Manufacturing Plant Cost Analysis
Added on 2020-02-24
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MANAGEMENT ACCOUNTING
EXECUTIVE SUMMARYManagement accounting deals with the collection of various financial information of the organisation for the purpose of decision making. Decision making is one of the most significant parts and any error made in this process can cost heavily to the company. Therefore, the work of the management accountant is to provide correct advise to the company.The work of the management accountant is to guide the company and prevent the company from taking any kind of wrong decisions. It helps not only in decision making but also in planning the finance of the company. There are many decisions that has to be taken by the management in its day to day operation like whether to accept a special order, at what level ofoutput should it operate, whether the company will have any extra profits if it accepts it, whatis the breakeven point and many other things. A company can know the correct importance ofthe management accounting when it comes to know about its various benefits. Although it has many issues involved in it such as high cost and doubt relating to reliability but overall it is proves to be helpful for the company.In this report, there are various decisions taken with the help of various calculations such as the calculations of the contribution, breakeven point, at different levels of production and alsothe operating income for the year given a fixed level of production.
ANALYSISCONTRIBUTION PER UNIT.Contribution per unit is determined by deducting the variable cost from the amount of sales. Contribution can also be defined as the amount left in order to cover the fixed cost that has been incurred. The contribution per unit for the current level of production and maximum level of production for all the three plant of Cisco manufacturing ltd. has been shown below along with the calculations.1.(a) CALCULATION OF CONTRIBUTION PER UNIT (under current level of production).1. Northcote manufacturing plant(170 units)ParticularsAmountSales700Less: Variable costMaterial cost160Labour cost160Overhead cost20Contribution per unit360The Northcote manufacturing plant produces 170 units at the current level of production.2. Brunswick manufacturing plant(190 units)ParticularsAmountSales700Less: Variable costMaterial cost165Labour cost150Overhead cost30Contribution per unit355The Brunswick manufacturing plant produces 190 units at the current level of production.3. Preston manufacturing plant (185units)ParticularsAmountSales700Less: Variable costMaterial cost150Labour cost145Overhead cost35Contribution per unit370The preston manufacturing plant produces 185 units at the current level of production.
1.(b) CALCULATION OF CONTRIBUTION PER UNIT (under maximum level of production).1. Northcote manufacturing plant (240units)ParticularsAmountSales700Less: Variable costMaterial cost170Labour cost165Overhead cost25Contribution per unit340The maximum level of production for Northcote manufacturing plant is 240 units.2.Brunswick manufacturing plant (310units)ParticularsAmountSales700Less: Variable costMaterial cost170Labour cost155Overhead cost30Contribution per unit345The maximum level of production for Brunswick manufacturing plant is 310 units.3. Preston manufacturing plant (310units)ParticularsAmountSales700Less: Variable costMaterial cost160Labour cost155Overhead cost30Contribution per unit355The maximum level of production for Preston manufacturing plant is 310 units.
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