Management Accounting - Sample Assignment

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
Q.1) calculation of break even point sales..................................................................................1
Q.2) Allocation of cost................................................................................................................2
Q.3) Preparation of cost budget and statement of cash receipt from debtors.............................5
Q.4) Job cost sheet......................................................................................................................6
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is a branch of accounting which helps the management in
decision making, cost controlling, profit margining, financial reporting and planning etc.
through reports of management accounting, management enables to have better control over
financial position and cost control over the business organisation. This report will include
calculation of break even analysis, allocation of joint cost through various methods, cash budget
and statement of debtors receipt, and preparation of job cost sheet as well for different
organisation.
Q.1) calculation of break even point sales
1. a)calculation of number of helicopter required for break even per month
Particular Calculations Amount
Sales per ride 1000
Variable cost
Add Fuel 150
Add Wages of pilot 500
Add Food and drink 100
Total Total variable cost per ride (150+500+100) 750
Contribution 10000-750 250
Fixed cost
Add Rental of helicopter 5000
Add Insurance 1100
Add Transport and storage 500
Addd Maintenance 800
Total fixed cost (5000+1100+500+800) 7400
Number of helicopter rides required for
break even sales 7400/250 29.6
B) statement showing sales revenue required for break even
Particular calculations Amount
1

Number of helicopter rides required for break even
sales 29
Sales per ride 1000
Total sales revenue for break even (1000*29) 29000
C) number of helicopter required for gaining profit $10,000 per month
Particular calculations Amount
Break even sales revenue 29000
Add Profit 10000
Total sales required 29000+10000 39000
Charges per ride 1000
Number of helicopter rides required 39000/1000 39
2.
Particular calculations Amount
Sales per ride 1000
Variable cost
Add Fuel 150
Add Wages of pilot 500
Add Food and drink 100
Add Commission 50
Total variable cost per ride (150+500+100+50) 800
Contribution per ride (1000-800) 200
Fixed cost
Add Rental of helicopter 5000
Add Insurance 1100
Add Transport and storage 500
Add Maintenance 800
Add Advertising expenses 2000
Total fixed cost (5000+1100+500+800+2000) 9400
Number of helicopter rides required for 9400/200 47
2

break even sales
Charges per ride 1000
Total sales revenue for break even 1000*47 47000
Add Profit before tax 12500
less Tax (12500*20%) 2500
Sales revenue after tax 44500
Add Profit required after tax 10000
Total sales revenue required 54500
Charges per ride 1000
Number of helicopter rides required
for earning profit (54500/1000) 54.5
Calculation of profit before tax
Particular Amount
profit after tax required 10000
tax percentage 20
profit before tax (10000/80*100) 12500
Break even point analysis is a process of management accounting which provides help to
the management in deciding appropriate sales price of the product or service provided by the
organisation through which it can gain a set profit margin in a particular time.(Hennessy. and
Meagher, 2017)
Q.2) Allocation of cost
Allocation of cost is a method used to identify cost of production of each
process(Chenhall. and Moers, 2015). It is helpful for management of those business entities
which performs produces the products in more than one process in order to identify cost
involved in each production process METHODS OF JOINT COST ALLOCATION IN COST
ACCOUNTING, (2015). It enables the management in effectively identifying stages of
production where management can control the wastage of cost and make the company more cost
effective.
Particular Amount
Total production 5200000
3

Wrapped 2000000
Boxed 2000000
Figurines 1200000
Joint cost 2600000
A) physical unit method
Particular Wrapped Boxed Figurines Total
Quantity 2000000 2000000 1200000 5200000
calculations
2600000/5200000
*2000000
2600000/5200000
*2000000
2600000/5200000
*1200000
Allocated cost 1000000 1000000 600000 2600000
B) relative sales value method
Particular Wrapped Boxed Figurines Total
Sales price per
product 6 10 12 28
Calculations: 260000/28*6 260000/28*10 260000/28*12
Allocated cost 557142.857 928571.428 1114285.714 2600000
C)Net realisable value method
Calculation of net realisable value
Particular Wrapped Boxed Figurines Total
Production 2000000 2000000 1200000
Sales price per
product 6 10 12 28
Calculations 2000000*6 2000000*10 1200000*12
Sales value (a) 12000000 20000000 14400000 46400000
Separable cost 1 5 3 9
Total cost (b) 2000000 10000000 3600000 15600000
Calculations 12000000- 20000000- 14400000-
4

