Management Accounting for Cost & Control Assignment, University Name

This assignment solution addresses key concepts in Management Accounting for Cost & Control, covering topics such as traditional vs. modern cost accounting methods, computation of equivalent units, joint production costs allocation, and variance analysis. The document provides detailed answers to specific questions, including calculations, explanations, and comparisons. It explores practical applications of cost management techniques, including budgeting and its relationship to government policies. The assignment also includes references to relevant academic sources, offering a comprehensive understanding of the subject matter and its practical implications within a business context.

Running head: MANAGEMENT ACCOUNTING FOR COST & CONTROL
Management Accounting for Cost & Control
Name of the University
Name of the student
Authors note

1MANAGEMENT ACCOUNTING FOR COST & CONTROL
Table of Contents
Answer to Question 1:................................................................................................................2
Requirement a:.......................................................................................................................2
Requirement B:......................................................................................................................3
Answer to Question 2:................................................................................................................3
Answer to Question 3:................................................................................................................6
Requirement a:.......................................................................................................................6
Requirement b:.......................................................................................................................6
Answer to Question 4:................................................................................................................7
Requirement a:.......................................................................................................................7
Requirement b:.......................................................................................................................9
Answer to Question 5:..............................................................................................................10
Requirement A:....................................................................................................................10
Requirement B:....................................................................................................................11
References:...............................................................................................................................13

2MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question 1:
Requirement a:
DR. CR.
Date Particulars Amount Date Particulars Amount
To, Balance b/d. 24855 31/8/14 By, Work-in-Process A/c. 6010
To, Accounts Payable A/c. 6155 By, Balance c/d 25000
31010 31010
DR. CR.
Date Particulars Amount Date Particulars Amount
1/8/X4 To, Balance b/d 8790 31/8/X4 By, Cost of Goods Sold A/c. 30000
31/8/X4 To, Work-in-Process A/c. 30110 By,Balance c/d 8900
38900 38900
DR. CR.
Date Particulars Amount Date Particulars Amount
31/8/X4 To, Finished Goods A/c. 30000 31/8/X4 By, Profit & Loss A/c. 32800
To, Manufacturing
Overhead A/c. 2800
32800 32800
Direct Material Account
Finished Goods
Cost of Goods Sold

3MANAGEMENT ACCOUNTING FOR COST & CONTROL
DR. CR.
Date Particulars Amount Date Particulars Amount
1/8/X4 To, Balance b/d 6700 31/8/X4 By, Finished Goods A/c. 30110
To, Direct Labor A/c. 14800 By, Balance c/d 9400
To, Manufacturing Overhead A/c. 12000
To, Direct Material A/c. 6010
39510 39510
DR. CR.
Date Particulars Amount Date Particulars Amount
31/8/X4 To, Bank A/c. 6700 1/8/X4 By, Balance b/d 2345
31/8/X4 To, Balance c/d 1800 By, Direct Material A/c. 6155
8500 8500
Work-in-Process
Accounts Payable
Requirement B:
The cost accounting format used for constructing the great pyramid of Giza 4500
years ago and its construction now has wide differences. Pyramid was constructed then using
the traditional approach involving stages of planning, initiating, executing, designing and
closing. However, there were some constraint faced in the pyramid construction and the
application of modern cost management accounting would involve different techniques of
construction. Using the modern concept, processed cost accounting would be considered
appropriate for the construction of great pyramid of Giza. The construction cost would be
managed by segregation of cost and where cost of each unit of products is assumed to be
same of other (Fullerton et al. 2013). Actual production cost can be easily assigned using the
modern techniques.
Answer to Question 2:
Computation of Equivalent Units:

4MANAGEMENT ACCOUNTING FOR COST & CONTROL
Process 1 Physical Flow
Material Conversion
O/WIP 2000 0 1400
Started in May 6000
Total Production 8000
Completed in Process 7000 7000 7000
C/WIP 1000 1000 500
Total Equivalent Units 8000 7500
Process 2 Physical Flow
Material Conversion
O/WIP 1000 0 500
Started in May 7000
Total Production 8000
C/WIP 750 0 225
Completed I Process 7250 7250 7250
Total Equivalent Units 7250 7975
Equivalent Units
Equivalent Units
Cost per Equivalent Units:

