Management Accounting and its Types of System

This article discusses the concept of management accounting and its different types of systems. It explores the methods of management accounting reporting and techniques of cost analysis. It also covers the types of planning tools for budgetary control and how management accounting helps in dealing with financial problems. Additionally, it provides a practical application of management accounting costing.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Management accounting and its different types of system..........................................................3
Methods of management accounting reporting...........................................................................7
Techniques of cost analysis.........................................................................................................9
Types of planning tool for budgetary control............................................................................10
Adoption of management accounting system in response of financial problem.......................12
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1
APPENDIX......................................................................................................................................3

INTRODUCTION
Management accounting refers to the accounting that is concerned with managerial level and
is also known as decision making accounting. This is the base by which managers can determine
the actual performance of the company and the related activities and operation and on the basis
of that they make decision regarding the company which will assist it to have better dealing with
activities and involvement of operations that may lead to success of company in terms of goal
accomplishment (Kostyukova and et.al., 2018). It is also used in the form of planning tool by
which managers will determine the direction on which company need to work. IKEA is a value
based company that create various items related with making the home even more better in terms
of better experience. It is one of the famous company that produces various home accessories,
home appliances and various other. It was founded on 1943. This report will discuss about the
concept of management accounting along with various system and its reporting frameworks.
This report will also shed light on the concept of planning as a base concept with context of
management accounting. Likewise, it will also discuss that how management accounting and
different approaches enable the company to deal with financial issues. Lastly a practical
application of management accounting costing is also presented in the report.
MAIN BODY
Management accounting and its different types of system
Management accounting:
It is one of the major form of accounting concerned with internal user. Management
accounting is mainly considered withy managers and managerial level of organization. It is also
known as decision making accounting because on the basis of managerial report managers
determine the company’s position and performance and take the adequate decision (Rikhardsson
and Yigitbasioglu, 2018).
Management accounting refers to a process and procedures that will lead to have creation
of documents and reports which will aid management in taking decisions (What is Managerial
Accounting?, 2021).
Management accounting involves compiling information that will allow the managers to
make decision and make planning for future (Kristin, 2019).

It is the process of identifying, analysing, interpreting and communicating the information to
managers which will further assist the company to move towards the direction of the its objective
with the required and adequate decisions concerning with management.
Principles:
Designing and compiling:
As per this principle management accounting is considered with the best and relevant
data. This means that the management accounting comprises of all such information by which
details regarding past, present and future can be grabbed (Volkovska, 2017). This will lead to
better decision making.
Management by exception:
This principle is implemented when information is being presented to management. This
means that only information related with budgetary control and standard costing is presented.
This will lead to the comparison of actual performance with the standard (Principles of
Management Accounting, 2021). Here the deviation are found and corrective actions are taken.
Use of return on investment:
It is also called return on capital employed. The rate concerning return indicate the
efficiency of business. This is for the reason capital employed is calculated on the basis of real
money value.
Integration:
Here all the required information is integrated and used in such a way that the cost will be
minimum and the concerned benefits will be maximum.
Controllable and uncontrollable cost:
There is always such cost which is controllable and uncontrollable with regard to
business. Management accounting suggest techniques through which steps can be taken in order
to control the controllable cost.
Forward looking:
Management accounting always works on the forward looking approach. It fix standard
and make plans regarding the future controlling and efficiency.
Difference between management and financial accounting:
Financial accounting Management accounting

It is fully concerned with preparation of
financial statement and enable information to
interested parties.
It include the providing of information to
managers regarding the company’s
performance so that decision can be taken.
It include monetary information It include monetary as well as non-monetary
information too.
It provide financial information to outsiders. The information will be used by management
for planning and decision making.
Financial statements are prepared at the end of
year (Surbhi, 2018).
Statements can be prepared at any time as per
management requirement.
Include the summary of financial performance
and position.
Include all details regarding the company.
Management accounting system:
It refers to a system that is considered with management accounting. As per this system
management accounting management will entitle the information regarding the company and on
the basis of that information and its critical analysis they will take adequate decision for the
betterment of the company and leading it towards the direction of its objectives (Abdusalomova,
2019).
Importance of integration:
It is very important to integrate management accounting in the organization. This is
because it will enable the company to have a taking of best and adequate decision regarding the
company. As management accounting is related with detailed and in-depth analysis of
information so by enabling this data and information to the managers they can make future plan
regarding the company which will further lead to growth and success of company. In case of
IKEA which is a company that dealt with consumer products and home related product and when
information regarding the various aspect that come under the scope of management accounting is
shared and inculcated in the organization then it will lead to have better performance and raising
of chances related with grabbing of organizational goal.
Types:
Cost accounting system:

