# HI5017 Managerial Accounting

## Question 2 – Week 3 (7 marks)

1. Total manufacturing cost for 150 Coffee table
 Job No. X10 Direct materials used 22,800 Direct Labour used (600 *16) 9,600 Applied Factory Overhead (30*400) 12,000 Total manufacturing cost for Job No. X10 44,400
1. b) Calculate the cost per coffee table for Job No. X10?
 Total manufacturing cost for Job No. X10 (A ) 44,400 Number of Coffee Table ( B ) 150 Cost Per Coffee Table (A/B) 296
1. c) List two uses of this unit cost information to the managers at Tik Tok Company.
• Company can determine break even point  and level of profit.
• Per unit cost helps in determining key cost drivers which increase overall cost of production.

## Question 2 – Week 5

1. Calculations for activity rates for each of the overhead items
 Activity Cost Pools Cost Drivers Estimated Overhead (A ) Expected Use of Cost Drivers ( B ) Activity Rate (A/B) Purchasing Number of orders 1,200,000 40,000 30 Per Order Machine setups Number of setups 900,000 18,000 50 Per Setup Machining Machine hours 4,800,000 120,000 40 Per Machine Hour Quality Control Number of inspections 700,000 28,000 25 Per Inspection

Here is the calculations showing activity rates for overhead items. For purchasing activity the rate is \$30 per order, For Machine setups and Machining \$50 per set up and \$40 per Machine hours respectively. Quality control costs \$25 per inspection.

• Using the rates in (1) determine the unit cost for TRI-X.
 Calculation of Overheads applied Activity Cost Pools Activity Rate (A ) TRI-X Product ( B ) Applied Overheads (A*B) Purchasing 30 17,000 510,000 Machine setups 50 5,000 250,000 Machining 40 75,000 3,000,000 Quality Control 25 11,000 275,000 Total Overheads applied (A ) 4,035,000 Number of Units manufactured ( B) 26,000 Overhead Unit Cost (A/B) 155.19
 Direct Materials 700 Direct Labour (\$20/hour) 120 Overheads applied 155.19 Total Unit Cost of TRI-X 975.19
1. Calculate the Gross Profit  on the Product TRI-X
 Selling Price Per Unit 1600 Less Unit Cost 975.19 Gross Profit Per Unit 624.81

The selling price of TRI-X  in the market is \$1600 per unit , as per the cost drivers and activity costs the total unit cost will be \$975.19  which means  gross profit from the sale of goods  will be \$624.8.

## Question 3 – Week 6

1. Cash receipt budget schedule , include total receipts per month
 Cash Receipt Budget Particulars July August September Total Total Sales (A) 140,000 210,000 280,000 630,000 Immediately Collected ( A *15% ) =( B ) 21,000 31,500 42,000 94,500 Less Cash Discount (B* 4%) 840 1,260 1,680 3,780 Cash Collected from Immediate  (B – C ) =(D ) 20,160 30,240 40,320 90,720 One month later (A *25%) = ( E ) 35,000 52,500 87,500 Two months later ( A *40%) = ( F ) 56,000 56,000 Total  Receipts (D +E +F) 20,160 65,240 148,820 234,220

Working Note

 Sales Budget Particulars July August September Total Number of Units Sold 1,000 1,500 2,000 4,500 Selling Price Per Unit 140 140 140 140 Total Sales 140,000 210,000 280,000 630,000
1. Prepare a material purchases budget schedule for each of the first three
 Material Purchases  Budget Particulars July August September Total October Budgeted Production 1,450 1,650 2,120 5,220 2,460 Add Ending Inventory @20% of next month 330 424 492 492 Total Requirements 1,780 2,074 2,612 6,466 Less Beginning Inventory – 330 424 – Number of Units to be Purchased 1,780 1,744 2,188 5,712 Direct Material Cost Per Unit 60 60 60 60 Total Direct Material purchased 106,800 104,640 131,280 342,720

