Management Accounting for Cost & Control

This article discusses the concept of Panopticism, major functions of management accounting, the use of checklist in control activities, and more. It also includes manufacturing and income statements, journal entries, and calculations for payroll accrual. Subject: Management Accounting, Course Code: N/A, Course Name: N/A, College/University: N/A

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................................................................................................................3
Answer to Question No 2................................................................................................................3
Answer to Question No 3................................................................................................................4
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
Answer to Question No 9:.............................................................................................................13
Answer to Question 10:.................................................................................................................15

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Direct Method:...........................................................................................................................15
Step Method:..............................................................................................................................15
Reciprocal Method:...................................................................................................................15
Reference List................................................................................................................................17

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question No 1
Panopticism is a socio-theoretical and communal framework which was introduced by
Michel Foucault, a French philosopher. The framework was named after Panopticon which is a
model for external surveillance (Gane, 2012). Panopticon refers to the external laboratory of
power with the application of which attitude and behaviour of individuals can be modified for
the better and is considered to be a disciplinary course of action which involves surveillance. It is
a course of disciplinary action which is used in case of prisons in order to implement discipline
as a tool of authority. It is used for observation of prisoners and it is used as a source of data.
For example, the concept of panopticon can be used effectively for the purpose of
surveillance which is a very much significant with the introduction and overall development of
technology. The observable data which can be collected with the various data mining techniques
and such data can be made available to the individuals and companies for the purpose of
surveillance of data.
The use of Panopticism is very useful in management accounting as it can be used to
keep track of every transactions and at the same time ensure that there are no mistakes or errors
in such transactions (King, 2012). Even if there are certain mistakes in the process of accounting
the same can be rectified and ensure that the accounting process remains authentic.
Answer to Question No 2
The major functions of management accounting are given below in details:
1. Planning: The method of planning is sued by the management to make short term and
long-term plans for attaining a particular goal or objective of business. The management

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
of the company is responsible for the planning process and also for the various important
decisions which are to be taken by the business regarding various aspects such as
allocation of funds, financing decision and other similar decisions. Generally, the most
important tool which is used for the purpose of planning is budgeting (Chadwick, 2013).
For example, the management accounting method employs the use of budget for planning
process which is useful for deciding the targets and also measure the performance of the
company. in addition to this, the budget is useful for planning for allocation of resources.
2. Organising: The method is used to establish the business model of the company as well
assigning the different part of the plans to the various departments in pursuance of the
objectives and goals of the business (Biege, Lay & Buschak, 2012). The managers of the
companies are responsible to organise the process with the use of management
accounting so that different departmental performance can be measured effectively. For
example, the statements which are prepared by the management with the application of
management accounting can be used to make decisions regarding operations, product and
similar other decisions.
3. Controlling: This is one of the functions of management accounting which is used for
evaluation, reviewing and correcting the results of the business. The process of
controlling is executed with the use of various performance reports which is used to
measure the performance of the business on the basis of standards set by the business
(Zubakov & Mustafin, 2015).
Answer to Question No 3
Rock band Van Halen has used the checklist in the process of control. In the case of
rocker David Lee Roth who made an agreement with the rock band Van Halen. The application

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
of checklist by the business is an effective measure for the control activities of the business. The
application of checklist allowed the band to properly plan and implement the plans of the band.
Moreover, it is useful in the effective maintenance of the resources. The rock band needs to carry
the checklist in order to ensure that every resource such as instruments which are used for the
performance is carried from one place to another. A checklist can also be used by the band to
prepare a schedule for the performance of the band in different destination. In this way the band
can make use of the checklist for the effective performance measurement and scheduling of the
band.

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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
In case of a perpetual inventory system the sales and purchase of stocks are recorded
immediately and the account displays the information accordingly. The process of perpetual
inventory system continuously upgrades the inventory records (Bauer et al., 2012). For example,
in case of a retail store which uses computerised system of inventory measurement can
automatically update the inventory records about the raw material used and the final products
which was sold with just a simple scan of the product. Thus, from the above discussions it is
clear that there is no need to physical stock take (Berlemann & Wesselhöft, 2012).
Overtime refers to the additional working hours which the labourer works over the
normal working hours of that labourer. In case of overtime the wages offered by the company are
also above the normal working hours of the business. The amount can be treated in different
ways by the management depending upon the nature of the situation. Generally such costs are
considered as overhead costs and it depends on the numbers of overtime working hours of the
labourer.
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.

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Journal Entry:
Dr. Cr.
Date Particulars Amount Amount
30-Apr Manufacturing Overhead A/c……Dr. 30000
To, Material Control A/c. 30000
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

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
Requirement c:
i) Journal Entries:
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 different techniques which are used by
the management for assigning the indirect expenses to the products. In case of both the

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MANAGEMENT ACCOUNTING FOR COST & CONTROL
processes, the indirect costs are projected and the same are allocated on the basis of the cost
drivers which are most appropriate (Ray, 2012). The basic differences between the two
processes are on the points of complexity and accuracy which exists between the two processes.
In case of traditional costing method costs are allocated on the basis of random aggregate rate
and is less precise. These factors are covered up by activity-based costing techniques, however it
is a bit on the complex side.
The benefits which are associated with ABC Costing techniques are:
1. The method improves the processes of organization
2. The products which are not productive are recognized by the business by the use of this
method.
3. The method of ABC costing is easy to understand
4. It is good for business
The disadvantages of ABC costing are as follows:
1. The implementation process of ABC Costing techniques is quite costly.
2. The chances of data misinterpretation are also there in case of ABC Techniques.

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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
Bauer, D. G., Campero, R. J., Rasband, P. B., & Weel, M. D. (2012). U.S. Patent No. 8,321,302.
Washington, DC: U.S. Patent and Trademark Office.
Berlemann, M., & Wesselhöft, J. E. (2012). Estimating aggregate capital stocks using the
perpetual inventory method: New empirical evidence for 103 countries (No. 125).
Diskussionspapier, Helmut-Schmidt-Universität, Fächergruppe Volkswirtschaftslehre.
Biege, S., Lay, G., & Buschak, D. (2012). Mapping service processes in manufacturing
companies: industrial service blueprinting. International Journal of Operations & Production
Management, 32(8), 932-957.
Chadwick, G. (2013). A systems view of planning: towards a theory of the urban and regional
planning process. Elsevier.
Gane, N. (2012). The governmentalities of neoliberalism: panopticism, post-panopticism and
beyond. The Sociological Review, 60(4), 611-634.
King, R. D. (2012). Imprisonment: some international comparisons and the need to revisit
panopticism. In Handbook on prisons (pp. 125-152). Routledge.
Ray, S. (2012). Relevance and applicability of activity based costing: An appraisal. Journal of
Expert Systems (JES), 1(3), 7.
Zubakov, V. M., & Mustafin, A. N. (2015). The Controlling Process of the Human Capital
through the Effective Redistribution of the General Welfare. Mediterranean Journal of Social
Sciences, 6(1 S3), 270.