Management Accounting for Cost and Control - Assignment Report

This document is a comprehensive report addressing a management accounting assignment, providing detailed solutions to various questions. The assignment covers a range of topics, including value chain analysis of Wesfarmers Limited, constructing a cost of manufacturing statement for Portland Precision Engineering Company Limited, cost allocation methods for Bezos Limited, job costing for Collaroy Products Limited, and process costing for Pure Cotton Limited. The report provides step-by-step calculations, explanations of different costing methods, and evaluations of their accuracy. It also includes discussions on key management accounting issues and the application of various techniques in real-world scenarios. The assignment showcases the application of accounting principles and techniques to solve practical business problems. The document also includes a memo to the Chief Financial Officer of Bezos Limited, evaluating the accuracy of support department cost allocation methods.

Running head: MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Management Accounting for Cost and Control
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Table of Contents
Question 1: Value chains of Wesfarmers Limited.....................................................................3
Question 2: Cost of manufacturing statement of Portland Precision Engineering Company
Limited.......................................................................................................................................4
Part 1:.....................................................................................................................................4
Part 2:.....................................................................................................................................6
Parts 3 and 4:..........................................................................................................................6
Question 3: Cost allocation of Bezos Limited...........................................................................7
Part 1:.....................................................................................................................................7
Part 2:.....................................................................................................................................7
Part 3:.....................................................................................................................................7
Part 4:.....................................................................................................................................7
Part 5:.....................................................................................................................................8
Part 6:.....................................................................................................................................8
Part 7:.....................................................................................................................................8
Question 4: Job costing of Collaroy Products Limited..............................................................9
Part 1:.....................................................................................................................................9
Part 2:...................................................................................................................................10
Part 3:...................................................................................................................................10
Question 5: Process costing of Pure Cotton Limited...............................................................10
Part 1:...................................................................................................................................11

2MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Part 2:...................................................................................................................................11
References:...............................................................................................................................13

3MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Question 1: Value chains of Wesfarmers Limited
In this section, Wesfarmers Limited is selected, which is the leader in the Australian
retail industry in recent times. Wesfarmers has always strived to provide quality products to
its customers (Wesfarmers.com.au, 2019). Despite such effort, certain issues are evident that
include transportation, partnership with suppliers and inbound/outbound integration. This has
mandated the need for Wesfarmers to improve its services for maintaining competitive
advantage in the market. Therefore, by using Porter’s value chain analysis, the supply chain
management of Wesfarmers could be analysed, which includes the following three functions:
Inbound logistics: This function involves relationships with the suppliers and the activities
to be obtained in stores and dissemination inputs. Since Wesfarmers is a retail company, it is
involved in distribution and control rather than producing the products. In terms of
distribution network, Wesfarmers makes contributions into logistics and procurement (Hertati
& Sumantri, 2016).
Procurement and logistics: Wesfarmers has adopted product lifecycle management system
for its method of procurement, as it assists in effective management of business to business
sales, suppliers and orders (Indiatsy et al., 2014). Moreover, for maintaining product quality,
the organisation conducts frequent audits before selling them to the customers. Furthermore,
the purchasing activities of the organisation have been nationalised so that it could save
additional costs. Finally, Wesfarmers has integrated the system of delivery network by
involving effective centres of distribution and system of transport. In this manner, the
organisation is in a better position to avoid strikes from the staffs along with enabling
effective control in its shipment activities.

4MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Marketing and sales: Wesfarmers uses to hold monthly offers to increase sales of different
products where it reduces the prices of different items. These offers are provided to the
customers so that they could place bulk orders. Along with this, Wesfarmers has been
involved in providing advices related to nutritional food habits so that the customers could be
encouraged to enjoy healthy lifestyles (Koc & Bozdag, 2017).
Operations: Wesfarmers is focused on using standardised procedures so that it could identify
and eradicate the products that are defective from the supplier deliveries. For this process, the
organisation has appointed a special team that checks the products arrived from time to time
from the suppliers until they are displayed on the store shelves. In the words of Simatupang,
Piboonrungroj and Williams (2017), space planning is extremely valuable in retail, since
gross profitability and sales volume rely on the space amount utilised for generating such
sales. In terms of space planning, Wesfarmers uses loop layout store design; thus, providing
adequate walking space to its customers, which is separate from the display area of the
products.
The above-mentioned functions are the main supply chain activities carried out by
Wesfarmers Limited. Based on these value-adding activities, it focuses on enforcing sound
human resource management policies along with involvement in structural development. This
is because it would assure Wesfarmers with inbound management excellence, enhanced
outbound collection and warehouse management system within the organisation (Sivula &
Kantola, 2014).

5MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Question 2: Cost of manufacturing statement of Portland Precision Engineering
Company Limited
Part 1:
Portland Precision Engineering Company Limited
Statement of Cost of Goods Manufactured
Particulars Amount (in $) Amount (in $)
Direct materials:
Beginning raw materials 67,200
Purchases of raw materials 194,600
Freight inwards 2,800
Raw materials available 264,600
Closing raw materials 71,500
Raw materials used in production 193,100
Direct labour 490,000
Manufacturing overhead:
Indirect labour 77,200
Depreciation on factory machinery 10,750
Factory rent expenses 39,270
Other manufacturing expenses 5,600
Insurance on factory and equipment 22,120
Electricity for factory 58,800
Depreciation on factory fittings 6,400
Indirect material used 8,726
Total manufacturing overhead 228,866
Total manufacturing cost 911,966

6MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Beginning work-in-process inventory 49,000
Total 960,966
Closing work-in-process inventory 50,700
Cost of goods manufactured 910,266
Part 2:

7MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Parts 3 and 4:
Question 3: Cost allocation of Bezos Limited
Part 1:

8MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Part 2:
Part 3:
Part 4:

9MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Part 5:
Part 6:
Part 7:
To: The Chief Financial Officer of Bezos Limited
From: The Manager
Date: 08/04/2019
Subject: Evaluation of accuracy of the methods of support department cost allocation

10MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Support department costs could be apportioned via step method, reciprocal method
and direct method. In case of the step method, there is sequential apportionment of costs to
the support department. The process begins with the support department for which highest
cost is incurred (Quattrone, 2016). After apportioning this departmental cost, there is
apportionment of the next highest cost incurred by another support department and the
method goes on until the one with the lowest cost has apportioned its costs.
In direct method, each support department cost is apportioned to operating
departments based on each department’s share related to allocation base. The other service
department’s services are not considered in this method.
Lastly, reciprocal method is deemed to be highly accurate despite of its complexities
(Messner, 2016). Under this method, the service department costs are apportioned to
operating as well as other service departments. The relationship between service departments
is realised and cost is apportioned between each service department. Hence, reciprocal
method is the most accurate method in terms of cost apportionment, since correct
apportionment of cost reduces the total expenses of a firm.
Question 4: Job costing of Collaroy Products Limited
Part 1:

11MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Part 2:
Part 3:
Question 5: Process costing of Pure Cotton Limited
Particulars Weighted Average FIFO
Materials Conversion Materials Conversion
Beginning work-in-process (in $)
188
,000 88,000 - -
Add: Costs incurred during March
(in $)
328
,000 545,600 328,000 545,600
Total (in $)
516
,000 633,600 328,000 545,600
Equivalent units
60
,000 52,000 40,000 44,000
Equivalent cost per unit (in $) 8.60 12.18 8.20 12.40

12MANAGEMENT ACCOUNTING FOR COST AND CONTROL
Part 1:
Particulars Amount
Units completed and transferred out
50,00
0
Equivalent cost per unit for materials (in $)
8.6
0
Equivalent cost per unit for conversion (in
$)
12.1
8
Units in process in the weaving department
20,00
0
Cost of sales (in $) 1,039,230.77
Ending work-in-process inventory (in $)
415,692.3
1
Part 2:
Particulars Amount
Units completed and transferred out
50,0
00
Equivalent cost per unit for materials (in $)
8.
20
Equivalent cost per unit for conversion (in $)
12.
40
Units in process in the weaving department 20,0

13MANAGEMENT ACCOUNTING FOR COST AND CONTROL
00
Cost of sales (in $)
1,030,000.0
0
Ending work-in-process inventory (in $)
412,000.
00

14MANAGEMENT ACCOUNTING FOR COST AND CONTROL
References:
Hertati, L., & Sumantri, R. (2016). Just In Time, Value Chain, Total Quality Management,
Part Of Technical Strategic Management Accounting. International Journal of
Scientific & Technology Research, 5(4), 180-191.
Indiatsy, C. M., Mwangi, M. S., Mandere, E. N., Bichanga, J. M., & George, G. E. (2014).
The application of Porter’s five forces model on organization performance: A case of
cooperative bank of Kenya Ltd. European Journal of Business and
Management, 6(16), 75-85.
Koc, T., & Bozdag, E. (2017). Measuring the degree of novelty of innovation based on
Porter's value chain approach. European Journal of Operational Research, 257(2),
559-567.
Messner, M. (2016). Does industry matter? How industry context shapes management
accounting practice. Management Accounting Research, 31, 103-111.
Quattrone, P. (2016). Management accounting goes digital: Will the move make it
wiser?. Management Accounting Research, 31, 118-122.
Simatupang, T. M., Piboonrungroj, P., & Williams, S. J. (2017). The emergence of value
chain thinking. International Journal of value chain management, 8(1), 40-57.
Sivula, A., & Kantola, J. (2014). Combining crowdsourcing and Porter’s value
chain. International Journal of Advanced Logistics, 3(1-2), 17-26.
Wesfarmers.com.au. (2019). Home. Retrieved 8 April 2019, from
https://www.wesfarmers.com.au/