Working Note

 Schedule of Payment of Material Budget Particulars July August September Total Total Direct Material purchased 106,800 104,640 131,280 342,720 Payment made in the following month 106,800 104,640 211,440 Total Payments made for Purchases – 106,800 104,640 211,440
1. a cash budget for the month of July. Include the owners’ cash
 Cash Budget Particulars July August September Total Opening Balance 250,000 194,810 52,650 250,000 Total Receipts 20,160 65,240 148,820 234,220 Total Cash Available ( A ) 270,160 260,050 201,470 484,220 Less Payments Material – 106,800 104,640 211,440 Labour 14,500 16,500 21,200 52,200 Variable Overheads 18,850 31,600 39,110 89,560 Fixed Overheads 42,000 52,500 52,500 147,000 Total Payments ( B ) 75,350 207,400 217,450 500,200 Ending Balance (A -B) 194,810 52,650 -15,980 -15,980

## Question 2 – Week 8

1. a) Using the general rule, determine the minimum transfer price.

When any manufacturing concerns are having factory outlets in more than one places  then they can transfer goods from one outlet to another  at transfer pricing. That transfer pricing  is the sum of  variable manufacturing costs and shipping cost and opportunity costs associated to the product. The calculation of transfer pricing are as follows:

= \$3.00 + \$0.20 + \$0.50 (\$4.00-\$3.50)

= \$ 3.70

1. b) Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change?

When Bottle division consume  everything from the external sources then  transfer pricing would change  as goods generated internally and goods purchased from external channels have different costs  and vary  a lot.

1. c) Assume the Bottle Division has no excess capacity and can sell everything produced externally. What is the maximum amount Perfume Division would be willing to pay for the bottles?

If Perfume division is going to purchase goods from bottle division which  sells products externally produced then Perfume division has to pay \$4.00  per unit. As it is consuming goods which is produced externally not within same organisation.

1. d) When is it more appropriate to use market-based transfer price rather than cost-based transfer price?

If there are two options cost based transfer price and market based transfer price, then market based transfer pricing is most simplest and elegant method. Company can earn highest possible profit rather than abnormal profit as per the regular  or mandate pricing schemes.

## Question 3 – Week 10

 Particular Alpha Beta Gama Total Selling Price Per Unit 250 400 1500 (-)  Variable cost Per Unit 80 200 800 Contribution margin per unit 170 200 700 Sales Units 12000 6000 2000 20000 Contribution margin 2040000 1200000 1400000 4640000 a. Weighted average contribution Margin 232 b. BEP 21551.72 c. Margin of safety 24999

Working Note

Contribution Margin = Total contribution margin of Sales mix/ Number of sales units

 Break Even Point Fixed cost/Contribution Margin per unit Margin of Safety Actual Sales- Break Even / Actual sales Projected Sales 25000 Total Annual Fixed Costs 5,000,000

## Question 3 – Week 11

 Particulars 80000 units For overseas selling Price (10000 units) 90000 units Direct Material 57 57 Direct Labour 60 60 Variable Manufacturing Overhead 16 16 Fixed Manufacturing Overhead 30 30 Variable Selling and Administrative Costs 10.2 19.2 Fixed Selling and Administrative Cost 27 27 Import and Other Duties Cost 4.2 Total Unit Cost 200.2 213.4 Total Cost 16016000 2134000 18150000 Selling Price 240 242.6 Selling Unit 80000 10000 90000 Total Sales 19200000 2426000 21626000 Profit 3184000 292000 3476000

Estimation of profit on the basis of 80000 units produced

Profit Percentage = 20

Profit For 10000 units = 42.68

1. (b) Cost for selling damaged goods

There are 200 units of finished goods remaining as inventory with the company from last two months. The goods are now damaged due to environment and natural conditions, now if the company wants to sale them in market. Now, these goods are considered as damaged goods.  The feasible approach  for deciding  the selling price of the goods is the price offered by  market or cost of manufacturing  whichever is high.

1. (c) “All future costs are relevant in decision making.” Do you agree? Explain.

Future costs are pre decided costs for transactions in present time period. Yes, these costs are relevant for decision making. If any contract  between  parties are formed related to future transactions then it is good if in the contract future costs should involved because costs are changing with the pass of time and if future contracts are based on traditional pricing then no party will gain profit.  For recovery of cost and generating  profit , it is good  for making  contracts  on the basis of future cost.

