ACC203 - Exhibition Furniture: Management Accounting Case Study

This assignment provides a detailed solution to a management accounting case study involving Exhibition Furniture, a desk manufacturer. It includes a revenue budget, production budget, direct material usage and purchase budget, direct manufacturing labor budget, manufacturing overhead budget, overhead rate and cost per unit calculations, ending inventory budgets, cost of goods sold budget, budgeted income statement, and budgeted balance sheet. The assignment also features a memorandum discussing improvements in the budgeting process, such as flexible budgeting, variance analysis, and quarterly budgeting. The analysis covers material usage, cost control, and financial planning, aiming to enhance the firm's profitability. Desklib offers this document to aid students, providing access to past papers and solved assignments for effective study.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student
Name of the University
Authors Note
Course ID

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to Part 1:........................................................................................................................2
Answer To A:.............................................................................................................................2
Answer To B:.............................................................................................................................2
Answer To C:.............................................................................................................................2
Answer To D:.............................................................................................................................3
Answer To E:.............................................................................................................................3
Answer To F:..............................................................................................................................4
Answer To G:.............................................................................................................................4
Answer To H:.............................................................................................................................4
Answer To I:..............................................................................................................................5
Answer To J:..............................................................................................................................5
Answer To K:.............................................................................................................................6
Answer To L:.............................................................................................................................6
Answer to Part 2:........................................................................................................................8
References:...............................................................................................................................10

2MANAGEMENT ACCOUNTING
Answer to Part 1:
Answer To A:
Revenue Budget for 2018:
Particulars Amount
Projected Sales Volume (in units) 2000
Estimated Retail Price $ 800
Budgeted Sales Revenue $ 16,00,000
Answer To B:
Production Budget (in units) for 2018:
Particulars Amount
Projected Sales Volume 2000
Add: Closing Finished Goods Inventory 300
2300
Less: Opening Finished Goods Inventory 200
Budgeted Production Volume 2100
Answer To C:
Direct Material Usage & Purchase Budget:
Particulars Amount
Oak Tops:
Production Volume 2100
Material Requirement per desk (sq.cm.) 3
Total Oak Tops Usage (sq.cm.) 6300
Add: Closing Oak Top Inventory 24
6324
Less: Opening Oak Top Inventory 40
Budgeted Purchase Volume of Oak Top (in sq.cm.) 6284
Unit Price $ 120

3MANAGEMENT ACCOUNTING
Budgeted Purchase of Oak Tops $ 7,54,080
Oak Legs:
Production Volume 2100
Material Requirement per desk (in units) 4
Total Oak Legs Usage (in units) 8400
Add: Closing Oak Legs Inventory 80
8480
Less: Opening Oak Legs Inventory 100
Budgeted Purchase Volume of Oak Legs (in units) 8380
Unit Price $ 7
Budgeted Purchase of Oak Tops $ 58,660
Total Budgeted Purchase $ 8,12,740
Answer To D:
Direct Manufacturing Labour Budget:
Particulars Amount
Budgeted Production Volume 2100
Direct Manufacturing Labour hours per desk 3
Total Manufacturing Labour Hours 6300
Labour Cost per hour $ 55.00
Total Direct Labour Cost $ 3,46,500
Answer To E:
Manufacturing Overhead Budget:
Particulars Amount
Total Manufacturing Labour Hour 6300
Variable Manufacturing Overhead Rate $ 20
Total Variable Manufacturing Overhead $ 1,26,000
Fixed Manufacturing Overhead $ 50,000
Budgeted Manufacturing Overhead $ 1,76,000

4MANAGEMENT ACCOUNTING
Answer To F:
Manufacturing Overhead Rate:
Particulars Amount
Budgeted Manufacturing Overhead $ 1,76,000
Total Manufacturing Labour Hour 6300
Budgeted Manufacturing Overhead Rate $ 27.94
Answer To G:
Manufacturing Overhead Cost per Unit:
Particulars Amount
Budgeted Manufacturing Overhead $ 1,76,000
Total Production Volume 2100
Budgeted Manufacturing Overhead Cost per unit $ 83.81
Answer To H:
Unit Cost of Closing Inventory:
Particulars Amount
Direct Material per unit:
Oak Top $ 360
Oak Leg $ 28
Total Direct Material Cost per unit $ 388
Direct Labour Cost per unit $ 165
Manufacturing Overhead Cost per unit $ 84
Unit Cost of Closing Inventory $ 636.81
Answer To I:
Ending Inventory Budget for Direct Materials:
Particulars Unit Rate Amount

5MANAGEMENT ACCOUNTING
Oak Top (in sq.mtrs.) 24 $ 120 $ 2,880
Oak Leg (in nos.) 80 $ 7 $ 560
Total Ending Inventory for Direct Material $ 3,440
Ending Inventory Budget for Finished Goods:
Particulars Amount
Finished Goods in units 300
Unit Cost of Closing Inventory $ 636.81
Total Ending Inventory for Finished Goods $ 1,91,043
Answer To J:
Cost of Goods Sold Budget:
Particulars Units Rate Amount
Direct Material:
Purchase of Oak Top (in sq.cm.) 6284 $ 120.00 $ 7,54,080
Purchase of Oak Legs (in nos.) 8380 $ 7.00 $ 58,660
Total Direct Materials Purchased $ 8,12,740
Add: Opening Stock of Direct Material:
Oak Top (in sq.cm.) 40 $ 100.00 $ 4,000
Oak Legs (in nos.) 100 $ 5.00 $ 500
$ 8,17,240
Less: Closing Stock of Direct Material:
Oak Top (in sq.cm.) 24 $ 120.00 $ 2,880
Oak Legs (in nos.) 80 $ 7.00 $ 560
Direct Material Consumed $ 8,13,800
Direct Labour Cost (In hours) 6300 $ 55.00 $ 3,46,500
PRIME COST $ 11,60,300
Manufacturing overhead 2100 $ 83.81 $ 1,76,000
COST OF GOODS MANUFACTURED $ 13,36,300
Add: Opening stock of Finished Stock $ 4,000
Less: Closing Stock of Finished Stock $ 1,91,043
COST OF GOODS SOLD $ 11,49,257

