Managerial Accounting Assignment Solution: Costing Analysis

This managerial accounting assignment solution analyzes overhead costs, cost allocation methods, and activity-based costing within a university setting. The solution presents detailed calculations for a predetermined overhead rate, allocating overhead costs across different study programs (Professional Studies, Arts, and Technology) using both traditional and activity-based costing systems. It includes calculations for direct costs, overhead costs, and total costs per student. The assignment contrasts the traditional costing system, which allocates costs based on a single volume basis, with the activity-based costing system, which uses activity drivers for more accurate allocation. The solution provides a breakdown of overhead costs by activity, such as central administration, information systems, and student counseling, with corresponding cost drivers and allocated costs for each program. The assignment concludes by recommending the use of the activity-based costing system for more accurate cost allocation. This solution is designed to help students understand and apply managerial accounting principles.

Running head: MANAGERIAL ACCOUNITNG
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1MANAGERIAL ACCOUNITNG
Table of Contents
Answer to question 1:.................................................................................................................2
Part a:.....................................................................................................................................2
Part b:.....................................................................................................................................2
Part c:.....................................................................................................................................2
Answer to question 2:.................................................................................................................2
Part a:.....................................................................................................................................2
Part b:.....................................................................................................................................3
Part c:.....................................................................................................................................3
Answer t o question 3:................................................................................................................3
Answer to question 4:.................................................................................................................5
References and bibliography:.....................................................................................................6

2MANAGERIAL ACCOUNITNG
Answer to question 1:
Part a:
Administrative salaries $ 9,00,000
Facility costs $ 13,00,000
Office expenses $ 3,00,000
Total overhead costs $ 25,00,000
Total number of students 4000
Predetermined overhead rate per
student $ 625
Part b:
Particulars Professional studies Arts Technology
Number of students 2000 1000 1000
Overhead rate per student $ 625 $ 625 $ 625
Allocated overhead
costs $ 12,50,000 $ 6,25,000 $ 6,25,000
Part c:
Particulars Professional studies Arts Technology
Number of students 2000 1000 1000
Total direct costs $ 18,40,000 $ 11,20,000 $ 11,55,000
Add: Overhead costs $ 12,50,000 $ 6,25,000 $ 6,25,000
Total costs $ 30,90,000 $ 17,45,000 $ 17,80,000
Cost per student $ 1,545 $ 1,745 $ 1,780
Answer to question 2:
Part a:
Activity Administrative Facilities Office Total

3MANAGERIAL ACCOUNITNG
Central administration $ 1,80,000 $ 65,000
$
45,000 $ 2,90,000
Information system
technology $ 1,80,000 $ 1,95,000
$
45,000 $ 4,20,000
Student counselling service $ 45,000 $ 65,000
$
30,000 $ 1,40,000
Human resources $ 90,000 $ 65,000
$
30,000 $ 1,85,000
Library operations $ 1,80,000 $ 7,80,000
$
90,000 $ 10,50,000
Registrar's office $ 2,25,000 $ 1,30,000
$
60,000 $ 4,15,000
Total $ 9,00,000 $ 13,00,000
$
3,00,000 $ 25,00,000
Part b:
Activity Cost driver
Use of
cost
driver
Total costs Cost per
activity
Central administration Hours spent on program 20000
$
2,90,000 $ 14.50
Information system
technology Processing hours 21000
$
4,20,000 $ 20.00
Student counselling service Number of students counselled 500
$
1,40,000 $ 280.00
Human resources Number of admin. staff and facility members 50
$
1,85,000 $ 3,700.00
Library operations Number of library circulations 12000
$
10,50,000 $ 87.50
Registrar's office Full time students 4000
$
4,15,000 $ 103.75
Part c:
Activity Cost driver Cost per
activity
Professional studies Facilities Technology
Use of
activit
y
Allocated
costs
Use of
activit
y
Allocate
d costs
Use of
activit
y
Allocate
d costs
Central administration Hours spent on program $ 14.50 6000
$
87,000 7000
$
1,01,500 7000
$
1,01,500
Information system
technology Processing hours $ 20.00 6000
$
1,20,000 3000
$
60,000 12000
$
2,40,000
Student counselling
service Number of students counselled $ 280.00 180
$
50,400 115
$
32,200 205
$
57,400
Human resources
Number of admin. staff and facility
members $ 3,700.00 21
$
77,700 15
$
55,500 14
$
51,800
Library operations Number of library circulations $ 87.50 6000
$
5,25,000 3000
$
2,62,500 3000
$
2,62,500
Registrar's office Full time students $ 103.75 2000
$
2,07,500 1000
$
1,03,750 1000
$
1,03,750
Total
$
10,67,600
$
6,15,450
$
8,16,950

4MANAGERIAL ACCOUNITNG
Answer t o question 3:
Particulars Professional studies Arts Technology
Number of students 2000 1000 1000
Total direct costs $ 18,40,000 $ 11,20,000 $ 11,55,000
Add: Overhead costs $ 10,67,600 $ 6,15,450 $ 8,16,950
Total costs $ 29,07,600 $ 17,35,450 $ 19,71,950
Cost per student $ 1,453.80 $ 1,735.45 $ 1,971.95

5MANAGERIAL ACCOUNITNG
Answer to question 4:
Traditional costing system requires the overhead costs to allocate over the
departments, or products based on a single basis or volume. It sprightly allocates the costs to
the products based on a single predetermined overhead allocation rate. In the given case
study, the overhead costs have been allocated to each of the study courses based on the
number of students. It can be observed that, following a traditional costing system the cost
per student for three of the courses coming to $1,545 for the professional studies, $1,745 for
the Arts and $1,780 for the Technology. On the other hand, the activity based costing system
requires to allocate the overhead expenses based on activity drivers or cost drivers. In this
system each of the components of overhead costs are identified with the respective cost
drivers and based on the respective cost driver, the rate per activity is calculated. Then as per
the usage of the specific activity, the overhead costs are allocated to each of the product or
service. It can be observed from the given case study, that there are mainly six activities in
the overhead costs and are driven by six costs drivers (Kaplan & Atkinson 2015). Taking the
total costs for each of the given six activates and uses of cost drivers, the rate per cost drivers
have been calculated. Then as per the use of such activities by four three of the courses, the
overhead costs have been allocated. Therefore as the basis for allocation of costs differs in
the traditional and activity based costing system, the total allocated overhead costs in both of
the systems becomes different, and as a result the total cost per student in these two methods
becomes different. Activity based costing system is much more rational and scientific in
nature; it allocates the overhead costs more significantly to the products or services. Hence, it
can be recommended to use the activity based costing system (Collis & Hussey 2017).

6MANAGERIAL ACCOUNITNG
References and bibliography:
Collis, J., & Hussey, R. (2017). Cost and management accounting. Macmillan International
Higher Education.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.