Advanced Diploma Accounting: Management Accounting Assignment Solution

This assignment solution covers key aspects of management accounting, starting with an overview of budgeting and variance analysis for Elephant Corporation, including reconciliation of budget discrepancies and the importance of environmental considerations. It then delves into costing methods, comparing traditional costing with Activity-Based Costing (ABC) and highlighting the advantages of ABC. The solution presents detailed sales, production, and direct material budgets for Molten Milk Perfume and Molten Yogurt Skin Treatment, alongside a labor budget and a cash budget. Furthermore, the assignment includes flexible budgeting and variance analysis for Brown Cow Corporation, identifying areas for improvement and the implementation of new technologies. Finally, it concludes with a financial ratio analysis for Comfort Blinds, assessing the company's performance through various financial metrics and addressing authority-related questions.

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Management accounting

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Table of Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................3
Question 3..................................................................................................................................4
Question 4..................................................................................................................................6
Question 5..................................................................................................................................7
References..................................................................................................................................9

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Question 1
Introduction
In the business, there is an objective that is established and various policies are
formulated for the same. All of them for Elephant Corporation will be provided in the report
below.
The budget has been prepared and in that, there are some findings which are provided
which represent the surplus of funds. The calculations are provided below:
Particulars Quarter 1 Quarter 2 Quarter
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Quarter 4 Total
Units 500 1500 3000 10000 15000
Selling price 8 8 8 8 8
Cash inflow 4000 12000 24000 80000 120000
Cash outflow 12000 22000 7000 1000 42000
Surplus -8000 -10000 17000 79000 78000
The calculation of responsible employees showed a surplus of $69000 in the last
quarter and $70000 in the complete year. There is a discrepancy as the actual surplus is
$78000 and $79000 respectively. The same can be handled with the help of reconciliation.
The objective of the company is to provide environmentally friendly services. For
this, the policy will be established in which continuous monitoring will be made.
The environmental factors shall be handled by allocating the required resources for
such factors so that they can be carried effectively.
The inhibit performance shall be identified by setting the parameters and determining
the cause of the problems. The budget will be incorporating the expenses which might be
incurred in such uncertain events (Tie et al., 2015). The budget shall be communicated to all
and for that, there will be a proper strategy in which the circulation of the budget will be
made to all. There will be proper reports which will be provided to all the departments. The
variances shall be identified and then the steps shall be taken to eliminate them. By this, the
costs will be incurred as per the budget and will be maintained in the limit. The deviations
which are present in the price and usage will be analyzed by monitoring the performance
regularly.
Conclusion
The report covered all the aspects in relation to budget and all the variances have been
identified. The manner in which several issues will be handled is also identified.

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Question 2
Costing is required to be carried in a proper manner and for that there are traditional
and ABC methods that are applied. By the help of this the cost will be determined and the
calculations on the basis ABC are provided below:
Particulars Crusty Wave
Units 3000 200
Direct material 100 500
Direct labour 100 300
Purchasing
Materials
36000 8000
Machines Setups 12000 60000
Inspection 35000 14000
Running Machines 120000 40000
Total cost 203200 122800
Cost per unit 67.73 614.00
Mark up of 60% 40.64 368.4
Selling price 108.37 982.40
Calculation of cost by using traditional costing
Particulars Crust
y
Wave
Direct material 100 500
Direct labour 100 300
Manufacturing overhead 500 2500
Total cost 700 3300
The plan incorporates the use of traditional costing but the results which are found are
contradictory to the same. It can be noted that the total cost of the products is higher with
traditional costing and that is an adverse aspect for the business. Due to this it is can be said
that the use of ABC costing will be made to serve the company in a better manner.
ABC is beneficial as in this the allocation of overheads is made in an appropriate
manner. The cost of a product is calculated in an accurate manner with the help of proper cost
management. There is will be cost reduction which will be attained and decision making will
be improved (Almeida & Cunha, 2017). Due to this, it is recommended that management
uses this system and this will be increasing the gain of the company and also the goodwill be
maintained. There will be proper cooperation which will be attained and the overall positive
results will be made possible in the long run.
Question 3

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Sales budget
Particulars Molten milk
perfume
Molten yogurt skin treatment
Units sold 16000 7000
Selling price per unit 18 15
Sales 288000 105000
Total sales 393000
Production budget
Particulars Molten milk perfume Molten yogurt skin
treatment
Sales 16000 7000
Add: Closing stock 12000 3000
Less: Opening stock 2000 6000
Production units 26000 4000
Direct material
budget
Particulars Molten milk
perfume
Molten yogurt skin
treatment
Production units 26000 4000
Material per unit 3 2
Total material
required
78000 8000
Add: Closing stock 22000 9000
Less: Opening stock 7000 1000
Material purchased 93000 16000
Cost per kg of
material
0.37 0.37
The total cost of
material
34410 5920
Total material cost 40330
Labour Budget
Particulars Molten milk perfume Molten yogurt skin treatment
Production units 26000 4000
Stripping hours per unit 1 0.5
Churning hours per
unit
1 0.5
Slicing hours per unit 1 0.5
Hours required per unit 3 1.5

