Project Report: Management Accounting Analysis for BBQ and Balloons

This project report analyzes the financial performance of a BBQ and Balloons business through the lens of management accounting principles. The report begins with an introduction to management accounting and its role in organizational decision-making, followed by an income statement analysis of the business. The report then delves into labor cost calculations, activity-based costing, and variance analysis to assess the profitability and efficiency of the business. The analysis includes calculations of labor costs per unit, activity rates, and net customer margins for both barbecues and balloons. The report also addresses qualitative aspects, such as the division of income among partners and the strategic implications of selling balloons. Furthermore, it covers planning budgets and variance analysis for material costs. The report concludes with references to relevant academic sources, providing a comprehensive overview of management accounting concepts applied to a real-world business scenario.

Running Head: Management Accounting
1
Project Report: Management Accounting

Management Accounting
2
Contents
Introduction.......................................................................................................................3
Que 1.................................................................................................................................3
Que 2.................................................................................................................................4
Que 3.................................................................................................................................5
Que 4.................................................................................................................................6
Que 5.................................................................................................................................7
Que 6.................................................................................................................................9
References.......................................................................................................................11

Management Accounting
3
Introduction:
Management accounting is a type of accounting which is used by the organizations to
manage all the financial data of the business and present it in such a way that organization
and all of its stakeholders could reach over a decision and conclusion about the performance
of the organization. It basically deals with various provisions of accenting to record and
present the accounting information to aware the stakeholders. It takes the concern over all the
accounting nature activities of an organization. It identifies and tracks all the controlling and
performance measures of the business to take proper decision. In other words, it is a set of
financial and non financial decisions which are made in an organization to deal with
information processed by an organization or the managers of the organization.
Here, a case study of 4 friends has been studied to identify the concept of
management accounting and make a proper understanding of those concepts. It involves
income statement to variance analysis study.
Que 1:
Below is the income statement of BBQ and Balloons:
Income Statement
for the year ending
Particulars Units Price Total
Barbecue Sales 2000 $ 2.00 $ 4,000
Balloon Sales 1000 $ 1.00 $ 1,000
Total sales $ 5,000
Cost of stock
Barbecue 2000 $ 0.25 $ 500
Balloon 1000 $ 0.03 $ 30
Gross Profit (Total sales - cost of sales) $ 4,470
Less: Expenses
Remuneration $ 1,600
Leasing BBQ $ 200
Balloon Pump $ 50
Sales and administrative $ 50
Permit expenses $ 250
Total Expenses $ 2,150
Net profit (Gross profit - Total $ 2,320

Management Accounting
4
expenses)
The above table represents that the total net profits earned by the company in an
accounting period is $ 2320.
Que 2:
Part a:
Calculation of labor cost per person and total labor cost:
Particulars
Activity
measures John Paul Ringo
Georg
e Total
Operating
BBQ
Number of
barbeques
sold
$
300,000.00
$
100,00
0.00
$
40,000
.00
$
-
$
400,00
0
Inflating
balloons
Number of
balloons
$
5,000.00
$
37,500.
00
$
15,000
.00
$
10,000
.00
$
50,000
Cashier
Number of
balloons and
barbeques
$
250.00
$
-
$
2,500.
00
$
250.00
$
5,000
Greeting
customers
Number of
balloons and
barbeques
$
500.00
$
-
$
500.00
$
3,750.
00
$
5,000
Total labour
costs
$
305,750.00
$
137,50
0.00
$
58,000
.00
$
14,000
.00
Total labour
costs per unit
$
1,223.00
$
550.00
$
193.33
$
46.67
The above table represents the total labor cost per unit of all the four partners of the
business.
Part b:
Activity rate of each labor cost:
Particulars Activity measures John Paul Ringo
Georg
e Total
Operating
BBQ
Number of
barbeques sold
$
300,000.00
$
100,000
.00
$
40,000
.00
$
-
$
400,00
0
Inflating
balloons Number of balloons
$
5,000.00
$
37,500.
00
$
15,000
.00
$
10,000
.00
$
50,000

