University Assignment: Management Accounting Information - FNSACC507

This document presents a comprehensive solution to a management accounting assignment, addressing key concepts and practical applications. The assignment covers various aspects of management accounting, including the role of management accounting, differences between direct and indirect costs, fixed and variable costs, prime and conversion costs, product and period costs, and organizational policies for costing systems. It also delves into budget preparation principles and variance analysis. The solution includes calculations for prime cost, conversion cost, and production cost, along with journal entries for wage distribution and overhead application rates using flexible budgeting. The document incorporates references to academic sources to support the analysis and provide a deeper understanding of the subject matter.

Running head: PROVIDE MANAGEMENT ACCOUNTING INFORMATION
FNSACC507 Provide Management Accounting Information
Name of the Student:
Name of the University:
Authors Note:

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
Table of Contents
Task Description:.......................................................................................................................2
Answer 1:...................................................................................................................................2
Answer 2:...................................................................................................................................2
Answer 3:...................................................................................................................................3
Answer 4:...................................................................................................................................3
Answer 5:...................................................................................................................................3
Answer 6:...................................................................................................................................4
Answer 7:...................................................................................................................................4
Answer 8:...................................................................................................................................5
Activity 1:...................................................................................................................................5
Activity 2:...................................................................................................................................6
a. Preparing the general journal entry for the distribution of the gross wages:.........................6
b. Preparing the entries in general journal form to record the gross factory pay for the month
and the payment for net pay:......................................................................................................6
Activity 3:...................................................................................................................................6
a. Prepare a flexible budget for 3500 and 4000 machine hours:................................................6
b. Calculate the overhead application rate for fixed and variable costs:....................................7
References and Bibliography:....................................................................................................8

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
Task Description:
Answer 1:
Management accounting mainly comprises of reports such as balance sheet, cash flow
statement and profit & loss statement, which help in providing all the relevant information
regarding the organization and its financial conditions to the stakeholders.
The three examples of information that management accounting provides are balance
sheet, cash flow statement and profit & loss statement.
The key management accounting information requirements is to adequately plan and
formulate the future policies, which can help in interpreting development financial
information of the company. The companies require to provide all the relevant information
while preparing the financial statements, as the investors reply on the information to make
investment decisions (Ismail and King 2014).
Answer 2:
There are differences between the direct and indirect cost, which can be analyzed on
the diverse aspect that are depicted as follows.
 Direct cost is the overall expenses that can be identified easily as per the cost objectives.
On the other hand, indirect costs are expenses that are not easily identified as per the cost
of objective.
 Direct cost has a particular cost object why indirect cost has multiple cost objects.
 Direct cost can also be identified as the variable cost incurred by the organization, why
indirect cost are mainly considered as fixed cost.

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
One of the examples that can identify the difference between direct and indirect costs
are the attributable expenses such as direct materials, direct labor and direct wages that
comprises of direct cost. On the other hand, indirect expenses examples are rent,
advertisement and office expenses.
Answer 3:
The difference between the fixed cost and variable cost that is incurred by the
organization on daily basis. Fixed cost is development expenses that are conducted by the
organization, which does not vary with the changes in the overall production units. On the
other hand, value of variable cost relevantly changes with the alteration in the production
units. Moreover, fixed cost is definite and will incur regardless of the overall operational
conditions of the organization. However, variable cost is not definite, as it directly alters with
the relevant changes in production conditions of the company. The major examples of fixed
cost are rent, salaries, lease, insurance, and interest payments, while variable expenses are
direct labor, direct materials, freight out, commission and production supplies (Otley 2016).
Answer 4:
The prime cost is considered to be the overall expenses that is incurred by the
organization on direct materials and direct labor. On the other hand, conversion costs include
both direct labor and overhead expenses that is incurred by the organization while
transferring the raw materials into finished goods.
Answer 5:
The distinction between product cost and period cost is important as it allows the
organization to properly measure the overall net income that has been conducted during the
time specified on the income statement. The product cost mainly comprises of the overall

