Management Accounting

Running head: MANAGEMENT ACCOUNTING
Management Accounting
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1MANAGEMENT ACCOUNTING
Executive Summary:
The current report would focus on analysing the costing system for conducting its business
operations by Connectta Limited. From the case information, it has been identified that the firm
follows job costing system in order to make sound disclosure of business costs. In case of job
costing system, the overhead costs related to the service departments are assigned to the
production departments and hence, there is limitation of cost pools in the system. However, the
activity-based costing procedure assists in creating separate cost pools for the service activities
along with overhead costs associated with service activities, which are apportioned directly to the
specific products by applying the rates of cost drivers.

2MANAGEMENT ACCOUNTING
Table of Contents
Introduction:....................................................................................................................................3
1. Suitability of using job costing system for an organisation:........................................................3
2. Balance of work-in-process inventory account of Connectta Limited:.......................................4
3. Cost of the chairs in finished goods inventory:...........................................................................5
4. Over-applied or under-applied overhead for the year:................................................................6
5. Alternative accounting treatments under job costing system for under-applied or over-applied
overhead balances:...........................................................................................................................6
6. Benefits of activity-based costing over job costing system:........................................................7
Conclusion:....................................................................................................................................10
References:....................................................................................................................................12

3MANAGEMENT ACCOUNTING
Introduction:
The current report would focus on analysing the costing system for conducting its
business operations by Connectta Limited. From the case information, it has been identified that
the firm follows job costing system in order to make sound disclosure of business costs. The
paper would focus on evaluating the costing methods, which are available to the organisation and
the possible ways through improvements could be made. Different costs are calculated for
Connectta Limited. Moreover, the alternative accounting treatments in relation to overhead costs
and their likely effects have been discussed adequately in this paper. The analysis would be
performed for under-applied or over-applied overhead costs and the ways of treating them from
the cost accounting perspective. The report would shed light on the role performed by activity-
based costing system and the techniques through which the management of the firm could be
assisted to make decisions for ensuring economic growth in future. In other words, the benefits
of activity-based costing system would be discussed for mitigating the deficiencies inherent in
traditional costing system.
1. Suitability of using job costing system for an organisation:
The section has laid stress on different aspects related to the cost accounting reporting
framework and the framework that is followed by Connectta Limited. In the existing market
situation, a firm is required determining the appropriate project costs in order to estimate profits
and product prices that would be offered to the customers (Balakrishnan, Labro & Soderstrom,
2014). Job costing system is described as the system that a firm uses for meeting the orders made
by the customers. From the viewpoint of the business, the management of Connectta Limited
applies job costing technique for controlling the use of raw materials. The customer orders are