Managerial Accounting Assignment
Essay by essam emad • February 21, 2018 • Coursework • 1,814 Words (8 Pages) • 1,007 Views
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Program: | MBA |
Course: | MANAGERIAL ACCOUNTING |
Course Code: | BMAC5203 |
Semester: | JANUARY 2017 |
Type of Assignment | INDIVIDUAL |
Lecturer: | Mr. Saleh Al-Riyami |
Student: | Esam Emad Al-Sagheer Noman |
Student ID: | 20152020113 |
Task 1
a). Calculating Cost of Unit using the Traditional Costing System:
1.
Basic product | Super Product | |
Direct Labor Hours per Unit | 4 DLHs | 6DLHs |
Number of Units | 40,000 units | 10,000 units |
Total DLHs per Product | 4 * 40,000 = 160,000 DLHs | 6 * 10,000 = 60,000 DLHs |
Total Estimated DLHs | 160,000+60,000 = 220,000 DLHs |
2.
Overhead Rate = Total Estimated Costs / Total Direct Labor Hours
= 1,000,000 / 220,000
= 4.55 $ per DLH
3. Per-Unit Cost:
Basic Product | Super Product | |
Direct Labor( 10$ per Hour) | 40$ | 60$ |
Direct Material | 15$ | 20$ |
Total Prime Costs | 55$ | 80$ |
Overhead Costs | 4.55$ * 4 = 18.2$ | 4.55$ * 6 = 27.3$ |
Total Cost Per unit: | 73.2$ | 107.3$ |
Selling Price per Unit ( at profit 25% mark-up of the total cost per unit) | 73.2$ * 1.25 = 91.5$ | 107.3$ * 1.25 = 134.125$ |
b). Calculating Cost of Unit Using the Activity-Based Costing System:
1. Activity Rates Calculation:
Number of Machine Set-ups | 280,000$/100 = 2,800$ per Set-up |
Number of Quality Control Inspections | 220,000$/2,000 = 110$ per Inspection |
Number of Sales Order Processed | 240,000$/5,000 = 48$ per Sale Order Processed |
Machine Hours | 260,000$/500,000 = 0.52$ per Machine Hour |
2. Calculating the Cost of Unit:
Basic Product | Super Product | |
Direct Labor Cost(10$ per hour) | 40$ * 40,000 Units = 1,600,000$ | 60$ * 10,000 Units = 600,000$ |
Direst Material | 15$ * 40,000 Units = 600,000 | 20$ * 10,000 Units = 200,000$ |
Total Prime Costs | 1,200,000$ | 800,000$ |
Overhead Costs: | ||
Machine Set-ups | 2,800$ * 20 = 56,000$ | 2,800$ * 80 = 224,000$ |
Quality Control Inspections | 110$ * 500 = 55,000$ | 110$ * 1,500 = 165,000$ |
Sales Order Processed | 48$ * 1,500$ = 72,000$ | 48$ * 3500 = 168,000$ |
Machine Hours | 0.52$ * 350,000 = 182,000$ | 0.52$ * 150,000 = 78,000$ |
Total Cost : | 1,565,000$ | 1,435,000$ |
/ Number of Units | /40,000 | /10,000 |
= Cost per Unit | = 64.13$ | =143.5$ |
Selling Price (at Profit 25% of the full unit cost) | 64.13 * 1.25 = 80.16$ | 143.5 * 1.25 = 179.38$ |
c). The Conclusions and the Advice that can be given to the Management of the Business:
The Conclusion:
If we compare both Traditional and the ABC Systems, we will find the following:
Cost Per Unit | Traditional Costing System | ABC System | |
Basic | Super | Basic | Super |
73.2$ | 107.3$ | 64.13$ | 143.5$ |
In the Traditional system the Basic product was over-priced and the Super Product was under-priced. This comes back to how the company assigned its overhead costs.
The advice:
- ABC system is an accurate system of costing where it assigns each cost in its place and that is why the costs of each product calculated is precise.
- ABC system helps the managers in making right decisions and to estimate the profit.
- Managers should use the right cost drivers.
Task 2
- To prepare the whole master budget (Sales budget up to budgeted Statement of Financial Position) for Berjaya Sdn. Bhd. For July, August and September.
Berjaya Sdn Bhd
Sales Budget
Quarter Ending September 30
July | August | September | Total Quarter | |
Budgeted Sales in Units | 30,000 Units | 40,000 Units | 50,000 Units | 120,000 Units |
Selling Price per Unit ($) | x 12$ | x 12$ | x 12$ | x 12$ |
Total Sales | 360,000$ | 480,000$ | 600,000$ | 1,440,000$ |
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