Management Accounting Discussion 2022

1
Management Accounting

2
Table of Contents
Part A.........................................................................................................................................3
Introduction............................................................................................................................3
1..............................................................................................................................................3
2..............................................................................................................................................4
3..............................................................................................................................................4
4..............................................................................................................................................4
5..............................................................................................................................................5
Conclusion..............................................................................................................................5
Part B..........................................................................................................................................5
References..................................................................................................................................7
Appendix....................................................................................................................................8

3
Part A
Introduction
The company is involved with the manufacturing task and in that there are various
decisions that are required to be taken into consideration. The main discussion which will be
carried in this report is in relation to the installation of the new machine. The decision in this
respect will be evaluated and for that overhead rate will be calculated and various other
calculations will be made to understand the scenario in a better manner.
1.
Management accounting involves various tools that can be used and in that there are
calculations made which help the managers in taking the effective decision. There is currently
the consideration of a new machine which shall be installed (Osadchy & Akhmetshin, 2015).
For that, the new overhead rate will be calculated to ascertain the change. The calculation is
shown below for better understanding.
Particulars Amount
Estimated overheads 2475000
Reduction in cost 468000
Lease installment 300000
Wages of a skilled technician 45000
Total Overheads after
installation
2352000
Original labour hours 52000
Saved hours 6000
New hours required 46000
New overhead rate per hour 51.13
The calculation has been made and in that it can be noted that there is a higher
overhead rate which is determined for each labour hour. The rate of $47.6 has reached to
$51.13. There are several additional costs which are incurred with the installation and that led
to the increase in the rate. The total overheads are now allocated among the remaining hour
which is also the main reason for the hike of rate.