Management Accounting Homework: Costing, Variance, and Budgeting

This document presents a comprehensive solution to a management accounting assignment. It begins with a detailed process costing analysis, including the preparation of a production cost report, calculation of equivalent units, and allocation of costs to units transferred and work-in-progress. The solution addresses the valuation of work-in-progress and the costs associated with different production processes. The assignment continues with questions on joint product costing, exploring scenarios for product valuation at the split-off point and further processing decisions. The solution also delves into variance analysis, calculating actual labor rates, material price variance, and material usage variance. Finally, the assignment concludes with a budget for a nine-month period, including calculations for cost of goods sold, revenue, and gross profit. The document provides a complete and structured approach to solving complex management accounting problems.

Running head: MANAGEMENT ACCOUNTING
Management accounting
Student Name
University Name

2MANAGEMENT ACCOUNTING
Table of Contents
Question 2: Process Costing............................................................................................................3
a. Production Cost Report............................................................................................................3
Question 2b......................................................................................................................................4
Question 3........................................................................................................................................5
Answer A.........................................................................................................................................5
Answer 3B.......................................................................................................................................6
Question 4........................................................................................................................................7
Question 5........................................................................................................................................8
Bibliography....................................................................................................................................9

3MANAGEMENT ACCOUNTING
Question 2: Process Costing
a. Production Cost Report
Units at the beginning Work In progress (A)-5600
Units started during the month (B) -45600
Total Units (A+B) 51200
Equivalent Units-Calculation
Particulars Direct Material Direct Labor Overhead Physical units
Completed Units (D) 32800 32800 32800 32800
Closing Work-In-Progress (C-D)-E 18400 18400*30%=
5520
18400*30%
=
5520
18400
Total (X) (E+D) 51200 38320 38320 51200
Costs/ unit
Particulars Direct
Material
Direct Labor Overhead Total
Opening Costs $
27,000.00
$
44,307.69
$
13,292.31
$
84,600.00
During the year Costs $
118,700.00
$
187,000.00
$
56,100.00
$
361,800.00
Total Units (TU) $ 145,700.00 $ 231,307.69 $ 69,392.31 $ 446,400.00
Cost per equivalent unit (TU-X) 2.85 6.04 1.81 10.69

4MANAGEMENT ACCOUNTING
Allocation of cost to units transferred
Particulars Direct
Material
Direct
Labor
Overhead Amount
Cost of units transferred (Total
Units*Per Unit Cost)
$
93,339.06
$
197,987.80
$
59,396.34
$
350,723.2
0
WIP Closing(Total Units*Per Unit
Cost)
$
52,360.94
$
33,319.90
$
9,995.97
$
95,676.80
Total $
145,700.00
$
231,307.69
$
69,392.31
$
446,400.0
0
Question 2b
WIP A/c
Particulars Given
Units
Amount Particulars Given
Units
Amount
Opening balance 5600 $
84,600.00
Process two
Transferred
32800 $
350,723.20
Starting Units 45600 $

5MANAGEMENT ACCOUNTING
118,700.00
Direct Labor
Costs
$
187,000.00
Cost of Overhead
@30%
$
56,100.00
Closing balance 18400 $
95,676.80
Total 51200 $
446,400.00
Total 51200 $
446,400.00
Question 3
Answer A
The given information is as follows:-
Raw Material Processed Cost=$350,000.00
Total Output ( Kg)=100000
A-C (Transfer)(Kg)= 60000
Further Cost- Process C= $45,000.00
B-D (Transfer) (Kg) 40000
Further Cost- Process D- $25,000.00
Selling Price Grade C output $4.50
Grade C products-Profit/loss Statement

6MANAGEMENT ACCOUNTING
Particulars Amount
Allocation Cost of A $
187,500.00
Product C-Processing Cost $
45,000.00
Product C-Total Cost $
232,500.00
Product C (Selling Price)
(60000*4.50)
$
270,000.00
Estimated Profit $ 37,500.00
Selling Price of Grade D products
Particulars Amount
Product Cost (350000-1870000) $ 163,000.00
Processing Cost- Product D $ 25,000.00
Product D-(Total Cost) $ 188,000.00
Selling price (Total Cost/40000) $ 4.70
Answer 3B
Split-off point-Product A
Particulars Amount
Product A-Cost $ 187,500.00
Total Units 60000
Selling price(A)(Per kg) $ 2.00
Revenue incurred $ 120,000.00
Profit / (Loss) $ (67,500.00)
From the above analysis, it can be inferred that if Product A is sold at a split off point, then the
company will suffer a loss of $67,500.00. On the other hand, if product C is processed from product A,
then, a profit of $37,500.00 will be earned. Therefore, product A must be processed for Product C instead
of splitting off.

7MANAGEMENT ACCOUNTING
Question 4
Actual Labor rate per hour
Actual direct labor rate per hour
Particulars Amount
Direct Labor Per unit $ 30.00
Standard Labor per hour 3
Given units produced 22000
Standard labor expenses allowed $ 1,980,000.00
Direct labor variance (UF) $ 2,378.00
Actual labor expenses (Variance+Standard Expense) $ 1,982,378.00
Actual labor worked (hours) 60000
Actual labor rate per hour (Expense/hours) $ 33.04
Material price variance on purchase
Particulars Amount
Standard material/unit $ 7.00
Materials Purchased $
2,036,000.00
Units produced $
220,000.00
Standard Material/hour $ 12.00
Standard price allowed for actual production (Stanared meterial/unit*hour*Materials
produced)\
$
1,848,000.00
Material Purchase price variance (Material Purchase-Standard Price) $ 188,000.00
Material usage variance
Particulars Kg
Standard Material/hour 12
Unit produced 22000
Quantity allowed for actual production (Material per hour*units) 264000
Materials used (Actual Quantity) 203000
Material usage variance (Favourable) (Quatity allowed-Used) 61000
If function

8MANAGEMENT ACCOUNTING
Material usage variance
Favorable
Variances
Particulars Kg
Standard Material/hour 12
Given Units 22000
Quantity allowed for actual production (Material per hour*units) 264000
Materials used (Actual Quantity) 203000
Material usage variance 61000
Material price variance
Unfavorable
Variances
Particulars Amount
Standard material/unit $
7.00
Materials Purchased $
2,036,000.00
Standard price for actual production (Stanared meterial/unit*hour*Materials
produced)\
$
1,848,000.00
Material Purchase price variance $
188,000.00
Question 5
Budget For 9 Months –Till Sept, 30th
Particulars Mar-31 Jun-30 Sep-30 Total
Opening inventory 47890 45500 45500 138890
Purchase (Cost of goods sold+
Closing-Less Opening
Inventory)
80110 65607.6 71673.6 217391.2
Closing Inventory
(35000*130%)
45500 45500 45500 136500
Cost of goods sold 82500 65607.6 71673.6 219781.2
Total Revenue 137500 109346 119456 366302
Gross Profit (Revenue- Cost of
Goods Sold)
55000 43738.4 47782.4 146520.8

9MANAGEMENT ACCOUNTING
Bibliography
Collier, Paul M. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons, 2015.
Jensen, Michael C. "Paying people to lie: The truth about the budgeting process." European
Financial Management 9, no. 3 (2003): 379-406.
MITCHELL, FALCONER, and HANNE NØRREKLIT. "Introduction." In A Philosophy of
Management Accounting, pp. 15-34. Routledge, 2017.
Scott, William R. Financial accounting theory. Vol. 2, no. 0. Prentice Hall, 2015.