Managerial Accounting - Assignment PDF

Running Head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Authors Note:

1MANAGERIAL ACCOUNTING
Table of Contents
Answer 1:.........................................................................................................................................2
Part a:...............................................................................................................................................2
Part b:...............................................................................................................................................6
Answer 2:.........................................................................................................................................8
Part a:...............................................................................................................................................8
Part b:...............................................................................................................................................9
Answer 3:.......................................................................................................................................10
Reference.......................................................................................................................................12

2MANAGERIAL ACCOUNTING
Answer 1:
Part a:
Berkshire Toy Company - Flexible budget
Quantity Amount ($)
revenues
retail selling price 49 8573285
internet selling price 42 4428018
wholesale selling price 32 1445184
retail sales volume 174965
internet sales volume 105429
wholesales sales volume 45162
total sales volume 325556
Flexible budget of expenditures
Amount ($)
variable overhead 1725664.743
fixed overhead 658897
variable selling 1859594
fixed selling 5023192
administrative expenses 1123739
Amount ($)
Units sold 325,556
PAMAQA
Revenues
retail 8,573,285
internet 4,428,018
wholesale 1,445,184
Total Revenue 14,446,487

3MANAGERIAL ACCOUNTING
Amount ($)
Direct Materials:
acrylic fabric 256421.634
acrylic eyes 125637.12
plastic joints 246001.921
polyster filling 450856.15
woven label 16422.35
designer box 69487.88
accessories 66012.99012
Total Direct Materials 1230840.045
Direct Labor:
sewing 1545853.87
stuffing and cutting 850635.89
assembly 989011.18
dressing and packaging 282804.55
Total Direct Labor 3668305.49
Variable Overheads 1725664.743
Total Variable Production Costs 6,624,810
Variable Selling Expense 1859594
Total Variable Expenses 8,484,404
Contribution Margin 5962082.722
PANAQA
Fixed Costs:
mfg overheads 658897
selling 5023192
admin 1123739
Total Fixed Costs 6,805,828
Operating Income -843745.278
Variance in sales

4MANAGERIAL ACCOUNTING
Static Budgeted
sales
Actual sales Variance Variance
(%)
Retail sales 11,662,000.00 8,573,285.0
0
(3,088,715.00
)
(26.49)
Internet sales - 4,428,018.0
0
4,428,018.00 1.00
Wholesale
sales
1,344,000.00 1,445,184.0
0
101,184.00 7.53
13,006,000.00 14,446,487.00
Variance in costs
Budgeted Actual Variance Variance
(%)
variable overhead 1,046,304.0
0
1,725,664.7
4
679,360.7
4
64.93
fixed overhead 661,920.00 658,897.00 (3,023.00
)
(0.46)
variable selling 1,218,280.0
0
1,859,594.0
0
641,314.0
0
52.64
fixed selling 4,463,000.0
0
5,023,192.0
0
560,192.0
0
12.55
administrative
expenses
1,124,000.0
0
1,123,739.0
0
(261.00) (0.02)
Master
(Static)
Budget
Actual Variance Variance (%)
Revenues
retail 11,662,000.00 8,573,285.00 (3,088,715.00) (26.49)
internet - 4,428,018.00 4,428,018.00 1.00
wholesale 1,344,000.00 1,445,184.00 101,184.00 7.53
Total Revenue 13,006,000.00 14,446,487.00

