Management Accounting - Costing Methods and Overhead Allocation

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

1MANAGEMENT ACCOUNTING
Table of Contents
Requirement 1:.................................................................................................................................2
Department Wise Overhead Allocation:......................................................................................2
Overhead Allocation of Service Department:..............................................................................2
PRODUCTION COST UNDER TRADITIONAL METHOD:..................................................3
Requirement 2:.................................................................................................................................3
Overhead Cost per Activity Driver:.............................................................................................3
PRODUCTION COST UNDER ABC METHOD:.....................................................................4
Requirement 3:.................................................................................................................................4
References:......................................................................................................................................5

2MANAGEMENT ACCOUNTING
Requirement 1:
Department Wise Overhead Allocation:
Particulars Total Machine Centre A
Machine
Centre B Assembly Stores Maintenance
Area Occupied (Square Mtr.) 52000 9000 8000 12000 15000 8000
Lighting & Heating $5,50,000 $95,192 $84,615 $1,26,923 $1,58,654 $84,615
Insurance of Buildings $3,00,000 $51,923 $46,154 $69,231 $86,538 $46,154
Property Taxes $8,50,000 $1,47,115 $1,30,769 $1,96,154 $2,45,192 $1,30,769
Nos. of Employees 1100 340 210 350 100 100
Salaries of Works Management $11,00,000 $3,40,000 $2,10,000 $3,50,000 $1,00,000 $1,00,000
Book Value of Machinery $1,52,00,000 $80,00,000 $55,00,000 $8,00,000 $4,00,000 $5,00,000
Insurance of Machinery $2,50,000 $1,31,579 $90,461 $13,158 $6,579 $8,224
Depreciation of Machinery $16,00,000 $8,42,105 $5,78,947 $84,211 $42,105 $52,632
Total Other Overheads $46,50,000 $16,07,915 $11,40,946 $8,39,676 $6,39,069 $4,22,394
Indirect Wages & Supervision $77,80,000 $12,00,000 $10,00,000 $16,00,000 $21,00,000 $18,80,000
Indirect Materials $13,20,000 $5,00,000 $6,50,000 $1,50,000 $0 $20,000
TOTAL MANUFACTURING OVERHEAD $1,37,50,000 $33,07,915 $27,90,946 $25,89,676 $27,39,069 $23,22,394
Overhead Allocation of Service Department:
Particulars Total Machine Centre A
Machine
Centre B Assembly
Material Procurement $80,00,000 $40,00,000 $30,00,000 $10,00,000
Overhead Cost of Stores Dept. $27,39,069 $13,69,534 $10,27,151 $3,42,384
Direct Labor Hours 3900000 900000 1000000 2000000
Overhead Cost of Maintenance Dept. $23,22,394 $5,35,937 $5,95,486 $11,90,971
Total Overhead of Service Dept. $50,61,463 $19,05,471 $16,22,636 $15,33,355
Other Manufacturing Overhead $86,88,537 $33,07,915 $27,90,946 $25,89,676
TOTAL OVERHEAD OF PRODUCTION CENTRE $1,37,50,000 $52,13,386 $44,13,583 $41,23,031
Cost Driver Machine Hours
Machine
Hours
Direct Labour
Hours
Machine/Labour Hours 2000000 1200000 2000000
Overhead Cost per Machine/Labour Hours $2.61 $3.68 $2.06