#### References:

Accounting Tools. (2020). Transfer Pricing. Accountingtools.com [online]. Available at: https://www.accountingtools.com/articles/2017/5/16/transfer-pricing. [Accessed on 06.10.2020].

## Introduction

The company is a perpetual identity which had a group of people which are collected to make the individual as well as the goals of the company fulfil.

The management accounting gives the way to the company to complete the individual as well as the company objectives. It can be achieved better with the management accounting. Management accounting will let the company understand the way of doing management as well as the way of reporting the statements. It clears out all the aspect of the management.

Initially company was handled with the traditional way of accounting and management. Built with the time they had realised that the improvisation for accounting and management is needed. The research was done to knee the new way of management. Many case studies had been evaluated.

Below the assignment is based on the study done by the Watts, Yapa and Dellaportas in 2014. They had taken the new concepts of accounting as well as the new strategic management. They had dined research on the multinational manufacturing company. They want to know the overall impact of the research.

The journal which had taken for the comparison was David TaylorRobyn King; they also simplified the method of management. They had studied that the management can be done with the traditional method but the improvisation and the innovation is needed in the traditional method for the proper management.

• ### Identify any three (3) specific examples of the different types of management accounting methods and/or techniques from the case

In the given journal it was found that the change was done in the later part of the 20th century in the accounting system. The cost accounting was introduced. The techniques like JIT; TQM was intimated in the organisations. The purpose of adopting new techniques was with the two perspectives first for the long term change and other was operational or short term change. The firm had made different goals for the different perspectives. The strategy trigger for adoption was taken into the consideration for making it successful change (Watts, et. al., 2014)

Firstly it was initiated in the research factors to identify what are the essentials of the new accountings system; later the outlines were prepared for the adoption. The next strafe was the implementation of strategy, while the last was the outcomes of the strategy

The outcome will decide the overall impact of the strategy and whether the changes can be taken for the long term or not. The 3 examples of the types of the management are:

Operational Decision making:  the company applies at the Key Performance Indicators (KPI). For the facility of production. The decision makers have issues about production. That the timeframes are have short term.  And the mangers were taking decision with the ground level. The company have not used ABC and Bam in the operations. There is external and internal benchmarking which will be relied on the capabilities of specific projects. They also used scorecards for managing the activities. The company is utilising all the resource to find the better way of the accounting. The new costing method bifurcate the cost of the product in the various stages. The indicators were evolved to adopt thru ABC costing in the accounts. This will help to justify the cost of operation in the product as they utilise the operating. The overall cost was not allocated in the proportion of the units produced.

Tactical decisions making: the managers were involved in the generating KPI of the plants. The decisions were making the decision son the timeframe of 6-12 months. The management use tactical decision for making decisions. The company is calculating the supply chain management and the customer demands for making the tactical decisions. The decisions are mainly depend on the external information’s of the above. Management in addition with the management accounting system they are also laying emphasis on the information gathered from the external suppliers. There are issue arising in the decision making process as little information are not accurate. The company had also tried to implement the strategy on the initial level of the management but later on they had implemented in the overall company. The gradually adoption will help to know where the company had make defaults and how it can be recovered or can be rectified.

Strategic Decision making: the company had focused on the matters which had been leaded with the tie of 1 year. The shareholders, customers and the stakeholders have to be satisfied with the requirements of the global events. All the factors which are macro and micro economics will affect the strategic decision making. These are based on the mostly internal information of the company. The balances are based on the historical checks and the balances with the expected trends. The strategic managers have to be viewed the future to make decisions and to make better progress of the company. The company had also let the strategy formulation on the new accounting techniques. The company had made the strategies that how gradually adoption of the technique will help the company to adopt it as a whole.

### 2.  Are MAS relevant to contemporary organisations

(I) Yes MAS are relevant to the contemporary organisations. The company have to apply the management accounting for the smooth function of the business…

It helps the manager to mating the records of the accounts and to verify it if it needed on the later. It will also helps in the organisation documentarian and proper maintenance of accounts. The MAS will helps to prevent fraud and the proper accounting of the records. It will keep the records the accounts for the long time. As well as the data will be secure as it password protected.

