University Cost Accounting Assignment: Solutions and Analysis

This document presents a comprehensive solution to a cost accounting assignment, addressing various aspects of the subject. It begins by defining panopticism and its relevance to management accounting, followed by a discussion of the core functions of management accounting, including planning, organizing, and controlling. The assignment then delves into control mechanisms, referencing the Van Helen Rock Band checklist as a tool for ensuring thoroughness and consistency. A detailed manufacturing account and profit and loss account are provided, along with an explanation of perpetual inventory systems and the treatment of overtime payments. The document also includes journal entries for material control and payroll accounting. Furthermore, the assignment explores the system of costing and contrasts traditional and activity-based costing (ABC) methods, highlighting the benefits and drawbacks of each. Finally, the direct and step methods of cost apportionment are demonstrated. The assignment covers a wide range of cost accounting concepts and provides practical examples and calculations throughout.

Running head: COST ACCOUNTING
Cost Accounting
Name of the Student
Name of the University
Authors Note
Course ID

1COST ACCOUNTING
Table of Contents
Answer to question 1..................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................4
Answer to question 5 A:.............................................................................................................5
Answer to question 5 B:.............................................................................................................6
Answer to question 6:.................................................................................................................6
Answer to question 7:.................................................................................................................7
Answer to question 8:.................................................................................................................8
Answer to question 9:.................................................................................................................9
Answer to question 10:.............................................................................................................11
Reference List:.........................................................................................................................13

2COST ACCOUNTING
Answer to question 1
Panopticism can be defined as the social theory that is named after the panopticon
which is originally created by the French philosopher Michael Foucault. The tern
panopticism can be defined as the experimental laboratory of the power which helps in
modifying the behaviour as the symbol of displaying the society surveillance.
Panopticims is important in management accounting as it calls for the attention in
accounting and management components of anti-corruption project. Panopticism would help
in detailing the accounting and auditing concepts as the emphasis of detecting and preventing
the corruption (Scott, 2015). Panopticism helps in implementing control over the accounting
records and would act as the reformation tool that would stress important on the financial
controls as the anti-corruption. Panopticism would help in eliminating conflict of interest
among the control and good management by implementing strong auditing programs.
Another importance of panoptcism can be highlighted in the study is that it actually
helps in implementing data transparency which would help in promoting better synoptically
system. The panoptical approach will help in enduring the company under the control of the
private organization (Eldenburg et al., 2016). For example, implementing panoptical system
in a organization would help in determining the raw nature of the data obtained and would
help in side-lining the professional auditors.
Answer to question 2:
The functions of management accounting are as follows;
a. Planning: The functions of management accounting includes formulation of short and
long term plans that is necessary over the particular interval of time. The functions of
management accounting is closely interwoven with planning since it provides

3COST ACCOUNTING
information regarding decision making (Lanen, 2016). For example, decisions
regarding what types or products are to be sold or what would be the product pricing.
b. Organizing: The functions of management accounting is based on creating an
original framework for assigning responsibilities to the individuals that are working
within the organization for attaining business goals. Management accounting helps in
organizing the functions of managers by offering reports that are necessary to regulate
information.
c. Controlling: Management accounting assist in the controlling functions by
generating performance reports and reports of control that helps in reflecting the
variations among the anticipated performance and the actual performance (Boardman
et al., 2017). The reports forms the basis for taking necessary corrective measures.
Answer to question 3:
According to Otley, (2016) routine and responsibilities have turned out to be a
complex thing in the modern world with mistakes are virtually inevitable in the modern
world. According to the Van Helen Rock Band checklist is considered as the most important
tool of control. The checklist help in careful composing and application of the same. The rock
band realised that check list form the important tool of control as this helps in making sure
that everyone that are involved in the job are better able to understand the goals and follow
the prescribed procedure.
According to the rock band they would also benefit from the checklist as well as the
checklists are highly considered portable. The check list helped the rock band in ensuring that
a thoroughness is maintained along with the inventory of supply, consistency and often time
savings when adding up the necessary records among the other things. Under the conditions
complexity not only the check list as the help but are also required for success.

4COST ACCOUNTING
Answer to question 4:
Manufacturing Account:
In the Books of Tendulkar Manufacturing Co.
Manufacturing Statement
for the period ended 30 September 3017
Particulars Amount (in $) Amount (in $)
Raw Materials Purchased 8,42,000
Add: Opening Stock of Raw Materials 11,000
Less: Closing Stock of Raw Materials 26,000 8,27,000
Labour 4,56,780
Inward Charges on Raw Materials 25,340
Prime Cost 13,09,120
Manufacturing Overhead:
Manufacturing Expense 3,70,000
Depreciation on Machinery 12,900
Factory Salaries 3,67,800
Add: Accrued Salaries 12,600 3,80,400
Insurance 12,000
Add: Prepaid Insurance 3,700 15,700
Rates 9,425
Factory Cost 20,97,545
Add: Opening Work-in-Process
Material 23,000
Labour 17,000
Overhead Expenses 26,000 66,000
21,63,545
Less: Closing Work-in-Process
Material 15,000
Labour 11,000
Overhead Expenses 8,000 34,000
Cost of Goods Manufactured 21,29,545
Add: Opening Stock of Finished Goods 50,000
Less: Closing Stock of Finished Goods 11,000
Cost of Goods Sold 21,68,545
Profit and Loss Account:

5COST ACCOUNTING
In the Books of Tendulkar Manufacturing Co.
Income Statement
for the period ended 30 September 3017
Particulars Amount (in $) Amount (in $)
Sales of Finished Goods 38,56,000
Cost of Goods Sold 21,68,545
Gross Profit 16,87,455
Operating Expenses:
Advertising 24,000
Audit Fee 12,000
Discount Expense 3,450
Discount Revenue (5,320)
Freight Outwards 6,543
Insurance 4,000
Less: Prepaid Insurance 925 3,075
Light and Power 23,000
General Expenses 54,320
Rates 3,142
Office Salaries 35,000
Add: Accrued Office Salaries 2,340 37,340
Sales Commission 47,600
Total Operating Expenses 2,09,150
Operating Income 14,78,305
Tax Expense 56,740
Net Profit 14,21,565
Answer to question 5 A:
A perpetual system of inventory constantly updates the records for the company when
it uses the raw materials or sells the product to the customers (Macve, 2015). Companies that
makes the use of the perpetual inventory system should introduce the cycle of counting
physical stock take in to the everyday company’s inventory account and compares the
quantity against the inventory records. The physical stock take under the this system would
help in investigating the discrepancies in inventory record to ascertain the reason for incorrect
quantities.

6COST ACCOUNTING
Answer to question 5 B:
Overtime payment represents the amount that is paid to the worker for the overtime
worked which is greater than the normal rate of wages paid. The overtime payment is also
regarded as the indirect labour cost and it is included in the overhead costs.
Answer to question 6:
Material Control Account
Dr. Cr.
Date Particulars
Amoun
t Date Particulars
Amoun
t
1st
April To Balance b/d 60,000
By Work-in-Process
Account 80,000
To Accounts Payable
Account 70,000
31st
April By Balance c/d 50,000
1,30,00
0
1,30,00
0
Accounts Payable Account
Dr. Cr.
Date Particulars
Amoun
t Date Particulars
Amoun
t
By Material Control
Account 70,000
31st
April To Balance c/d 77,000
By GST Clearing
Account 7,000
77,000 77,000
GST Clearing Account
Dr. Cr.
Date Particulars
Amoun
t Date Particulars
Amoun
t
To Accounts Payable
Account 7,000 By Balance c/d 7,000
7,000 7,000
Journal Entries:

7COST ACCOUNTING
Journal Entry:
Material Control Account………Dr $ 70,000
GST Clearing Account…………….Dr $ 7,000
To Accounts Payable Account $ 77,000
Answer to question 7:
Accrued Payroll Account
Dr. Cr.
Date Particulars
Amou
nt Date Particulars
Amou
nt
To Salary and Wages
Account 50,000
1st
July By Balance b/d 18,000
31st
July To Balance c/d 8,000
By Salary and Wages
Account 40,000
58,000 58,000
Salary and Wages Account
Dr. Cr.
Date Particulars
Amou
nt Date Particulars
Amou
nt
To Bank Account 50,000
By Accrued Payroll
Account 50,000
To Accrued Payroll
Account 40,000
By Salary and Wages
Account 40,000
90,000 90,000
Journal Entry:
Salary Account……..Dr 12,000
Wages Account……..Dr 28,000
To Accrued Payroll Account 40,000
Accrued Payroll Account…..Dr 50,000
To Salary and Wages Account 50,000
Salary and Wages Account.....Dr 50,000
To Bank Account 50,000

8COST ACCOUNTING
Answer to question 8:
Computation of Gross Pay for September
Amount ($)
Gross Pay per day 8000
Total gross pay for September 240000
Withholding each day 2400
Total withholding for September 72000
Net Pay 168000
Total amount credited 168000
Salaries and Wages Account
Raw Material Account
Particular Amount Particular Amount
To Accrued Salaries and
Wages
$
2,40,000.00 By Salaries and Wages
$
2,40,000.00
By Balance C/d
$
2,40,000.00
Total
$
2,40,000.00 Total
$
2,40,000.00
Accrued Salaries and Wages Account
Raw Material Account
Particular Amount Particular Amount
To Salaries and Wages
$
1,68,000.00 By Cash
$
1,68,000.00
By Balance C/d
$
1,68,000.00
Total
$
1,68,000.00 Total
$
1,68,000.00
Cash Account
Raw Material Account
Particular Amount Particular Amount
To Salaries and Wages
$
2,40,000.00
By Accrued Salaries and
Wages
$
2,40,000.00
By Balance C/d $