Management Accounting
5
Cashier
Number of balloons
and barbeques
$
250.00
$
-
$
2,500.
00
$
250.00
$
5,000
Greeting
customers
Number of balloons
and barbeques
$
500.00
$
-
$
500.00
$
3,750.
00
$
5,000
Total labour
costs
$
305,750.00
$
137,500
.00
$
58,000
.00
$
14,000
.00
Total labour
costs per unit
$
1,223.00
$
550.00
$
193.33
$
46.67
Activity rate
$
152.88
$
68.75
$
58.00
$
14.00
Part c:
Activity based costing profit margin:
Sales margin Barbeques & Balloons
Selling units 3000
Selling price 3
Sales volume $ 9,000.00
Costs:
Cost of stock $ 530.00
Leasing $ 200.00
Remuneration $ 1,600.00
Balloon Pump $ 50.00
Sales and administrative $ 50.00
Permit expenses $ 250.00
Net customer margin $ 6,320.00
The above table represents the total net profit margin of company which is $ 6320.
Que 3:
Activity based costing for the sales of barbecues:
Barbeques
Selling units 2000
Selling price 2
Sales price $ 4,000.00

Management Accounting
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Costs:
Cost of stock $ 500.00
Leasing $ 200.00
Remuneration $ 800.00
Balloon Pump
Sales and administrative $ 25.00
Permit expenses $ 125.00
Net customer margin $ 2,350.00
Activity based costing for the sales of balloons:
Balloons
Selling units 1000
Selling price 1
Sales price $ 1,000.00
Costs:
Cost of stock $ 30.00
Remuneration $ 800.00
Balloon Pump $ 50.00
Sales and administrative $ 25.00
Permit expenses $ 125.00
Net customer margin $ (30.00)
Que 4:
Part A:
According to the Paul’s opinion, the income must be divided on the basis of hard
work instead of the entire work done by all the partners. The given statement by Paul is not
justified as the work has been divided by all 4 of them according to their capability and the
understanding. Now, deviation of the income because of the hard work is not at all justified.
Also, the hard work contains in managing the cashier counter and the greeting the customers
as it also ask for lot of efforts and the capability to face new people every day. Further, they
work as marketing people of the company because of which there is sale of barbecue and
balloons (Weygandt, Kimmel and Kieso, 2018). Hence, the contributions of all the 4 partners
are equal in the business and it leads to the conclusion that the profit must be dividend
equally in all the partners.

Management Accounting
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Part B:
Ringo has given a statement about not to start the balloons business. At some part, the
statement of Ringo is correct as the main business of the company was to sell the barbecue
instead of the balloons. Also, the calculations describe that the balloons business is in loss.
However, balloons are a good strategy part to attract the customers towards the business. It
helps the other product of the business to sell faster. The company has decided to incorporate
the balloons business by evaluating the market to help the business overall. So, it concludes
that selling the balloon in the business was not worst decision (Palmatier, 2018). It has been
used by the business to create a base and attract the customers to buy the products from the
business. It would help the business to grab the niche market.
Part C:
An evaluation has been done over the qualities of intangible employees on the basis of
subjective nature. A subjective nature evaluation helps the management and all the other
stakeholders to identify the clear picture of employee’s performance and the changes which
can be done by the management to motivate and explore the employees. However, it could
also lead the management towards risk. According to the case study, assessing the activities
of an employee should be started at the beginning of the business. Below are the few steps
which could be followed by the business:
 At the time of low flexibility, subjective evaluation could be used to identify the
employee performance in an organization.
 The main issue with the subjectivity evaluation is supervisory issues and dishonest
assessment over the performance (Williams and Dobelman, 2017).
 Subjectivity measurements only define about few terms and performance of
employees. It don’t take concern over the entire performance of the company.
Que 5:
Part A:
Planning budget:
Actual Budgeted
Particulars
Un
its Price
Actual
results
Un
its Price Value
Varian
ce
Sales 300 $ $ 400 $ $ $

