Reference no: EM132090109 , Length: word count:1800

Abstract

This subject focuses on management accounting for cost and control purposes in an organisational context. It emphasises the use of quantitative techniques and computer software including spreadsheets. The subject includes an overview of management accounting perspectives with an emphasis on systems design and provides a framework for problem solving and analysis of conventional and modern cost accounting paradigms including job and process costing, standard costing and variance analysis, relevant costs for decisions, activity-based costing, kaizen costing, just-in-time, target costing, control systems, benchmarking, performance evaluation and balanced scorecard.

Learning outcomes

On successful completion of this subject, you should:
- be able to discuss and critique the historical and ethical development of management accounting;
- be able to apply cognitive skills in the design and operation of costing systems;
- be able to critically evaluate the design and operation of performance management systems;
- be able to explain the role of management accounting in organisational contexts and the implications for management accounting of different paradigms;
- be able to apply analytical and synthetical skills in report writing, and use quantitative techniques and computer software including using the Internet as a professional source;
- be able to create and implement computerised decision models; and
- be able to critique how managers make decisions.

Assessment item 1

Task

The purpose of Assessment item 1 is to establish the skills needed in the workplace for costing products and services using the appropriate processes and tools and applying analytical processes to construct accounting systems and models using workplace tools. Each question uses realistic data and the professional practices similar to that found in workplaces.

Your assignment consists of different question styles including discussion questions, reports, exercises, problem questions and spreadsheet questions. It assesses learning outcomes as listed in the assignment rationale below.

Question 1: An overview of management accounting
1a. Describe and explain the differences between management accounting and financial accounting.
1b. Describe and explain the major functions of management accounting and give examples.
1c. Using your textbook and other relevant references, explain how concepts such as panopticism, control, and discipline may be relevant to management accounting, give examples.

Question 2: Manufacturing Statement and Income Statement
Lake Ltd.'s accounting department provided following financial information:

Required: prepare a statement of Cost of Goods Manufactured and an Income Statement for Lake Ltd. for the year ended 30th June 2017. You can prepare the statements in an Excel spreadsheet then paste into Word.

Question 3: Job order costing
The Port Furniture Company manufactures tables. In March 2017, the two production departments had budgeted allocation bases of 4,000 machine-hours in Department A and 8,000 direct manufacturing labour-hours in Department B. The budgeted manufacturing overheads for the month were $57,500 and $62,500, respectively. For Job X, the actual costs incurred in the two departments were as follows:

Required:
3a. Determine the budgeted manufacturing overhead rate for each department.
3b. Prepare necessary journal entries to summarise the March transactions for Department A. 3c. Determine the total cost of Job X.
3d. What are some of the major cost objects that managers often focus on in companies using job costing? Use the textbook or other references to support your answers.

Question 4: Service department cost allocation
Inns Battery Company has two service departments: Maintenance and Personnel. Maintenance Department costs are allocated on the basis of budgeted maintenance-hours. Personnel Department costs are allocated based on the number of employees. Data on budgeted maintenance-hours and number of employees are as follows:

Required:
4a. Using the direct method, determine the amount of support department costs to be allocated to Production Department A.
4b. Using the step-down method, determine the amount of Maintenance Department costs to be allocated to Production Department A, if the service department with the highest percentage of interdepartmental support service is allocated first.
4c. Using the reciprocal method, determine the amount of maintenance department costs to be allocated to Production Department A (round up to nearest dollar).
4d. List and explain two possible reasons why a manager might prefer that budgeted rather than actual cost-allocation rates be used when cost is being allocated to his/her department from another department. Use the textbook and/or other relevant resources to support your answer.

Question 5: Activity Based Costing
Come-On-In company produces two types of entry doors: Standard and Deluxe. The assignment basis for manufacturing overheads has been direct labour hours. For 2016, the company complied the following data for the two products:

During 2016, the company purchased a state-of-art robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. The information gathered is as follows:

Required:
5a. Using the current cost system, determine the total cost of manufacturing one unit of each product and the profit per unit for each product.
5b. Under the current cost system, estimated manufacturing overhead per unit are less for the deluxe door ($80) than the standard door ($120). What is a likely explanation for this?
5c. Using the activity-based costing data, compute the cost driver rate for each overhead activity. 5d. Compute the revised manufacturing overhead cost per unit for each type of product.
5e. Is the deluxe door as profitable as the original data estimated using previous cost system? Why or why not? Explain.

