Managerial Accounting: Case Study Analysis and Financial Review

This document presents a comprehensive solution to a managerial accounting case study, involving financial analysis, cost estimation, budgeting, and decision-making. It covers various aspects such as cost equations, regression analysis, overhead allocation, process costing using the FIFO method, and break-even analysis. The solution addresses specific problems related to cost estimation, overhead application, production reports, and income statement preparation. Additionally, it includes an analysis of Cafe Xaragua's financial performance and reopening decisions for Norgan Theatre, providing insights into revenue changes, gross margin analysis, and key assumptions for budgeting. Desklib offers more solved assignments and past papers for students.

Running head: MANAGEMENT ACCOUNTING 1
Management Accounting
Name
University Affiliation

MANAGEMENT ACCOUNTING 2
Month Total
Flights Commercial Flights
Privat
e
Flight
s
Airport
Costs
January 1,000 950 50 $20,000
February 800 400 400 $17,000
March 1,400 1,100 300 $19,000
April 900 850 50 $18,000
May 1,000 925 75 $19,000
June 1,200 1,000 200 $20,000
July 1,100 750 350 $18,000
August 1,400 895 505 $24,000
September 1,000 700 300 $19,000
October 1,200 915 285 $21,000
November 900 840 60 $17,000
December 1,500 1000 500 $21,000
1 Use the Hi-Lo method to estimate variable per flight and
fixed costs.
Max $ 24,000 1,500
Min $ 17,000 800
Change $ 7,000 700
Variable Cost per
flight
$ 10

MANAGEMENT ACCOUNTING 3
Fixed Costs $ 9,000
2 Write the cost equation based on your answer above.
Equation:
Y=9000+10
X
3 Use the regression output below to write a cost equation that incorporates commercial and private
flights.
SUMMARY OUTPUT
Regression
Statistics
Multiple R 0.740610474
R Square 0.548503874
Adjusted R
Square 0.448171401
Standard
Error 1467.299438
Observation
s 12 0
ANOVA
df SS MS F
Significance
F

MANAGEMENT ACCOUNTING 4
Regression 2 23539957.91 11769978.96
5.4668629
2
0.02792178
2
Residual 9 19376708.76 2152967.64
Total 11 42916666.67
Coefficient
s Standard Error t Stat P-value Lower 95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
12278.923
6 2387.313477 5.143406486 0.0006085
6878.44533
8
17679.401
9
6878.4453
4
17679.401
9
Commercia
l
6.2859863
4 2.475050667 2.539740468
0.0317242
9
0.68703274
5
11.884939
9
0.6870327
4
11.884939
9
Private
6.7480024
8 2.657548722 2.53918298
0.0317533
2
0.73620960
7
12.759795
4
0.7362096
1
12.759795
4
Equation
:
Y=12278.92362+6.2859863(x)
+6.748002484(z)
Least square regression model is the most accurate method of cost estimation since it considers all the variables of the variables under
investigation. It mainly focuses on having a constant and on the other hand coming up with regression formula that generates all the
values to improve the model of calculation. Basically, having it in place ensures that the organization can be able to project all its costs
in a most effective and feasible. It involves analyzing past data using mathematical techniques to determine the variables and fixed
components of a cost and provide an equation that can be used to predict the future expenses. The disadvantage with this cost
estimation techniques is that is complicated and more complex and does not favor personnel who are not well equipped with
mathematics related courses.
Problem 3

MANAGEMENT ACCOUNTING 5
Total budgeted
manufacturing overhead
$235,000
Total budgeted machine
hours
46,550
During January, the company began the following jobs:
Job Number Direct Material Direct Labor Machine Hours
A79 $6,500 $2,950 1,000
N08 $13,500 $4,290 2,500
P82 $3,800 $1,750 500
1 Compute the company’s predetermined overhead rate for the current year.
Total budgeted manufacturing
overhead
$235,000
Total budgeted machine hours 46,550
Pre-determined overhead rate $5.05
2 How much manufacturing overhead was applied to each job during January?
Job Number Application rates Manufacturing

MANAGEMENT ACCOUNTING 6
Overheads
A79 $1,000 $5.05 5048.335124
N08 $2,500 $5.05 12620.83781
P82 $500 $5.05 2524.167562
3 Calculate the over-applied or under-applied overhead for January.
Job Number Manufacturing Overheads
A79
5,048.34
N08
12,620.84
P82
2,524.17
Estimated Overhead
20,193.34
Over/(Under Applied)
Overhead
Actual overheads
26,000.00
Undersupplied
5,806.66
4 If the company wants to earn a 40% profit on their jobs,
Price for job A79 Price for job A79 Amounts