5MANAGEMENT ACCOUNTING FOR COST & CONTROL
Particulars Material Coversion Transferred-in Total
Process 1:
O/WIP Cost $3,000 $2,000 $5,000
Current Cost $30,000 $60,000 $90,000
Total Production Cost of Process 1 $33,000 $62,000 $95,000
Total Equivalent Units 8000 7500
Cost per Equivalent Units of Process 1 $4.13 $8.27 $12.39
Process 2:
O/WIP Cost $3,000 $4,000 $8,000 $15,000
Current Cost $35,000 $45,000 $86,742 $166,742
Total Production Cost of Process 2 $38,000 $49,000 $94,742 $181,742
Total Equivalent Units 7250 7975 7000
Cost per Equivalent Units of Process 2 $5.24 $6.14 $13.53 $25
Cost of Finished Goods and Closing Stock:
Particulars Amount
Finished Goods Completed during May 7250
Cost per Equivalent Units $25
Cost of Finished Goods Completed $180,671
Closing Stock in Process 1 1000
Cost per Equivalent Units for Process 1 $12.39
Cost of Closing Stock in Process 1 $12,391.67
Closing Stock in Process 2 750
Cost per Equivalent Units for Process 1 $24.92
Cost of Closing Stock in Process 2 $18,690.08

6MANAGEMENT ACCOUNTING FOR COST & CONTROL
Answer to Question 3:
Requirement a:
Particulars Amount
Total Joint Production Cost A $250,000
Less: Joint Cost allocated to
A B $187,500
Joint Cost allocated to B C=A-B $62,500
Sales Volume of C (in kg.) D 60000
Selling Price per kg. of C E $4.50
Net Realisable Value of C F=DxE $270,000
Net Realisable Value of D
G=Fx(C/
B) $90,000
Sales Volume of D (in kg.) H 40000
Selling Price per kg. of D I=G/H $2.25
Requirement b:
The net profit, earned in general circumstances, are computed below:
Particulars A B Total
Selling Price per unit $4.50 $2.25
Sales Volume 60000 40000 100000
Total Sale Revenue $270,000 $90,000 $360,000
Joint Cost Allocation ($187,500) ($62,500) ($250,000)
Further Processing Cost ($45,000) ($25,000) ($70,000)
Net Profit $37,500 $2,500 $40,000
However, if the company sells product A for $2 per kg at the spilt-off point, the the
outcomes of the business operation would be as follows:

7MANAGEMENT ACCOUNTING FOR COST & CONTROL
Particulars A B Total
Selling Price per unit $2.00 $2.25
Sales Volume 60000 40000 100000
Total Sale Revenue $120,000 $90,000 $210,000
Joint Cost Allocation ($142,857) ($107,143) ($250,000)
Further Processing Cost ($25,000) ($25,000)
Net Profit ($22,857) ($42,143) ($65,000)
As the company would incur huge loss in this new scenario, it should process product
A further instead of selling it outside.
Answer to Question 4:
Requirement a:
Particulars Amount
Material Purchased (in units) 220000
Standard Price per kg $6
Standard Cost for Actual Material
Purchased $1,320,000
Actual Cost of Actual Material
Purchased $1,364,000
Material Price Variance ($44,000)
Remarks Unfavorable
Material Price Variance:

8MANAGEMENT ACCOUNTING FOR COST & CONTROL
Particulars Amount
Units Produced 19500
Standard Usage per unit of
production 11
Standard Usage for Actual
Production 214500
Actual Material Usage 197000
Standard price per kg. $6
Material Usage Variance $105,000
Remarks Favorable
Material Usage Variance:
Particulars Amount
Actual Production 19500
Standard Labor hour per unit 2
Standard Labor Hour for Actual
Production 39000
Actual Labor Hours 40000
Standard Labor Rate per hour $20
Direct Labor Efficiency Variance ($20,000)
Total Direct Labor Variance ($1,650)
Direct Labor Rate Variace $18,350
Standard Labor Cost for Actual
Labor Hours $800,000
Actual Labor Cost $781,650
Actual Direct Labor Rate per hour $19.54
Actual Direct Labor Rate per hour:

9MANAGEMENT ACCOUNTING FOR COST & CONTROL
Dr. Cr.
Date Amount Amount
Direct Material A/c. Dr. $1,364,000
To, Accounts Payable A/c. $1,364,000
Work-in-Progress A/c. Dr. 1287000
To, Direct Material A/c. 1287000
Material Price Variance A/c. Dr. $44,000
To, Direct Material A/c. $44,000
Direct Material A/c. Dr. $105,000
To, Material Usage Variance A/c. $105,000
Direct Labor Cost A/c. Dr. $781,650
To, Accrued Payroll A/c. $781,650
Work-in-Progress A/c. Dr. 780000
To, Direct Labor Cost A/c. 780000
Direct Labor Cost A/c. Dr. $18,350
To, Direct Labor Rate Variance A/c. $18,350
Direct Labor Efficiency Variance A/c. Dr. $20,000
To, Direct Labor Cost A/c. $20,000
Material Usage Variance A/c. Dr. $105,000
Direct Labor Rate Variance A/c. Dr. $18,350
To, Cost of Goods Sold A/c. $59,350
To, Direct Labor Efficiency Variance A/c. $20,000
To, Material Price Variance A/c. $44,000
Particulars
Requirement b:
One of the most crucial tools in the business management is the analysis of variance
that helps in analysing the cause of deviation between the actual cost and estimated cost. The
actual and planned expenses of any project can be effectively monitored using the variance
analysis application. Variance analysis helps in identification of fluctuation in any accounting
budget (Lanen, 2016).
Some of other areas where tool of variance analysis can hold importance are
organizational behaviour and human resource department. Performance of human resource