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Total hours required 78000 6000
Rate per hour 32 32
Total labour cost 2496000 192000
Cash budget
Particulars July
March sales (5%) 7750
April sales (10%) 16700
May sales (40%) 75200
June sales (30%) 58500
July sales (10%) 18800
Sundry cash
inflows
6900
Total inflows 183850
Direct material 3360.83
Direct labor 224000.00
Indirect labor 1666.67
Indirect material 2083.33
Fixed overheads 29166.67
Total outflows 260277.50
Net cash balance -76427.50
In the making of the budget, there are various steps which need to be followed and they
are as follows:
 The first step is to set the goals which are realistic so that the decisions can be made
accordingly.
 All the expenses and incomes which will be made are required to be ascertained.
 The budget will be formulated by taking them into account in such a manner that the best
fulfillment of needs is made possible (Cristina-Otilia, 2014).
 The plan which is made shall be implemented in the most effective and efficient manner.
 All the other expenses which might be incurred shall be taken into account.
 Monitor the budget regularly to make the required changes in the same.
Brown Cow Corporation limited is a manufacturing business in which the raw material is
purchased to produce the product which will be sold in the market.
Question 4
Particulars Budget (35000) Budget
(40000)
Actual Variance
Machine hours 35000 40000 40000
Indirect
material
1,05,000 120000 122000 -2000

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Indirect labour 1,75,000 200000 195000 5000
Rent 55,000 55000 56000 -1000
Electricity 45,000 50000 54000 -4000
Total 380000 425000 427000 -2000
The flexible budget and is made and also the comparison of the same with the actual
results is made. In this, it can be noted that there is variance that is involved and all of the
expenses except indirect labour are showing the negative variance which is not favorable for
the business. The expenses are incurred in a higher amount which needs to be reduced (Radu
& Giju, 2015). There is a higher amount which is incurred in material, electricity and rent.
This is due to the difficulties faced by Barney in managing all the activities and for that
additional help will have to be made available.
The facilities which need improvement will be identified and then the same will be
communicated to management via the written form to take proper action on that. The training
will be given as to the technology and machines which are used by which efficiency will be
increased.
Various equipment is used and in that computer will be included by which proper
recording will be made and the labor requirement will decrease. The advanced machines will
be used to make them useless time and material. The accountant should have instructions as
then only they can provide proper directions and have the plan implemented in a successful
manner. The approval will be required to ensure that targets will be met and organizational
goals will be attained. The staff shall be trained as then only the plan will be made successful.
Various assumptions are made in the plans, reports and forecasting and the data shall be
analyzed to ensure the correctness and suitability in lieu of the organizational procedures and
policies.
Question 5
Particulars Formula Result
Net profit ratio Net profit/sales*100 17.54%
Current ratio Current assets/current liabilities 2.48
Quick ratio Quick assets/current liabilities 1.24
Inventory turnover COGS/Inventory 5.08
Debt ratio Total liabilities/total assets 0.26
Debt to equity ratio Total liabilities/total equity 0.36
The calculation is made and it can be noted that all the ratios are within the specified
range and are maintained adequately. This ensures that business is performing in a suitable
manner and is in a good position. To ascertain the reliability and validity the sources from
which data is collected will be tested and also the comparison will be made to ensure that
correct data is taken (Williams & Dobelman, 2017). The industry in which comfort blinds are
operating is in a good position and there are various growth opportunities that are available

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with the help of new designs and techniques. The economy is powerful and there will be
growth that will be attained.
To client,
The parameters which have been set are considered and there are further calculations
which are made. On that basis, it can be said that all the targets are met and the company is
performing in a well manner. All the ratios are in the specified range and it is beneficial to
work with the company.
Script with authority
Authority: What process are you following?
Me: There are parameters which are set and working is made accordingly.
Authority: What steps do you take to ensure compliance?
Me: There is a plan which is prepared and all the members are informed of the method to
carry the process by which best results are attained. There is proper monitoring which is
made.
Authority: What changes have been incorporated to improve the process?
Me: There is the making of budget and also ratio analysis is performed to ensure that the
budget is maintained. The training is given to staff so that they can comply with the policies
and procedures effectively. There are proper guidelines that are provided to members for
implementation and also monitoring is done regularly to ensure the attainment of objectives.

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References
Tie, X., Zhang, Q., He, H., Cao, J., Han, S., Gao, Y., ... & Jia, X. C. (2015). A budget
analysis of the formation of haze in Beijing. Atmospheric Environment, 100, 25-36.
Almeida, A., & Cunha, J. (2017). The implementation of an Activity-Based Costing (ABC)
system in a manufacturing company. Procedia Manufacturing, 13, 932-939.
Cristina-Otilia, Ţ. (2014). Sales Budget-Management tool in business background
entity. Management Strategies Journal, 26(4), 255-261.
Radu, M., & Giju, G. C. (2015). The Flexible Budget–Basic Tool Of The Management
Control In The Economic Entities. Scientific Bulletin-Economic Sciences, 14(1), 3-10.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.