Charles Sturt University ACC512: Cost and Control Assignment

This assignment solution for ACC512, focusing on Management Accounting for Cost and Control, addresses several key areas. It begins with an analysis of value chains, discussing their benefits and application in improving business operations, specifically for Farm Organic Ltd. The solution then presents calculations for the cost of goods manufactured, cost of sales, and gross profit, along with a discussion of the limitations of the cost of goods manufactured statement. Further, the assignment delves into cost allocation methods, including direct, step-down, and reciprocal methods. It also covers overhead allocation, total unit cost calculation, and journal entries. Finally, the assignment calculates the cost of goods transferred using both the weighted average and FIFO methods, prepares journal entries for production costs, and explains the differences between the two costing methods. The assignment references relevant academic sources to support its findings.

Running head: MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Management Accounting for Cost and Control
Name of the Student:
Name of the University:
Authors Note:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Table of Contents
Question 1: Value Chains...........................................................................................................3
Question 2: Cost of Manufacturing Statement...........................................................................5
1. Cost of goods manufactured statement for 31 July 2019:......................................................5
2. Cost of sales for 31 July 2019:...............................................................................................5
3. Gross profit for 31 July 2019:................................................................................................6
4. Identifying the cost of goods manufactured statement limitations:.......................................6
Question 3: Cost Allocation.......................................................................................................7
1. Providing operating departments information using the direct method:................................7
2. Providing operating departments information using the step-down method:........................7
3. Providing operating departments information departments using the reciprocal method:....8
Question 4:.................................................................................................................................8
1. Allocation rate of overhead:...................................................................................................8
2. Gargantua total overhead allocation:.....................................................................................8
3. Total unit cost:........................................................................................................................9
4. Gargantua job actual overhead:..............................................................................................9
5. Allocation Journal entries:.....................................................................................................9
6. Total profit:............................................................................................................................9
Question 5:.................................................................................................................................9
1. Calculate the cost of goods transferred:.................................................................................9
2. Journal entries for production costs of February:................................................................13

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
3. Differences between weighted average cost method and the FIFO method:.......................14
References:...............................................................................................................................15

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Question 1: Value Chains
Value chain analysis is considered to be one of the most viable method that can be
used by the companies for analyzing the internal firm activities, which helps in deriving and
recognizing the goal. The evaluation would eventually help in determining the most valuable
activities that can be used by the company to secure the high level of income from their
operations. The benefits of the value chain analysis are mainly depicted as follows.
 The value chain analysis would eventually help in determining the chain of activities that
is mainly conducted by the companies for determining the process that can create value in
the long run.
 The major activities of value chain directly relate to the operations, marketing, outbound
logistics, sales, inbound logistics, and services
 The utilization of the value chain analysis would eventually help in gaining competitive
edge and boost profits in the long run.
 Moreover, the value chain analysis would help in ensuring that value created directly
exceeds costs (Mudambi & Puck, 2016).
 The value chain analysis allows the organization to creating efficiencies by analyzing the
five primary value chain activities, which allows the origination to boost profit levels and
gain competitive edge in the market.
 Therefore, David can use the value chain analysis for adequately improving the level of
value, which is derived by analyzing the least possible total cost.
 The process of the value chain analysis also helps in analyzing the steps that needs to be
taken into consideration, while creating a relevant product.
The above advantages of the value chain analysis directly help in providing the in-
depth analysis of the company’s performance in the long run, which might have direct impact

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
on the overall performance of the organization. Therefore, with the help of value chain
analysis the overall expenses and the activities that is associated with the operations are
mainly evaluated, which can help in detecting the appropriate level of improvements that can
be conducted to support the operations. Robinson et al., (2015) mentioned that with value
chain analysis, companies are mainly able to understand the level of improvements that is
needed in the operations, which can directly support their revenue generation capability.
David with the help of value chain analysis is able to detect the level of improvement
that is needed within the organization for boosting their income and reduce the level of
expenses that might be conducted for supporting its operations. Hence, David for improving
the operations of Farm Organic Ltd can use the value chain analysis, as there are relevant
advantages to the method. The advantages of value chain analysis are immense, which is
discussed in the above points and can allow David to improve its decisions making capability
by assembling relevant changes to the overall expenses and income conditions of Farm
Organic Ltd. Therefore, David with the help of value chain analysis can adequately compare
the models of Farm Organic Ltd with its competitors to get a deeper understanding of the
weakness and strength of their business, as it allows the management to make appropriate
investment decisions.

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Question 2: Cost of Manufacturing Statement
1. Cost of goods manufactured statement for 31 July 2019:
2. Cost of sales for 31 July 2019:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
3. Gross profit for 31 July 2019:
4. Identifying the cost of goods manufactured statement limitations:
The statement of cost of goods manufactured has limitations that reduces the viability
of management to conduct appropriate decision making process. The cost of goods
manufactured statement limitations is depicted as follows.
 The statement of cost of goods manufactured does not allow the management to detect the
change in the sales requirement in future, which is mainly used for preparing the budget
and accommodating for the production process that required relevant raw materials for
achieving finished goods.
 The statement of cost of goods manufactured does not allow the management to
understanding the aggressive administrative expenses that is hampering the profit making
conditions, which is useful for reducing the expenses and improving profitability in the
long run (Williams & Dobelman, 2017).
 Further analysis of the statement of cost of goods manufactured has mainly indicated
about the overall raw materials used and the inventory of finished goods that have been
conducted by the company. Thus, the statement of cost of goods sold does not provide
adequate insight to the company regarding the alterations that needs to be conducted by
the company regarding the financial performance.
 The statement of cost of goods manufactured directly limits the company’s ability to
detect the overall improvements that is needed on the administrative expenses to the

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
levels of measures that needs to be taken on the sales commission to boost the levels of
sales in the process. This information of the sale units allows the management to make
relevant decisions on the overall plan that could boost their marketing activities and in
turn raise the level of sales.
 The management is also not able to prepare the budget for the future years on the basis of
the statement of cost of goods sold.
Question 3: Cost Allocation
1. Providing operating departments information using the direct method:
2. Providing operating departments information using the step-down method:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
3. Providing operating departments information departments using the reciprocal
method:
Question 4:
1. Allocation rate of overhead:
2. Gargantua total overhead allocation:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
3. Total unit cost:
4. Gargantua job actual overhead:
5. Allocation Journal entries:
6. Total profit:
Question 5:
1. Calculate the cost of goods transferred:
Weighted Average cost method:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
FIFO Method:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
2. Journal entries for production costs of February:

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
3. Differences between weighted average cost method and the FIFO method:
The analysis in the above table directly indicates about the overall difference in the
weighted average cost method and FIFO method. The analysis has indicated that in Weighted
average cost the overall expenses is relatively low in comparison to the FIFO method. The
calculations have mainly indicated that overall valuation that is conducted under the weighted
average method has provided the lowest level of cost for both Sheep Drench and Cattle
Drench.

MANAGEMENT ACCOUNTING FOR COST AND CONTROL
References:
Mudambi, R., & Puck, J. (2016). A global value chain analysis of the ‘regional
strategy’perspective. Journal of Management Studies, 53(6), 1076-1093.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.