Management Accounting: Cost Values, Breakeven Point Analysis, Non-Financial Performance Measures

This article covers the computation of different cost values, statement showing cost of goods sold and goods manufactured, income statement, breakeven point analysis, and relevance of non-financial performance measures in management accounting.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Students:
Name of the University:
Author’s Note:

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MANAGEMENT ACCOUNTING
Table of Contents
Computation of Different Cost Values............................................................................................2
Statement showing Cost of Goods Sold and Goods Manufactured.................................................4
Income Statement............................................................................................................................5
Breakeven Point Analysis................................................................................................................5
Relevance of Non-Financial Performance Measures......................................................................6
Reference.........................................................................................................................................7

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Computation of Different Cost Values
Computation of Closing WIP Balance:
Particulars Amount
Budgeted Manufacturing Overhead A $1,000,000
Budgeted Direct Labor Hours B 200000
Manufacturing Overhead Rate per
direct labor hour C=A/B $5.00
Direct Labour Hours for WIP D 32400
Manufacturing Overhead for WIP E=CxD $162,000
Direct Labor Cost F $90,720
Cost of Direct Material G $140,000
Closing Balance of WIP H=E+F+G $392,720
Figure 1: (Computation of Closing WIP balance)
Source: (Created by Author)
Computation of Direct Labor Cost:
Particulars Amount
Direct Labour Hours for WIP A $90,720
Direct Labour Hours for WIP B 32400
Direct Labor Cost per hour C=A/B $2.80
Total Direct Labor Hours for May D 260000
Total Direct Labor Cost for May E=CxD $728,000
Figure 2: (Computation of Direct Labour Cost)
Source: (Created by Author)

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Computation of Sales Revenue:
Particulars Amount
Cost of Goods Sold A $3,600,000
Mark Up Percentage B 40%
Sales Revenue C=AxB $5,040,000
Figure 3: (Computation of Sales Revenue)
Source: (Created by Author)
Dr. Cr.
Date Particulars Amount Date Particulars Amount
31/05/2018 To, Bank A/c. $420,000 1/05/2018 By, Balancce b/d $50,000
To, Balance c/d $62,000 31/05/2018 By, Raw Material A/c. $432,000
$482,000 $482,000
Accounts Payable A/c.
Figure 4: (Table Showing Account Payable Account)
Source: (Created by Author)
Dr. Cr.
Date Particulars Amount Date Particulars Amount
1/05/2018 To, Balance b/d. $2,622,720 31/05/2018 By, Raw Material A/c. $2,634,720
To, Accounts Payable A/c. $432,000 31/05/2018 By, Balance c/d. $420,000
$3,054,720 $3,054,720
Raw Material A/c.
Figure 5: (Table Showing Raw Material Account)
Source: (Created by Author)

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Statement showing Cost of Goods Sold and Goods Manufactured
Particulars Amount Amount
Opening Stock of Raw Material $2,622,720
Add: Purchase of the year $432,000
$3,054,720
Less: Closing Stock of Raw Material $420,000
Direct Materials Consumed $2,634,720
Direct Labor Cost $728,000
PRIME COST $3,362,720
Manufacturing Overhead Cost $1,300,000
TOTAL PRODUCTION COST $4,662,720
Add: Opening Stock of WIP $210,000
$4,872,720
Less: Closing Stock of WIP $392,720
COST OF GOODS MANUFACTURED $4,480,000
Add: Opening Stock of Finished Goods $280,000
Cost of Goods available for Sale $4,760,000
Less: Closing Stock of Finished Goods $1,160,000
COST OF GOODS SOLD $3,600,000
SCHEDULE OF COST OF GOODS MANUFACTURED & GOODS SOLD:
Figure 6: (Table showing Computation of Cost of Goods Sold)
Source: (Created by Author)

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Income Statement
Particulars Amount
Sales Revenue $5,040,000
Cost of Goods Sold -$3,600,000
GROSS PROFIT $1,440,000
Selling & Administration Cost -$32,000
Net Profit for the period $1,408,000
INCOME STATEMENT:
Figure 7: (Income Statement for May 2018)
Source: (Created by Author)
Breakeven Point Analysis
As per the question which is given in the question deals with a company which is
engaged in the manufacturing of more than one product. Breakeven Point in units can be
computed by dividing the total fixed costs which are attributable to the business divided by the
contribution margin of the business (Morano and Tajani 2013). Breakeven Point analysis shows
the no profit no loss situation which the business can attain at a certain level of sales or units.
Breakeven point analysis can be useful for the business to determine the minimum amount of
sales which the business needs to achieve for the purpose of improving the profitability of the
business. The important concepts which are to be understood from the formula of breakeven
point in units is the concept of the contribution margin and the concept of product mix and sales
mix. Product or sales mix refers to the proportion of the company’s total sales for each type of
products which is sold by the company (Palia 2014). The contribution margin relates to the total

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earnings which is available to the company for meeting the fixed expenses of the business and
also the ability of the business to generate profits for a period. The computation of the breakeven
analysis in units considers fixed costs of the business as shown in the formula for the
computation of the same.
Relevance of Non-Financial Performance Measures
Non-Financial Performance Measures refers to the quantitative measures which depicts
the performance of a business which is not expressed in monetary terms and normally includes
significant ratios. The non-financial performance measures show various aspects of performance
of the business which deals with various areas of business performance (Abernethy, Bouwens
and Lent 2013). The non-financial performance measures majorly consist of significant ratios
which deals with various aspects such as profitability, liquidity, solvency and stability ratios. The
significant ratios which are computed by the business are often considered to be financial
indicators of the success of the business. In many cases, shareholders consider important results
of significant ratios for the purpose of making investment decisions. The management considers
both the financial and non-financial performances for the purpose of understanding the growth
which the business has achieved during the period (Ho, Wu and Wu 2014). This also measures
the response of the company towards social responsibility, governance and also market valuation
of the shares of the company. Therefore, from the above discussions it is clear that non-financial
performance indicators are important and are considered when measuring the o0verall
performance of a business during a year.

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Reference
Abernethy, M.A., Bouwens, J. and Lent, L., 2013. The role of performance measures in the
intertemporal decisions of business unit managers. Contemporary accounting research, 30(3),
pp.925-961.
Ho, J.L., Wu, A. and Wu, S.Y., 2014. Performance measures, consensus on strategy
implementation, and performance: Evidence from the operational-level of
organizations. Accounting, Organizations and Society, 39(1), pp.38-58.
Morano, P. and Tajani, F., 2013. Break Even Analysis for the financial verification of urban
regeneration projects. In Applied Mechanics and Materials (Vol. 438, pp. 1830-1835). Trans
Tech Publications.
Palia, A.P., 2014. Target profit pricing with the web-based breakeven analysis
package. Developments in Business Simulation and Experiential Learning, 35.