University of Sunderland: Management Accounting Assignment - UGB106

This document presents a comprehensive solution to an Introduction to Management Accounting assignment, focusing on practical applications and numerical problems. The assignment covers key concepts such as cash budgeting, break-even analysis, and variance analysis. Question 1 analyzes Woodrock Limited's cash flow through the preparation of a cash budget and provides recommendations for improvement. It also examines behavioral aspects of budgeting. Question 2 focuses on Plaistead Plc, calculating contribution per unit, break-even points, margin of safety, and profit projections under various scenarios, including a new marketing strategy. The solution also includes a discussion of the assumptions underlying the break-even model. Question 4 addresses standard costing, its purposes, key values, and limitations, linked with the application of variance analysis, providing a columnar statement. The assignment aims to help students understand the importance of management accounting in business decision-making.

Introduction
to Management
Accounting

Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Question 1: Woodrock Limited...................................................................................................4
a. Preparation of cash budget:.....................................................................................................4
b. Comment on the cash position within the business, analyzing what Woodrock Limited
could do to improve cash flow:...................................................................................................8
c. Critically examine those issues of relevance in behavioral aspects of behavioral aspects of
budgeting which may lead to problems in a business entity.......................................................8
Question 2: Plaistead Plc.................................................................................................................9
a. Calculation of contribution per unit.........................................................................................9
b. Calculation of break-even point and margin of safety...........................................................11
c. Calculation of profit at 48000 tables at £13 per shelf............................................................12
d. If Plaistead require £90,000 profit, how much electric kettles should they require to make
and sell, if the selling price is £13 per electric kettle?...............................................................13
e. Price should Plaistead Plc to sell 53,000 electric kettles for making profit of £90,000:.......13
f. New Strategy:.........................................................................................................................14
g. Briefly discuss the underpinning assumptions attached to the break-even model:...............15
Question 4: Jayrod Plc...................................................................................................................16
Columnar statement:..................................................................................................................16
Purposes of standard costing, its key values and limitations linked with application of variance
analysis:.....................................................................................................................................17
CONCLUSION..............................................................................................................................19

INTRODUCTION
Management accounting framework is vital to the activity of production businesses as it
includes the expense details essential for decision-making. This covers all the major aspects of
accounting as well as managerial process to enable an organization to operate effectively.
Management accounting is way to acquire prepared management analyses and documents that
provide directors with reliable and timely financial and observable details to create a current
moment and long-term decisions. It recognizes, tracks, breaks down, integrates, and transmits
knowledge to enable an organization to achieve its goals (Ax and Greve, 2017). MA varies from
budgetary record keeping. Although monetary bookkeeping offers information to individuals
within the organization and, more specifically, to people outside the organization, MA is often
used to assist managers inside the organization with practical governance. The study covers
various vital aspects of managerial accounting through practical and numerical tasks which help
managers in assessing actual position and generate information for decision making.
MAIN BODY
Question 1: Woodrock Limited
a. Preparation of cash budget:
Desk Cabinet
Selling Price (£) 30 50
Materials (£) 10 12
Labour Hours
(Minutes)6
30 40
Forecast Demand
Month
1 700 400
2 500 300
3 600 350

4 800 400
5 1000 650
6 1100 800
Rent 12000 for
first six
month
Lease Cost 2500 per
month
Marketing and advertising
costs
8000
Manager's Salary 3000 p.m.
Insurance 4000
Labor rate 12 per hour

Month 1 Month
2
Month 3 Month 4 Month 5 Month 6
Desk
Demand
700 500 600 800 1000 1100
Cabinet
Demand
400 300 350 400 650 800
Labor Hour Worked
Desk 350 250 300 400 500 550
Cabinet 266.6667 200 233.3333 266.666
7
433.3333 533.3333
Sales (demand * sales per
unit)
Desk 21000 15000 18000 24000 30000 33000
Cabinet 20000 15000 17500 20000 32500 40000
Material Purchases (Sales * Material
purchase rate)
Desk 7000 5000 6000 8000 10000 11000
Cabinet 4800 3600 4200 4800 7800 9600
Cash Budget:
Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Cash Sales Receipts:
Desk 21000 15000 18000
Cabinet 20000 15000 17500
Cash Payments:
Material Purchases

