Management Accounting : Sample Assignment PDF

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student
Name of the University
Authors Note
Course ID

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to A...............................................................................................................................2
Answer to i:................................................................................................................................2
Answer to ii:...............................................................................................................................2
Answer to iii:..............................................................................................................................3
Answer to iv:..............................................................................................................................4
Answer to B:..............................................................................................................................5
Reference List:...........................................................................................................................7

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Answer to A
Answer to i:
Direct Materials Price and Quantity (Efficiency) Variances
Materials
Actual price 4.6
Standard Price 4.5
Quantity Purchased 25000
Material Price Variance 2500
Material Quantity (Efficiency) Variance
Actual Quantity Used for Actual Output 23100
Standard Quantity allowed for Actual Output 25000
Standard Price 4.5
Material Quantity (Efficiency) Variance -8550
Working Notes
Material Price Variance
= (4.6 – 4.5) = 0.1
= 25,000 x 0.1 = 2500
Material Quantity Variance
= 23100 – 25000 = (1900)
= (1900) x Standard price
Or (1900) x 4.5 = (8550)
Answer to ii:
Direct Labour Rate and Efficiency Variances
Labour

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Labour Rate Variance
Actual Labour Price Per hour 14.6
Standard labour price per hour 15
Actual Hours use 40100
Labour Rate Variance -16040
Labour Efficiency Variance
Actual Hours for actual output 40100
Standard hours for actual output 40000
Standard Price 4.5
Labour Efficiency Variance 450
Working Notes:
Labour Variance
Actual labour price per hour – Standard Labour price per hour
= 14.6 – 15 = (0.4)
= (0.4) x Actual Hours Used
Or (0.4) x 40100 = (16040)
Labour efficiency variance:
Actual hours for actual output – Standard hours for actual output x Standard Price
= (40100 – 40000) x 4.5
= 450
Answer to iii:
Variable Overhead Spending and Efficiency Variance:
Variable Overhead
Variable Overhead Spending Variance
Actual Variable Overhead Costs 119000
Standard variable overhead rate 3

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Actual volume of allocation base 25000
44000
Variable Overhead Efficiency Variance
Actual volume of allocation base 23100
Standard Volume of allocation base for output 25000
Standard variable overhead rate 3
Variable Overhead Efficiency Variance -5700
Working Notes
Variable overhead spending variance:
Actual variable overhead costs – (Standard variable overhead rate x actual volume of
allocation base)
= 119000 – (3 x 25000)
= 44,000
Variable overhead efficiency variance
Actual volume of allocation base – Standard volume of allocation base x Standard variable
overhead rate
= 23100 – 25000 x 3 = (5700)
Answer to iv:
Fixed Overhead Spending and Production Volume Variance
Fixed Overhead
Fixed overhead spending variance
Actual Fixed overhead costs 180000
Estimated fixed overhead costs 160000
Fixed overhead spending variance 20000
Fixed overhead volume variance
Estimated volume of allocation base 8000

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standard volume of allocation base for output 7800
standard fixed overhead allocation rate 20
Fixed overhead volume variance 4000
Working Notes
Fixed overhead spending variance
= Actual Fixed overhead cost – Estimated fixed overhead costs
= 180,000 – 160,000
= 20,000
Fixed overhead volume variance
Estimated volume of allocation base – Standard volume of allocation base for output x
standard fixed overhead allocation rate
= (8000 – 7800) x 20
= 4,000
Answer to B:
As evident from the current situation the material price variance reflected a favourable
situation as the material price variance stood 2500. The material quantity efficiency variance
reported an unfavourable efficiency variance -8550. Under the labour variance the labour rate
variance stood -16040. While the labour efficiency variance favourably stood 450. The
variable quantity overhead stood 44000 for the year while the variance overhead efficiency
variance stood unfavourably to (5700). The fixed overhead spending variance stood
favourably to 20000 while the fixed overhead volume variance stood 4000.

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As evident from the above stated computations an assertion can be bought forward by
stating that the material quantity variance for the company stood negatively which
significantly requires an effort to be understand the cause of unfavourable amount of actual
quantity that was used on the actual output. It can be stated that there were also the instances
of labour rate variance as the variance stood negatively to 16040. The company is required to
look into the primary reason for the such cause of unfavourable variances and investigate
unfavourable situation to take into the account the causes of variance. Additionally, the
variable overhead efficiency variance stood negatively to -5700 therefore it is recommended
that the variances should be invested further by Rafael to understand the major cause of such
deviation.

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Reference List:
Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017. Cost-benefit
analysis: concepts and practice. Cambridge University Press.
Lanen, W., 2016. Fundamentals of cost accounting. McGraw-Hill Higher Education.