Management Accounting Assignment: Value Chain and Costing

This management accounting assignment solution encompasses several key areas of the subject. It begins with a value chain analysis of BHP Billiton, examining its primary and secondary activities to identify management accounting issues and improve operational efficiency. The solution then presents a detailed cost of goods manufactured statement for Portland Precision Engineering Company Limited, calculating the cost of sales, gross profit, and net profit. Following this, the assignment addresses cost allocation methods, comparing the direct, step-down, and reciprocal methods and justifying the selection of the most accurate method. The solution further explores cost accounting concepts, including weighted average and FIFO methods, by calculating equivalent units and equivalent cost per unit, and preparing the cost of goods sold and closing work-in-process inventory. The assignment includes several requirements, from preparing financial statements to determining the most appropriate cost allocation method. The provided solution is comprehensive and offers insights into various aspects of management accounting.

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

1MANAGEMENT ACCOUNTING
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................4
Requirement 1........................................................................................................................4
Requirement 2........................................................................................................................5
Requirement 3 and 4..............................................................................................................5
Answer to Question 3.................................................................................................................6
Requirement 1........................................................................................................................6
Requirement 2........................................................................................................................6
Requirement 3........................................................................................................................6
Requirement 4........................................................................................................................6
Requirement 5........................................................................................................................7
Requirement 6........................................................................................................................7
Requirement 7........................................................................................................................7
Answer to Question 4.................................................................................................................8
Requirement 1........................................................................................................................8
Requirement 2........................................................................................................................8
Requirement 3........................................................................................................................9
Answer to Question 5.................................................................................................................9
Requirement 1........................................................................................................................9
Requirement 2........................................................................................................................9
References................................................................................................................................10

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Answer to Question 1
Introduction
A Value Chain can be considered as a full range of activities that includes designing,
production, marketing and distribution and business organizations conduct these activities for
bringing the product or service from conception to delivery (da Silva Guabiroba et al., 2017).
This report involves in the analysis of the value chain of BHP Billiton with the aim to resolve
some of their management accounting related issues.
Value Chain Analysis of BHP Billiton
In the recent years, BHP Billiton has been facing certain issues in the areas of
management accounting such inappropriate transportation, lack of collaboration between the
suppliers, lower efficiency of the business operations and others. These issues are affecting
the competitive advantage of BHP Billiton. With the aim to resolve these issues, BHP
Billiton has engaged in efficient Value Chain Activities for increasing the overall efficiency
of their business operations. More specifically, BHP Billiton has been engaged in five
specific activities of their value chain; they are Supply chain management, Operations,
Distribution, Sales and Marketing and Services (da Silva Guabiroba et al., 2017). The
workers of BHP Billiton execute these value chain activities in ‘The BHP Billiton Way’.
These are discussed below:
Supply Chain Management – Supply chain management is one of the most crucial cost
drivers of BHP Billiton and inventory management is considered as a key function for the
firm. Due to the large size, BHP Billiton is active in bulk freight for achieving delivery
efficiency. BHP Billiton has ensured major investment for the creation of final product that
are bulk commodities.

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Operations – The presence of BHP Billiton in the operational value chain can be seen in the
emissions credit business and power trading operations business. These business operations
of the company have the potential to become the areas of future growth and competitive
advantage for the company (Simatupang, Piboonrungroj & Williams, 2017).
Distribution – Distribution is considered as a crucial function for the value chain of BHP
Billiton since BHP Billiton is referred to one of the largest bulk shipping seaborne freight
carriers in the world. For this reason, distribution works as a most important cost drivers in
the value chain of BHP Billiton.
Sales and Marketing and Services – On the basis of the main product lines that are
strategically positioned throughout the world, the presence of seven customer services can be
seen in the company. For this reason, BHP Billiton manages the value chain activities in the
sales and marketing in accordance with the matric structure with the main reporting centre in
Melbourne, Australia. BHP Billiton has adopted ‘customer centric’ marketing system that
consists of aspects like people, processes and knowledge.
Apart from these, BHP Billiton has also adopted certain secondary activities in their
value chain; these activities are Product R&D, Technology, System development, Human
resource management and General administration. These activities provide support to the
primary value chain activities (Grigorescu, 2015).
Conclusion
It can be seen from the above discussion that BHP Billiton has adopted both the
primary as well as secondary functions in their value chain for increasing the overall
efficiency of their businesses operations. These activities play vital role in resolving the
management accounting issues within the organization.

