Detailed Analysis of Management Accounting Assignment Solution

This document presents a comprehensive solution to a management accounting assignment. The solution addresses multiple aspects of cost accounting, starting with the high-low method to estimate fixed and variable costs for shipping activities. It then delves into job-order costing, calculating costs for various jobs, including direct materials, direct labor, and overhead allocation using a predetermined overhead rate. The assignment further explores cost accounting principles, including calculating equivalent units, unit manufacturing costs, and the cost of goods transferred out and ending work-in-process. The solution also covers variance analysis, calculating material price and quantity variances, labor rate and efficiency variances, and fixed overhead variances. Finally, the assignment includes break-even analysis, calculating the break-even point in units and preparing a contribution margin income statement. References from academic journals and textbooks are provided to support the analysis.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1MANAGEMENT ACCOUNTING
Table of Contents
Question 1 (a):.................................................................................................................................3
Question 1 (b):.................................................................................................................................3
Requirement i:.............................................................................................................................3
Requirement ii:............................................................................................................................4
Requirement iii:...........................................................................................................................4
Requirement iv:...........................................................................................................................4
Requirement v:.............................................................................................................................5
Question 2 (a):.................................................................................................................................5
Requirement i:.............................................................................................................................5
Requirement ii:............................................................................................................................6
Requirement iii:...........................................................................................................................6
Requirement iv:...........................................................................................................................6
Question 2 (b):.................................................................................................................................7
Requirement i:.............................................................................................................................7
Requirement ii:............................................................................................................................7
Requirement iii:...........................................................................................................................8
Question 3 (a):.................................................................................................................................9
Requirement i:.............................................................................................................................9

2MANAGEMENT ACCOUNTING
Requirements ii, iii and iv:.........................................................................................................10
Question 3 (b):...............................................................................................................................11
Requirement i:...........................................................................................................................11
Requirement ii:..........................................................................................................................11
Requirement iii:.........................................................................................................................11
Question 3 (c):...............................................................................................................................12
Requirement i:...........................................................................................................................12
Requirement ii:..........................................................................................................................12
Requirement iii:.........................................................................................................................12
References and Bibliographies:.....................................................................................................14

3MANAGEMENT ACCOUNTING
Question 1 (a):
Particulars Packages shipped Total shipping costs
High level 28 $ 2,000
Low level 12 $ 900
Difference 16 $ 1,100
Variable cost $ 68.75 $1,100/16
Fixed cost $ 75.00 $2,000-(28x$68.75)
Total cost of
shipping $ 1,175.00
$75.00+(16x$68.75)
Question 1 (b):
Requirement i:
Particulars Details Job 876 Job 877 Job 878
Opening balance 1 August A $ 13,210 $ 2,650 $ -
Direct materials B $ 5,540 $ 8,300 $ 11,830
Direct labour C $ 9,000 $ 7,750 $ 18,000
Overhead D $ 6,840 $ 4,800 $ 8,160
570x$12 400x$12 680x$12
Total E=A+B+C+D $ 34,590 $ 23,500 $ 37,990

4MANAGEMENT ACCOUNTING
Requirement ii:
Particulars Details Job 878
Opening balance 1 August A $ -
Direct materials B $ 11,830
Direct labour C $ 18,000
Overhead D $ 8,160
680x$12
Total E=A+B+C+D $ 37,990
Requirement iii:
Particulars Details Values
Balance of finished goods, August 1 A $ 32,000
Job 876 B $ 34,590
Job 877 C $ 23,500
Job 874 D -$ 14,000
Job 877 E -$ 23,500
Ending finished goods
F=A+B+C+D+
E $ 52,590

5MANAGEMENT ACCOUNTING
Requirement iv:
Particulars Details Values
Job 874 A $ 14,000
Job 877 B $ 23,500
Cost of goods sold C=A+B $ 37,500
Requirement v:
Particulars Details Values Values
Sales
A=$37,500x125
% $ 46,875
Cost of goods sold B $ 37,500
Gross margin C=A-B $ 9,375
Expenses:
Variable marketing expenses D=Ax6% $ 2,813
Fixed marketing expenses E $ 1,700
Administrative expenses F $ 4,400
Total expenses G=D+E+F $ 8,913
Operating income H=C-G $ 463
Question 2 (a):
Requirement i:
Particulars Details Values

6MANAGEMENT ACCOUNTING
Units completed A 14,400
Units in EWIP B 1,500
Fraction completed C 35%
Equivalent units D=A+(BxC) 14,925
Requirement ii:
Particulars Details Values
Total manufacturing costs A $ 41,790
Number of equivalent units B 14,925
Unit manufacturing cost for March C=A/B $ 2.80
Requirement iii:
Particulars Details Values
Units completed A 14,400
Unit manufacturing cost B $ 2.80
Cost of goods transferred out for March C=AxB $ 40,320
Requirement iv:
Particulars Details Values
Units in EWIP A 1,500
Fraction completed B 35%

7MANAGEMENT ACCOUNTING
Equivalent units in EWIP C=AxB 525
Unit manufacturing cost D $ 2.80
Value of March's EWIP E=CxD $ 1,470
Question 2 (b):
Requirement i:
Particulars Details Values
Overhead costs:
Setting up equipment A $ 6,600
Machining B $ 9,000
Total overhead costs C=A+B $ 15,600
Direct labour costs:
Elegant D $ 18,000
Bien E $ 6,000
Total direct labour costs F=D+E $ 24,000
Overhead rate per direct labour cost G=C/E $ 0.65
Cost allocated to Elegant H=DxG $ 11,700
Direct material of Elegant I $ 6,000
Cost per unit for each handbag of
Elegant J=H/I $ 1.95
Cost allocated to Bien K=ExG $ 3,900
Direct material of Bien L $ 6,000

