Finance Paper Questions on Management Accounting - 275 Words

Finance Paper: Questions on Management Accounting (Essay Sample) Content: NameCourse instructorSubjectDateManagement AccountingQ1Let the cost incurred in registry dept be = rLet the cost incurred in the personnel dept be = pLet the cost incurred in the central admin be = cR =0.05p+100,000à ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬. (1)P =0.05c + 60,000à ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬. (2)C =0.2p + 190,000à ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬. (3)From eon (3)0.02p = c- 190,000P = 5c -950,000à ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬Ãƒ ¢Ã¢â€š ¬..4Equating eon 4 and 2 we have5c à ¢Ã¢â€š ¬ 950,000 = 0.05c + 60,000C = 204,040.04Substituting in eon 2P = (0.05x204040.04) + 60,000P= 70202.02Substituting in eon 1R = 0.05x70202 + 100,000 = 103510.10To the undergraduate department= 0.7r + 0.5p +0.6c= (0.7 x103510) + (0.5x 70202.02) + (0.6 x 204040.04)=229,982/=To the post graduate department= (0.3r + 0.25p + 0.35c)= (0.3x103510) + (0.25x70202.02) + (0.35x204040.04)= 120,017.5/=Instead of using reciprocal allocation of costs, end user departments should be able to bargain over the level and price of provision of services from service departments. This statement is true because the apportionment of costs to the various department are mere estimations of which some departments use services than others hence the apportionment in terms of percentage may not bring the true service cost that should be apportioned to the department. Again, it is the departmental managers who will surely know the costs they incur in each department.Q2 * The overhead rate = the estimated overhead cost /estimated direct labour hours= 490,000/5000 = 98/ per direct labour hour * SL 205Overhead cost = overhead rate x direct labour hours= 98 x 350= 3430/=SL 229= 98 x40= 3920/= * The material purchase rate= (180,000/3000, 000) = 0.06/= per material costProduct design rate = (60,000/2000) = 30/= per hourProduction run rate= (140,000/800) = 175/= per production runDepreciation rate(110,000/22000) = 5/= per machine hourSL 205Raw material overhead cost = 28,000 x 0.06 =1680/=Design overhead costs = 10 x 30 =300Production run costs = 175 x -2 = 350Depreciation costs = 5 x 20 = 100Total= 2430SL 229Raw material overhead cost = 0.06 x 36,000= 2160Production design costs= 30 x25= 750Design production run overhead = 175 x 8 = 1400Depreciation overhead= 20 x5= 100The production overhead costs in the answer b and c are different because we have used different absorption rates in the two instances and this simply imply that the different departments do not incur the same costs allocated to them in terms of direct labour hours hence direct labour hour rate might not give the accurate results to the apportioning. The management should therefore consult with the various department heads in order to discern the correct amount of cost to be [incurred in each department.Q3 (I) * The highest à ¢Ã¢â€š ¬Ã‹Å"priceCurrent selling price for the seller (B) = 75/=CostsVariable costs=45/=Variable selling cost= 2/=Unit fixed cost (300,000/20,000) = 15/=Total costs62/=Profit margin (13/75) =17.333%After reduction of the selling costThe cost will be (45+ 1 + 15) = 61 which = (100 à ¢Ã¢â€š ¬ 17.333) %Therefore the highest selling price would be (61/0.82666)= 73, 79/=This is the highest price because it is the price the division A will be willing to sell to division B in order to maintain the same profit margin and after reducing the selling variable costs accordingly.b) The lowest priceTotal purchase cost for division B = 20,000 x 72= 1,440,000The total number of units acquired = 20,000 + 2,000= 22000The price = (1,440,000/ 22000)= 65.45/=This price the division B is willing to pay currently with inclusion of the quantity discount offered by the outside company.(ii)The current profit margin = 17.33%Calculation of profit after price increaseProf it = (80-1-45-15) = 19/=Profit margin 19/80= 23.75%Less cost implication margin on Division B (80-65.45)/80= 18.19%The overall resultant profit margin= (23.75- 18.19)5.56%Hence the overall corporate profits will reduce by (17.33-5.56) =11.77%Division B will be forced to buy from A when the price at which B sells the product reduces to 65.45/= at this point, it will be producing at the price with which the outside company will be selling. This means that the managerial practice would be quite efficient such they shall have implemented policies that would ensure a substantial reduction in production costs, like reducing the idle hours, employing qualified personnel, and doing the proper planning on the production