ACT202: Management Accounting Report - Cost Allocation Analysis

This report, prepared for an ACT202 Management Accounting assignment, presents a comprehensive analysis of cost allocation methods. It begins by outlining activity center costs and subsequently delves into the costs associated with specific activities like setup and operation of machinery. The report then proceeds to evaluate the application of activity-based costing (ABC) and contrasts it with traditional costing methods. Through detailed calculations and comparisons, the report highlights the limitations of traditional costing in accurately reflecting product costs, especially when overhead allocation is mismanaged. The assignment further explores the impact of these costing methods on product pricing decisions, demonstrating how inaccurate cost allocation can lead to over- or under-pricing of products like Mettwurst and Csabai. The report concludes by advocating for the adoption of ABC to overcome the inherent limitations of traditional costing systems, particularly in environments with diverse product lines and complex manufacturing processes. The report also discusses the benefits, costs, and limitations of the ABC method.

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

1
MANAGEMENT ACCOUNTING

2
MANAGEMENT ACCOUNTING
Contents
Requirement 1:.................................................................................................................................3
Requirement 2:.................................................................................................................................5
Requirement 3:.................................................................................................................................5
Requirement 4:.................................................................................................................................9
Requirement 5:...............................................................................................................................17
Requirement 6:...............................................................................................................................17
Requirement 7:...............................................................................................................................17
Requirement 8 and 9:.....................................................................................................................18
Introduction:..............................................................................................................................18
Discussion and analysis:............................................................................................................18
Conclusion:................................................................................................................................21
References:....................................................................................................................................22

3
MANAGEMENT ACCOUNTING
Requirement 1:
Requirement 1
Activity
centres
Wages Building
cost
Deprecia
tion
Consuma
bles
Energy Other Total
activity
centre
cost
New
product
developme
nt
172,7
36.22
87,3
13.43
1,101.
69
5,6
05.75
1,53
5.43
268,2
92.53
Sales and
distribution
748,5
23.62
203,7
31.34
1,101.
69
3,3
63.45
6,65
3.54
963,3
73.65
Inspecting 115,1
57.48
203,7
31.34
1,101.
69
3,3
63.45
1,02
3.62
324,3
77.59
Mincing 1,842,5
19.69
378,3
58.21
520,0
00.00
22,033.
90
72,8
74.74
16,37
7.95
2,852,1
64.49
Mixing 1,842,5
19.69
378,3
58.21
650,0
00.00
14,322.
03
109,3
12.11
16,37
7.95
3,010,8
90.00

4
MANAGEMENT ACCOUNTING
Smoking
and
packing
1,497,0
47.24
378,3
58.21
130,0
00.00
22,033.
90
72,8
74.74
13,30
7.09
2,113,6
21.18
Administr
ation
748,5
23.62
203,7
31.34
2,203.
39
2,8
02.87
6,65
3.54
963,9
14.77
Corporate
manageme
nt
345,4
72.44
116,4
17.91
1,101.
69
2,8
02.87
3,07
0.87
468,8
65.79
7,312,5
00.00
1,950,0
00.00
1,300,0
00.00
65,000.
00
273,0
00.00
65,00
0.00
Image view:
Requirement 1
acvtivity centres Wages Building cost Depreciation ConsumablesEnergy Other Total
New product development 172,736.22 87,313.43 1,101.69 5,605.75 1,535.43 268,292.53
Sales and distribution 748,523.62 203,731.34 1,101.69 3,363.45 6,653.54 963,373.65
Inspecting 115,157.48 203,731.34 1,101.69 3,363.45 1,023.62 324,377.59
Mincing 1,842,519.69 378,358.21 520,000.00 22,033.90 72,874.74 16,377.95 2,852,164.49
Mixing 1,842,519.69 378,358.21 650,000.00 14,322.03 109,312.11 16,377.95 3,010,890.00
Smoking and packing 1,497,047.24 378,358.21 130,000.00 22,033.90 72,874.74 13,307.09 2,113,621.18
Administration 748,523.62 203,731.34 2,203.39 2,802.87 6,653.54 963,914.77
Corporate management 345,472.44 116,417.91 1,101.69 2,802.87 3,070.87 468,865.79
7,312,500.00 1,950,000.00 1,300,000.00 65,000.00 273,000.00 65,000.00
Requirement 2:
Activity Labour Building
cost
Machine
cost
Total cost