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
expenses that is incurred producing the financial product. On the other hand, period cost is
the expenses that is conducted by the organization for producing and selling the products that
is not associated with manufacturing process. Product cost examples are direct materials,
direct labor, and allocated factory overhead. However, the examples of period cost are rent
office depreciation, office supplies and utilities.
Answer 6:
The two key features of the organizational policy and procedures that needs to be
applied to the costing systems of the organizations are physical control and segregation of
duties. Both the measures would eventually help in adequately improving the operational
conditions of the organization. The increment in physical control would adequately help in
protecting and restricting access to physical resources to outsiders, which would eventually
help in designing and adequate secure room that might help lock all the relevant data of the
organization. Furthermore, description of duties would eventually help in dividing
responsibilities and reduce the occurrence of fraudulent activities within the organization
(Rikhardsson 2017).
Answer 7:
The three key principles and practices of budget preparation are management support,
employee involvement and statement of organizational goals. The three principles would
eventually help the organization to improve their current operational conditions and secure
responsible accounting and sound accounting system within its vicinity. The improvement in
the current operational conditions of the organization is a key principle, as it would help in
reducing the overall costs and maximize the level of income from operations. Moreover, the
adoption of responsible accounting as the key principle would help project actual financial

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
performance of the company. The use of sound accounting system would only be used for
appropriately supporting the financial requirements of the organization.
Answer 8:
Variance analysis is adequately conducted for investigating the difference between the
planned behavior and the actual output generated by the organization. The analysis helps in
maintaining control over the business, which ensures system integrity within the company,
and performs certain functions without being degraded or impaired in the internal or external
environments.
Activity 1:
Particulars Value
Selling and Administration $66,000.00
Financial expenses $17,500.00
Period cost $83,500.00
Particulars Value
Direct labour $20,900.00
Direct Material $48,600.00
Prime cost $69,500.00
Particulars Value
Conversion cost $40,100.00
Factory Overhead $19,200.00
Direct labour $20,900.00
Particulars Value
Direct Material $48,600.00
Factory Overhead $19,200.00
Direct labour $20,900.00
Production cost $88,700.00

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
Activity 2:
a. Preparing the general journal entry for the distribution of the gross wages:
Particulars Amount Amount
Direct
Labour…....................Dr 49,300
Tax installment deductions 16,100
Health fund deductions 1,200
Payroll clearing 66,600
b. Preparing the entries in general journal form to record the gross factory pay for the
month and the payment for net pay:
Particulars Amount Amount
Payroll clearing….............Dr 66,600
Cash 66,600
Particulars Amount Amount
Labour
Control……………………..Dr 66,600
PAYG Tax withheld 16,100
Health fund 1,200
Accrued Payroll 49,300
Activity 3:
a. Prepare a flexible budget for 3500 and 4000 machine hours:
Units 3500
flexible budget
Fixed Variable
Depreciation of plant 10500
Indirect labor 27900
Repairs 0 14000
Insurance 8400
Factory supplies 0 7000
Electricity 5700 17500

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
Other overhead 3500
Total 52500 42000
Units 4000
flexible budget
Fixed Variable
Depreciation of plant 10500
Indirect labor 27900
Repairs 0 16000
Insurance 8400
Factory supplies 0 8000
Electricity 5700 20000
Other overhead 4000
Total 52500 48000
b. Calculate the overhead application rate for fixed and variable costs:
Particulars Fixed Variable
Total overhead cost 52,500.00 42,000.00
machine hours 3,500.00 3,500.00
Overhead application rate 15.00 12.00
Particulars Fixed Variable
Total overhead cost 52,500.00 48,000.00
machine hours 4,000.00 4,000.00
Overhead application rate 13.13 12.00

PROVIDE MANAGEMENT ACCOUNTING INFORMATION

PROVIDE MANAGEMENT ACCOUNTING INFORMATION
References and Bibliography:
Bhimani, A. and Willcocks, L., 2014. Digitisation,‘Big Data’and the transformation of
accounting information. Accounting and Business Research, 44(4), pp.469-490.
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(7-8), pp.414-428.
Ismail, N.A. and King, M., 2014. Factors influencing the alignment of accounting
information systems in small and medium sized Malaysian manufacturing firms. Journal of
Information Systems and Small Business, 1(1-2), pp.1-20.
Lavia López, O. and 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), pp.81-119.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Rikhardsson, P.M., 2017. Information systems for corporate environmental management
accounting and performance measurement. In Sustainable Measures (pp. 132-150).
Routledge.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.