Management Accounting

Read about the cost analysis of BBQ and Balloons, situational analysis, planning budget, and calculation of variance in Management Accounting.

Running Head: MANAGEMENT ACCOUNTING 0
Management Accounting
(Student Name)

MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction......................................................................................................................................2
Income Statement of Barbeque and Balloons..................................................................................2
Cost Analysis of BBQ and Balloons...............................................................................................3
Labor cost per unit & Total Labor Cost.......................................................................................3
Activity Rate................................................................................................................................3
Activity-Based Costing Product Margin......................................................................................4
Activity Based Costing Product Margin of Barbecues & Balloons................................................4
Activity Based Costing Product Margin of Barbecues................................................................4
Activity Based Costing Product Margin of Balloons...................................................................4
Situational Analysis.........................................................................................................................5
Paul Statement..............................................................................................................................5
Ringo Views.................................................................................................................................5
Need for Avoiding before making Rules.....................................................................................5
Planning Budget...............................................................................................................................6
Comparison between Planning Budget and Actual Budget.........................................................6
Blaming for differences between Planning and Actual Results...................................................7
Calculation of Variance...................................................................................................................7
Material Variance, Quantity Variance and Total Variance of BBQ............................................7
Material Variance, Quantity Variance and Total Variance of Balloons......................................7

MANAGEMENT ACCOUNTING 2
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

MANAGEMENT ACCOUNTING 3
Introduction
Managing business play a vital role for the organization in an efficient manner. Most of the firms
enter in the market to earn maximum profit. The organization has adopted various strategies to
grow in the competitive market more efficiently (Trevino and Nelson, 2016). Moreover, the
financial analysis is one of the process by which the organizations or the businesses which
include big or small have a look at their progress (Schroeder, Clark and Cathey, 2019). There are
mainly three aspects of the business that are examined, it include stability, viability as well as
profitability. The financial performance as the part of the financial management is the core
indicator of the success or the failure of the organization. The financial performance analysis can
be considered as the heart of the financial decisions. It helps in highlighting the overall
performance of the organization in an effective and efficient manner (Dewachter et al., 2015).
One of the scenarios is provided in which four team member running the business of BBQ as
well as Balloon.
In the following part there will be detailed analysis of the cost as well as profit that occur from
both department as well as the efficiency of the team members that support the form to grow in
the market in an effective as well as efficient manner.
Income Statement of Barbeque and Balloons
BBQ & Balloons
Income Statement
Year Ended December 2019
Month 2019

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Sales
Sale of Barbecue $ 4,000.00
Sales of Balloon $ 1,000.00
Total Sales $ 5,000.00
Cost of Goods Sold
Cost of Sales of Barbecue $ 500.00
Cost of Sales of Balloon $ 30.00
Total Cost of Sales $ 530.00
Gross Profit $ 4,470.00
Expenses
Selling & Administrative
Gazebo $ 50.00
Shopping Centre $ 250.00
Remuneration $ 1,600.00

MANAGEMENT ACCOUNTING 5
Total General & Administrative $ 1,900.00
Operating Expenses
BBQ $ 200.00
Balloon Pump $ 50.00
Total Operating Expenses $ 250.00
Total Expenses $ 2,150.00
Net Profit / (Loss) $ - $ 2,320.00
Cost Analysis of BBQ and Balloons
Labor cost per unit & Total Labor Cost
Operating
BBQ
Inflating
Balloons
Cashie
r
Greeting
Customers Total
John 75% 10% 5% 10% 100%
Paul 25% 75% 0% 0% 100%
Ringo 10% 30% 50% 10% 100%

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George 0% 20% 5% 75% 100%
John Paul Ringo George Total
Operating BBQ 300000 100000 40000 0
40000
0
Inflating
Balloons 5000 37500 15000 10000 50000
Cashier 250 0 2500 250 5000
Greeting
Customers 500 0 500 3750 5000
Total 305750 137500 58000 14000
46000
0
Name Labour Cost Per Unit Total Labour Cost
John 1223 305750
Paul 550 137500
Ringo 193.3 58000

MANAGEMENT ACCOUNTING 7
George 46.7 14000
Activity Rate
Person of Activity Cost Pool Total Cost Total Activities
Activity
Rate
Operating BBQ 305750 2000 152.875
Inflating Balloons 137500 1000 137.5
Cashier 58000 1000 58
Greeting Customers 14000 1000 14
After analyzing the activities of four cost pool, it has been found that Barbeque is considered as
one of the most expensive cost pool activities due to the main reason the overall changes occur in
running such activity is high. The firm is paying high amount to the team members that enhance
the cost of the activity to the certain extent. Moreover, the space that is taken by the firm is also
considered as the high amount due to the reason sufficient space is required to running such
activity. The production of Barbeque is also high that enhance the level of inventory
consumption that affected the overall cost of the organization to the certain extent. The overall
expenses that occur in running such business is high as comparison to the selling of balloons.
Therefore, due to such reasons the BBQ is considered as one of the most expensive activity
among the four activities (Beynon, Jones and Pickernell, 2016).

