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FNSACC507 Provide Management Accounting Information
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FNSACC507 Provide Management Accounting Information
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Course Code: FNSACC507
University: Victoria University
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Country: Australia
Question:
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Use assessment templates if provided, to complete relevant sections of the assessment. You can also create your known templates for assessment evidence.
You must achieve a satisfactory result for all tasks to achieve competency in this unit.
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Question 1 – Questions and Answers
Explain how data in a cost accounting system can be recorded and securely stored.
In terms of a cost accounting system, what information does management require in order to make informed decisions?
Explain the relevance of “Australian Standard: Record Management” to maintaining management accounting information.
Describe the reconciliation process for matching invoices and purchase orders in a financial system.
What are the GST considerations when doing reconciliations using accruals based versus cash based system?
Describe how variance analysis assists with reviewing the quality or effectiveness of the cost assignment process.
We can have a costing system with integrity when we apply policies and procedures to systematically allocate data. In this way, accurate data and reports can be produced. How does this affect our reliability on variance analysis techniques?
Describe the role and purpose of budgets in an organisation.
List at least 3 objectives of budgets.
While preparing budgets, list at least three sources that you can use to gather information.
Describe the principles of double-entry bookkeeping and accrual based accounting.
How many components do completed products have? What are they? Provide a brief description of each one.
Answers:
The data in a cost accounting system must be stored properly from the source document such as suppliers invoice bills and other supporting documents by a professional adequately qualified for the job. Access to the cost accounting system should be restricted. Only the accountant should be allowed access to the system.
Information about manufacturing and product costs are necessary to ascertain the cost of production properly and take informed decision about the business.
The manufacturing entities in Australia are under compulsion to follow the standard in maintaining and managing accounting information.
The financial systems generally have inbuilt system to check and compare the invoices and purchase orders. In case of discrepancies, the financial system outlines those discrepancies.
In case based system GSTs are reconciled to determine the net GST liability (payable) or net GST asset (receivable) as the case may be. In case of accrual basis of accounting adjustments are made to determine GST payable and GST receivable both to make payment accordingly.
Variance analysis helps the management to identify the possible area of lack of efficiency in the production or manufacturing process. Necessary changes shall be made in these areas by the management to improve the efficiency of the overall production process.
The reliability of variance analysis techniques would be improved significantly if the integrity in the costing system is intact. The data recorded in costing system if correctly processed without any manipulation then the resultant information will reflect the actual costing of a manufacturing and production organization. Thus the variance analysis will also be improved as the data will be authentic and correct (Dekker, 2016).
Budgets are prepared to achieve organization objectives. Comparison of actual financial performance of an organization with its budgeted performance further helps the management to evaluate the efficiency of an organization in achieving its objectives.
Three objectives of budgets are as following:
Evaluation of performance.
Optimum utilization of resources.
Minimizing cost of productions.
Three sources to gather information are as following:
Historic financial statements.
Board of directors’ report.
Proposed agreement documents.
The principle of double entry system of accounting is that there would be equal liabilities and assets after each financial transaction as there is always compensating effects on wealth and liabilities for the double entry system of accounting of each and every financial transaction.
Accrual based accounting is on the basis of earning and incurred concept rather than receipts and payments. Thus, revenue is recognized when earned even if not received and expenditures are recognized when incurred even if not paid (Otley, 2016).
The following is on the basis of actual components:
Raw materials.
Direct labor.
Factory overhead both fixed and variable.
However, there are the following which can also be referred to as components of finished products:
Upstream of raw materials.
Raw materials.
Secondary products.
Intermediate products (Fullerton, Kennedy & Widener, 2014).
