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Management Accounting Assignemnt (pdf)

   

Added on  2021-05-30

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Management Accounting1
Management Accounting Assignemnt (pdf)_1

IntroductionThe overhead cost comprises significant part of the overall cost of production,particularly in the manufacturing firms. The overhead costs in most of cases can not be traced toany particular product or service and hence, the allocation of overhead cost becomes animportant issue for the management. The allocation of overhead should be based on someconsistent and rationale basis else it may show distorted picture of the product cost. In thetraditional costing system, the allocation of overheads is done based on volume based costdrivers such as machine hours and or labor hours. However, the allocation in fashion is notconsidered to be appropriate (Kim, 2017). Thus, to overcome limitation of traditional costingsystem, the activity based costing system came into existence. In this context, this report dealswith analysis of product cost based on traditional costing system and activity based costingsystem. Further, the report also describes the advantages of activity based costing and itsapplication in the company. Analysis under Traditional Costing SystemThe analysis of cost allocation on production and service departments of the companyunder the traditional costing system has been presented in the table given below:Annual indirect costProduction ServiceTotal ParticularsMachine centre-AMachinecentre-BAssemblyMaterialprocurementGeneralfactorysupportIndirect wages and supervision1,200,000.00 1,000,000.00 1,600,000.00 2,100,000.00 1,880,000.00 7,780,000.00 Indirect materials500,000.650,000.00150,000- 20,000.1,320,002
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00 .00 00 0.00 Total 1,700,000.00 1,650,000.00 1,750,000.00 2,100,000.00 1,900,000.00 9,100,000.00 Unallocated overheadLighting and Heating (based on area occupied)95,192.31 84,615.38 126,923.08 158,653.85 84,615.38 550,000.00 Property taxes (based on area occupied)147,115.38 130,769.23196,153.85 245,192.31 130,769.23 850,000.00 Insurance of machinery (based on area occupied)43,269.23 38,461.54 57,692.31 72,115.38 38,461.54 250,000.00 Depreciation of machinery842,105.26 578,947.3784,210.53 42,105.26 52,631.58 1,600,000.00 Insurance of building157,894.74 108,552.6315,789.47 7,894.74 9,868.42 300,000.00 Salaries and works management340,000.00 210,000.00350,000.00 100,000.00 100,000.00 1,100,000.00 Total1,625,576.92 1,151,346.15 830,769.23 625,961.54 416,346.15 4,650,000.00 Grand Total3,325,576.92 2,801,346.15 2,580,769.23 2,725,961.54 2,316,346.15 13,750,000.00 Reallocation of service department costMaterial procurement (based on material issued)1,362,980.77 1,022,235.58 340,745.19 General factory support (direct labor hours)534,541.42 593,934.911,187,869.82 Total allocated overheads5,223,099.11 4,417,516.64 4,109,384.25 3
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