MANAGEMENT ACCOUNTING 8
Activity-Based Costing Product Margin
Barbeque & Balloons
Sales Units 3000
Sales Price $3
Sales $9,000
Costs:
Direct Material 530
Direct Labour 1600
BBQ 200
Balloon Pump 50
Gazbo 50
Shopping Centre 250
Operating Income $6,320

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Activity Based Costing Product Margin of Barbecues & Balloons
Activity Based Costing Product Margin of Barbecues
Particular Barbeque
Sales 4000
Costs:
Direct Material 500
Direct Labour 800
Gazbo 25
Shopping Centre 125
Operating Expenses 200
2350
Activity Based Costing Product Margin of Balloons
Particular Balloons
Sales 1000

MANAGEMENT ACCOUNTING 10
Costs:
Direct Material 30
Direct Labour 800
Gazbo 25
Shopping Centre 125
Operating Expenses 50
Operating Income -30
Situational Analysis
Paul Statement
Mr. Paul has stated that the whole efforts were made by him as well as John. According to him
they have done all essential work and manage the activities while Ringo as well as George was
managing the consumers, and counting the money which is considered as one of the simple
activity done by them according to Paul. However, such statement is not considered as true due
to the reason Ringo and George is also managing the activities o the certain extent. They majorly
handle consumers and greet them as well as also handling the cash transaction therefore, they are
directly included in the activities of running the business. Therefore, they will be similarly liable
for the expenses occur as well as income that occurs from the business. Ringo and George also
make contribution in the activities of the enterprises by giving their time as well as handling one
of the department that is essential for running the business due to the reason, if no one will

MANAGEMENT ACCOUNTING 11
manage the cash department then it may create loss to the company and if any person do no greet
the consumers may cause the issue of dissatisfaction among them. Thus, such statement is not
considered as true to the certain extent (Marquis et al., 2019).
Ringo Views
Mr. Ringo has stated that selling the balloons was the worst idea ever. Such statement is not
wrong to the certain extent due to the main reason while analyzing the current operating income
of the enterprise, the company is going in loss of $30 in Balloons department due to the main
reason the expenses that occur in such activities is high as comparison to the actual units that is
sold by the organization. However, in the condition when the total variance o the department is
analyze, the total cost variance of Barbecue is high as comparison to Balloons due to the main
reason, the production of Balloons is lower than Barbecue. Therefore, it creates cheap labor to
the enterprise to the certain extent. while analyzing the activity rate of the Balloons it is lower
than Barbecue that represent that the opportunity will be available for the balloons in the near
future that will provide great earning to the firms in regards to balloons to the certain extent.
Thus, the statement is also not correct to the certain extent due to the reason; the investment in
the preset may give huge return to the company in an effective and efficient manner.
Need for Avoiding before making Rules
Subjective performance evaluation is one of the manner of evaluating an employee or member of
the organization that is not based on the quantifiable numbers. The rating is given to the
employees on the basis of the perception of how that is doing as well as the value they bring to
the business. Therefore, in the case of Barbecue & Balloons enterprises, the John has stated that
the rules should be set for assessing their individual performance before beginning the enterprise.
There are certain things that are required to keep in the mind of team members before making
rules to avid subjective performance evaluation such as:
 It is required for the enterprise to allocate similar task to each and every person of the
team member. It will help in in distributing burden as well as enhance the skills of the
team members in an effective manner.

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 The participation f percentage should be equal that make them possible to equally
participate in the activities if the enterprises in an effective as well as effective manner.
 It is required to prepare proper communication channel to enhance the coordination and
bond among the team members to the certain extent (Mitsuhashi and Min, 2017).
Planning Budget
Particulars
Uni
ts
Pric
e
Amou
nt
Increased
Units
Pric
e
Amou
nt
Varian
ce
Sales
300
0 1.65 4950 4000 1.65 6600 1650
Cost of Goods Sold:
Direct Material 0.16 475 0.16 633 158
Direct Labour 0.53 1600 0.53 2133 533
Manufacturing Overhead 0.08 240 0.08 320 80
Gross Profit 2635 3513 878
Selling and Administrative
Expenses
Lease of Gazebo 0.02 50 0.02 67 17