As per this system cost regarding the product is being analysed by the firms. This will
help them to analyse the profitability, valuing inventory and controlling cost. This is an
important system because this will enable the companies to analyse the actual cost and on the
basis of that they can further analyse the profit (Prischenko and Nizovkina, 2017). And in case if
the cost of production is high then by effective controlling it can be maintained too. This system
also enable the company to have a cost-profit analysis which means with the help of this system
profit in association of cost will be analysed and identified.
Advantages:
It is an important system because through this profitable and unprofitable activities can
be identified. It also act as base for future production policies. Here exact cause of declining
profit is also identified.
Inventory management system:
As per this system a watch over the inventory is being performed by the business. This
approach assist the company to monitor the inventory right from making purchase, till transfer to
production and conversion till it will be sold (Chebet and Kitheka, 2019). This will ensure a
check over the inventory. As inventory is a major aspect with regard to company so with an
enabling of inventory management, company can make efficient utilization of it through this
system. This means that with this system not only checking but the problem of over and under
stocking will also be reduced.
Advantages:
It is an essential method because it will keep track inventory and reduced the risk of
wastage and overselling. It will lead to cost saving. It will lead to have better negotiation in
business. It reduces the risk of over and under stork situation.
Job costing system:
It is all related with overhead costing which can be understood as depreciation on
equipment of production and building rent. This is related with one or more cost pool. However,
on the end of every accounting period, the total sum in each cost pool is assigned to various open
jobs. This is based on certain methodology.
Advantages:

Profitability regarding each job will be identified individually. It also acts as base for cost
elimination with similar jobs. Here a detailed analysis of the cost regarding material, labour, and
overhead is performed.
Price optimising system:
As per this system the determination of demand variation is calculated with various price
levels. Then this data will be combine with information on cost and inventory level so that the
adequate price will be determined and profit will be raised (Simchi-Levi, 2017). This system also
enable the company to have an adequate determination of the prices as per analysis of the market
demand so that it will ultimately assist the company to grab good percentage of profit.
Advantages:
This system ensure the minimization of possibility of occurrence of any error. It will
enable the companies to make adjustment in prices as per the market trends and situation. This
system enables the companies to secure optimum profits for the business.
However, with respect to IKEA cost accounting, price optimization and inventor control
is usually followed. This is because it enables the IKEA to have adequate availability of
inventory, cost covering with profitability. In the same manner these system also ensure to have
a maintenance of adequate prices so that the company will earn sufficient profits and pricing
strategy.
Presenting financial information:
It is concerned with the financial accounting wherein the financial information is
presented in the form of financial statements. These statements are the base on which the
company’s performance and situation can be analysed and identified. The presented information
is relevant to users including customers, employees, investors, shareholders because it will
enable them to judge and analyse the company’s financial efficiency in terms of its performance.
Information is usually presented in understandable manner because it will enable the user
to understand the company’s financial position. Because if the information is complex then the
user would not be able to understand the complex terms and may not take investment decision.
Thus, it is kept understandable and simple.

Methods of management accounting reporting
Management reporting:
It is an essential aspect with regard to management accounting. This is because it enable
the managerial level to have a knowledge regarding the company’s current performance and
requirement. This will also ensure timely taking of decision with regard to company. IKEA also
ensure the inculcation of management accounting reporting so that it can take best decision with
regard to its success.
Methods:
Budget report:
It is an essential type of report concerning managerial accounting. As per this report
estimated budgets regarding the business are prepared and then the activities are plan and
synchronized as per planned budget. Budgets are generally prepared on the basis of past
performance and futuristic plans (Schaltegger, Etxeberria and Ortas, 2017). Various aspects are
being considered while preparing budget. It includes all the sources of income and estimated
expenditure too. This report enable the managers to offer cost cuts, employees incentive,
negotiate terms with vendors and suppliers. This is counted as critical report. IKEA also made
this report and perform its activities within the framework of estimated budget.
This report is significant and relevant because it is made on the basis of past data trends
and analysis. Likewise, this report also include future expected expenses and income so it is
relevant too.

