Management Accounting Case Study of Exhibition Furniture - ACC203

This document presents a comprehensive solution to a management accounting case study focused on Exhibition Furniture, a desk manufacturer. The solution includes a detailed revenue budget, production budget, direct material usage and purchase budget, direct manufacturing labor budget, manufacturing overhead budget, and a cost of goods sold budget. It further provides a budgeted income statement and balance sheet. The analysis covers key financial aspects such as sales forecasting, inventory management, cost control, and profitability assessment. Part two consists of a business memorandum offering recommendations for continuous improvement in budget schedules, emphasizing quarterly budgeting and variance analysis to enhance performance and strategic decision-making. The document also includes relevant calculations and justifications for the presented financial figures.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author Note

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to Part 1..............................................................................................................................2
Answer to requirement a..............................................................................................................2
Answer to requirement b.............................................................................................................2
Answer to requirement c..............................................................................................................2
Answer to requirement d.............................................................................................................3
Answer to requirement e..............................................................................................................4
Answer to requirement f..............................................................................................................4
Answer to requirement g.............................................................................................................4
Answer to requirement h.............................................................................................................5
Answer to requirement i..............................................................................................................5
Answer to requirement i..............................................................................................................5
Answer to requirement j..............................................................................................................6
Answer to requirement k.............................................................................................................6
Answer to requirement l..............................................................................................................7
Answer to Part 2..............................................................................................................................8
Business Memorandum...............................................................................................................8
Bibliography..................................................................................................................................10

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Answer to Part 1
Answer to requirement a
Revenue Budget for 2018:
Particulars Amount
Projected Sales Volume (in units) 2000
Estimated Retail Price $ 800
Budgeted Sales Revenue $ 1,600,000
Answer to requirement b
Production Budget (in units) for 2018:
Particulars
Amoun
t
Projected Sales Volume 2000
Add: Closing Finished Goods Inventory 300
2300
Less: Opening Finished Goods Inventory 200
Budgeted Production Volume 2100
Answer to requirement c
Direct Material Usage & Purchase Budget:
Particulars Amount
Oak Tops:
Production Volume 2100
Material Requirement per desk (sq.cm.) 3
Total Oak Tops Usage (sq.cm.) 6300
Add: Closing Oak Top Inventory 24
6324
Less: Opening Oak Top Inventory 40

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Budgeted Purchase Volume of Oak Top
(in sq.cm.) 6284
Unit Price $ 120
Budgeted Purchase of Oak Tops $ 754,080
Oak Legs:
Production Volume 2100
Material Requirement per desk (in units) 4
Total Oak Legs Usage (in units) 8400
Add: Closing Oak Legs Inventory 80
8480
Less: Opening Oak Legs Inventory 100
Budgeted Purchase Volume of Oak Legs
(in units) 8380
Unit Price $ 7
Budgeted Purchase of Oak Tops $ 58,660
Total Budgeted Purchase $ 812,740
Answer to requirement d
Direct Manufacturing Labor Budget:
Particulars Amount
Budgeted Production Volume 2100
Direct Manufacturing Labor hours per desk 3
Total Manufacturing Labor Hours 6300
Labor Cost per hour $ 55.00
Total Direct Labor Cost $ 346,500

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Answer to requirement e
Manufacturing Overhead Budget:
Particulars Amount
Total Manufacturing Labor Hour 6300
Variable Manufacturing Overhead Rate $ 20
Total Variable Manufacturing Overhead
$
126,000
Fixed Manufacturing Overhead $ 50,000
Budgeted Manufacturing Overhead
$
176,000
Answer to requirement f
Manufacturing Overhead Rate:
Particulars Amount
Budgeted Manufacturing Overhead
$
176,000
Total Manufacturing Labor Hour 6300
Budgeted Manufacturing Overhead Rate $ 27.94
Answer to requirement g
Manufacturing Overhead Cost per Unit:
Particulars Amount
Budgeted Manufacturing Overhead $ 176,000
Total Production Volume 2100
Budgeted Manufacturing Overhead Cost
per unit $ 83.81

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Answer to requirement h
Unit Cost of Closing Inventory:
Particulars Amount
Direct Material per unit:
Oak Top $ 360
Oak Leg $ 28
Toatl Direct Material Cost per unit $ 388
Direct Labor Cost per unit $ 165
Manufacturing Overhead Cost per unit $ 84
Unit Cost of Closing Inventory $ 636.81
Answer to requirement i
Ending Inventory Budget for Direct Materials:
Particulars
Uni
t Rate Amount
Oak Top (in sq.mtrs.) 24
$
120 $ 2,880
Oak Leg (in nos.) 80 $ 7 $ 560
Total Ending Inventory for Direct Material $ 3,440
Answer to requirement i
Ending Inventory Budget for Finished Goods:
Particulars Amount
Finished Goods in units 300
Unit Cost of Closing Inventory $ 636.81
Total Ending Inventory for Finished Goods $ 191,043