Desk 7000 5000 6000 8000
Cabinet 4800 3600 4200 4800
Labor Wages @ 12 7400 5400 6400 8000 11200 13000
Rent 12000
Lease 2500 2500 2500 2500 2500 2500
Marketing and advertising
costs
2000 2000 2000 2000
Manager Salary 3000 3000 3000 3000 3000 3000
Insurance 4000
Net Cash Flows -30900 -12900 -25700 16900 3100 4200

b. Comment on the cash position within the business, analyzing what Woodrock Limited could
do to improve cash flow:
Due 90 days credit sales of will be collected from debtor after 90 days and supplies have
provided 60 days credits so payments are made after 90 days. Due to Rent and insurance in first
month there is higher cash outflows. However, cash outflow level has been declined to 12900 in
next month. In month 3 there is also payments to suppliers made for purchased made in first
month. Due to increased sale and decline in cash expenses there is positive increased cash inflow
in month 4 which changed to be changed to 3100 and 4200 based on fluctuation in sales units.
Overall trend in cash budget is incremental except in month 4.
c. Critically examine those issues of relevance in behavioral aspects of behavioral aspects of
budgeting which may lead to problems in a business entity.
Here are certain issues relating to relevance of behavioral aspects of budgeting as listed below:
 Budgeting is focused on a series of suppositions that also, in particular, not far
from conditions of operation under which this has been established. If the market
environment shifts to some significant extent, then the sales or cost structures of the
organisation will shift so dramatically that immediate facts will quickly deviate
from expectations outlined in budget. Where there is sudden economic slump, this
position is a particular problem, as budget allows for certain level of expenditure which is
no longer actually bearable under suddenly lowered level of income/revenue.
 During budget formulation phase at ending of year, budgeting process mainly
emphasizes management's attention on policy. There's really no procedural dedication to
revisiting the plan for the remainder of year. Therefore, if there is paradigm switch
in market only after budget has been executed, there's no mechanism in effect to
systematically analyse the circumstance and undertake adjustments, putting a business at
a massive drawback with its more agile rivals (Ameen, Ahmed and Abd Hafez, 2018).
 Creating a budget could be time-consuming, particularly in an inadequately structured
setting where several versions of budget might be necessary. If there is well-designed
budgeting system in place, workers are used to process, and organisation employs
budgeting software, time needed is less. If business environment is

changing constantly, work required can be more substantial, which asks for frequent
incarnations of budget model.
 The essence of budget is numerical, so management emphasis appears to be focused
on quantitative dimensions of a company; this typically means concentrating on
enhancing or sustaining profitability. In fact, clients do not value about company's
profits-they will only purchase from corporation as longer as they receive quality service
and well-built items at a reasonable price. Unfortunately, this is quite challenging,
because they qualitative in essence, to incorporate these principles into budget. Therefore,
the idea of budgeting doesn't really inherently support client ’s needs (Langfield-Smith,
Thorne and Hilton, 2018).
Question 2: Plaistead Plc
These information are already given in situation:
Particulars Amount (£)
Selling price 13
Actual production units 70000
Budgeted production units 53000
Variable cost (per unit):
Materials 5.25
labour 2.95
Variable overheads 1.85
Fixed costs:
Production 59000
Selling 47600
a. Calculation of contribution per unit
Contribution for actual production units (£)
Particulars Amount (£)
Total units 70000

Total sales revenue 910000
Total variable costs (materials +labour + overhead) 703500
Contribution 206500
Contribution per unit 2.95
Contribution per unit = (Total sales revenue – Total variable costs) / total units
Contribution for budgeted production units (£)
Particulars Amount (£)
Total units 53000
Total sales revenue 689000
Total variable costs (material +labour + overhead) 532650
Contribution 156350
Contribution per unit 2.95
Interpretation: Contributions per unit is measured for both actual and budgeted units
provided in task, as shown in above tables. Overall units are provided, and the total revenue from
selling is measured applying units and the £13 sale price. Contribution is derived by subtracting
variable costs from total revenues. Contribution each unit is derived by splitting the overall
contribution into units sold.

b. Calculation of break-even point and margin of safety
Break-even point for actual production units (£)
Particulars Amount (£)
Fixed costs 106600
Sales price per unit 13
Variable cost per unit 10.05
Break-even point in units 36135
Break-even point in £ 469755
Break-even point for budgeted production units (£)
Particulars Amount (£)
Fixed costs 106600
Sales price per unit 13
Variable cost per unit 10.05
Break-even point in units 36135
Break-even point in £ 469755
Margin of safety for actual production units (£)
Actual sales 70000
Break-even point 36135
Margin of safety 33865

Margin of safety for budgeted production units (£)
Budgeted sales 53000
Break-even point 36135
Margin of safety 16865
Break-even point in units = Fixed costs / (sales price per unit – variable cost per unit)
Margin of safety = Actual sales – Break-even point
Interpretation: For both existing units as well as budget units, break-even level in
units produced. A summation of production including fixed costs would determine the overall
fixed costs. Then after accumulation of supplies, staff, including variable-overheads, variable
costs each unit arrives. Safety margin following break-even level is also measured.
c. Calculation of profit at 48000 tables at £13 per shelf
Profit = contribution – fixed costs
Calculation of profit at 53,000 electric kettles
Particulars Amount (£)
Sales revenue 689000
Less: Variable costs 532650
Contribution 156350
Less: fixed costs 106600
Profit 49750
Interpretation: When companies produce 53000 electric kettles, net profit amount is
calculated, which also results in a transition in sales revenues. In addition, there are variable
costs and contribution.