Account receivable report:
This is also an important report form every company including IKEA too. This is because
enabling the services on credit is an important aspect of every business including IKESA too.
This report will identify all those defaulters to whom amount is still not recovered yet. This
report also specify the amount as well as time. As written of bad debt is common in every
business but it is also not a good aspect. Hence, this report ensures the timely receiving of
payment with a strengthening of credit policy regarding the company.

This is an important and relevant report because it will lead to entitle and deliver the
information regarding with debtors to the company.
Cost report:
As per this report costing regarding the company’s operation regarding the production of
products are being identified and analysed. As per this report costing related with material,
labour, overhead related with the production of the final product are determined and added. This
will enable the managers to analyse the actual costing regarding the product. This report also
lead to setting up of selling prices of the products by keeping adequate profit margin so that the
company can cover its cost and profit is maximised. This report also prepared in every company
including IKEA where a cost analysis is performed and profit will be set.
This is relevant and accurate because it involves the actual cost and that form the basis of
future.

Performance report:
As per this report the performance of the company with regard to financial and non-
financial aspect are being determined and reported. This report act as a base by which company
can analyse the company’s performance and on the basis of which the future planning and
actions will be taken (TYPES OF MANAGERIAL ACCOUNTING REPORTS, 2020). This report
also helps the manager to identify the deviation and loopholes which are needed to be overcome.

Preparation of this report at regular interval in IKEA enable the company to have the
determination of future course of action and planning regarding the future activities and business
operations.
This report is accurate and reliable because it is made on the basis of analysis of
company's financial statements and information and as financial statements are the reflection of
company's image so it will lead itself raise its accuracy.
Other managerial report:
Apart from these IKEA also prepare other managerial report including project report,
competitor analysis, information report and various others. And on the basis of the information
regarding reports various decisions are taken by the management of the IKEA that assist it to
perform its operations towards the direction of its objectives. This report including competitor
analysis, information report and various other will lead to have a creation of base that will assist
the organisation to grab and accomplish its goals.
Integration of system and reporting:
An integration of management accounting system and reporting enable the company
including IKEA to have better working of business operation. This can be understood as if the
inventory system will be integrated then it will lead to have full control related with issuing and
dispatching of inventory will take place as it is already being adopted in IKEA too. likewise, an
adoption of management accounting reporting will enable to have better controlling and
monitoring like in case of cost or performance report. These report will enable the IKEA to have
measurement and monitoring of its performance. However, on a critical note it is to be
considered that an execution of these concepts will require a lot of time as well as cost because it
is time consuming as well as costly affair too.
Techniques of cost analysis
Cost:
It refers to the expenses which is being incurred in order to acquire any good or product.
It can also be said that the cost is the financial valuation of resources including material, risk,
time and various other aspects in order to purchase the product (Pope and Mohr, 2017).
Types:
Fixed:

It refer to the cost which remain fixed whether the production performed ort not.
Variable:
It changes with the changing production. This means depended on produced output unit.
Total cost:
It is the sum total of fixed and variable cost.
Marginal cost:
It refers to the cost of producing an extra unit.
Opportunity cost:
It refers to the cost of producing next best alternative use.
Absorption cost:
It is the sum total cost which is used in order to entitle the product or the service and it
also include manufacturing cost. It also includes the sum total of all direct related with
production and indirect that plays an indirect role like advertisement cost.
Standard cost:
It is the benchmark cost which is used for comparing the actual cost. It is based on past
analysis and future trends.
Techniques:
Two major techniques are:
Marginal costing:
Here marginal cost is identified by differentiating fixed and variable costing. It is used to
identify changes in profits and volume or type of product (Vijaya, 2020).
Absorption costing:
It includes the charging of all the concerned cost including fixed and variable too. It is
somewhat different from marginal wherein fixed cost is not included (LIU and PAN, 2018).
Types of planning tool for budgetary control
Planning tools:
These tools are used for making planning regarding the budgetary controlling and
perform the budgetary control process. These tools will enable the organization to make plans
regarding the strategies of the organization. It includes:
Preparation of budgets:

This is one of the major planning tool that assist the organization to perform its activities
in the desired manner so that they can be directed towards their goal. Budgets refers to a
statement that guide the companies regarding the estimated expenditures and the concerned
revenue.
Types:
Capital:
This budget is related with the capital and big investment decision. It is all related with
major project. Here big decision like construction of new plant, purchase of new machinery,
expansion of business are being undertaken.
Operational:
It refers to a budget that include day to day operational expenses. It includes an
estimation of regular expenses and the desired revenue. it is just for meeting and planning the
daily operation regarding the company (Collins and Paragould, 2020).
Advantages:
Thera are various advantages the company including the IKEA can grab by having an
inculcation of budgetary concept in the organization. This tool enables the IKEA to have
management of money adequately with an appropriate investment in required project along with
generation of revenue from concerned project. It also enables the IKEA to grab its objective in
terms of raising of profit percentage. It will act as a base for monitoring the performance of the
company. this will also assist the IKEA to plan its business operation as per the concerned
budgets so that expenses will be managed and revenue can be raised.
Disadvantages:
The major disadvantage that may affect IKEA include time element that the future time
may change and thereby success of budget may fail. It will also discourage efficient persons and
efficient moves too.
Pricing:
Pricing is the base that will lead to play an important role with regard to budgetary
control. This is because a wrong determination of pricing policy may lead to have an adverse
impact over the organization and as a result the company’s financial structure (Kienzler and
Kowalkowski, 2017). Adoption of adequate pricing strategy will enable the companies including
IKEA to have cost covering along with ensuring sufficient profit margin. Pricing as per

competitor analysis is also important because the prices of competitor would be low then it will
lead to have loosing of customers. Thus, it should be kept as per market analysis too.
Pricing strategies:
Cost plus pricing:
Here a mark-up is added to the cost of product. It will ensure cost coverage and fixed
profit.
Competitive pricing:
Prices are determined as per competitor analysis and their pricing strategies.
Value based:
Here the determination of price is performed as per the value offered by the product to
the customer.
Advantages:
Adoption of adequate pricing strategies enable the IKEA to have a sufficient grabbing of
profit margin. It will also enable it to have competitive advantage. This will also lead to have the
raising of profit and sales margin of IKEA.
Disadvantages:
This is a good system but a slight wrong determination of pricing strategy will lead to
have a complete adverse impact over the company. This may majorly affect the sales and
revenue of companies too.
Costing system:
Costing system and its associated types including actual, standard and various others
plays an important role in terms of planning and budgetary control. This is because with the
determination and consideration over the cost element the future plan regarding the budgetary
control can be implemented and adopted.
Adequate costing suppose standard costing enable the IKEA to have an analysis
regarding the pricing and costing of the company’s operation. this is because by considering it as
standard the comparison is made that further assist the company to have better controlling and
determination. Likewise, process costing (related with processing of product), contract costing
(made for specified contract and task) and various other also plays a major role in terms of
making plan regarding the company’s operation and thereby lead to goal attainment.
Advantages:

The biggest advantage that the IKEA may grab is related with the cost controlling and
improvement. This will lead to attainment of sufficient profit margin along with controlling un-
necessary activities that may lead to rise in cost. It will act as basis of planning tool for IKEA by
which it can predict and estimate the future costing and expenses along with controlling.
Disadvantages:
The major disadvantage is time lag. This means setting up of standards on the
information of past costing may not necessarily deliver success in present and future too.
Strategic planning:
This is also a major planning tool by which company can determine its future course of
actions. As per this tool by adopting various tools including SWOT, PEST, Porter’s five forces
and various other company can determine the external and internal environment and by
considering the environment and its impact, company can determine its future course of action
and plans. An inculcation of the strategic and concerned tool IKEA can make future plans with
respect to company so that it can’t only grab its objectives but it will also able to convert its
threats and weakness into opportunities and threats along with facing the market competition and
become the market player.
Advantages:
This tool enables the IKEA to have better controlling and making of futuristic plans. This
will also lead to enabling direction in which it has to pursue its activities. It will raise the
profitability and market share.
Disadvantages:
The major disadvantage of strategic plan is changing trends and time. Also it is a costly
affair. With changing trends, these plan may have chance to get fail.
Cash flow forecasting:
It is one of the major planning tool under which forecasted cash flow is being prepared by
company. This cash flow will determine the projections of future inflows and outflows.
Advantages:
 Enable foresight for earning.
 Financial health determined Planning for significant purchase.
Disadvantage:

 Cash inflows and outflows are not predictable because future conditions changes.
 It is a rough estimate and not guarantee applicability.
Standard costing:
As per this method standards are set on the basis of past performance and past data
analysis. This method will lead to act as base that will inculcate future resolving of fluctuations
and loopholes.
Advantages:
 Cost control improvement. Act as base for decision-making and managerial planning.
Disadvantage:
 Low morale and create pressure on employees.
 Non reporting in relation to certain variances.
 Decrease morale of employees.
Zero based budgeting:
Under this method all expenses will be justified for every new period. This method start
with a zero base.
Advantages:
 Justification of all operating expenses. Legacy expenses will be in check.
Drawbacks:
 Matriculation by savvy managers.
 It will lead to short term thinking.
Variance analysis:
It is a method that will entitle the knowing of difference between actual outcome and
planned outcome. This method enables the company to identify differences.
Advantages:
 Lead to entitle better performance. Changes and corrective actions will be taken on adequate time.
Disadvantage:
 Costly and lengthy processing
 Manipulation of data

 Used in short term situations.
Use of planning tool for preparation and forecasting of budget:
Planning tools like pricing strategies, strategic planning, budget determination have a
major role with respect to preparation of budget and its forecasting. This can be understood with
the example of strategic planning in which SWOT and various other strategic tools are used.
These tools act as base that entitle various information to company by which they can make plan
and forecast the future budget. Likewise, pricing tool also enable the determination of pricing
and enabling the preparation of budget.
In addition, of this, it is also to be noted that these tools plays an important role with
respect to forecasting budgets because with the help of these tools future budget in terms of
determination of income and expenses will be made easy. Likewise, these tools will lead to have
formulation of plans and future strategies.
Adoption of management accounting system in response of financial problem
Identification of problem:
In order to meet the problems it is also important that the financial problem need to be
identified first. This means that with the identification of problem it can be meet and deal. There
are various modes by which the financial problem will be identified including benchmarking,
setting up of key performance indicators, budgetary targets and various others. These all will be
taken as base and standard against which the actual financial performance of the company is
measured, by having a comparison the differences and deviations are being analysed and
identified that by which activity the financial issue is arising. These standards are kept set by
IKEA too in order to identify and analyse the problem. Being taken as a base and standards, KPI,
benchmarks and targets will also assist the company to raise its performance too so that the
targets can be hit.
Use of management system in order to solve financial problems:
After identification of problems either through benchmarking or other modes these can be
solved easily by the management accounting system. This can be understood as IKEA make
identification of problem usually by KPI however by adopting the appropriate system it may

again solve it. Like through KPI if it finds that the prices of operation are raising then expected
and standards then in such case it adopt the cost system of management accounting in which it
make strategies regarding cost control. However, in case of Walmart which is also a big retailing
store and competitor of IKEA first make identification of problem through the use of
benchmarking and setting up of KPI and as per problem it adopt management accounting system.
Like if it find issue regarding pricing then with the help of price optimization system it make
determination of pricing policy as per market demand.
Management accounting system in response of financial problem:
Management accounting system including cost accounting, inventory system, price-
optimisation and job costing plays an important role with respect to resolving financial problem.
Here, the use of cost accounting system in IKEA help to identify where company is incurring its
expenses and from where profit is earned. Then, with help of cost accounting system cost is
controlled and reduced. This solve problem of excess of cost incurred. Moreover, in tesco the job
costing system is used to estimate accurately the cost which is involved in project. Then, overall
process is simplified by which cost is reduced. Alongside, on basis of that report is prepared and
strategies are developed. Thus, in this way financial problem is solved.
In addition, price optimisation system is used by IKEA to determine how customers will
respond to different prices for its products and services through different channels. It is also used
to determine the prices that the company determines will best meet its objectives such as
maximizing operating profit. Hence, financial problem to specifying the price of product in
different market is solved. It helps regulate and control pricing decisions across every category
and product type.
Financial governance:
It refers to a way by which company can collect, manage, monitors and make controlling
with respect to financial transactions. This means that the financial governance is not only
related with the collection of data but it will also include the controlling and management too
(Seabrooke and Tsingou, 2021). With regard to IKEA financial governance is the making of
financial policies, internal control, data security, workflow, financial control, tracking of data
and its validation. These aspects enable the IKEA to have an assurance regarding the business
data along with its validity.