5MANAGERIAL ACCOUNTING
Particulars Master Budget
PBNBQB
Actual
PANAQA
Variance Variance (%)
Direct Materials:
acrylic fabric 233,338.00 256,421.63 23,083.63 9.89
acrylic eyes 106,400.00 125,637.12 19,237.12 18.08
plastic joints 196,000.00 246,001.92 50,001.92 25.51
polyster filling 365,400.00 450,856.15 85,456.15 23.39
woven label 14,000.00 16,422.35 2,422.35 17.30
designer box 67,200.00 69,487.88 2,287.88 3.40
accessories 33,600.00 66,012.99 32,412.99 96.47
Total Direct Materials 1,015,938
.00
1,230,840.
05
Variance Variance
(%)
Direct Labor:
sewing 1,120,000
.00
1,545,853.
87
425,853.8
7
38.
02
stuffing and cutting 672,000.
00
850,635.8
9
178,635.8
9
26.
58
assembly 672,000.
00
989,011.1
8
317,011.1
8
47.
17
dressing and packaging 224,000.
00
282,804.5
5
58,804.55 26.
25
Total Direct Labor 2,688,000
.00
3,668,305.
49
Variable Overheads 1,046,304
.00
1,725,664.
74
679,360.7
4
64.
93
Total Variable Production
Costs
4,750,242
.00
6,624,810.
28
Variable Selling Expense 1,218,280
.00
1,859,594.
00
641,314.0
0
52.
64
Total Variable Expenses 5,968,522
.00
8,484,404.
28
2,515,882.2
8
42.
15
Contribution Margin 7,037,478
.00
5,962,082.
72
(1,075,395.2
8)
(15.
28)
PBNBQB PANAQA
Fixed Costs:

6MANAGERIAL ACCOUNTING
mfg
overheads
661,92
0.00
658,897.
00
(3,023.00) (0.46)
selling 4,463,00
0.00
5,023,192
.00
560,192.00 12.55
admin 1,124,00
0.00
1,123,739
.00
(261.00) (0.02)
Total Fixed
Costs
6,248,92
0.00
6,805,828
.00
Operating
Income
788,55
8.00
(843,745
.28)
(1,632,303.28) (207.00)
Part b:
Bonus Base Rate Bonus
David Hall (Purchasing Dept)
Materials price variances:
acrylic fabric 20,428
acrylic eyes 0
plastic joints 25,181
polyster filling 48,183
woven label 0
designer box 6,317
accessories (26,946)
$
73,164
20% $
14,633
Rita Smith (Marketing Dept)
Actual Net revenue:
Actual Revenue 14,446,487
Variable Selling
Expenses
(1,859,594)
Fixed Selling Expenses (5,023,192)
7,563,701
Budgeted Net revenue:
Budgeted Revenue 13,006,000
Variable Selling
Expenses
(1,218,280)
Fixed Selling Expenses (4,463,000)
7,324,720

7MANAGERIAL ACCOUNTING
$
238,981
10% $
23,898
Bill Wilford (Production Dept)
Production efficiency variances:
Direct materials:
acrylic fabric (5,548)
acrylic eyes (1,926)
plastic joints (43,294)
polyester filling (74,189)
woven label (145)
designer box 2,328
accessories 0
Direct Labor: (466,638)
Variable Overhead: (181,639)
Production rate/spending variances:
Direct Labor Rate: (76,329)
Variable Overhead Spending: (327,488)
Fixed Overhead Spending: 3,023
$
(1,171,844)
3% $
-
Summary
Bonus Base Rate Bonus
David Hall (Purchasing
Dept.)
$
73,164
20% $
14,633
Rita Smith (Marketing
Dept.)
$
238,981
10% $
23,898
Bill Wilford (Production
Dept.)
$
(1,171,844)
3% $
-
Answer 2:
Part a:
Variance in sales
Particulars Budgeted sales Actual sales Variance Variance (%)
Retail sales 11,662,000.00 8,573,285.00 (3,088,715.00) (26.49)
Internet sales - 4,428,018.00 4,428,018.00 1.00

8MANAGERIAL ACCOUNTING
Wholesale sales 1,344,000.00 1,445,184.00 101,184.00 7.53
13,006,000.00 14,446,487.00
The variances in sales are mostly positive except the retail sales. The retail sales have
failed to meet the budgeted expectation by almost 26.50%. It is important to understand the
reason for the same; the company expected no sales on internet however it achieve as much as
$4428018.00 sales on internet. Thus, it can be concluded that the main reason for the company to
fail to meet the retail sales is that a part of the sales has been effected online through internet.
Variance in costs
Particulars Budgeted Actual Variance Variance
(%)
variable overhead 1,046,304.0
0
1,725,664.7
4
679,360.7
4
64.93
fixed overhead 661,920.0
0
658,897.0
0
(3,023.00
)
(0.46)
variable selling 1,218,280.0
0
1,859,594.0
0
641,314.0
0
52.64
fixed selling 4,463,000.0
0
5,023,192.0
0
560,192.0
0
12.55
administrative
expenses
1,124,000.0
0
1,123,739.0
0
(261.00
)
(0.02)
Variable overhead has increased by 64.93% from the budgeted level clearly indicates that
the company needs to be more efficient in utilizing its resources. The overall sales have only
increased by 11.08% as can be seen in the table below. Thus, increase of almost 65% in variable
overheads is not acceptable and the management needs to take immediate steps to ensure better
utilization of its resources. Similarly the variable selling overhead has also increased by more
52% which again shows the inability of the management to keep the expenditures within the
limit.