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Answer to Question 2
Requirement 1
In the Books of Portland Precision Engineering Company Limited
Statement of Cost of Goods Manufactured
For the Year Ended 31 December 2018
Particulars Amount Amount
Direct materials (A):
Opening raw materials $ 67,200
Add: Purchases of raw materials $ 1,94,600
Add: Freight inwards $ 2,800
Raw materials available $ 2,64,600
Less: Ending raw materials $ 71,500
Raw materials used $ 1,93,100
Direct labour (B) $ 4,90,000
Factory manufacturing overhead (C):
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 $ 2,28,866
Total manufacturing cost (D) = (A) + (B) + (C) $ 9,11,966
Add: Opening work-in-process inventory $ 49,000
Total $ 9,60,966
Less: Ending work-in-process inventory $ 50,700
Cost of goods manufactured $ 9,10,266

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Requirement 2
Requirement 3 and 4

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Answer to Question 3
Requirement 1
Requirement 2
Requirement 3
Requirement 4

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Requirement 5
Requirement 6
Requirement 7
Memo
To: Chief Financial Officer of Bezos Limited
From: _
Subject: Determination of the Most Accurate Method

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The presence of three methods can be seen for cost allocation in service departments; they are
Direct method, Step-down method and Reciprocal method. Direct method is a simple method
where costs are assigned to each department based on their allocation base. However,
sequential allocation of costs to the service departments can be seen in step-down methods.
This cost allocation process starts from the department with maximum cost and it continues.
Reciprocal method helps in the cost allocation in the operating service departments and
service departments. This method ascertains the relation between different service
departments and cost allocation is done from and to the service departments (Hilton & Platt,
2013). For this reasons, this method is considered as the most accurate method of cost
allocation.
Answer to Question 4
Requirement 1
Requirement 2

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Requirement 3
Answer to Question 5
Particulars Weighted Average FIFO
Materials
Conversio
n Materials
Conversio
n
Opening work-in-process
$
1,88,000 $ 88,000 $ - $ -
Add: Costs incurred during
March
$
3,28,000 $ 5,45,600
$
3,28,000 $ 5,45,600
Total
$
5,16,000 $ 6,33,600
$
3,28,000 $ 5,45,600
Equivalent units 60,000 52,000 40,000 44,000
Equivalent cost per unit
$
8.60 $ 12.18
$
8.20 $ 12.40
Requirement 1
Particulars Units
Units completed and transferred out during December 50,000
Equivalent cost per unit for materials $ 8.60
Equivalent cost per unit for conversion $ 12.18
Units in process in the weaving department 20,000
Cost of goods sold $10,39,230.77
Closing work-in-process inventory $ 4,15,692.31
Requirement 2
Particulars Units
Units completed and transferred out during December 50,000
Equivalent cost per unit for materials $ 8.20
Equivalent cost per unit for conversion $ 12.40
Units in process in the weaving department 20,000
Cost of goods sold $ 10,30,000

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Closing work-in-process inventory $ 4,12,000
References
da Silva Guabiroba, R. C., da Silva, R. M., da Silva César, A., & da Silva, M. A. V. (2017).
Value chain analysis of waste cooking oil for biodiesel production: Study case of one
oil collection company in Rio de Janeiro-Brazil. Journal of cleaner production, 142,
3928-3937.
Grigorescu, I. L. (2015, June). Value chain analysis–basic element of an organization’s
competitive advantage. In International conference KNOWLEDGE-BASED
ORGANIZATION (Vol. 21, No. 2, pp. 318-324). De Gruyter Open.
Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
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.