MANAGERIAL ACCOUNTING
Introduction
In this study, a discussion is developed on the cost and management accounting to explaining the cost behavior as the level of production changes. On the other hand, an analysis has been made on the process costing system to find out per unit cost for the mass production industries.
1.0 Cost of goods manufactured schedule for the quarter
| Direct materials | 75000 | |
| Direct materials used | 75,600 | |
| Finished goods inventory ( opening) | 150600 | |
| finished goods inventory (closing) | 108000 | |
| factory overhead | -102000 | |
| Indirect materials used | 16,800 | |
| Direct manufacturing labor | 96,000 | |
| Indirect manufacturing labor | 37,200 | |
| Property taxes | 5,760 | |
| Salesperson’s’ company vehicle costs | 2,400 | |
| Depreciation of manufacturing equipment | 52,800 | |
| Depreciation of office equipment | 24,720 | |
| Miscellaneous plant overhead | 27,000 | |
| Plant utilities | 18,480 | |
| General office expenses | 61,080 | |
| Marketing distribution costs | 6,000 | 342,240 |
| Work in progress beginning | 28080 | |
| work in progress closing | -34200 | |
| Cost of goods manufactured | 492720 |
Table 1: cost of goods manufactured
(Source: Done by the Author)
Cost of goods manufactured schedule for the quarter is 492720. Work in progress, direct labour, raw material this are the variable, which determine the cost of goods manufactured. Lower finished good always helps a company to produce maximum number of cost of goods manufactured.
1.1 Cost of goods sold schedule for the quarter
| Beginning inventory | 108000 | |
| Work in process inventory (opening) | 28080 | |
| Work in process inventory (closing) | 34200 | 62280 |
| End inventory | -102000 | |
| Cost of sold goods | 68280 |
Table 2: Cost of sold goods
(Source: Done by the Author)
Cost of goods sold schedule for the quarter is 68280. Cost of sold goods dependents on the beginning inventory, work in progress and the end inventory. Higher opening inventory is always good for a company to increase the cost of sold goods (Branu et al. 2013).
1.2 Comparison between managerial accounting and financial accounting
| Managerial accounting | Financial accounting |
This accounting system helps the manager to make policies, plan and strategies to operate the business (Weygandt & Kimmel & Kieso, 2015). Is is not compulsory to maintain managerial accounting. Managerial accounting assist the management team for proper planning and decision making. The management accounting format is not specified. Managerial accounting reports are prepared as per the need of the company. It is a complete and detailed report with regarding various planning and proper information. Marginal costing bassically use for the internal purpose of the company. | Financial accounting system focuses on the financial statement of a company (Weygandt & Kimmel & Kieso, 2015). Financial accounting is compulsory for any organisation. Financial accounting mainly provides financial information to outsiders like equity, preference shareholders. The financial accounting format is specified. The financial accounting statements are need to prepared at the end of the each financial year. Financial accounting report is a summarized reports about the position of the company. Company’s equity and preference shareholders are follow the financial accounting report. Therefore, the purpose of the financial accounting statement is for the outsiders. |
2.0Budgeted manufacturing overhead rate for each department. (Q.2)
| Department A | For 15500 machine hour | Per unit |
| Direct materials purchased on account | 55,000 | 3.548387097 |
| Direct materials used | 16,250 | 1.048387097 |
| Direct manufacturing labor | 26,250 | 1.693548387 |
| Indirect manufacturing labor | 5,500 | 0.3548387097 |
| Indirect materials used | 3,750 | 0.2419354839 |
| Lease on equipment | 8,125 | 0.5241935484 |
| Utilities | 500 | 0.03225806452 |
| total cost | 7.443548387 | |
| Department B | For 18000 machine hour | Per unit |
| Direct materials purchased on account | 88,750 | 4.930555556 |
| Direct materials used | 6,750 | 0.375 |
| Direct manufacturing labor | 26,750 | 1.486111111 |
| Indirect manufacturing labor | 4,500 | 0.25 |
| Indirect materials used | 2,375 | 0.1319444444 |
| Lease on equipment | 1,875 | 0.1041666667 |
| Utilities | 625 | 7.277777778 |
| total cost | 14.55555556 |
Table 3: Overhead cost
(Source: Done by the Author)
The budgeting overhead rate is prepared for identifying per unit production in a particular period of time (Islam & Hu, 2012). In above table, a calculation has been created to identify the per unit production in each department. These departments are consisting with direct materials, direct labour and indirect materials. Total cost of department A was 7.44. That signifies, the company was able to minimise the cost of production and other operating expenses. A lower total cost always a favorable position of any company. It almost eliminate the raw materials cost with due time. On the other hand, department B’s total cost was 14.55 per unit. It signifies that department B was unable to minimise the per unit cost. It is important for the department B to minimise the overhead per unit cost and other operating expenses cost.
2.1 Total cost of job
Total cost for the department A is 7.44 for 15500 machine hours. On the other hand, total cost of department B is 14.55 for 18000 machine hours. It is important for a company to minimise the total cost of job. Higher cost of a product has increased the per unit production cost. Hence, the cost of goods sold may increase