9MANAGERIAL ACCOUNTING
Overall sales 13,006,000.00 14,446,487.00 1,440,487.00 11.08
Part b:
Incentive schemes are generally implemented by an organization to motivate its
employees to perform at a high level. An organization expects its employees to perform at a
standard level to help the organization in achieving its desired objectives. However, in order to
motivate employees to perform at a higher level of efficiency than the standard generally
management uses incentive schemes (Weygandt et al. 2015). In case of the company in question
and its incentive scheme is concerned which only applies to the head of the three main
departments there are certain advantages as well as disadvantages.
Advantages:
I. The managers of three departments will be highly motivated to achieve the targets
given to them to receive lucrative incentives.
II. Use of resources will be highly efficient and effective in these departments.
III. Reduction in overall expenditures.
IV. Achievement of high production will be possible.
V. Optimum utilization of resources will be possible.
VI. The three departments will have to coordinate properly in order to help each other
to achieve the target set to receive lucrative incentive. Thus, the coordination
between three departments will be very high.
Disadvantages: Since the incentive schemes only apply to different heads of three departments of
the company in this case, there will be certain disadvantages too along with the above mentioned
advantages. Let us discuss these disadvantages below;

10MANAGERIAL ACCOUNTING
I. The employees of different departments will be feeling left out since they are not part
of the incentive scheme. Thus, there will be dearth of motivation as far as the
employees of these three departments are concerned.
II. Employees are the back bone of an organization if they feel not part of something
then it will be hard for them to give their best for the interests of the company. Hence,
it will be difficult to motivate the employees of the company to give their best since
they have not been considered in the proposed incentive schemes.
III. Lack of motivation will be a huge roadblock to different departments in their way to
achieve their objectives.
Answer 3:
Balanced Scorecard is a system used by organizations to meet their performance
standards and expectations. Management personnel in different parts of the world use balanced
scorecard effectively to achieve desired success in managing the organizations. In case Berkshire
Toy Company Limited decides to use balanced scorecard to measure its performances then the
following performance dimensions can be measured by the company with the help of the BSC
system;
Financial: Using BSC the company will be able to keep track of its financial performance.
Whether the financial resources are being used effectively and efficiently can be tracked using
BSC by the company.
Customers: The customer’s point of view shall be assessed by using BSC approach within the
organization. Whether the organization is able to fulfill the customers’ requirements to satisfy
their needs and demand can be measured by using this approach. Customers expect to get quality

11MANAGERIAL ACCOUNTING
products and services from the company, by using BSC approach the management of Berkshire
will be able to keep track of its customer satisfaction program (Edmonds et al. 2016).
Stakeholders: The Company has numerous stakeholders, use of BSC approach will be helpful for
the company to manage the interests and requirements of different stakeholders. BSC approach
will be an effective method to ensure that each and every stakeholder of the company is satisfied.
Internal process: The quality of products and services offered by the company can be measured
using the BSC approach. By controlling the internal processes within the company the
management can provide good quality products and services to the customers. Thus, BSC
approach will be very effective in achieving this objective (Braun et al. 2014).
Organizational capacity: Managing human capital, technology, infrastructure and other resources
by utilizing them properly will be possible with BSC approach.

12MANAGERIAL ACCOUNTING
Reference
Braun, K.W., Tietz, W.M., Harrison, W.T., Bamber, L.S. and Horngren, C.T., 2014. Managerial
accounting. Pearson.
Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial
accounting concepts. McGraw-Hill Education.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting. John
Wiley & Sons.