University Management Accounting Assignment: Cost & Control Analysis

This document provides a comprehensive solution to a management accounting assignment, addressing various aspects of cost and control. It begins by emphasizing the importance of business reports for managerial decision-making, including financial statements and cash flow analysis. The solution then delves into cost control methods, highlighting the role of surveillance and employee performance. It explores product costing processes, differentiating between financial, managerial, and managerial accounting applications. The assignment further examines cost recording methods, comparing integrated and interlocking systems, and provides examples of direct labor costs like overtime wages. Detailed T-accounts and journal entries are presented for material control and accrued payroll expenses. The solution also includes an analysis of activity-based costing (ABC), comparing its advantages and disadvantages with traditional costing methods, and concludes with various allocation methods with calculations. The document includes references to relevant academic sources.

Management Accounting
for cost & control

1
By student name
Professor
University
Date: 28 August 2017.
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Contents
Question no 1…………………………………………………………………...2
Question no 2…………………………………………………………………...2
Question no 3…………………………………………………………….....….2
Question no 4…………………………………………………………….....….4
Question no 5…………………………………………………………….....….6
Question no 6…………………………………………………………….....….7
Question no 7…………………………………………………………….....….8
Question no 8…………………………………………………………….....….9
Question no 9……………………………………………………………......13
Question no 10……………………………………………………………......15
Refrences.....……………………………………………………………….......17
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Question 1
Preparation of the business reports is very viable for any organisation. It helps the management
in taking important decisions in relation to the business. The reports can be prepared monthly, weekly
or on special basis as the manager may demand. It is important that the reports are prepared with
utmost precision so that the overall decisions that the managers take are correct. There are various
types of business reports, that include the financial statements, the cash flow statement, the pricing
statement etc. These reports help the management to take important decisions keeping the investors
and the shareholders in mind. If the managers feel, they can ask for expert advice while studying the
accuracy of the overall report. It helps the management and the investors to get a snapshot of the
financial position of the company and then base their decisions on the same. In this way, the reports are
helpful to the managers. (Annema, Frenken, Koopmans, & Kroesen, 2017).
Question 2
Proper cost control methods must be installed by the mangers to make sure that the
organisation is functioning without any loopholes. Once the planning is done, and the plans are laid out,
the main aim of the manager will be to make sure that these are implemented with precision, in that
control functions, plays an important role. . Panopticm is a social theory that has been developed by a
French philosopher. It puts pressure on the point that people who are involved in the overall mechanism
of a process, functions better when they know that they are placed under some surveillance by the
authority. If the same is applied in an organisation, if the employees of the company functions keeping
in mind that they are under constant supervision, there will not be any loophole. They will always try to
perform better so that they are able to impress the management. In this way, these control methods are
helpful to the company. (Hopkin, 2017).
Question 3
The main four process of product costing that has been identified in the text are –
 Product costing in financial accounting is something, which helps in ascertaining what is the
effect on the finances of the cost of the product. It can be used in the calculation of the closing
stock of good, other valuation measure
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 Product costing as used in the cost of the management; it helps the managers in ascertaining
the total cost that was incurred in the manufacture of a product by the company.
 Product costing in managerial accounting, is required by the managers in orders to take
important decisions with regard to the production. It helps in the general, in planning and
budgeting.
 Product costing is used also, while making important disclosures to the interested parties. Many
electric and gas companies, provide proper costing details that are included to justify the same
to the consumers (Baal, Meltzer, & Brouwer, 2016)
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Question no 4
Particulars Amount (in $) Amount (in $)
Direct materials
Beginning Raw material inventory 30/9/X6 400,000
Add : Purchases 2,200,000
Add : Work in progress 30/9/X6 90,000
Inventory available for use 2,690,000
Less: Closing stock of inventory 30/9/X7 80,000
Less: Closing Work in progress 30/9/X7 34,000
Total Direct Material used 2,576,000 2,576,000
Direct Labour
Beginning Work in progress 30/9/X6 35,000
Add : During the year 600,000
635,000
Less: Closing Work in progress 30/9/X7 25,000
Total Direct Labour used 610,000 610,000
Direct Expenses
Beginning Work in progress 30/9/X6 25,000
Add: Manufacturing expense during year 220,000
245,000