of the products. These instances try to improve the efficiency and effectiveness of the company production sector.Q4Variable costingDirect material80/= per unitDirect labour15/= per unitVariable selling cost5/= per unitVariable overhead 8/= per unitTotal 108/= per unitAbsorp tion costingDirect material 80/= per unitDirect labour 15/= per unitVariable production overhead8/= per unitFixed production overhead20/= per unitTotal 123/= per unitTotal cost5000 (123 + 5) + 25,000=665,000/=b) Mark up = [profit / cost of goods sold] = 66500/655000= 10%c) Let the direct labour hours per unit be = xMark up required should be 0.5 *10%=5%CostsDirect material =400,000Direct labour = 75,000V. selling costs= 25,000Fixed selling costs= 25,000Variable overhead costs=8* 5000xFixed overhead cost= 20 * 5000xTotal 525000+ 140,000xTherefore 0.05 = 27,875/ (525,000 + 140,000x)27875 = 0.05 (525,000 + 140,000x)7,000x = 1625X = 0.2322hrsAssumptionThe direct labour hour cost per unit remains the same * The use of full cost allocation methods makes controlling overhead costs more difficult because it hides the reason for incurring overheads.The since the absorption costing does not include some other variable costs such as selling variable cost in the calculation of the unit cost it allows for the transfer of the costs to the next period bay having a larger closing stock.Question 5a. Discuss, with appropriate examples, how the performance of managers can be assessed using non-financial measures of performance. In what circumstances is the use of non-financial measures likely to encourage better performance by managers than using financial measures?Coordination,Here the performance of the managers will be evaluated on the basis with he outlines the different activities that are being carried out in the company. We would ask ourselves such questions as, is the flow of activities in order for example from manufacturing, to packaging to storage to selling and distribution. Is there any time lag between such activities? Are the employees placed accordingly in terms of work design and stipulation on time commensurate to the activities?CommunicationA manager is gauged in this virtue by looking at the official reports issued by the management, the response given to su ch reports and the effectiveness of such reports is also determined. Additionally a closer look at the timeliness of such communicative devices should be check. The evaluator should ask questions like, how many channels the employees get the information about the company, how do they take the information of the company.ReputationIn this stance, we look at how people view the company, the relationship the company has with the outsiders and other ambience that comes in the picture of any person at the mention of the company. This in itself tells us how the company is ranked according to the peopleà ¢Ã¢â€š ¬s perception and [beliefs about the company. The moment the company is having a good reputation; it means the managerà ¢Ã¢â€š ¬s performance is up to date.Clarification of responsibilities and authorityThe manager has the diction of proper organizational skills and knowledge that helps him organize the various activities giving them a clear outline of the job description. A good m anager should be at a position to give clear and appropriate instructions to the various activities that are in the firm.MotivationA good manager should be at position to have a profoundly well motivated workforce with a view to efficiently accomplishing the objectives of the firm. The manager will be judge by how the various employees in various departments perceive the job and how interested they are with the job. Here a good manager will ensure a healthy working condition of the employees to the extent that they feel part and parcel of the firm. * Discuss the caveats of a decision-making approach to the study of management accounting.In the study, one should be aware of both the financial and the non financial factors that one should look into while making and informed decision. The non financial factors include;The reputation of the firm which basically entail how the company is perceived by the outsiders, this in effect calls for the company to check how socially responsible it is to the community around which must be include in decision making.The legal environment, during the decision making, the company should also clearly examine various impacts that the legal environment tries to bring on board for example what impact the tax imposition bring to the company profitabilityThe proper classification of costs, here, the company should be aware of the relevant and the irrelevant costs tha...