Management Accounting Techniques for Pyramid Construction

The assignment content discusses the importance of cost management accounting in construction projects, particularly in building the Great Pyramid of Giza. It highlights the traditional approach to constructing a pyramid and how modern cost management techniques can reduce limitations and improve efficiency. Additionally, it explains variance analysis as an important tool in management accounting, which helps identify reasons for variation between budgeted figures and actual results.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the University
Name of the student
Authors note

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to Question 1:................................................................................................................2
Requirement A:......................................................................................................................2
Requirement B:......................................................................................................................3
Answer to Question 2:................................................................................................................4
Answer to Question 3:................................................................................................................5
Answer to Question 4:................................................................................................................7
Answer to Question 5...............................................................................................................11
Part B........................................................................................................................................12
References:...............................................................................................................................13

2MANAGEMENT ACCOUNTING
Answer to Question 1:
Requirement A:
DR. CR.
Date Particulars Amount Date Particulars Amount
To, Balance b/d. 24855 31/8/14 By, Work-in-Process A/c. 6010
To, Accounts Payable A/c. 6155 By, Balance c/d 25000
31010 31010
Direct Material Account
DR. CR.
Date Particulars Amount Date Particulars Amount
1/8/X4 To, Balance b/d 6700 31/8/X4 By, Finished Goods A/c. 30110
To, Direct Labor A/c. 14800 By, Balance c/d 9400
To, Manufacturing Overhead A/c. 12000
To, Direct Material A/c. 6010
39510 39510
Work-in-Process
DR. CR.
Date Particulars Amount Date Particulars Amount
1/8/X4 To, Balance b/d 8790 31/8/X4 By, Cost of Goods Sold A/c. 30000
31/8/X4 To, Work-in-Process A/c. 30110 By,Balance c/d 8900
38900 38900
Finished Goods
DR. CR.
Date Particulars Amount Date Particulars Amount
31/8/X4 To, Bank A/c. 6700 1/8/X4 By, Balance b/d 2345
31/8/X4 To, Balance c/d 1800 By, Direct Material A/c. 6155
8500 8500
Accounts Payable

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DR. CR.
Date Particulars Amount Date Particulars Amount
31/8/X4 To, Finished Goods A/c. 30000 31/8/X4 By, Profit & Loss A/c. 32800
To, Manufacturing
Overhead A/c. 2800
32800 32800
Cost of Goods Sold
Requirement B:
The Construction of the great Pyramid of Giza now and construction of the same in
4500 years makes a huge difference. Traditional approach is required in constructing a
pyramid in which numerous steps are amalgamated such as commencement, planning,
designing, implementing and finally finishing. In the process of construction of the pyramid
there were several limitation such as cost of construction, techniques involved, amount of
resources, etc. Reduction of such limitation and variance in the technique of construction can
be bought about through the application and utilization of modern cost management
accounting (Cost, 2016).
Hence, the solicitation of processed cost accounting technique might be suitable for
the construction of the great pyramid in recent times. The process can aid in isolation of cost
that further in turn would aid in regulating the cost of construction. In case of processed
accounting per unit cost of the products is considered to be of equal cost with that of the other
unit. Whenever a wide mixture of products are prepared, processed costing is considered
helpful as it is based on standard costing (DRURY, 2013). Moreover, without the
identification of the actual cost construction of pyramid is quite difficult. However,
determination of the actual cost of product would be identified through enactment of
processed costing.

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Answer to Question 2:
Process 1 Physical Flow
Material Conversion
O/WIP 2000 0 1400
Started in May 6000
Total Production 8000
Completed in Process 7000 7000 7000
C/WIP 1000 1000 500
Total Equivalent Units 8000 7500
Process 2 Physical Flow
Material Conversion
O/WIP 1000 0 500
Started in May 7000
Total Production 8000
C/WIP 750 0 225
Completed I Process 7250 7250 7250
Total Equivalent Units 7250 7975
Equivalent Units
Equivalent Units
Particulars Material Coversion Transferred-in Total
Process 1:
O/WIP Cost $3,000 $2,000 $5,000
Current Cost $30,000 $60,000 $90,000
Total Production Cost of Process 1 $33,000 $62,000 $95,000
Total Equivalent Units 8000 7500
Cost per Equivalent Units of Process 1 $4.13 $8.27 $12.39
Process 2:
O/WIP Cost $3,000 $4,000 $8,000 $15,000
Current Cost $35,000 $45,000 $86,742 $166,742
Total Production Cost of Process 2 $38,000 $49,000 $94,742 $181,742
Total Equivalent Units 7250 7975 7000
Cost per Equivalent Units of Process 2 $5.24 $6.14 $13.53 $25