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Answer to requirement j
Cost of Goods Sold Budget:
Particulars
Unit
s Rate Amount
Direct Material:
Purchase of Oak Top (in sq.cm.) 6284 $ 120.00 $ 754,080
Purchase of Oak Leags (in nos.) 8380 $ 7.00 $ 58,660
Total Direct Materials Purchased $ 812,740
Add:Opening Stock of Direct Material:
Oak Top (in sq.cm.) 40 $ 100.00 $ 4,000
Oak Legs (in nos.) 100 $ 5.00 $ 500
$ 817,240
Less:Closing Stock of Direct Material:
Oak Top (in sq.cm.) 24 $ 120.00 $ 2,880
Oak Legs (in nos.) 80 $ 7.00 $ 560
Direct Material Consumed $ 813,800
Direct Labor Cost (In hours) 6300 $ 55.00 $ 346,500
PRIME COST $ 1,160,300
Manufacturing overhead 2100 $ 83.81 $ 176,000
COST OF GOODS MANUFACTURED $ 1,336,300
Add: Opening stock of Finished Stock $ 4,000
Less:Closing Stock of Finished Stock $ 191,043
COST OF GOODS SOLD $ 1,149,257
Answer to requirement k
Budgeted Income Statement:
Particulars Amount
Total Sales Revenue $ 1,600,000
Cost of Goods Sold ($ 1,149,257)
Gross Profit $ 450,743

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Variable Marketing Cost ($ 2,000)
Fixed Marketing Cost ($ 10,000)
Net Profit for the period $ 438,743
Answer to requirement l
Budgeted Balance Sheet:
Particulars Amount
Current Assets:
Cash $ 20,000
Direct Material Inventory $ 3,440
Finished Goods Inventory $ 191,043
TOTAL CURRENT ASSETS $ 214,483
Non-Current Assets:
Property,Plant & Equipment (net) $ 550,000
TOTAL NON-CURRENT ASSETS $ 550,000
TOTAL ASSETS $ 764,483
Current Liabilities $ 30,000
Non-Current Liabilities $ 59,340
TOTAL LIABILITIES $ 89,340
NET ASSETS $ 675,143
Equity:
Shareholders' Equity $ 650,000
Budgeted Profit $ 438,743
Retained Earnings ($ 413,600)
TOTAL EQUITY CAPITAL $ 675,143

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Answer to Part 2
Business Memorandum
To: Chief Executive Officer (Exhibition Furniture)
From: Management Accountant
Date: February 7, 2018
Subject: Business recommendation for continuous improvement into budget schedules
Sir,
The budgets for the financial year of 2018 have been prepared and the figures represent
that in order to obtain the desired amount of revenue the company needs to incorporate new
strategies. The budgeted sales revenue forecast a projected amount of $1,600,000. However, it
should be noted here that the variance analysis that may be carried out after the actual derivation
of the results, would lead to the determination of the worthiness of the prepared budget.
Moreover, it is not always possible for a firm to maintain a fixed margin of the net
obtained revenue all throughout a particular financial year. Thus, it is very important to lay out a
structure that not only looks at the long-term business goals but also aids in the achievement of
the short term and potential organizational objectives. Hence, the two particular
recommendations that can be incorporated by business for continuous improvement are as
follows:
 The budget prepared, can be segregated on the basis of a quarter instead of an entire year.
This means that the budgets prepared will correspond to the respective quarters in the
financial year instead of giving an overview into the estimations that should be
undertaken by the management of the firm in order to achieve the budgeted outcomes.
The preparation of the budgets on the basis of a quarter will help the employees and other
stakeholders of business to understand and carry out their duties. This is because the
quarterly budget will narrow the scope thus, help the employees to understand their roles
and responsibilities. Moreover, the continuous updating and achievement of the goals

9MANAGEMENT ACCOUNTING
will keep the staff morale high resulting in the improvement of production both
quantitatively and qualitatively.
 The second recommendation revolves around the preparation of a variance analysis
between the budgeted outcomes and the actual results obtained. The term variance refers
to the percentage by which the actual outcomes exceed or fall short of the budgeted
outcomes. A negative variance results in an unfavorable outcome whereas a positive
variance results in a favorable outcome. Therefore, drawing an analysis of the
unfavorable variance will help the firm in identifying the potential area where it needs to
work on. The firm may also consider the implementation of suitable technology in order
to innovate the existing products offered by it. This will not only attract new customers
into business but also expand the existing base of customers. Implementation of suitable
internal controls will also result in the establishment of a sustainable business thus
ensuring continuous improvement.
Therefore, these are the potential recommendations that could be followed in order to
incorporate continuous improvement into the business of Exhibition Furniture.
Best Regards,
Management Accountant

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Bibliography
Bradbury, M., & Scott, T. (2015). The association between accounting performance and
constituent response in political markets. Pacific Accounting Review, 27(4), 394-410.
Sponem, S., & Lambert, C. (2016). Exploring differences in budget characteristics, roles and
satisfaction: A configurational approach. Management Accounting Research, 30, 47-61.