MANAGEMENT ACCOUNTING 7
Direct Materials $6,500
Direct Labor $2,950
Machine Hours $1,000
Total $10,450
Target Profit $14,630.0
Charge $14,630.0
Problem 4
Production Report
For the month of August
Physical Units Percentage
Complete
Work-in-Process, August 1 40,000 80%
Units started during August 80,000
Units completed and transferred out 100,000
Work-in-process, August 31 20,000 30%
Direct Material Conversion Total
Work-in-process, August 1 $42,000 $305,280 $347,280

MANAGEMENT ACCOUNTING 8
Costs incurred during August $96,000 $784,400 $880,400
Total $138,000 $1,089,680 $1,227,680
Use the FIFO method of process costing in
completing the following:
1 Compute equivalent units for materials
and conversion.
Equivalent
units
Physical units % of
completion
Direct
Materials
Conversio
n
Work in progress, August 1 40,000 80%
Units started during August 80,000
Total units to account for 120,000
Units completed and transferred 100,000 100% 100000 100000
Work in progress, August 31 20,000 30% 20000 6000
Units to account for 120,000
Total equivalent units 120000 106000
Less equivalent units represented in August 40,000 32000

MANAGEMENT ACCOUNTING 9
1 WIP
New equivalent units for August 80,000 74000
2 Compute the cost per equivalent unit.
Matrial Conversion
$1.20 $10.60
Cost per unit
3 Compute the cost of goods completed
and transferred out during August.
Cost of August 1 WIP inventory $347,280.00
Cost incurred to finish the August 1 WIP
inventory
$84,800.00
Cost incurred to produce units that were both
started and completed during August
$472,000.00

MANAGEMENT ACCOUNTING 10
Total cost of goods completed and
transferred
$904,080.00
4 Compute the dollar amount of ending
work-in-process inventory.
Work-In-Progress Inventory
August 1 balance $347,280.00 Cost of goods
transferred out
$904,080.0
0
Costs incurred during August $880,400.00
August 31 balance $24,000.00
Problem 5
Weeders Hedge Clippers Leaf Blowers
Unit sales 50,000 50,000 100,000
Unit selling price $28 $36 $48
Variable manufacturing cost per unit $13 $12 $25
Variable selling cost per unit $5 $4 $6

MANAGEMENT ACCOUNTING 11
Prepare a contribution margin formatted budgeted income statement for 2018.
Weeders Hedge Clippers Leaf Blowers
Unit Sales 50,000.00 50,000.00 100,000.00
Unit sale price 28.00 36.00 48.00
Variable Manufacturing cost/unit 13.00 12.00 25.00
Variable selling cost per unit 5.00 4.00 6.00
Contibution Margin Per Unit 10.00 20.00 17.00
Total Contribution Margin 500,000.00 1,000,000.00 1,700,000.00
Fixed Manufacturing overhead 500,000.00 500,000.00 1,000,000.00
Fixed Selling and Administrative
Expenses
150,000.00 150,000.00 300,000.00
Net Profit
(150,000.00)
350,000.00 400,000.00
2. Assuming the sales mix remains as budgeted, determine how many units of each product CTC must sell in order to break even in 2018
Weeders Hedge Clippers Leaf Blowers
Fixed Manufacturing overhead 500,000.00 500,000.00 1,000,000.00
Fixed Selling and Administrative
Expenses 150,000.00 150,000.00 300,000.00
Contribution Margin/Unit 10.00 20.00 17.00
Total Fixed Cost 650,000.00 650,000.00 1,300,000.00
Break Even Quantity in Units 65,000.00 32,500.00 76,470.59
Weeders Hedge Clippers Leaf Blowers
Unit Sales 50,000.00 50,000.00 300,000.00
Unit sale price 28.00 36.00 48.00
Variable Manufacturing cost/unit 13.00 12.00 30.00

MANAGEMENT ACCOUNTING 12
Variable selling cost per unit 5.00 5.00 6.00
Contibution Margin Per Unit 10.00 19.00 12.00
Total Contribution Margin 500,000.00 950,000.00 3,600,000.00
Fixed Manufacturing overhead 500,000.00 500,000.00 1,000,000.00
Fixed Selling and Administrative
Expenses
150,000.00 150,000.00 300,000.00
Net Profit
(150,000.00)
300,000.00 2,300,000.00
Weeders Hedge Clippers Leaf Blowers
Total Contribution Margin 500,000.00 950,000.00 3,600,000.00
Fixed Manufacturing overhead 500,000.00 500,000.00 1,000,000.00
Fixed Selling and Administrative
Expenses 150,000.00 150,000.00 300,000.00
Contribution Margin/Unit 10.00 19.00 12.00
Total Fixed Cost 650,000.00 650,000.00 1,300,000.00
Break Even Quantity in Units 65,000.00 34,210.53 108,333.33
Case Study
Income Statement for Café Xaragua
Assumption Number
of Days in a Year
equals 365
Sales Price/unit Quantity Sales/day Annum Totals
Drip Coffeee 3.00 200.00 600.00 219,000.00
Special Coffee 4.00 300.00 1,200.00 438,000.00