Management Accounting Report

Running head: REPORT 0
Management accounting
MAY 9, 2019
student details:

REPORT 1
Answer 1.
1. Revenue Budget for Clear Limited the year ending 31 Dec 2019
Particulars Selling price Units sold Total Revenues
1 Litre Bottle 0.20 38,40,000 7,68,000
15 Litre Containers 1.20 9,60,000 11,52,000
19,20,000
2. Minimum number of 1 litre bottles produced during
2019
Budgeted Unit sales (1 Littre Bottles)
38,40,00
0
Add: Target ending finished goods inventory 4,80,000
Total Requirements
43,20,00
0
less: Finished goods inventory at beginning 7,20,000
Unites to be produced
36,00,00
0
3. Beginning inventory of 15 Litre Containers on 1 January 2019
Budgeted Sales 9,60,000
Add: Target ending inventory 1,60,000
Less: Budgeted Production 10,40,000
Inventory at beginning 80,000
Answer 2
January February March April May
Total sales 50000 40000 35000 24000 50000
Credit sales 40000 32000 28000 19200 40000
cash sales 10000 8000 7000 4800 10000
Collection form sale of may 20000
Collection form sale of April 6720
Collection form sale of march 3500
Cash received from debtors in
May 30220

REPORT 2
Answer 3
a. when the company effectively uses the investment and produces gain, ROI would be higher.
Whereas if the firm unproductively uses the investment and produces loss, ROI would be low.
For investor, selecting the firm with the good return on investment is very essential because the
higher ROI means that the firm is successfully using the investments to produce the higher return. In
the above situation, division trouser is more effective.
b. Computation of residual income for each
division
Particulars Shirts Trouser
Minimum required
ROI 12% 12%
Net operating income 4,50,000 1,00,000
Charge for use of
capital 3,60,000 60,000
residual income 90,000 40,000
particulars Shirts Trouser
Minimum required
ROI 15% 15%
Net operating income 4,50,000 1,00,000
Charge for use of
capital 4,50,000 75,000
residual income - 25,000
Particulars Shirts Trouser
Minimum required
ROI 18% 18%
Net operating income 4,50,000 1,00,000
Charge for use of
capital 5,40,000 90,000
residual income
-
90,000 10,000
c. The trouser department is simply larger than the shirt Division and for this reason alone one will
expect that this will have the great amount of residual income. In fact, based on the data above, the