Management Accounting
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0 1.65 4,950.00 0 1.65
6,600.0
0
1,650.0
0
Cost of goods sold
Direct materials
$
0.16
$
475.00
$
0.16
$
633.33
$
158.33
Direct labour
$
0.53
$
1,600.00
$
0.53
$
2,133.3
3
$
533.33
Manufacturing overhead
$
0.08
$
240.00
$
0.08
$
320.00
$
80.00
Gross Margin
$
2,635.00
$
3,513.3
3
$
878.33
Selling and
administrative expenses:
Lease of Gazebo
$
0.02
$
50.00
$
0.02
$
66.67
$
16.67
Stand permit
$
0.08
$
250.00
$
0.08
$
333.33
$
83.33
Net operating income
$
2,335.00
$
3,913.3
3
$
1,578.3
3
Part B:
Comparison of planning budget:
According to the above table, it has been compared that the net sales units of the
business has been increased to 4000 units whereas earlier the total sales unit of the business
were 3000 units. The budget planning is a method which is used by the big organizations or
the individuals to evaluate the total revenues and expenses on the basis of the changes, cash
inflows and cash outflows of the project or other activities of the business.
The main goal of the budgeting is to record all the necessary aspects of the business to
identify the future strategies and goals of the business. The proper planning of budgeting
needs a proper process to identify the variances and the reasons behind these variances. The
above table represents that the actual operating income of the company is $ 2335. However,
the budgeted net operating income of the business would be $ 3913.33 (Schroeder, Clark and
Cathey, 2019). The rise in net income has been seen due to the increase in the net units of the
sales.

Management Accounting
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Part C:
The table represents that there is a big difference in the net operating income of the
business. The reasons behind these differences are changes in the total units of the company.
Blaming person:
Moreover, if there is difference in the actual and the planning budget of an
organization then the ultimate responsibility of these differences is of management. The
accountants who prepare the planning budget should be aware about all the activities and
changes in the business so that a proper budget could be prepared (Robinson, Henry, Pirie
and Broihahn, 2015). If any difference is occurred because of the proper research than the
planning budget preparer could be at fault. The overall responsibility lies at the hand of
management and the accountant.
Que 6:
Part A:
Variances of BBQ:
Particulars BBQ
Material Price variance
Standard quantity (SQ) 2000
Standard price (SP) $ 450.0
Actual Price (AP) $ 500.0
Actual Quantity (AQ) 2075
Quantity Variance
(AC-SC)*AQ $103,750
Price variance
(AQ-SQ)*SP $ 33,750
Total variance
Price variance + Quantity Variance $137,500
Part B:
Variance of balloons:

Management Accounting
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Particulars Balloons
Material Price variance
Standard quantity (SQ) 1000
Standard price (SP) $ 25.0
Actual Price (AP) $ 30.0
Actual Quantity (AQ) 1050
Quantity Variance
(AC-SC)*AQ $ 5,250
Price variance
(AQ-SQ)*SP $ 1,250
Total variance
Price variance + Quantity Variance $ 6,500

Management Accounting
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References:
Palmatier, R.W., (2018)Advancing marketing strategy research.John Wiley & Sons United
States.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A. (2015) International financial
statement analysis.New York: John Wiley & Sons.
Schroeder, R.G., Clark, M.W. and Cathey, J.M. (2019) Financial accounting theory and
analysis: text and cases. New York: John Wiley & Sons.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., (2018) Financial and Managerial
Accounting, Loose-leaf Print Companion. John Wiley & Sons.
Williams, E.E. and Dobelman, J.A. (2017)Financial statement analysis. World Scientific Book
Chapters, pp.109-169.