 4800
10-Sep By Factory overhead A/c 8000
17-Sep By Factory overhead A/c 8000
05-Aug By Factory overhead A/c 8000
30-Sep By Factory overhead A/c 6,400
35,200 35,200
InDirect Labour Cost Account
Dr. Cr.
Answer to question 9:
Costing is process of collecting, recording and classifying the cost that is occurred in
conducting an activity or attaining the business purpose. During the early 1980 an increasing
amount of intense competition was found around the world as there was an increase in
overheads and decline in direct labour (Kamala et al., 2015). Additionally, companies were
found to be facing problems with the traditional method of costing. However, with the rise of
ABC costing process businesses viewed this method as the most suitable and appropriate
method of costing.
The ABC method of costing is bought into action when it is noticed that cost of
overhead is on greater side and there are several miscellaneous products (Sokolov &
Elsukova, 2016). Inaccuracy and errors are viewed as the most unwelcome process of costing

12MANAGEMENT ACCOUNTING FOR COST AND CONTROL
due to the competitive rates set by the competitors in the market. Businesses view that with
increasing competition there is a need for highly reliable and accurate system of costing.
The traditional costing uses the same old single method of pooling overhead and fails
to ascertain the original costs. Costs are randomly allocated depending upon the machine
hours and labour (Greenberg & Wilner, 2015). Whereas the ABC costing system recognizes
the parts of products and labour while the traditional costing method arbitrarily assembles the
expenses.
Activity costs helps the businesses and managers to identify the targeted costs. This
method of costing is termed beneficial because it helps in making simpler process of decision
making and applies the target oriented management concept (Saidi, 2018). Business using the
ABC costing method may determine the business performance and set out standards that
would help in facilitating comparative study.
Under the traditional method of costing, businesses are able to determine the cost of
product only after the production procedure while the ABC costing helps in determining the
cost based upon the feedback of the consumers (Greenberg & Wilner, 2015). Businesses
using the ABC method of costing can determine whether they wishes to increase or decrease
the cost of activity to attract the consumers. This system helps in meeting the current age
competition and helps in keeping up with the market through quality and quantity of
products.
The ABC method of costing helps in developing the strategy during the long run by
gaining competitive advantage on specific activities. The ABC method uses cost
identification method that is associated with the direct and indirect cost of products. In spite
of benefits there are certain criticism against the ABC costing as there are certain cost that
requires to be allocated among the production (Sokolov & Elsukova, 2016). The ABC

13MANAGEMENT ACCOUNTING FOR COST AND CONTROL
method fails to determine those cost. On a conclusive note the ABC method of costing is an
improvement over traditional costing system. The traditional costing system may result in
significant over and under allocation of cost to products which under the ABC costing does
not happens. Therefore, business should prefer ABC costing rather that opting for traditional
costing methods.

14MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Answer to question 10:
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
Overhead Allocation of S1 15000 5000 -20000
Overhead Allocation of S2 10294 14706 -25000
Total Manufacturing Cost 85294 64706 0 0
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
Overhead Allocation of S1 12000 4000 -15000 4000
72000 49000 5000 29000
Overhead Allocation of S2 11941 17059 0 -14500
Total Manufacturing Cost 83941 66059 5000 14500
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
Overhead Allocation of S1 15464 5155 -25773 5155
75464 50155 -5773 30155
Overhead Allocation of S2 10103 14433 4330 -28866
Total Manufacturing Cost 85567 64588 -1443 1289
Overhead Allocation Under Direct Method
Overhead Allocation Under StepMethod
Overhead Allocation UnderReciprocal Method

15MANAGEMENT ACCOUNTING FOR COST AND CONTROL

16MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Reference List:
Berlemann, M., & Wesselhöft, J. E. (2014). Estimating aggregate capital stocks using the
perpetual inventory method. Review of Economics, 65(1), 1-34.
Fiddler, M. (2017). Panopticism.
Greenberg, R. K., & Wilner, N. A. (2015). Using concept maps to provide an integrative
framework for teaching the cost or managerial accounting course. Journal of
Accounting Education, 33(1), 16-35.
Kamala, P., Struwig, J., Bornman, M., Boersman, R., Vermaak, M., McGill, M., ... & Taylor,
P. (2015). Principles of Cost Accounting. OUP Catalogue.
Rickman, J., & Bowker, G. (2015). NEOLIBERALISM, PROFIT, AND THE NEW
PANOPTICISM.
Saidi, F. (2018). Implementation of ABC System: A Case of a Center for Entrepreneurship.
Salako, M. A., & Yusuf, S. A. (2016). Cost accounting: A pivotal factor of entrepreneurial
success.
Sokolov, A. Y., & Elsukova, T. V. (2016). Using abc to enhance throughput accounting: An
integrated management approach. Academy of Strategic Management Journal, 15, 8-
15.
Wiffen, P. (2016). Reporting guidelines: checklists for specific study designs.
Wild, J. (2015). Financial accounting fundamentals. McGraw-Hill Higher Education.