Assignment Task
Scenario and the Tasks
The management accounting system of any organization is the foundation of the internal financial information system. Management needs a variety of information to plan, to control and to make decisions. Information regarding the financial aspects of performance is provided by the costing system. This assignment is designed to evaluate the knowledge on management accounting concepts and their application. Your report should cover all tasks listed below with 1500-word count.
Task 01
Assume that you are the Management Accountant of a leading consumer goods manufacturing company which offers a range of well reputed brands to the Sri Lankan Market. One of the company’s objectives is that introducing at least one new product to the market in a year. The company expects to introduce 100ml herbal facial wash in 2022. As the management accountant, you are expected to identify and classify different types of costs associated with the new product.
Task 02
Shanell Industrial Limited makes and sells one product, which has the following standard variable production costs per unit.
|
|
Rs. |
|
Direct materials cost (2 kg at Rs.25 per kg) |
50 |
|
Direct labour cost (3 hours at Rs.40 per hour) |
120 |
|
Variable production overhead costs (Rs.10 per labour hour) |
30 |
The budgeted selling price per unit is Rs.400 for the coming two years. The production and sales budgets for the next two years are as follows:
|
|
2019 |
2020 |
|
Production in units |
50,000 |
60,000 |
|
Sales in units |
40,000 |
70,000 |
There is no opening inventory at the beginning of 2019. Budgeted and actual costs are as follows
Fixed production overhead costs are absorbed based on a normal production level of 54,000 units per annum.
- Prepare the income statements for 2020 under marginal costing and absorption
- Explain the difference between the profits under two Calculations are required to support your explanation.
Task 03
1. The management of Silki Limited recently identified that the most of controlling issues are derived in the production floor because of improper budgetary system. Having much thoughtful discussion at the Board Meeting recently held, the company decided to establish a new budgetary system in the company. You as the newly recruited Management Accountant, discuss the importance of budgeting.
2. Silki produces two products namely P1 and P2. The following budgeted information was extracted for the quarter ending 31 st March 2021.
a. Estimated direct material and labour requirement of two products are as follows:
|
Direct Material required per product |
P1 |
P2 |
|
MN1 (in liters) MN2 (in liters) Direct labour (hours) |
1 0.8 3 |
0.5 2 2 |
b. Opening and closing stocks of finished goods were as follows:
|
Product |
Stock as at 01st January 2021 |
Stock as at 31st March 2021 |
|
P1 P2 |
1150 3450 |
1950 1525 |
c. The budgeted sales for products P1 and P2 would be 15,750 units and 11,675 units respectively and selling prices are as follows:
|
Product |
Selling price per unit (Rs.) |
|
P1 P2 |
280 50 |
d. Standard direct material cost and direct labour cost per unit are as follows.
| MN1 (in liters) | Rs. 6.00 |
| MN2 (in liters) | Rs. 3.00 |
| Direct labour (hours) | Rs. 3.00 |
e. There is no opening or closing raw material
You are asked to prepare the sales budget, production budget, material purchase budget and direct labour budget for the quarter ending 31 st March 2021
Briefly explain the expected performance of the company at the budget committee
2. ABC PLC produces and sells a branded product. The following productions and sales forecasts for the month of June, July, August and September 2020 were extracted from the records of the company:
|
|
June |
July |
August |
September |
|
Purchases (in units) |
8,000 |
12,000 |
15,000 |
13,000 |
|
Sales (in units) |
9,000 |
10,000 |
14,000 |
13,000 |
- The following additional information is also provided:
- Purchase price per unit is 80. All the purchases are made on credit basis and payments will be made in the following month.
- 60% of the sales are on cash basis and balance will be collected in the following Selling price per unit is Rs.120.
- Total administration and distribution expenses for the month have been estimated to be Rs. 480,000 and it will be paid in the same month.
- The company intends to obtain a bank loan of Rs. 1,000,000 during the month of August 2020 to be settled in monthly installments of Rs. 60,000 each for a period of 2 First installment will be paid on 01 st September 2020.
- Cash balance as at 30 th June 2020 would be 125,000.
Task 04
Rexi Manufacturers makes a single product, X, using a single raw material A. Standard costs relating to X have been calculated as follows.
|
Per Unit (Rs) |
|
| Direct material, A, 10kg at Rs. 20 per kg |
200 |
| Direct labour, 5 hours at Rs.6 per hour | 30 |
| Variable production overhead, 5 hours at Rs.1 per hour | 5 |
| Fixed production overhead, 5 hours at Rs.10 per hour | 50 |
| Standard cost | 285 |
| Standard profit | 95 |
| Standard profit | 380 |
The company expects to produce 900 units in month of April 2019. During April 2019 the actual results are as follows.
800 units of product X were produced and sold at Rs. 312,000. 7800 kgs costing Rs. 159,900 were bought and used. 4200 hours were worked during the month and total wages were Rs. 24,150. The variable production overhead for the month was Rs. 4,900. The fixed production overhead for the month was Rs. 47,000.
1. Calculate the following variances for the month of April 2020.
- Direct material cost variance and direct material usage variance
- Direct labor rate variance and direct labor efficiency variance
- Variable overhead expenditure variance and variable overhead efficiency variance
- Fixed overhead expenditure variance, fixed overhead efficiency variance and fixed overhead capacity variance
- Sales price variance and sales volume variance
2. Prepare a summary of total cost variances and total sales
3. Identify possible causes for the variances and recommend corrective actions for adverse