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Stand Permit 0.08 250 0.08 333 83
Net Operating Income 2335 3913 978
Comparison between Planning Budget and Actual Budget
In order to compare the actual results from the planning budget, the variance is majorly occurring
in the revenue of the enterprise. According to the actual results the firm is earning $2335 in
contrast with, according to the planning budget, the firms are earning $3913. It occurs due to
enhance in the overall sales unit that affect the overall performance and revenue of the
organization to the certain extent. the activity of the organization is also vary as according to the
actual results the company deliver 3000 units while according to planning budget, the unit is
enhanced by 2000 units that affected overall cost and revenue of the firm. The spending level is
also increase with the increase in unit that enhances the level of spending variance to the certain
extent. Therefore, the variance of the enterprise increases at greater level that will affect the
overall performance of the organization to the certain extent (Miller, 2018).
Blaming for differences between Planning and Actual Results
The main blame for huge variance occurs between actual and planning results is the loss that
occurs in the activity of Balloons. The company has faced loss from Balloon activity that
affected overall profitability of the organization to the certain extent. Moreover, the sales units of
the organization also responsible for the variance that occurs in between the actual and planned
results. The sales units enhance by 2000 that enhance the overall sales profit as well as expense
of the organization to the certain extent. The lack in the coordination between the team members
as well as high cost rate of labor affect the overall cost of the enterprise that enhance the level of
variance between them to the certain extent. In addition with, the increase in expenses also blame
as the differences that is identified between the planning budget as well as the actual results.

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Calculation of Variance
Material Variance, Quantity Variance and Total Variance of BBQ
Particular BBQ
Material Price Variance
Standard Price 450
Standard Quantity 2000
Actual Price 500
Actual Quantity 2075
Quantity Variance
(Actual Cost-Standard Cost)*Actual Quantity (Marais, Wecker and Weil,
2017) 103750
Price Variance
(Actual Quantity-Standard Quantity)*Standard Cost (Liu and Cui, 2019) 33750
Total Variance

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Price Variance+ Quantity Variance 137500
Material Variance, Quantity Variance and Total Variance of Balloons
Particular Balloons
Material Price Variance
Standard Price 25
Standard Quantity 1000
Actual Price 30
Actual Quantity 1050
Quantity Variance
(Actual Cost-Standard Cost)*Actual Quantity 5250
Price Variance
(Actual Quantity-Standard Quantity)*Standard Cost 1250

MANAGEMENT ACCOUNTING 16
Total Variance
Price Variance+ Quantity Variance 6500
Conclusion
From the above analysis it can be concluded that financial analysis plays an essential role in
analyzing the overall performance of the organization. One of the company Barbecue & Balloons
is analyzed in the report in which the overall reporting revenue of the company is analyzed.
Furthermore, the overall financial performance of the enterprise is good however; the company
faces loss in the activities of Balloons that need to be focus by them to enhance its performance
in an effective manner. Paula and Ringo have supported their views that are not correct to the
certain extent. Therefore for making rules it is required for the firm to analyze the activities to
run the business more efficiently.

MANAGEMENT ACCOUNTING 17
References
Beynon, M.J., Jones, P. and Pickernell, D. (2016) Country-based comparison analysis using
fsQCA investigating entrepreneurial attitudes and activity. Journal of Business Research, 69(4),
pp.1271-1276.
Dewachter, H., Iania, L., Lyrio, M. and de Sola Perea, M. (2015) A macro-financial analysis of
the euro area sovereign bond market. Journal of Banking & Finance, 50, pp.308-325.
Liu, Z. and Cui, L. (2019) July. Application Research of Standard Cost Method in Multiple
Material Situations. In IOP Conference Series: Earth and Environmental Science Vol. 295, No.
3, p. 032005
Marais, M.L., Wecker, W.E. and Weil, R.L. (2017) Statistical Estimation of Incremental Cost
from Accounting Data. Litigation Services Handbook: The Role of the Financial Expert, pp.1-26.
Marquis, E., Guitman, R., Black, C., Healey, M., Matthews, K.E. and Dvorakova, L.S. (2019)
Growing partnership communities: What experiences of an international institute suggest about
developing student-staff partnership in higher education. Innovations in Education and Teaching
International, 56(2), pp.184-194.
Miller, G. (2018) Performance based budgeting. London: Routledge.
Mitsuhashi, H. and Min, J. (2017) Interim Rank Biases of Subjective Performance Evaluation in
Contests. Journal of Applied Business and Economics, 19(5).
Schroeder, R.G., Clark, M.W. and Cathey, J.M. (2019) Financial accounting theory and
analysis: text and cases. New York: John Wiley & Sons.
Trevino, L.K. and Nelson, K.A. (2016) Managing business ethics: Straight talk about how to do
it right. New York: John Wiley & Sons.