IKEA also use the financial governance as monitoring tool by which it monitor the
internal working and financial transactions. Through this concept IKEA can set and mould its
financial activities towards the direction of its objectives.
Management accosting skills:
Financial problems concerning the company can also be dealt with the appointment of
management accountant too. Management accountant is a professional personnel that will ensure
the meeting of financial problem along with leading the company to grab its objectives.
management accountant by having an analysis of the financial performance of the company and
the management reports will suggest the managers to have a taking of best decision. However, it
is to be noted that the management accountant must possess certain specified skills in order to
deliver the outcome to IKEA in case of financial problems. These skills may include effective
communication skill, business knowledge, accuracy, professional standard, analytical and
numerical abilities, team-spirit and various others (Frigo and Kip Krumwiede, 2020). Presence of
these skills will lead to ensure the better meeting of financial problem with a better solution so
that the IKEA can never face the financial issues. Management accountant will also make future
plan that will lead to minimization of losses.
Effective strategies and system:
Apart from the above aspects regarding meeting of financial problems, adoption of
effective strategies in terms of adequate and timely reporting, disclosure principle
implementation, distribution of responsibility as per position and various other will also lead to
have better dealing of financial issues. This is because if there is an implementation of these
concepts with respect to organization including the IKEA too then it will lead to have better
treatment of financial problem. This can be understood as if the organization has effective
reporting system then the issues can be reported at early stage and as a result can be treated on
time. Likewise, adoption of the practice of disclosure will lead to have adequate disclosing of
information and on that basis actual performance and situation of the company will be
determined that whether it is running in profit or loss direction. And by keeping it as base the
management can take the most appropriate decision with respect to company and the financial
problem will be dealt before arising. In the same way making assignment of responsibility as per
power will lead to have the treatment of financial issue at the initial phase and as a result the
organization will not be affected in broader scale and manner.

CONCLUSION
From the above report it is concluded that the management accounting and its associated
concept plays an important role with regard to companies including IKEA. Adoption of adequate
management accounting system will lead to have better performance of company in terms of
leading its action towards its objectives. It is also understood that preparation of adequate
management accounting report by IKEA will lead to have an analysis of the financial
performance of the company. Likewise, adoption of adequate costing technique including
marginal and absorption also enable the company to have sufficient availability of profits. This
report also summarizes that management accounting along with using for decision making can
also be used for making plans regarding the future course of action with regard to companies. An
appropriate identification of the financial risk and the treatment of those risk with suitable tactics
including financial governance, appointment of management accountant would again assist the
company to face the financial issue along with its solving.

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2

APPENDIX
Income statement from absorption costing mode:
For 2020:
Absorption product cost per
unit
2020
Direct material 17
Direct labour 11
variable overhead 7
fixed overhead 23.33
Total product cost 58
Total unit produced 3600
Product cost per unit
3600/58
=62
Income statement 2020
Sales (3000*92) 276000
-COGS (3000*62) -186000
Gross profit 90000
Operating expenses
General and admin expenses 10500
Total expenses 10500
Net operating income 79500
For 2021:
Absorption product cost per
unit 2021
Direct material 17
Direct labour 11
variable overhead 7
fixed overhead 23.33
Total product cost 58
Total unit produced 4100
Product cost per unit 70
Income statement 2021
3

Sales (4000*92) 368000
-COGS (4000*70) -280000
Gross profit 88000
Operating expenses
General and admin expenses 10500
Total expenses 10500
Net operating income 77500
Difference between the profit:
Income statement from marginal costing:
For 2020:
Particular 2020
Sales 276000
-Variable cost 14000
Contribution 262000
-Fixed cost 94500
Profit 167500
For 2021:
Particular 2021
Sales 368000
-Variable cost 14000
Contribution 354000
-Fixed cost 94500
Profit 259500
Notes:
Variable cost = Direct material+ labour+ direct variable expenses
=6800 (400*17) +4400(400*11) +2800(400*7)
= 14000
Fixed cost= Total fixed cost+ administrative cost
4

= 84000+10500
=94500
5