The advantage of MAS in the given case is:

1. It helps in research and development of the business: it helps in the research of the organisations. The new planning is made as per the research conducted. It will helps in laying down emphasis to achieve the goals and objectives of the company. The organisation will make the new strategy for the achievement of the work.
2. Strategy formulation: the next step is to make the strategy. The strategy formulation is the step in which the strategy has been planed as per the requirements of the company. The formulation will be on the present as well the future issues of the company (Luthans & Doh, 2012). The company has to decide which will the best strategy among the all strategy for the company point of perspective.
3. Operational Cost: the operational cost will be reduces with the MAS. The cost of wastage will be reduced with the proper accounting system. There will be the proper method and balancing the inventory. The correct method of the entry and the exit of inventory will be places. It will help in reduction of stole of the inventory and the proper records with the authorisation will be placed.
4. Security: with the MAS the record will be properly secured and the data protection will be increased. The security of the MAS will be done through biometric as well as the password protects. The backup of the data will be taken and can be recover wt the of the disaster or the lost of the files.

Firstly it was initiated in the research factors to identify what are the essentials of the new accountings system; later the outlines were prepared for the adoption. The next stage was the implementation of strategy, while the last was the outcomes of the strategy

The outcome will decide the overall impact of the strategy and whether the changes can be taken for the long term or not.

Comparisons with the other journal

the other journals was regarding the different value of management accounting in the new company the company had tried the historical method into he new start up company but  at the late stage the research was found that the traditional methods are not so good. So company had approached new methods for the innovation (Taylor, et. al., 2019)

The study was done with the Techno co, who had made start up and adopted new technology over. 12 months.

The study found that the company had adopted both the methods of traditional as well as the new methods of the accounting, and the traditional method are made with the innovation in such a way to divers the functional areas.

Another experiment was done to know how the hierarchy can be evidenced to manage the controls and how the innovated ideas can be generated with this.

Difference in findings

The findings were different in the words nit in the result. Bath studies were concluded that the transitional methods are necessary to control the management but with the new innovations or with the new ideas. The organisations cannot be run on the original method but can be improvised with the new modern accounting.

In the first case the new technology was used such as TQM or ABC to manage the casing of the product, It helpos in the manage the product and the costing method.

While in the other journal the new ideas are generated to the control the management with the traditional method. They started with the tradiotnal and reached to the new innovative method.

### 3. What conclusions do you make about the relevance of MAS in today’s competitive and (in most cases)

The following are the conclusions of the MAS at the today competitive market:

• Forecast: the forecast of the company can be easy with the MAS. It will help in the decision making. It helps in the decision which machine should buy, whether it should invest in this project or not. Is this will give more profits to the company? The answer of the entire question will be made though the MAS. The future trends will be analysed in the company. The MAS will be useful the company for the future predictions (Myrelid & Olhager, 2015).
• Cash flows: the cash flows can be managed with the MAS. It will show from where cash had seen sourced out and where it has been utilised. The MAS will be making the proper CASH flow statement which will depict the interest borne on the loan of the company and the income of internet o which the company had made the investment. The company will be managing the investment and the flow of cash on that. The cash flow will also show that the company is funding through the banks or any financial institutions, or either through the issuing of the shares. The company will be making the records of the dividends that how much was paid in the last year, and how much it is to be proposed in this year.
• Variance calculations: the calculation of the variance is that the amount swill shown actual in the profit and loss will be differ from he expected. It will helps in the finding the difference between the expected an actual figures of the above. If the difference is much than the expected than the reason behind should be evaluated (Myrelid & Olhager, 2015). The MAS will give the proper accounting method to calculate the variance and the reason behind that variance by calculating the percentage on the with the expectation
• Rate of Return: the shareholder or the stakeholder both wants the maximum of profits on their investments. The MAS will calculate the rate of return and it will be compared with the last years of return, the MAS will find the reason if there is any reduction in the profits nada los will evaluate the reason for the extreme increment of the return.  It will also give the highest t amount expended on which content. If it can be evaded then company should evade on the report mentioned by the MAS.
• Internal Control: the internal control can be done through MAS. The proper maintenance of employee’s s well as the assists can be done through MAS. The MAS will be locating the regular attendance of the employees if some employees are not performing as per the criteria then the mass will be reported on that. The MAS will also have records on the assets valuation. The valuation of the assets should be as per the norms of the accounting. The company should revaluate the assets or can impair it as the case may be.
• Internal Audit: the Internal Audit of the company means to verify the management of the accounting. The internal auditors can verify each and everything as per the internal norms of the company. It wills are the audit of the company easier task, as all the records had been verified once. The internal auditor will have to manage each and every before  making the fuss