9COST ACCOUNTING
2,40,000.00
Total
$
2,40,000.00 Total
$
2,40,000.00
Journal Entry
Particulars Amount Amount
Salaries and Wages Expense Account ...................Dr 240000
To Accrued Salaries and Wages Payable A/c 240000
Salaries and Wages Account ......................Dr 168000
To Cash A/c 168000
Salaries and Wages Expense Payable ...................Dr 2400
To Salaries and Wages Payable A/c 2400
Answer to question 9:
The system of costing acts as the information system. The costing system generally
requires particular form of information namely the direct labour hours and quantity of units
produced (Henderson et al., 2015). The traditional costing system allocates the overhead
under the single machine type application of overhead or rates for the operational department
that are volume based. The costs of overhead usually does not vary with the quantity.
Therefore assigning these costs in respect of volume based would create a distortion among
the costs that is assigned to numerous lines of product.
According to Warren & Jones, (2018) activity cost simultaneously is presented as the
refinement of the traditional system of costing for allocating the manufacturing overhead
among the units produced. In consistent with the statement, arguably the traditional costing
system regularly uses the volume based measures namely the direct labour hours or the
machine hours to assign the cost of overhead for the goods produced. Conversely ABC
costing assigns the cost of overhead to the products in respect of the resources that is by each
activity that are engaged in the process of designing, producing and distributing the particular

10COST ACCOUNTING
product. This is further escorted by allocating the cost among the cost pools representing the
specified activities and distributing the costs by making use of the correct cost drivers of
products.
An argument can be put forward by stating that ABC method of costing is more
focussed based and adopts detailed approach rather than making use of the department or
plant level for assembling costs (Williams, 2014). The ABC method of costing offers the
managers with the an appropriate and informative products costs resulting in improved
product profitability measurement for better strategic planning relating to product line, price,
customer market and capital expenditure. The ABC method of costing provides the managers
with easy access to relevant costs for making decisions and maintaining competitive position
in the market.
Despite the benefits there are certain arguments against the ABC costing concerning
the area of costs allocation. In spite of the availability of the data there are some costs that
need requires departmental allocations and product allocation in respect to arbitration volume
that is measures by discovering the particular activity (Schaltegger & Burritt, 2017). This
leads to cost occurrence that might not at times be considered feasible.
The development of ABC system of costing is time consuming and usually requires
more than a year for application. As the ABC system of costing produces large quantity of
information thee are circumstances where certain information could provide misleading
results to management and may force managers in concentrating on incorrect data (Scott,
2015). In spite of facing criticism ABC method of costing is view as more product oriented
and provides managers with easy recognition of relevant business costs for decision making
in order to remain more competitive. The ABC based costing can viewed as an improvement
over the traditional system of costing.

11COST ACCOUNTING
Answer to question 10:
Direct Method:
Partic
ulars
Material
and
Labour
Perce
ntage
Total of
Production
Department
Indirec
t Costs
Perce
ntage
Total of
Production
Department
P1 2,00,000
53.33
%
93.33%
90,000
48.91
%
86.96%P2 1,50,000
40.00
% 70,000
38.04
%
S1 10,000 2.67% 6,000 3.26%
S2 15,000 4.00% 18,000 9.78%
Total 3,75,000
1,84,00
0
Apportionment of Cost:
Partic
ulars
Material
and Labour
Allocation from
Service Department
Indirect
Costs
Allocation from
Service Department
Tota
l
P1 2,00,000 43,750 90,000 42,667
3,76,
417
P2 1,50,000 58,333 70,000 54,857
3,33,
190
Step Method:
Particulars P1 P2 S1 S2
Material and labour 60,000 45,000 20,000 25,000
Total 60,000 45,000 20,000 25,000
Add: Apportionment of S2
department 12,000 9,000 4,000
Total 72,000 54,000 24,000
Add: Apportionment of S1
department 13,714 10,286
Total 85,714 64,286
Reciprocal method of overhead Allocation
S1 S2 P1 P2
Indirect Manufacturing Expenses 20000 25000
Allocation of S1 24000 4800 14400 4800
Allocation of S2 2214 26760 9366 13380

12COST ACCOUNTING
Total cost allocated to each P1 and P2 23766 18180
Equation
S1 = 20000 + 0.20 = x ≈
S2 = 25000 + 0.10 24000
S1 = 20000+0.20 * (38000+0.10)
S2 = 25000+0.10 * (17600.02) 27500

13COST ACCOUNTING
Reference List:
Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit
analysis: concepts and practice. Cambridge University Press.
Eldenburg, L. G., Wolcott, S. K., Chen, L. H., & Cook, G. (2016). Cost management:
Measuring, monitoring, and motivating performance. Wiley Global Education.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Lanen, W. (2016). Fundamentals of cost accounting. McGraw-Hill Higher Education.
Macve, R. (2015). A Conceptual Framework for Financial Accounting and Reporting:
Vision, Tool, Or Threat?. Routledge.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, 45-62.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.