8MANAGEMENT ACCOUNTING
Cost per unit for each handbag of Bien M=K/L $ 0.65
Requirement ii:
Particulars Details Values
Setting up equipment A $ 6,600
Total set-up hours B=200+200 400
Rate per set-up hour C=A/B $ 16.50
Machining D $ 9,000
Total machine hours E=1,000+9,000 10,000
Rate per machine hour F=D/E $ 0.90
Set-up costs allocated to Elegant G=Cx200 $ 3,300
Machine costs allocated to Elegant H=Fx1,000 $ 900
Total overhead costs allocated to Elegant I=G+H $ 4,200
Direct material of Elegant J $ 6,000
Overhead cost per unit of Elegant K=I/J $ 0.70
Set-up costs allocated to Bien L=Cx200 $ 3,300
Machine costs allocated to Bien M=Fx9,000 $ 8,100
Total overhead costs allocated to Bien N=L+M $ 11,400
Direct material of Bien O $ 6,000
Overhead cost per unit of Bien P=N/O $ 1.90

9MANAGEMENT ACCOUNTING
Requirement iii:
The second approach needs to be used, which implies that the overhead cost per unit
based on machine hours and setup hours results in accurate allocation of cost (Langfield-Smith et
al., 2017). Bien is observed to be using machine hours and therefore, it is necessary to assign
machining costs to Bien. This could not be conducted, if the application of plant-wide rate based
on direct labour cost is made (Kaplan & Atkinson, 2015).
Question 3 (a):
Requirement i:
Particulars Details Values Comments
Standard direct materials (in
kilograms) A 2.20
Towels manufactured B 30,000
Standard quantity C=AxB 66,000
Standard price D $ 6.30
Actual quantity E 72,000
Actual direct material costs F $ 436,000
Actual price G=F/E $ 6.06
Standard direct labour (in hours) H 1.50
Standard labour hours I=BxH 45,000
Standard rate J $ 16.60
Actual labour hours K 44,900
Actual labour cost L $ 775,770

10MANAGEMENT ACCOUNTING
Material price variance
M=(ExD)-
F $ 17,600 Favourable
Material quantity variance
N=Dx(C-
E) - 37,800 Unfavourable
Labour rate variance
O=(K*J)-
L -$ 30,430 Unfavourable
Labour efficiency variance P=Jx(I-K) 1,660 Favourable
Requirements ii, iii and iv:
In the Books of Aquella Company
Journal Entries
Serial
Number Account Titles and Explanation Debit Amount Credit Amount
(a) Raw Materials Inventory (72,000x$6.30) $ 453,600
Accounts Payable $ 436,000
Material Price Variance $ 17,600
(To record purchase of raw materials)
(b) Work-in-Process Inventory (66,000x$6.30) $ 415,800
Material Quantity Variance $ 37,800
Raw Materials Inventory $ 453,600
(To record the issuance of raw materials)
(c) Cost of Goods Sold $ 37,800

11MANAGEMENT ACCOUNTING
Material Quantity Variance $ 37,800
Material Price Variance $ 17,600
Cost of Goods Sold $ 17,600
(Closing of material variances to cost of goods
sold)
Question 3 (b):
Requirement i:
Particulars Details Values
Standard hours allowed per unit A 2
Actual production B 7,000
Standard hours allowed for actual
production C=AxB 14,000
Requirement ii:
Particulars Details Values
Standard fixed overhead rate A $ 2.50
Standard hours allowed for actual production B 14,000
Applied fixed overhead C=AxB $ 35,000

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Requirement iii:
Particulars Details Values Comment
Actual fixed overhead costs A $ 40,840
Applied fixed overhead B $ 35,000
Total fixed overhead variance C=A-B $ 5,840
Unfavourabl
e
Question 3 (c):
Requirement i:
Particulars Details Values
Direct materials A $ 3.80
Direct labour B $ 2.80
Variable factory overhead C $ 4.20
Variable selling and administrative
expenses D $ 3.20
Variable cost per unit E=A+B+C+D $ 14.00
Selling price per unit F $ 40.00
Contribution margin per unit G=F-E $ 26.00
Requirement ii:
Particulars Details Values
Fixed factory overhead A $ 108,840

13MANAGEMENT ACCOUNTING
Fixed selling and administrative expense B $ 77,060
Total fixed cost C=A+B $ 185,900
Contribution margin per unit D $ 26
Break-even units E=C/D 7,150
Requirement iii:
Particulars Amount Amount
Sales revenue ($40x7,150 units) $ 286,000
Less: Variable costs
Direct material ($3.80x7,150 units) $ 27,170
Direct labour ($2.80x7,150 units) $ 20,020
Factory overhead ($4.20x7,150 units) $ 30,030
Selling and administrative expenses ($3.20x7,150 units) $ 22,880 $ 100,100
Contribution margin $ 185,900
Less: Fixed costs
Factory overhead $ 108,840
Selling and administrative expenses $ 77,060 $ 185,900
Net operating income $ -

14MANAGEMENT ACCOUNTING
References and Bibliographies:
Hopper, T., & Bui, B. (2016). Has management accounting research been critical?. Management
Accounting Research, 31, 10-30.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Langfield-Smith, K., Smith, D., Andon, P., Hilton, R., & Thorne, H. (2017). Management
accounting: Information for creating and managing value. McGraw-Hill Education
Australia.
Lavia López, O., & Hiebl, M. R. (2014). Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of Management
Accounting Research, 27(1), 81-119.
Messner, M. (2016). Does industry matter? How industry context shapes management
accounting practice. Management Accounting Research, 31, 103-111.
Quattrone, P. (2016). Management accounting goes digital: Will the move make it
wiser?. Management Accounting Research, 31, 118-122.