Management Accounting for Cost and Control Assignment Solution

This document presents a detailed solution to a management accounting assignment, addressing key concepts such as budgeting, cost control, product costing, and activity-based costing. The assignment covers various aspects, including the purposes of management accounting reports, the role of control in achieving organizational goals, and the application of different costing methods. It includes calculations, journal entries, and T-accounts related to labor costs, overhead allocation, and service department cost allocation using direct, step, and reciprocal methods. The solution also provides a comparison between traditional costing and activity-based costing, emphasizing the benefits of the latter. References to relevant academic literature are included. Desklib provides past papers and solved assignments for students.

Running head: MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Management Accounting for Cost and Control
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................2
Answer to Question 3:.....................................................................................................................3
Answer to Question 4:.....................................................................................................................3
Answer to Question 5:.....................................................................................................................5
Answer to Part A:........................................................................................................................5
Answer to Part B:.........................................................................................................................6
Answer to Question 6:.....................................................................................................................6
Answer to Question 7:.....................................................................................................................7
Answer to Question 8:.....................................................................................................................9
Answer to Question 9:...................................................................................................................11
Answer to Question 10:.................................................................................................................13
Answer to Part A:......................................................................................................................13
Answer to Part B:.......................................................................................................................14
Answer to Part C:.......................................................................................................................15
References:....................................................................................................................................19

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Answer to Question 1:
There are several purposes of management accounting reports, some of which are
discussed briefly as follows:
Budget report:
With the help of budget reports, the business owners could evaluate the performance of
their organisations and in case of large-sized organisations, the managers evaluate the
performance of the department and control costs. For instance, the managers and owners could
use these reports for providing incentives to their staffs (Drury, 2013).
Accounts receivable aging:
This report is a crucial tool to manage cash flow for the organisations extending credit to
the clients or customers. With the help of this report, the customer balances could be broken
down owing to their owed duration. For instance, if a large group of customers is unable to clear
their balances, it is necessary for the organisation to tighten its credit policies. In addition, it
helps the collection department to look into past debts.
Answer to Question 2:
Control is the method of assessing, gauging, monitoring and rectifying actual results to
assure that the plans and goals of the business organisation are accomplished. This has been
achieved through feedback. Feedback could be considered as the information that could be used
in evaluating or rectifying the steps taken in implementing a plan. Management accounting

3MANAGEMENT ACCOUNTING FOR COST AND CONTROL
enables in the control function by producing reports of performance and control reports that
depict variances between actual and expected performances.
The use of control and performance reports follows the principle of management by
exception. These reports act as the basis to undertake essential corrective actions to control
operations. In case of considerable variations between actual and budgeted outcomes, a manager
would investigate to ascertain what is not going well and probably that the units or subordinates
might require assistance.
Answer to Question 3:
In the words of Fullerton, Kennedy & Widener (2013), product costing is the method of
identifying and understanding the different accrued expenses in the manufacture and sale of a
product. This initiates with the purchase of raw wahes materials to expenses related to
transportation of the final product to retail establishments. This is broadly considered as highly
significant component on planning and evaluating the overall strategies of business. Thus, a
product costing system gathers the cost incurred in the process of production and apportions
those costs to the final products of the organisation. The product costing system is required for
the following four purposes:
 Use in financial accounting
 Use in managerial accounting
 Use in cost management
 Use in reporting to the interested firms

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Answer to Question 4:
Manufacturing statement (Normal view):
Manufacturing statement (Formula view):

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Income statement (Normal view):

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Income statement (Formula view):

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Answer to Question 5:
Answer to Part A:
The two interlocking double entries that could be used to record the labour costs include
the following:
First entry:
Wages Payable Account………….Dr
To Accrued Payroll Account/ Bank Account

8MANAGEMENT ACCOUNTING FOR COST AND CONTROL
This entry is made for recording payment to the labour. In case, there is any due payment,
accrued payroll account needs to be credited and in case; there is no undue payment, bank
account needs to be credited.
Second entry:
Work-in-Process Account…….Dr
To Wages Payable Account
This entry is made for exhibiting the overall labour amount utilised for the purpose of
production.
There is interlocking between these two entries, since the workers could not be preserved
for future use. In case, any worker is not paid during a specific period, the person could be used
for production, instead of prepaid payment (Otley & Emmanuel, 2013). On the contrary, if the
workers are utilised for production for a specific timeframe, the payment needs to be made
within a specific timeline after the period of production. Hence, it could be remarked that both
entries are associated with each other and each entry is the effect of the other entry (Fullerton,
Kennedy & Widener, 2013).
Answer to Part B:
As there is no direct association between the production purpose and overtime payment,
it needs to be treated as overhead expenditures, instead of direct labour.
Answer to Question 6:
Normal view:

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Formula view:
Answer to Question 7:
T-account for accrued payroll (Normal view):
T-account for accrued payroll (Formula view):

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Journal entries for recording salaries and wages (Normal view):
Journal entries for recording salaries and wages (Formula view):

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Answer to Question 8:
Amount to be credited to accrued payroll in respect of September earnings (Normal view):
Amount to be credited to accrued payroll in respect of September earnings (Formula view):
Closing balance in accrued payroll (Normal view):
Closing balance in accrued payroll (Formula view):