Task 2:
Question 1:
Particulars
Amount ($)
Amount ($)
Cost of goods manufactured
Opening balance of direct materials
49,000.00
Opening WIP
28,000.00
Purchases during the year
198,000.00
Direct labour costs incurred
205,000.00
Manufacturing overhead
173,000.00
653,000.00
Less:
Closing balance of direct materials
42,000.00
Closing balance of WIP
30,000.00
72,000.00
Cost of goods manufactured
581,000.00
Cost of goods sold
Cost of goods manufactured
581,000.00
Add: Opening finished goods
80,000.00
501,000.00
Less: Closing finished goods
76,000.00
Cost of goods sold
425,000.00
Question 2:
Manufacturing statement
Particulars
$
$
Opening direct materials
7,000.00
Opening WIP
9,600.00
Purchases
42,300.00
Direct labour costs
10,000.00
Manufacturing overheads
15,000.00
83,900.00
Less:
Closing direct materials
7,400.00
Closing WIP
13,000.00
20,400.00
Manufacturing costs
63,500.00
Trading statement
Particulars
$
$
Sales
82,000.00
Less: Cost of goods sold
61,000.00
Gross profit
21,000.00
Profit and loss account
Particulars
$
$
Sales
82,000.00
Less: Cost of goods sold
61,000.00
Gross profit
21,000.00
Less: Expenditures
Selling expenses
4,100.00
General and administratuve expenses
2,900.00
7,000.00
Profit before tax
14,000.00
Less: Tax @30%
4,200.00
Net profit
9,800.00
Question 3:
FIFO:
Periodic System
$
Opening stock: raw material at beginning
200
1440
Add: purchases
160
1184
Total material available
360
2624
Less: closing stock – raw material at end
220
1760
Raw material used
140
864
Calculation of closing stock:
220
1760
Weighted average cost under a perpetual system:
i) Perpetual inventory system
In
Out
Balance
Cost
Cost
Cost
Details
Units
Per
Total
Units
per
Total
Units
per
Total
Unit
unit
unit
$
$
$
$
$
$
Balance
200
7.2
1440
200
7.2
1440
Purchases
160
7.4
1184
360
7.2888889
2624
Issues
290
7.2889
2113.7778
70
7.2888889
510.222222
Purchases
260
8
2080
330
7.8491582
2590.22222
Issues
110
7.8492
863.40741
220
7.8491582
1726.81481
1726.8
Moving average periodic system:
Question 4:
Date
Account titles
Debit ($)
Credit ($)
Purchases (Inventories)
450.00
Accounts payable- Reliable Ltd
450.00
(Being purchases made on credit)
Cost of productions
170.00
Purchases (Inventories)
170.00
(Being goods issued for production)
Accounts payable- Reliable Ltd
30.00
Purchases (Inventories)
30.00
(Being faulty goods returned)
Purchases (Inventories)
15.00
Cost of productions
15.00
(Being goods returned to store from production)
Question 5:
i) Perpetual inventory system (FIFO)
In
Out
Balance
Cost
Cost
Cost
Details
Units
Per
Total
Units
per
Total
Units
per
Total
Unit
unit
unit
$
$
$
$
$
$
Balance
50
12
600
50
12
600
Purchases
100
12.4
1240
150
1840
Issues
80
12
960
70
12.4
868
Return
20
12.4
248
50
12.4
620
Purchases
100
12.2
1220
150
1840
Issues
120
0
1474
30
12.2
366
Return to store
20
12.2
244
50
12.2
610
Journal entries:
Date
Account titles
Debit ($)
Credit ($)
Jan-14
Accounts payable
248.00
Purchases (inventories)
248.00
(Being goods returned to supplier)
Jan-30
Purchases (inventories)
244.00
Cost of production
244.00
(Being goods returned to store from production)
Accounting entry for loss of stock:
Date
Account titles
Debit ($)
Credit ($)
Jan-31
Loss of goods
61.00
Purchases (inventories)
61.00
(Being goods short in stock taking)
Trading & PL account
61.00
Loss of goods
61.00
(Being loss of goods transferred to PL account)
Question 6:
Hours in week
Hourly rate
No of weeks annuallly
Annual
Basic wages
40
12
480
52
24,960.00
Compensation insurance
3,744.00
Payroll taxes
1,310.40
Contribution to superannuation funds
2,246.40
Total annual cost to worker
32,260.80
Number of hours actually worked by a worker (52 x 40) – (4+1+2) x 40}
1,800.00
Hourly rate (32260.80 / 1800)
$17.92
Hourly composite charge out rate to recover all labor costs is calculated below:
Hourly rate (32260.80 / 2080)
$15.51
Question 7:
Manufacturing overheads
Production activity levels
90%