2000000 10000000 3600000
Net realizable
value (a-
b) 10000000 10000000 10800000 30800000
Allocation of cost
Particular Wrapped Boxed Figurines Total
Net realizable
value 10000000 10000000 10800000 30800000
calculation
10000000/308000
00*100
10000000/308000
00*100
10800000/308000
00*100
Percentage nrv 32.467 32.467 35.064 100
calculation
2600000*32.467
%
2600000*32.467
%
2600000*35.064
%
Allocated joint
cost 844155.844 844155.844 911688.311 2600000
Allocation of cost helps the company in determining cost of production of each unit
which is important with a view to having better control over cost(Chen, Zhang. and Yuen,
2015).
2. Calculation of net realisable value
Particular Wrapped Boxed Figurines Total
Production 2000000 2000000 1200000
Sales price per
product 6 10 18 34
Sales value (a) 12000000 20000000 21600000 53600000
Separable cost 1 5 6 12
Calculation 2000000*1 2000000*5 1200000*6
5

Total cost (b) 2000000 10000000 7200000 19200000
calculation
12000000-
2000000
20000000-
10000000
21600000-
7200000
Net realizable
value (a-
b) 10000000 10000000 14400000 34400000
Calculation of percentage of net realisable value
Particular Wrapped Boxed Figurines Total
Net realizable
value 10000000 10000000 14400000 34400000
Calculation
(000,00) 100/344*100 100/344*100 144/344*100
Percentage of net
realisable
value 29.0697 29.0697 41.860 100
Recommendation
From the above calculation, it can be seen that net realisable of the company has been
increased after accepting the proposal of client of further processing the figurines chocolate into
chocolate gift baskets. Although this proposal increased the separable cost of chocolates to $6
but as client is buying it for $19 per kilogram, it will result in increasing the total net realisable
value of the company.
Therefore, it is recommended that Lindt chocolate limited should accept the proposal
Q.3) Preparation of cost budget and statement of cash receipt from debtors
Statement showing Cash receipt from debtors
Particular
Amount received
Total receipt in
quarter
October November December
6

calculation 150000*60%
200000*60
%
300000*60
%
Receipt in the month
following the sales 90000 120000 180000 390000
calculation 200000*30%
150000*30
%
200000*30
%
Receipt in the second month
following the sales 60000 45000 60000 165000
calculation 175000*10%
200000*10
%
150000*10
%
Receipt in the third month
following the sales 17500 20000 15000 52500
calculation
90000+6000
0+175
00
120000+450
00+2
0000
180000+60
000
+15
000
Total receipt from debtors 167500 185000 255000 607500
Cash budget
Particular
Amount Total amount
October November December
Receipts:
Total receipt from debtors
(a) 167500 185000 255000 607500
Payments
Addad
Cash purchase 87500 125000 175000 387500
Addas
Cash wages 30000 40000 56000 126000
Add
Rental expenses 20000 20000 21000 61000
7

A
Insurance expenses 1000 1000 1000 3000
Calculation
(87500+3000
0+200
0+100
0)
(125000+4
000
0+2
000
0+1
000)
(175000+560
00+21
000+1
000)
Total cash payments (b) 138500 186000 253000 577500
Calculation
(167500-
13850
0)
(185000-
186
000)
(255000-
25300
0)
Cash surplus/deficit 29000 -1000 2000 30000
Preparation of cash budget and statement cash receipt from debtors in particular time is
important for the company as it helps the management in maintaining liquidity in the
organisation which is an important task for the management in order to smoothly operate its
normal course of business(Hernandez, Jonker. and Kosse, 2017).
Q.4) Job cost sheet
Job number - JJ539
Particular Date
Requisition/ time
sheet
number
Quantity/
hours Rate
calculatio
ns Amount
Direct
mater
ial A
01/11/
1
9 235 2100 9.25 2100*9.25 19425
B
03/11/
1
9 718 1300 3.75 1300*3.75 4875
Total=A +B 24300
Direct 30/11/ 45 350 27.5 350*27.5 9625
8

labou
r
1
9
Manufacturi
ng
overh
ead 350 14.5 350*14.5 5075
calculation
(24300+946
25+5
075)
Total cost 39000
Number of
jacke
ts
sold 1200
Cost per
unit
39000/120
0 32.5
With the help of job cost sheet prepared by cost department, management enables to
identify cost per unit of a particular job. It is helpful for those organisations which produces
goods as per the requirement of its customers(Armitage, Webb. and Glynn, 2016).
CONCLUSION
Through the above study, it has been concluded management accounting has enabled
various organizations in their decision making and planning process. Through break even
analysis, company has enabled to set appropriate profit margin for the product. Allocation of
joint cost has helped the company in having better control over the production. With the help of
cash budget management has enabled to maintain liquidity in the business and job cost sheet has
helped the organisation in controlling the cost.
9