Managerial Accounting Assignment
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[pic 1][pic 2]Program:MBACourse:MANAGERIAL ACCOUNTINGCourse Code:BMAC5203Semester:JANUARY 2017Type of AssignmentINDIVIDUALLecturer:Mr. Saleh Al-RiyamiStudent:Esam Emad Al-Sagheer NomanStudent ID:20152020113Task 1a). Calculating Cost of Unit using the Traditional Costing System:1. Basic productSuper ProductDirect Labor Hours per Unit4 DLHs6DLHsNumber of Units40,000 units10,000 unitsTotal DLHs per Product4 * 40,000= 160,000 DLHs6 * 10,000= 60,000 DLHsTotal Estimated DLHs160,000+60,000= 220,000 DLHs2. Overhead Rate = Total Estimated Costs / Total Direct Labor Hours = 1,000,000 / 220,000 = 4.55 $ per DLH3. Per-Unit Cost:Basic ProductSuper ProductDirect Labor( 10$ per Hour)40$60$Direct Material15$20$Total Prime Costs55$80$Overhead Costs4.55$ * 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$b). Calculating Cost of Unit Using the Activity-Based Costing System:
1. Activity Rates Calculation:Number of Machine Set-ups280,000$/100= 2,800$ per Set-upNumber of Quality Control Inspections220,000$/2,000= 110$ per InspectionNumber of Sales Order Processed240,000$/5,000= 48$ per Sale Order ProcessedMachine Hours260,000$/500,000= 0.52$ per Machine Hour2. Calculating the Cost of Unit:Basic ProductSuper ProductDirect Labor Cost(10$ per hour)40$ * 40,000 Units= 1,600,000$60$ * 10,000 Units= 600,000$Direst Material15$ * 40,000 Units= 600,00020$ * 10,000 Units= 200,000$Total Prime Costs1,200,000$800,000$Overhead Costs:Machine Set-ups2,800$ * 20= 56,000$2,800$ * 80= 224,000$Quality Control Inspections110$ * 500= 55,000$110$ * 1,500= 165,000$Sales Order Processed48$ * 1,500$= 72,000$48$ * 3500= 168,000$Machine Hours0.52$ * 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 UnitTraditional Costing SystemABC SystemBasicSuperBasicSuper73.2$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 2To 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 BhdSales BudgetQuarter Ending September 30JulyAugustSeptemberTotal QuarterBudgeted Sales in Units30,000 Units40,000 Units50,000 Units120,000 UnitsSelling Price per Unit ($)x 12$x 12$x 12$x 12$Total Sales360,000$480,000$600,000$1,440,000$