100%
110%
Indirect materials
27,000.00
30,000.00
33,000.00
factory rent
30,000.00
30,000.00
30,000.00
Factory managers salary
55,000.00
55,000.00
55,000.00
Maintenance of machinery
9,000.00
10,000.00
11,000.00
Electricity
4,500.00
5,000.00
5,500.00
Depreciation- Machinery
7,000.00
7,000.00
7,000.00
Workers’ compensation insurance
2,700.00
3,000.00
3,300.00
Insurance machinery
900.00
900.00
900.00
Depreciation- building
2,500.00
2,500.00
2,500.00
Total manufacturing overheads
138,600.00
143,400.00
148,200.00
Question 8:
Production budget
Sales in units
35,000.00
Add: 50% of October sales (15000 x 50%)
7,500.00
42,500.00
Less: Opening finished stock (July 01)
7,000.00
Production in units for the quarter ending in September
35,500.00
Cost of direct materials (Refer to direct material budget)
213,000.00
Cost of direct labour (Refer to direct labour budget)
426,000.00
Factory overhead (35500 x 10)
355,000.00
Cost of production
994,000.00
Direct materials budget
Production units for the Quarter
35,500.00
Direct materials required for each unit
3 Kg
Total direct materials needed for production (35500 x 3)
106,500.00
Cost of direct materials (106500 x 2)
213,000.00
Direct labour budget
Production in units
35,500.00
Direct labour hour
1 hour per unit
Total labour hour required (35000 x 1)
35,500.00
Direct labour costs (35500 x 12)
426,000.00
Question 9:
Particulars
$
Direct materials (15 x 25)
375.00
Direct labour (16 x 15)
240.00
Variable factory overhead (16 x 4)
64.00
Fixed factory overhead (16 x 2)
32.00
Standard manufacturing cost of a door
711.00
Question 10:
Particulars
Amount ($)
Budgeted factory overhead
{(39650 x 1.5) x 1.05}
62,448.75
Actual factory overhead
60,468.00
Variance
(1,980.75)
Variance is favourable
Question 11:
Selling price
$40
Less: Variable cost
$15
Contribution per unit
$25
Break-even point
Fixed costs
$425000
Contribution per unit
$25
Break-even point in units (425000 / 25)
17000
Break-even point in sales (17000 x 40)
680000
Question 12:
Variable costs
Particulars
$
Commission on each shoe
7.00
Shoe service supplies
0.60
Utilities
0.40
Total variable cost per shoe
8.00
Fixed costs per month
Salaries of four shoe technicians (3000 x 4 +1200)
13,200.00
Advertisements
900.00
Rent
1,500.00
Shoe service utilities
250.00
Rent of decorative plant
150.00
Plant insurance
2,400.00
Total fixed costs per month
18,400.00
Contribution per shoe
Standard fee per shoe
20
Less: Variable cost per shoe
8
Contribution per shoe
12
Breakeven point (BEP)
Total fixed costs
$18,400.00
Contribution per unit
$12
BEP in units (18400/12)
1534 shoe services
BEP in $ (1534 x 20)
$30,680
Question 13:
Before getting into any discussion about the variance in the quarter of January to March it would be beneficial to calculate the variances. The table below shows variances in different expenditures
January to March
Expense details
Actual
Budget
Variance
$
$
$
Rent
16,000.00
15,000.00
1,000.00
Advertising
220,000.00
250,000.00
(30,000.00)
Office salaries
550,000.00
500,000.00
50,000.00
Promotion
150,000.00
140,000.00
10,000.00
Totals
936,000.00
905,000.00
31,000.00
As can be seen in the table above that except advertisement expenditure all other variances are unfavorable to the organization i.e. the actual expenditures have exceeded the budgeted expenditures. The reason for such increase in expenditures must be evaluated by the management and necessary steps shall be taken to ensure that in the future such expenditure reduces (Messner, 2016).
References:
Dekker, H. C. (2016). On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31, 86-99.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), 414-428.
Messner, M. (2016). Does industry matter? How industry context shapes management accounting practice. Management Accounting Research, 31, 103-111.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.
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