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Particulars Amount
Finished Goods Completed during May 7250
Cost per Equivalent Units $25
Cost of Finished Goods Completed $180,671
Closing Stock in Process 1 1000
Cost per Equivalent Units for Process 1 $12.39
Cost of Closing Stock in Process 1 $12,391.67
Closing Stock in Process 2 750
Cost per Equivalent Units for Process 1 $24.92
Cost of Closing Stock in Process 2 $18,690.08
Answer to Question 3:
a
Particulars Amount
Total Joint Production Cost A $250,000
Less: Joint Cost allocated to A B $187,500
Joint Cost allocated to B C=A-B $62,500
Sales Volume of C (in kg.) D 60000
Selling Price per kg. of C E $4.50
Net Realisable Value of C F=DxE $270,000
Net Realisable Value of D G=Fx(C/B) $90,000
Sales Volume of D (in kg.) H 40000

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b)
Total Joint Production Cost A $250,000
Less: Joint Cost allocated to A B $187,500
Joint Cost allocated to B C=A-B $62,500
Sales Volume of C (in kg.) D 60000
Selling Price per kg. of C E $4.50
Net Realisable Value of C F=DxE $270,000
Net Realisable Value of D G=Fx(C/B) $90,000
Sales Volume of D (in kg.) H 40000
Selling Price per kg. of D I=G/H $2.25

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Answer to Question 4:
Part A
a
Material Price Variance:
Particulars Amount
Material Purchased (in units) 220000
Standard Price per kg $6
$1,320,000
$1,364,000
Material Price Variance ($44,000)
Remarks Unfavorable
Standard Cost for Actual Material
Purchased
Actual Cost of Actual Material
Purchased

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Actual Material Usage 197000
Standard price per kg. $6
Material Usage Variance $105,000
Remarks Favorable
Actual Direct Labor Rate per hour:
Particulars Amount
Actual Production 19500
Standard Labor hour per unit 2
39000
Actual Labor Hours 40000
Standard Labor Hour for Actual
Production
b)
Actual Production 19500
Standard Labor hour per unit 2
39000
Actual Labor Hours 40000
Standard Labor Rate per hour $20
Direct Labor Efficiency Variance ($20,000)
Total Direct Labor Variance ($1,650)
Direct Labor Rate Variace $18,350
$800,000
Actual Labor Cost $781,650
Actual Direct Labor Rate per hour $19.54
Standard Labor Hour for Actual
Production
Standard Labor Cost for Actual
Labor Hours

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C)
Remarks Favorable
Material Usage Variance A/c.
Actual Direct Labor Rate per hour: Direct Labor Rate Variance A/c.
To,
Particulars Amount To,
To,
Actual Production 19500
Standard Labor hour per unit 2
39000
Actual Labor Hours 40000
Standard Labor Rate per hour $20
Direct Labor Efficiency Variance ($20,000)
Total Direct Labor Variance ($1,650)
Direct Labor Rate Variace $18,350
$800,000
Actual Labor Cost $781,650
Actual Direct Labor Rate per hour $19.54
Standard Labor Hour for Actual
Production
Standard Labor Cost for Actual
Labor Hours
Part B
The process of determination and acknowledgment of the alteration in case of income
and expenditure of the budgeted or planned figures than that of the figures of the current year
is called variance analysis. Through the process of variance analysis, the reason that causes
the rise and fall in the budgeted figures can be identified. Additionally, variance analysis also
assists in overall improved budgeting activities. By performing, such analysis the strength of
control mechanism can be evaluated which further helps the management to come up with

10MANAGEMENT ACCOUNTING
possibilities that might aid in avoiding or overcoming such variances. It aids in assigning
duty to the department that makes decision to involve with control mechanisms.
In business management, analysing the variance is an important tool that can also be
applied in management accounting procedure. It assists in understanding and identifying the
reason of variation between the budgeted figures and that of actual figure (Velasquez et al.,
2015). Additionally, it also aids in refining the efficiency and thus it improves the
organization’s overall performance. Through effective variance analysis numerous prospects,
opportunities, problems and trends in relation with short term as well as long term success of
any project of an organization can be identified which further assists in determining the
variance in cost and revenue.
In several other department such as human resource, organizational behaviour and
performance evaluation, quantitative investigation plays an important role. It assists in
providing undefended communication about the expectancy of response and as well as the
performance in various other departments. The performance of HR is directly related to the
financial results of the organization. Variance analysis assists and plays a major role in
instituting the relation amongst the deviation in some departments. In analysing the feedback
of employees in different respect, Variance analysis plays a vital role. In different levels,
managers makes use of the variance analysis that helps them in applying effective and
efficient cost controlling procedures and mechanisms. From the material usage variance, they
anticipates to draw maximum benefits.

