Cost Accounting Report: Helpful Legal's Financial Performance Analysis

This cost accounting report analyzes the financial performance of Helpful Legal, comparing actual results with the budgeted figures for the year 2018. The report highlights key findings, including an increase in salary and employee benefit expenses, a significant rise in advertisement and promotion expenses, and an increase in budgeted profits. It also examines a decrease in bad debt expenses and an increase in net profit. The report further delves into variance analysis, specifically focusing on labor rate, labor cost, fixed overhead expenditure, sales value, and total sales margin variances. The analysis reveals favorable budget scenarios in revenue, gross margin, and net profit for the Brisbane office in 2017. The report utilizes financial data to provide a comprehensive overview of Helpful Legal's financial health and performance, offering valuable insights into the company's cost management and revenue generation strategies.

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 Part B........................................................................................................................2
Answer to Part D:.......................................................................................................................4
Answer to requirement A:..........................................................................................................4
Answer to requirement B:..........................................................................................................5
Reference List:...........................................................................................................................7

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Answer to Part B
The five crucial findings that have been extracted from comparing the actual performance
with the Budgeted result of Helpful Legal for the year 2018 have been discussed below in
brief.
1. Firstly, as per as the consolidated budget of 2018, it can be found that in the year 2017
the forecasted amount of expenses incurred on Salaries and Employee Benefit
Expenses in 2018 had increased to $72,566,000. Thus there is an increase in such
expenses by $17,510,000 which equals to 31.80%. Thus through this observation it
can be concluded the operating expenses of the firm is increased due to increase in
expenditure related to salary and employee benefit (Dudin et al. 2015). The company
should take appropriate steps to reduces the high escalation of expenses as this will
increase cost and reduce the competitive advantage of the company. In addition to
this, the increase in expenditure will reduce the profit of the organization. In the law
firm the cost related to the employment is the main component of cost so increase in
expenditure over the inflation rate can cause significant decline in profit.
2. Second of all in the year 2017 calculated revenues was nearly about $6,173,000 for
the advertisement and promotion expenses which forecasted as per as consolidated
budget of 2018 but now in the year 2018 there is a huge increase in such expenses
which amounts to $11,888,000 which is nearly about the double of the previous
amount of expenses. Thus from this observation it can be clearly stated that as far as
the effective advertisement is concerned there is an increase in 92.58% in amount of
expenses. Thus this a positive sign as it increases the revenues due to its important
and effective advertisement.

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3. Thirdly, in Contrast to the projected revenue of 2017 the budgeted profits in the year
2018 has been increased by nearly 37% that is from the amount $106,906,000 in the
year 2017 to $146,348,000.00 in the year 2018 (Callaghan et al. 2014). As the price
increases which in turn leads to increase in the inflation factor is about 3% this
indicated huge increase in revenue considering this factors. Thus from the above
observation it is clearly evident that the organization has done much better
performance in the year 2018 as compared to that of the year 2017.
4. Fourthly, as far as the consolidated budget of 2018 is concerned there is a decreased
in expenses in bad debt of the organization. As per the forecasted budget of 2017 was
$4,086,000 which has been decreased to $2,256,000 in the year 2018 which is a
positive sign. As the amount of expenses is decreased by $1,830,000 it clearly gives a
progressive impact on the organization (Fullerton et al. 2014). Moreover, from this
observation it can be concluded that there is about 45% decreased in the amount of
bad debt which suggests that the management in able to collect its fees proficiently in
the year 2018 than compared to that of the year 2017.
5. Lastly, associated to the forecast revenues of 2017 the budget of the net profit amount
to $17,915,000 which leads to the amount of $30,065,000 in the year 2018. As there is
the increased in the amount of net profit by $12,150,000 which is approximately equal
to 67.82% which is a good sign for the organization as it has been benefited in the
year 2018 than from the year 2017. It generally shows that the ability of the law firm
of using its resources in a positive manner that in turn leads to increase in the amount
of net profit for the firm (Bhimani et al. 2013).

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Answer to Part D:
Answer to requirement A:
1. Computation of Labour rate variance
Computation of Labour Rate Variance
Budgeted rate 160
Actual Rate 157
Actual Working Hours 200640
Labour Rate Variance = (Standard Rate -
Actual Rate) x Actual Hours 601920
(160 - 157) x 200640
2. Computation of labour cost variance
Computation of Labour Cost Variance
Budgeted Labour Cost Actual Labour Cost
1758240 1780000
Labour Cost Variance = Budgeted Cost - Actual Cost
-21760
3. Computation of Fixed Overhead Expenditure Variance Overhead
Fixed Overhead Expenditure Variance Overhead
Actual Fixed Overhead Budgeted Fixed Overhead
$530,000 $550,000
Actual Fixed Overhead - Budgeted Fixed Overhead
-20000
4. Computation of Sales Value Variance
Computation of Sales Value Variance

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Budgeted Sales Actual Sales
$29,304,000 $31,500,480
Budgeted sales - Actual Sales
-2196480
5. Computation of Total Sales Margin Variance
Computation of Total Sales Margin Variance
Budgeted Profit Actual Profit
74,59,760 82,14,480
Budgeted Profit - Actual Profit
-754720
Answer to requirement B:
The analysis performed above there are three key reasons for the performance of the
Brisbane office performance of 2017 are as follows;
a. The revenue that has been derived for the year 2017 stands 31,500,480 while the
budgeted revenue for the same year has been forecasted to be 29,304,000. The actual
revenue derived by the Helpful Legal Brisbane Office represents a favourable
budgeting situation (Drury 2013).
b. Another performance metrics that has been measured in this regard is the actual gross
margin generated by the Helpful Legal with the budgeted gross margin. The actual
gross margin stood 8,777,480 while the projected gross margin represented an amount
of 8,009,760. An assertion can be bought forward that the gross margin represented a
favourable budgeting scenario (Deegan 2013).
c. Additionally, the third parameter that has been considered to measure the performance
of Helpful Legal for the year 2017 is the net profit generated by it. The net profit for
the budgeted period represented a sum of 7,459,760 while the actual performance
represented a favourable scenario with net profit standing approximately 8,214,480.

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Reference List:
Bhimani, A., Horngren, C.T., Sundem, G.L., Stratton, W.O. and Schatzberg, J.,
2013. Introduction to management accounting. Pearson Higher Ed.
Callaghan, S., Hawke, K. and Mignerey, C., 2014. Five myths (and realities) about zero-
based budgeting. McKinsey & Company, p.2.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Dudin, M.N., Kucuri, G.N., Fedorova, I.J.E., Dzusova, S.S. and Namitulina, A.Z., 2015. The
innovative business model canvas in the system of effective budgeting.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting
practices. Journal of Operations Management, 32(7), pp.414-428.