Management Accounting

Topics: Costs, Cost accounting, Cost Pages: 10 (1450 words) Published: February 4, 2015


Management Accounting ACC107

Individual Assignment

Asma Moosa 30624 Diploma In Business Sem 4

c)
Overhead absorption rate= OAR/ ORR
Smoothing= 12663.5/10000
= $1.27
Shaping = 31362.5/25000
= $ 1.25
Fixing = 20471.75/5000
= $ 4.09

Question 2
a)Total Selling Overheads
Variable selling overhead= 6000*18.75
=112500
Fixed selling overhead = 100000
Total selling overhead = 100000+112500= 212500

b) i) Marginal Costing
Revenue (200*10000)

2000000
Opening Inventory(84*2000)
168000

COST OF PRODUCTION

Direct Material(60*10000)
600000

Direct Labor(20*20000)
200000

Variable Manufacture OH (4*10000)
40000

1008000

_ Closing Inventory(84*10000)
(1680000)

840000

+Variable Selling OH (4*100000)
187500
(1027500)

972500
Less Fixed Cost

Fixed manufacturer OH
300000

Fixed Selling OH
150000

Fixed Administration OH
100000
(550000)

422500

ii) Absorption Costing

Revenue

2000000
Cost of sales

Opening Inventory(2000*119)
238000

Direct material
300000

Direct Labor
600000

Variable manufacturing OH
40000

1378000

Less closing inventory
228000

(1150000)
Gross Profit

850000
Less Non-manufactured Expenses

Variable selling cost
187500

Fixed selling cost
150000

Fixed administration cost
100000

(437500)
Net Profit

412500

Question 3
a)
Details
Oct
Nov
Dec
Jan
Class A

Sep, Sales 120*55/100
0
66000
30000
18000
Oct, Sales 160*55/100
0
0
88000
40000
Nov, Sales 220*55/100
0
0
0
121000

Class B

Sep, Sales 80*65/100
52000
16000
8000
-
Oct, Sales 100*65/100
0
65000
20000
10000
Nov, Sales 60*65/100
0
0
39000
12000
Total
52000
147000
185000
201000

b)High-low Method
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the highest volume of processing items there were 10,000 items processed at a total cost of $35,000 and at the lowest volume there were 6,000 items processed at a total cost of $27,000, the high-low method indicates the variable rate was $2 per unit. ($35,000 – $27,000) divided by (10,000 – 6,000). The fixed amount will be $15,000 [$27,000 – $2(6,000)]. Advantages

1-Informal Analysis
One advantage of the high-low method is the lack of formality required. The accountant can analyze these numbers using data from the monthly expenses and the activity level. He does not need to contact anyone outside of the company to determine the fixed expenses or the variable rate per unit. 2- Limited Data

Another advantage of this method is that it only requires two sets of numbers to calculate the fixed and variable costs. These include the activity level and the total cost. The accountant reviews the financial transactions for the account over several months to obtain the total cost amount. After gathering data from these two places, the accountant has all the information she needs to perform the analysis Disadvantages

1- Estimate
A disadvantage of the high-low method is that the results are estimates, not exact numbers. An accountant who needs to know the exact dollar amount of fixed expenses each month should contact a vendor directly. 2- Multiple Steps

Another disadvantage of the high-low method is the number of steps necessary to perform this analysis. The accountant needs to gather monthly data regarding the expense being analyzed and the unit of activity. The accountant lists each set of data and identifies the high and low values. Each additional step increases the potential for errors.

Question 4
a) Standard cost
Cost A $ $ 3 kilos * $ 5 per kilo 15 Cost B
1 kilo * $ 6...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Cost Accounting Text review Essay
  • One Hundred Cost Term in Accounting Essay
  • marginal costing versus lifecycle costing Essay
  • Essay on Cost Accounting & Management Decisions
  • Essay on Management Accounting
  • Essay on Management Accounting Costing and Budgeting
  • Essay about Management Accounting
  • Accounting Essay

Become a StudyMode Member

Sign Up - It's Free