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Answer to Question 5
Part A
Cost of Goods Sold Schedule:
Particulars 20X1 20X2 20X3 20X4 20X5 20X6 20X7
Sales 30000 32400 34992 37791 40000 40000 40000
Add: Closing Stock 3600 5249 5669 6000 6000 6000
37649 40661 43791 46000 46000
Less: Opening Stock 3600 5249 5669 6000 6000
Total Purchase 34049 35412 38123 40000 40000
Units Purchase Cost $5.10 $5.36 $5.68 $6.02 $6.50
Total Purchase Cost $173,649 $189,808 $216,537 $240,800 $260,000
Add: Opening Stock Value $17,640 $26,769 $30,384 $34,080 $36,120
$191,289 $216,577 $246,921 $274,880 $296,120
Less: Closing Stock Value $26,769 $30,384 $34,080 $36,120 $39,000
Total Cost of Goods Sold $164,520 $186,192 $212,841 $238,760 $257,120
Budgeted Income Statement:
Particulars 20X2 20X3 20X4 20X5 20X6
Sales Volume 32400 34992 37791 40000 40000
Selling Price per unit $6.63 $6.97 $7.38 $8.13 $8.78
Total Sales Revenue $214,812 $243,824 $279,051 $325,080 $351,000
Cost of Goods Sold ($164,520) ($186,192) ($212,841) ($238,760) ($257,120)
Gross Profit $50,292 $57,632 $66,210 $86,320 $93,880
($30,074) ($34,135) ($39,067) ($45,511) ($49,140)
Net Profit before Tax $20,218 $23,496 $27,143 $40,809 $44,740
Less: Income Tax @40% ($8,087) ($9,399) ($10,857) ($16,324) ($17,896)
Net Profit after Tax $12,131 $14,098 $16,286 $24,485 $26,844
Budgeted Statement of Retained Earnings:
Particulars 20X2 20X3 20X4 20X5 20X6
$3,500 $3,780 $4,082 $4,409 $4,762
Net Profit for the period $12,131 $14,098 $16,286 $24,485 $26,844
$15,631 $17,878 $20,368 $28,894 $31,606
Less: Dividends Payable ($7,885) ($9,164) ($10,586) ($15,915) ($17,449)
General & Administrative
Expenses
Opening Balance of Retained
Earnings

12MANAGEMENT ACCOUNTING
Part B
The main motive to prepare a budget of an organization is to make sure that it is as
per the priorities and the policies of the government. At the time of preparing the budget it
required to choose the variance which is effective in terms of costs. In the process of
formulation of the budget there consist of four key dimensions. The process of budget
includes assignment of resources purposefully or tactically and regulating expenses
aggregately. In order to enhance forecasting of revenue that assists in firming the relationship
among budget policies and expenses, political pressure needs to be exerted continuously. It is
necessary to take into account some of the political aspects and deficiency of required
information at the time of budget execution (Becker et al., 2015). On core projects, preparing
the budget is involved and depends upon tough political support of the organization. An
organization, which is financially accountable and sound, must be politically strong as both
are interconnected with one another. Deficiency in the process of preparing the budget mainly
depends on various political elements. Moreover, preparation of budget is considered as a
political process in case of government. After taking into account the fiscal and monetary
policies, government’s budgetary analysis is arranged.
It can surely happen that there may take place changes in the estimated figures that
also might be in the interest of their own. This might not fulfil the purpose of the organisation
as several departments of an organization are involved in it. The process of preparing the
budget consists of some necessary components that are primarily allied with the
organization’s decision-making consultants.

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References:
Becker, S. D., Wald, A., Gessner, C., & Gleich, R. (2015). The Role of Perceived Attributes
for the Diffusion of Innovations in Cost Accounting: The Case of Activity-Based
Costing. Comptabilité-Contrôle-Audit, 21(1), 105-137.
Cost, T. M. I. (2016). Cost and Management Accounting.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Velasquez, S., Suomala, P., & Järvenpää, M. (2015). Cost consciousness: conceptual
development from a management accounting perspective. Qualitative Research in
Accounting & Management, 12(1), 55-86.