### 4. Provide four (4) specific outcomes or lessons learned from each of the two articles’ research findings.

The following conclusions drawn from the research:

• The Case of a Newly Implemented Modern Management Accounting System in a Multinational Manufacturing Company
• Formulation of the strategies: the strategies were easy with the new management at system. The company had started it from the beginning; the strategy was formulated with the management level to the law level. The management were simplified with this. All the category of the management was handled with the proper account system or with the help of internal control. The findings were that the managers were involve and as well as the employees were participating in the process of, acing strategies. It were motivating their confidence as well s they were being treated as the part of the organisation’s
• New costing method: the new management accounting had started evaluating the new accounting conceits. Which were TQOM, ABC, JIT and all other? The company had started to follow the system from the initial basis. The basis to manage the accounts a weal the to manage the entire organisation with the proper format. The company had made process in the 4 parts. First the need of the techniques was evaluated, after that the company had decide wither this tech issues were applicable or not… next stage was the implementation of the strategy. The strategy was initiated with the lower process and the then it was taken on the grand level. The company then took it into larger level. The next stage of the strategies was taken for the overview. With this process the company had implemented the successful strategy. The company had implemented to the new costing method. With the new costing method, the company had managed inventory system, and the operating cost was bifurcated on the basis of the ABC costing. All the proper way helped in the reporting manner, all the reporting was done on the timely manner as well as in the format. The cost was allocated in the product as they were launching.
• Management controls, hierarchy and innovation: a case study of a start-up company
• Old methods need innovation: the company had decided with the old traditional method. The later on stage the company had found that the company was not able to manage with the whole with the old method. Hence the company made a new innovation with the new technology, like added the new control methods, the security had been increased. Hence the control was managed in the proper way. The company were concluded the the company can be owned with the old traditional method but can be managed with the new method of the technology.
• Easy control of management: the management had been simplified with the new technology method. The boards were managed, all the financial were regulated. The security was improvised, the reporting manner was better. Overall the conclusion was that the new management accounting method can be handled with the old rational method of management.

#### Conclusions

The conclusion was very simplified with the case studies. In the given cases the company had adopted new technology. The case which is given with the brief was focused on the strategy formulation as well as the adoption of new accounting technique. The company had made strategies with the initial stage as all the part was divided into the 4 subparts to know the effects of the change.

The change in the management accounting from traditional to the modern accounting was must. Company will adopt the original method but innovation was needed in that as per the journal taken for the comparison.

In the case which was written by thru Brat and the team they had adopted the new accounting method which had explained above. And also they had made changes in the strategy formulation. This innovation will help the company to adopt the technology very easily.

##### References

Luthans, F., & Doh, J. P. (2012). International management: Culture, strategy, and behavior. New York: McGraw-Hill.

Myrelid, A., & Olhager, J. (2015). Applying modern accounting techniques in complex manufacturing. Industrial Management & Data Systems115(3), 402-418.

Taylor, D., King, R., & Smith, D. (2019). Management controls, heterarchy and innovation: a case study of a start-up company. Accounting, Auditing & Accountability Journal.

Watts, D., Yapa, P. W., & Dellaportas, S. (2014). The case of a newly implemented modern management accounting system in a multinational manufacturing company. Australasian Accounting, Business and Finance Journal8(2), 121-137.