6MANAGEMENT ACCOUNTING
Answer To K:
Budgeted Income Statement:
Particulars Amount
Total Sales Revenue $ 16,00,000
Cost of Goods Sold ($ 11,49,257)
Gross Profit $ 4,50,743
Variable Marketing Cost ($ 2,000)
Fixed Marketing Cost ($ 10,000)
Net Profit for the period $ 4,38,743
Answer To L:
Budgeted Balance Sheet:
Particulars Amount
Current Assets:
Cash $ 20,000
Direct Material Inventory $ 3,440
Finished Goods Inventory $ 1,91,043
TOTAL CURRENT ASSETS $ 2,14,483
Non-Current Assets:
Property, Plant & Equipment (net) $ 5,50,000
TOTAL NON-CURRENT ASSETS $ 5,50,000
TOTAL ASSETS $ 7,64,483
Current Liabilities $ 30,000
Non-Current Liabilities $ 59,340
TOTAL LIABILITIES $ 89,340
NET ASSETS $ 6,75,143
Equity:
Shareholders' Equity $ 6,50,000

7MANAGEMENT ACCOUNTING
Budgeted Profit $ 4,38,743
Retained Earnings ($ 4,13,600)
TOTAL EQUITY CAPITAL $ 6,75,143

8MANAGEMENT ACCOUNTING
Answer to Part 2:
Memorandum:
To: CEO of Exhibition Furniture
From: ABC Consultant
Date: 6th February 2018
Subject: Improvement in Budgeting Process
The constant improvement that can be undertaken into the budgeting process. The
direct materials can be improved either in the areas of usage and price. It is recommended
that the budgeted usage amounts can be associated with the maximum improvement in the
current usage less minimum possible image for 1 square meter for either of the desk.
Additionally, the usage in variable cost environment can be made with respect to the flexible
budget (Eldenburg et al., 2016). The flexible budget could be particularly useful for the
business where the cost could be closely aligned with the degree of business activity. As a
result of this the retail environment where the overhead can be segregated and could be
treated as the fixed cost whereas the cost of oak tops and oak legs can be directly linked with
the revenues.
An important recommendations relating to the variance analysis could turn out to be
important in assisting the management of the Exhibition Finance by controlling the budgeted
costs and the actual costs (Kamal, 2015). The tool of budgeting applied to the financial and
operational data would help the CEO in identifying and determining the major cause of
variance. The application of variance budget would assist in maintaining the controlling the
project expenditure by observing planned costs against the actual costs.

9MANAGEMENT ACCOUNTING
An important considerations relating to the budget variance is that the quantitative
investigation of the difference between the original and planned behaviour (Lanen, 2016).
The variance budget could be implemented by the business to control the business cost.
Another alternative that could be recommended to the Exhibition furniture is setting up the
quarterly budget which could assist in creating the financial plan for the business. This would
enable the CEO of the Exhibition Furniture to witness any trouble in the horizon and would
provide the framework for assessing the performance of the organization. Having the
quarterly budget would principally assist in serving the written financial plan in the operation
of the business (Schaltegger & Zvezdov, 2015).
The preparation of the quarterly budget would force the manager in thinking about
and planning the future at the set times all thorough out the year (Salako & Yusuf, 2016).
Additionally, with the passage of every quarter both the actual performance and the budgeted
performance can be compared. On noticing that the company is performing well, the CEO
will be able to witness the opportunity to periodically assess the financial success. Preparing
the quarterly budget would enable the management of the CEO to reduce cost according to
the product needs and better the suit the profits that is budgeted by the firm. With the increase
in the degree of detail in the budget, there could be a better opportunity for conducting the
more detailed analysis.
Conclusively, the recommendations that is stated able would assist the CEO of
Exhibition Furniture in identifying the unnecessary cost and undertaking the above-
recommended alternative to better enhance the profitability of the firm.
Thank You
From ABC Consultant.

10MANAGEMENT ACCOUNTING
References:
Eldenburg, L. G., Wolcott, S. K., Chen, L. H., & Cook, G. (2016). Cost management:
Measuring, monitoring, and motivating performance. Wiley Global Education.
Kamal, S. (2015). Historical Evolution of Management Accounting. The Cost and
Management, 43(4), 12-19.
Lanen, W. (2016). Fundamentals of cost accounting. McGraw-Hill Higher Education.
Salako, M. A., & Yusuf, S. A. (2016). Cost accounting: A pivotal factor of entrepreneurial
success.
Schaltegger, S., & Zvezdov, D. (2015). Expanding material flow cost accounting.
Framework, review and potentials. Journal of Cleaner Production, 108, 1333-1341.