Rationale

This assessment task will assess the following learning outcome/s:
- be able to discuss and critique the historical and ethical development of management accounting.
- be able to critically evaluate the design and operation of performance management systems.
- be able to explain the role of management accounting in organisational contexts and the implications for management accounting of different paradigms.
- be able to apply analytical and synthetical skills in report writing, and use quantitative techniques and computer software including using the Internet as a professional source.
- be able to create and implement computerised decision models.
- be able to critique how managers make decisions.

This assignment assesses your achievement of learning outcomes including:
- the application of cognitive skills in the design and operation of costing systems;
- being able to critically evaluate the design and operation of performance management systems
- manufacturing statements,
- job costing systems,
- Activity Based Costing (ABC),
- methods of service department cost allocation;
- the role of management accounting in organisational contexts,
- the implications for management accounting of different paradigms;
- the application of analytical and synthetical skills in report writing;
- quantitative techniques and computer software including
- using the Internet as a professional source;
- the creation and implementation of computerised decision models and;
- to critique how managers make decisions.

In particular, this assignment is designed to assess;
- your application of knowledge,
- understanding and skills in certain topics including cost flows in management accounting,
- terminology,
- manufacturing statements,
- spreadsheet construction,
- product costing,
- materials acquisition systems,
- accounting for overhead,
- business report writing,
- activity based costing, (ABC) and,
- the allocation of overhead including service department costs.

Assessment item 2

Task

Your assignment consists of different question styles including discussion questions, reports, exercises, problem questions and spreadsheet questions. It assesses learning outcomes as listed in the assignment rationale below.

The purpose of this assignment is to continue to develop skills in costing systems with an emphasis on the role of control in managing the production of goods and services efficiently in the workplace. Each question builds on the knowledge gained through the first assignment to develop the concepts of management accounting control through costing. Each question uses realistic data and professional practices similar to that found in workplaces.

Question 1: Process Costing
Lake Surf Company uses an automated process to clean and polish its merchandise items. For March 2017, the company conducted the following activities:

Required:
Using the weighted average method, determine the following:

1a. the number of equivalent units 1b. cost per equivalent unit
1c. ending work in process inventory
1d. cost of normal and abnormal spoilage
1e. cost of goods completed and transferred out during March, 2017

Question 2: Budget
Lulu Company has the following budgeted sales for the next six-month period:

There were 69,000 units of finished goods in inventory at the beginning of January. Plans are to have an inventory of finished products that equals 100% of the following month sales plus 25% of the second month sales. Two kilograms of raw materials are required for each unit produced. From January, each kilogram of material costs $20 (up from $18 in December last year). Inventory levels for materials are equal to 40% of the needs for the next month. Lulu Company uses a FIFO inventory method for both raw material and finished goods.

Required:
2a. Prepare a production budgets in units for January and February
2b. Prepare a materials usage budget in kilograms and dollars for January
2c. Prepare a materials purchases budget in kilograms and dollars for January
2d. List and explain some benefits to an organisation of preparing an operating budget, use the textbook and other relevant sources to support your answer

Question 3: Variance Analysis
The following standard cost data relate to the operation of Dragon Company for 2016. The standard cost per unit is based on the normal annual production of 15,000 units.

Actual production in 2016 was 10,000 units. The following data was obtained from Dragon Company's records:

Required:
3a. Calculate and show flexible budget variance for each cost item.
3b. Calculate the following variances and indicate whether they are favourable or unfavourable. i.Direct material price variance
ii.Direct material efficiency variance iii.Direct labour price variance iv.Direct labour efficiency variance
v.Variable manufacturing overhead spending variance vi.Variable manufacturing overhead efficiency variance vii.Fixed manufacturing overhead spending variance viii.Fixed manufacturing overhead efficiency variance

Question 4: Relevant Costs and Decision Making
Gordon Manufacturing is approached by a new customer to fulfill a 4,000 unit, one-time-only special order for a product similar to the one offered to existing customers. At present, the company has excess operating capacity. The following data apply to sales to existing customers:

Required:
4a. For Gordon Manufacturing, what is the total relevant cost of making this special order?
4b. If the new customer is offering $350 per unit sold, should the company accept the special offer? Explain.
4c. Suppose the company is already operating at capacity when the special order is received. What would be the relevant cost of accepting the special order?
4d. List and explain any TWO potential problems that should be avoided when conducting a relevant cost analysis. Use the textbook and other relevant sources to support your answer.

Question 5: Balanced Scorecard

The Balanced Scorecard can be described as a tool that "translates an organisation's mission and strategy into a set of performance measures that provide the framework for implementing its strategy" (Horgren et al., 2014, p.585). Drawing on the textbook and no less than Ten (10) academic references, provide your description of the Balanced Scorecard, in particular its relationship to planning, performance targets, strategy, prediction, motivation, cybernetic effects and control (No more than 800 words).