10MANAGEMENT ACCOUNTING FOR COST & CONTROL
department is related with the financial outcome and using the variance analysis helps in
establishing relationship between departments of organization (Stretton, 2014).
Answer to Question 5:
Requirement A:
Particulars 20X2 20X3 20X4 20X5 20X6
Sales Volume 32400 34992 37791 40000 40000
Selling Price per unit $6.63 $6.97 $7.38 $8.13 $8.78
Total Sales Revenue $214,812 $243,824 $279,051 $325,080 $351,000
Cost of Goods Sold ($164,520) ($186,192) ($212,841) ($238,760) ($257,120)
Gross Profit $50,292 $57,632 $66,210 $86,320 $93,880
General & Administrative
Expenses ($30,074) ($34,135) ($39,067) ($45,511) ($49,140)
Net Profit before Tax $20,218 $23,496 $27,143 $40,809 $44,740
Less: Income Tax @40% ($8,087) ($9,399) ($10,857) ($16,324) ($17,896)
Net Profit after Tax $12,131 $14,098 $16,286 $24,485 $26,844
Particulars 20X2 20X3 20X4 20X5 20X6
Opening Balance of Retained
Earnings $3,500 $3,780 $4,082 $4,409 $4,762
Net Profit for the period $12,131 $14,098 $16,286 $24,485 $26,844
$15,631 $17,878 $20,368 $28,894 $31,606
Less: Dividends Payable ($7,885) ($9,164) ($10,586) ($15,915) ($17,449)
Closing Balance of Retained
Earnings $3,780 $8,714 $9,782 $12,979 $14,157
Budgeted Income Statement:
Budgeted Statement of Retained Earnings:
Workings:

11MANAGEMENT ACCOUNTING FOR COST & CONTROL
Particulars 20X1 20X2 20X3 20X4 20X5 20X6 20X7
Sales 30000 32400 34992 37791 40000 40000 40000
Add: Closing Stock 3600 5249 5669 6000 6000 6000
37649 40661 43791 46000 46000
Less: Opening Stock 3600 5249 5669 6000 6000
Total Purchase 34049 35412 38123 40000 40000
Units Purchase Cost $5.10 $5.36 $5.68 $6.02 $6.50
Total Purchase Cost $173,649 $189,808 $216,537 $240,800 $260,000
Add: Opening Stock Value $17,640 $26,769 $30,384 $34,080 $36,120
$191,289 $216,577 $246,921 $274,880 $296,120
Less: Closing Stock Value $26,769 $30,384 $34,080 $36,120 $39,000
Total Cost of Goods Sold $164,520 $186,192 $212,841 $238,760 $257,120
Cost of Goods Sold Schedule:
Requirement B:
Preparation of budget within the organization should be aligned with the government
policies and priorities. Controlling the expenditures aggregately along with strategic
allocation of resources is incorporated in the budget. The linkage between the budgetary
policies and expenditures for improving revenue forecasted is exerted by political pressure
(Otley & Emmanuel, 2013).

12MANAGEMENT ACCOUNTING FOR COST & CONTROL
It is depicted in the above comic image that relates budget to a social manifesto.
Preparation of budget can be in the interest of organization but it might not serve the needs of
nation and thus can lead to a political issue. Several ingredients are involved in budget
preparation that is related with higher level of authority in organization.

13MANAGEMENT ACCOUNTING FOR COST & CONTROL
References:
Bhimani, A., Horngren, C. T., Sundem, G. L., Stratton, W. O., & Schatzberg, J.
(2013). Introduction to management accounting. Pearson Higher Ed.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2013). Management accounting and
control practices in a lean manufacturing environment. Accounting, Organizations
and Society, 38(1), 50-71.
Lanen, W. (2016). Fundamentals of cost accounting. McGraw-Hill Higher Education.
Lavia López, O., & 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), 81-119.
Otley, D., & Emmanuel, K. M. C. (2013). Readings in accounting for management control.
Springer.
Stretton, A. (2014). Some differences between project management and accounting
perspectives on project cost control.