Less: Closing Work in progress 30/9/X7 12,000
Total Direct Expense used 233,000 233,000
Factory Overheads
Inward charges on Raw Material 190,000
Manufacturing expense 220,000
Salaries (factory) 600,000
Add: Accrued Salary (factory) 3,000
Depreciation Expenses 35,000
Insurance Factory (75% of (18000-2000)) 12,000
Rates factory - 75% 26,250 1,086,250
Total Manufacturing costs 4,505,250
Add: Opening Finished Goods Stock 450,000
Total cost of finished goods 4,955,250
Less: Closing Finished Goods Stock 200,000
Total cost of goods manufactured 4,755,250
Waugh Manufacturing Company
Manufacturing Statement for the year
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Particulars Amount (in $) Amount (in $)
Sales of finished goods 7,000,000
Less: Cost of manufactured goods sold 4,755,250
Profit in sale of Goods (Gross Profit) 2,244,750
Less: Other expenses
Advertising 50,000
Audit Fees 3,500
Discount Allowed to debtors 12,000
Discount received to creditors (9,000)
Cartage Outwards 21,000
Insurance offi ce (25% of (18000-2000)) 4,000
Light & Fuels (Offi ce) 30,000
General Expenses 30,000
Rates Offi ce - 25% 8,750
Salaries (Offi ce) 500,000
Add: Accrued Salary (offi ce) 5,000
Traveller's Commission 180,000 835,250
Net Profit before tax 1,409,500
Tax Expense 500,000
Net Profit after tax 909,500
Waugh Manufacturing Company
Income Statement for the year
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Question no 5 (A)
There are generally 2 methods of recording the cost: financial integrated accounting and
interlocking system where the cost records are maintained separately as compared to the financial
accounting books (Han, Subrahmanyam, & Zhou, 2017).
The major drawbacks are that it may lead to duplication of the expenses in the financial
statements and the overall process is complicated. The advantage is that reduces the need to including
complex entries while making integrated accounts. Thus in a way it is helpful to the management of the
company. (Daff, 2017).
Example: Suppose the productive wage is $ 45000 and unproductive wage is $18000, then the scheme
of entries would be:
1. Wages control a/cadre 45000
To general ledger adj. a/c 45000
(Being wages payment made)
2. Factory overhead control a/c Dr. 18000
To cost ledger control a/c 18000
(Being indirect wages recorded)
Question no 5 (B)
An example of the cost associated with the direct labour is overtime wages. These are paid to
the workers in situations where they work more than what is required. There are different methods of
treating the same that is followed by the companies. However, the most common is that, it is treated as
indirect labour costs and is shown under the head manufacturing overhead costs such that it is absorbed
by all of them (Hopkin, 2017)
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Question no 6
The T Account for materiaL control is given below.
Date Particulars Amount (in $) Date Particulars Amount (in $)
1-Jun To opening balance (balancing figure) 10000 30-Jun Issued to Production (WIP Control A/C) 50000
30-Jun By Indirect Material (Factory Overheads Control A/C) 30000
30-Jun To Purchases during June (General ledger adj A/C) 90000 30-Jun By Closing Balance 20000
100000 100000
Material control account as on 30th June
The balance of the material control as on 1st June was $ 10,000
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Question no 7
The T Account for accrued payroll expenses and the respective journal entries for the month is
as follows:
Date Particulars Amount (in $) Date Particulars Amount (in $)
31-Mar To Bank - payment made 40,000 1-Mar By Opening Balance 10,000
31-Mar By Direct Labour for the month 18,000
31-Mar To Closing Balance 4,000 31-Mar By Indirect Labour fo the month - Bal. Figure 16,000
44,000 44,000
Accrued Payroll A/C as on 31st March
Date Dr./Cr. Particulars Amount (in $)
31-Mar Dr. Direct Labour A/C 18,000
Cr. To Accrued Labour A/C 18,000
(Being direct labour expenses incurred)
31-Mar Dr. Overheads A/C 16,000
Cr. To Accrued Labour A/C 16,000
(Being indirect labour expenses incurred)
31-Mar Dr. Accrued Labour A/C 40,000
Cr. To Bank A/C 40,000
(Being payment made for labour expenses)
Journal Entries
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Question no 8
The background is as follows:
No of days Gross Payroll Amount Paid Withholding Amount
1 8000 5600 2400 Per day
5 40000 28000 12000 Monday to Friday
Payroll Period:
Payroll Payment
Direct labour 4,800
Indirect factory Labour 1,600
Selling Expenses 1,120
General and administrative expenses 480
Gross Payroll 8,000
Break up of Payroll
Thursday to Wednesday inclusive
Subsequent week's Friday
Calendar to be used
(a) Amount to be credited to Accrued Payroll for September, i.e., paid via bank:
Particulars Amount/Days
No of working days 22
No of payroll cycles 3 complete, 2 partial
Amount to be paid for 1-3, 4-10, 11-17, 18-24
No of days 18
Amount per day per employee 8,000$
Amount to be credited 144,000$
Less: Withholding amount - 30% 43,200$
Total Final Amount to be credited post withholding amount 100,800$
Amount to be credited in Payroll account
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(b) The calculations are shown below:
Particulars Amount/Days
Balance days left 25-30
No of days 4
Balance in Accrued Payroll for 4 days @ 8000 32,000$
Less: Withholding amount - 30% 9,600$
Balance in Accrued Payroll post withholding amount 22,400$
Amount outstanding as on 30th September in Payroll account
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