UGB222 Management Accounting: Financial Analysis and Decisions

This assignment solution provides detailed answers to several management accounting questions. It includes a high-low method analysis to estimate variable and fixed costs for St James Hospital, a schedule of cost of goods sold and an income statement, and a relevant cost analysis for make-or-buy decisions. Furthermore, it covers break-even point calculations and contribution margin analysis, offering a comprehensive overview of essential management accounting concepts and their practical application. Desklib is your go-to resource for more solved assignments and past papers.

Management
accounting

Contents
Contents...........................................................................................................................................2
Question 1........................................................................................................................................1
1...................................................................................................................................................1
2...................................................................................................................................................1
3...................................................................................................................................................1
Question 2........................................................................................................................................3
(i)..................................................................................................................................................3
(ii)................................................................................................................................................4
Question 5........................................................................................................................................4
(a).................................................................................................................................................4
(b).................................................................................................................................................5
(c).................................................................................................................................................5
Question 6........................................................................................................................................6
(a).................................................................................................................................................6
(b).................................................................................................................................................6
(c).................................................................................................................................................6
(d).................................................................................................................................................6
(e).................................................................................................................................................7
(f).................................................................................................................................................7

Question 1
1.
500 x 80% = 400 beds
400 x P40 x 30 = P 480,000 costs per month
500 x 60% = 300 beds
High: 400. . . . . . P 480,000
Low: 300 . . . . . . P 405,000
= (P 480,000 - P 405,000) / (400 - 300)
= P 75,000 / 100
= P 750 variable cost per occupied bed per month
a) Estimate the variable cost per occupied bed on a daily basis using the high-low method.
= P 750 / 30 days
= P 25 Variable cost per occupied bed on a daily basis.
b) Estimate the total fixed operating costs per month using the high-low method.
= P 480,000 - (P 750 x 400)
= P 180,000 Fixed costs per month.
2.
500 x 70% = 350 beds
Fixed Cost = P180,000
Variable Costs = 350 x P 750 = P 262,500
Total operating costs = P 180,000 + P 262,500
Total operating costs = P 442,500
3.
Given:

Initial Activity Level = 6800 units
Initial Total Variable Cost = $125,188
Initial Total Fixed Cost = $164,152
For a New activity level = 7100 units, compute:
a. Total variable cost
= (Initial Total Variable Cost/Initial Activity Level) x New activity level
= ($125,188/6800) x 7100 = $130,711
b. Total fixed cost
= Initial total fixed cost
= $164,152
c. Total Cost
= Total variable cost + Total fixed cost
= $130,711 + $164,152
= $294,863
d. Average variable cost per unit
= Total variable cost/New activity level
= $130,711/7100
= $18.41

e. Average fixed cost per unit
= Total fixed cost/New activity level
= $164,152/7100
= $23.12
f. Average total cost per unit
= Total cost/New activity level
= $294,863/7100
= $41.53
Question 2
(i)
Schedule of cost of goods sold
Particulars Amount
opening stock of raw material -
raw material purchased 310000
(-) raw material closing stock 40000
raw material consumed 270000
Cleaning supplies, factory 6000
Direct labour costs 80000
Indirect labour costs 136000
Maintenance, factory 47000
Rental cost facilities 52000
utilities cost factory 36000
Depreciation, production equipment 75000
Insurance, factory 9000
(-) WIP closing stock 30000
cost of goods manufactured 680000
(20000 units in june quarter)
cost of goods manufactured unit 34000
Cost of goods sold account
Particulars Amount
opening stock of finished goods -

cost of goods manufactured 680000
total goods available for sale 680000
(-) closing stock 4000 units 136000
cost of goods sold 544000
(ii)
Income statement for the quarter ending
june30
Particulars Amount Amount
sales revenue (16000 units) 975000
(-) COGS
opening stock of finished goods -
cost of goods manufactured 680000
total goods available for sale 680000
(-) closing stock of 4000 units 136000
cost of goods sold 544000
gross profit 431000
(-) operating cost
selling and admin salaries 90000
deprecistion office equipment 18000
rent selling and admin 13000
utilities selling and admin 4000
advertising 200000
travel sales 60000
total operating cost 385000
net profit 46000
Question 5
(a)
Statement of Relevant Cost
Make Buy
Direct Material $210,000 -
Direct Labor $150,000 -
Variable Manufacturing Overhead $45,000 -
Fixed Manufacturing Overhead(Traceable) $30,000 -
(90,000 × 1/3)
Purchase Cost (15,000 units @$35 p.u.) - $525,000

Total Relevant Cost $435,000 $525,000
The engines should be produced instead of buying and the offer should not be accepted as it
leads to increase in costs by $90,000($525,000 - $435,000).
(b)
Statement of Relevant Cost
Make Buy
Cost of making $435,000 -
Cost of buying - $525,000
Opportunity Cost - segment margin for the new product $150,000 -
Total Relevant Cost $585,000 $525,000
The engines should be bought instead of producing and the offer should be accepted as it leads to
savings in costs by $60,000($585,000 - $525,000).
(c)
Incremental cost- Incremental costs are the added expenses associated with the
manufacturing of one extra item, and it only considers such expenses which are likely to change
as a result of a specific criterion, whereas the rest costs are judged unimportant. It is described as
an extra cost borne by a corporation as a result of changes in price connected with the
manufacturing, upgrading gear and technology, or installing a second item, for example.
Opportunity cost- When author talks about a resource's "opportunity cost," they're
referring to the worth of the resource's next-highest-valued alternate usage. If you spend lots of
cash travelling to the movies, for instance, you can't invest more time studying books at house,
and you can't invest the cash on anything different. If studying this article will be your next right
approach after watching the picture, the opportunity cost of watching the film is the amount paid
plus the enjoyment you miss out on by not studying the books.

Question 6
(a)
Sales = 3000000
(-) variable cost = 2025000 (300000+1387500+150000+60000+127500)
Contribution = 975000
(b)
Breakeven point in units = fixed cost / contribution per unit
= 855000/6.5
= 131538.45
Fixed cost = 855000 (90000+240000+525000)
Contribution per unit = 975000/150000
= 6.5
(c)
Sales = 3184615
(-) variable cost = 2149615
Contribution = 1035000
(-) fixed cost = 855000
Profit = 180000
(d)
Sales = 17 (20-15%)
(-) variable cost = 13.5
Contribution = 3.5
Breakeven point in units = fixed cost / contribution per unit
= 855000/3.5
= 244285.71

(e)
Sales = 20
(-) variable cost = 15.75
Contribution = 4.25
Breakeven point in units = fixed cost / contribution per unit
= 855000/4.25
= 190000
(f)
The contributions margins proportion is the proportion differential among a corporation's sales
and variable costs. The sum of funds sufficient to support fixed costs is represented by this ratio.
A strong contributing margins percentage is desirable since the greater the proportion, the more
cash each goods sold is able to support all other costs.