5
MANAGEMENT ACCOUNTING
Set up scales 365,625.
00
97,500.
00
463,125.
00
Weigh ingredients 731,250.
00
97,500.
00
828,750.
00
Load mixers 1,462,500.
00
195,000.
00
1,657,500.0
0
Operate mixers 3,656,250.
00
1,170,000.
00
1,300,000.
00
6,126,250.0
0
Clean mixers 731,250.
00
195,000.
00
926,250.
00
Move mixture to smoke house 365,625.
00
195,000.
00
560,625.
00
Total 7,312,500.
00
1,950,000.
00
1,300,000.
00
10,562,500.0
0
Requirement 3:
List of activities
Activity Activity
cost
Activity
drivers
Annual quantity of
activity driver
Cost of per unit
of cost driver
Corporate 3 Assigned directly to products

6
MANAGEMENT ACCOUNTING
management 45,472.00
Process
management
3
85,566.00
No of invoices 6,500.00 59.3178
Process payable s 3
64,912.00
No of
purchase
orders
3,300.00 110.5794
Production
planning
2
13,436.00
No of
purchase
schedules
1,300.00 164.1815
Reports of health
dept. 31,991.00
No of reports 1,300.00 24.6085
Process sales order 6
16,752.00
no of sales 5,200.00 118.6062
dispatch sales
order
3
43,258.00
No of
dispatches
3,300.00 104.0176
New production
development
1
72,736.00
Assigned directly to products #DIV/0!
Inspect meat 1
36,720.00
No of batches 1,300.00 105.1692

7
MANAGEMENT ACCOUNTING
Disposal of
substandard meat 31,991.00
No of batches 1,300.00 24.6085
Move to mincing
room 31,991.00
No of batches 1,300.00 24.6085
set up mincer 2
04,808.00
No of batches 1,300.00 157.5446
Weigh and short
ingredients
2
04,808.00
No of batches 1,300.00 157.5446
Load mincer 1,6
23,318.00
No of
kilograms
260,000.00 6.2435
Operate mincer 3
90,697.00
No of batches 1,300.00 300.5362
Unload and clean
mincer
2
04,808.00
No of batches 1,300.00 157.5446
Move to mixing
room
2
23,726.00
No of batches 1,300.00 172.0969
Set up scales 4
63,125.00
No of batches 1,300.00 356.2500
Weigh ingredients 8
28,750.00
No of batches 1,300.00 637.5000

8
MANAGEMENT ACCOUNTING
Load mixers 1,6
57,500.00
No of batches 1,300.00 1,275.0000
Operate mixers 6,1
26,250.00
No of
kilograms
260,000.00 23.5625
Clean mixers 9
26,250.00
No of batches 1,300.00 712.5000
Move mixture to
smoke house
5
60,625.00
No of
kilograms
260,000.00 2.1563
Pack into skins 4
72,178.00
No of
products
1,040,000.00 0.4540
Set up smoke
house
1
69,953.00
No of trays 20,800.00 8.1708
Move to
smokehouse 94,436.00
No of trays 20,800.00 4.5402
Smoke products 1,1
69,265.00
No of trays 20,800.00 56.2147
Unload
smokehouse 94,436.00
No of trays 20,800.00 4.5402
Inspect finished
goods 55,227.00
No of trays 20,800.00 2.6551

9
MANAGEMENT ACCOUNTING
Disposal of
substandard
product
31,991.00
No of trays 20,800.00 1.5380
Move to truck 1
13,354.00
No of trays 19,760.00 5.7365
Requirement 4:
Mettwurst
Activities consumed Annual quantity of activity driver Relevant
cost
Corporate management 93773 Assigned directly to product 93,773.
00
Process receivables 700 Invoices 41,522.
49
Process payables 300 purchase orders 33,173.
82
Production planning 160 Production schedules 26,269.
05
Reports of Health Dept. 160 Reports 3,937.
35

10
MANAGEMENT ACCOUNTING
Process of sales order 650 Sales orders 77,094.
00
Dispatch sales order 500 Dispatches 52,008.
79
New product development 0 Assigned directly to new product lines
Inspect meat 160 Batches 16,827.
08
Disposal of substandard
meat
160 Batches 3,937.
35
Move to mincing room 160 Batches 3,937.
35
set up mincer 160 Batches 25,207.
14
Weigh and short
ingredients
160 Batches 25,207.
14
Load mincer 52000 Kilograms 324,663.
60
Operate mincer 160 Batches 48,085.
78
Unload and clean mincer 160 Batches 25,207.

11
MANAGEMENT ACCOUNTING
14
room 160 Batches 27,535.
51
Set up scales 160 Batches 57,000.
00
Weigh ingredients 160 Batches 102,000.
00
Load mixers 160 Batches 204,000.
00
Operate mixers 52000 Kilograms 1,225,250.
00
Clean mixer 160 Batches 114,000.
00
Move mixture to smoke
house
52000 Kilograms 112,125.
00
Pack into skins 208000 Product 94,435.
60
Set up smoke house 2080 Trays 16,995.
30
Move to smoke house 2080 Trays 9,443.