Management Accounting Practice Problems
1.Bench Marking
To assess the financial strength of the different entities and industries norms benchmarks are used. There are different of ways of assessing the positions of company performances. ( Orlova and Afonin, 2015).
Difference between types of benchmarks:
- In house benchmarkingis an assessment of a business course to a similar course inside the group.
- Competitive benchmarkingis a direct participant-to-participant comparison of a process, method, product or service.
- Industrial benchmarkingis an evaluation to alike or indistinguishable practices within the similar or comparable purposes outside the instantaneous industry.
- Process benchmarkingsketchily theorizes dissimilar business processes or functions that can be experienced in the similar or comparable ways irrespective of the trade.
2.A)
|
Calculation of Break-Even point of Hi-Sierra P/L |
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|
Particulars |
Units |
Amount ($) |
|
sales |
3960000 |
|
|
No. of units sold |
960 |
|
|
Sales price/ Unit |
4125 |
|
|
Cost of goods sold-Variable |
1680000 |
|
|
Selling and Administration Expense-Variable |
168000 |
|
|
Total Variable Cost |
1848000 |
|
|
Total Variable Cost/ unit |
1925 |
|
|
Contribution Margin/unit |
2200 |
|
|
Cost of goods sold-Fixed |
540000 |
|
|
Selling and Administration Expense-Fixed |
156000 |
|
|
Total Fixed Cost |
696000 |
|
|
Break- Even point in Units |
316.36 |
B)
|
Calculation of Margin of Safety of Hi-Sierra P/L |
|
|
Particulars |
Amount ($) |
|
Sales |
3960000 |
|
Less-Cost of goods sold-Variable |
1680000 |
|
Selling and Administration Expense-Variable |
168000 |
|
Contribution |
2112000 |
|
PV Ratio |
53% |
|
Selling and Administration Expense-Fixed |
156000 |
|
Cost of goods sold-Fixed |
540000 |
|
Total Fixed Cost |
696000 |
|
Break-Even Sales |
1305000 |
|
Margin of Safety at present sales level in $ |
2655000 |
C)
|
Calculation of Increase or decrease in Profit |
|||
|
Particulars |
Units |
Amount/unit ($) |
Amount ($) |
|
Sales price /unit |
15 |
3380 |
|
|
Sales |
50700 |
||
|
less- Cost of goods sold Variable |
15 |
1750 |
26250 |
|
Selling and Administration Expense-Variable |
15 |
155 |
2325 |
|
Total Variable Costs |
28575 |
||
|
Contribution |
22125 |
||
|
Less- Cost of goods sold fixed cost |
540000 |
||
|
Selling and Administration Expense-Fixed |
156000 |
||
|
Total Fixed Cost |
696000 |
||
|
Profit Before Tax |
-673875 |
D)
|
Answer to 2 D |
|||
|
Particulars |
Units |
Amount/unit ($) |
Amount ($) |
|
Sales price /unit |
12 |
3730 |
|
|
Sales |
44760 |
||
|
less- Cost of goods sold Variable |
12 |
1750 |
21000 |
|
Selling and Administration Expense-Variable |
12 |
175 |
2100 |
|
Total Variable Costs |
23100 |
||
|
Contribution |
21660 |
||
|
Less- Cost of goods sold fixed cost |
540000 |
||
|
Selling and Administration Expense-Fixed |
156000 |
||
|
Total Fixed Cost |
696000 |
||
|
Profit Before Tax |
-674340 |
The profit calculated on both the order shows loss but the loss in order 3 is less by $ 465. Therefore, order 3 is more attractive. The loss can be transformed in profits as the company has capacity of producing more units and in this order; there is scope of reducing the variable cost that is packing cost.
3.A)
|
Calculation of Contribution Margin Unit of Gold Coast Surfing P/L |
|||||
|
Product Type |
Sales Price |
Invoice Cost |
Sales Commission |
Variable Cost |
Contribution Margin |
|
Grommit |
$1,250.00 |
$ 890.00 |
$ 60.00 |
$ 950.00 |
$ 300.00 |
|
Kermie |
$ 720.00 |
$ 510.00 |
$ 40.00 |
$ 550.00 |
$ 170.00 |
B)
|
Calculation of Weighted Average Contribution Margin Unit of Gold Coast Surfing P/L |
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|
Product Type |
Sales Mix |
Contribution Margin |
|
Grommit |
40% |
$ 300.00 |
|
Kermie |
60% |
$ 170.00 |
|
Weighted Average |
$ 222.00 |
C)
|
Calculation of Break-Even Sales Volume of Gold Coast Surfing P/L |
||||
|
Product Type |
Sales Price |
Sales Mix |
Break-Even Volume |
Sales Revenue |
|
Grommit |
$ 1,250.00 |
40% |
68 |
$ 84,459 |
|
Kermie |
$ 720.00 |
60% |
101 |
$ 72,973 |
|
Fixed Cost |
$37,500 |
|||
|
Weighted Average |
$ 222.00 |
|||
|
Break- Even Point units |
169 |
|||
|
Total Revenue |
$ 157,432 |
4.
|
Computation of Cost under Traditional Method of The Outback Camping Company |
||
|
Particulars |
Desert Strom |
Alpine |
|
Direct Material |
4256000 |
882000 |
|
Direct Labor |
4659200 |
1528800 |
|
Overhead |
256000 |
84000 |
|
Total Cost |
9171200 |
2494800 |
|
Computation of Cost under ABC method of The Outback Camping Company |
||
|
Particulars |
Desert Strom |
Alpine |
|
Set up |
42000 |
18000 |
|
Construction of Machines |
130000 |
70000 |
|
Inspections |
12857 |
7143 |
|
Total Cost |
184857.14 |
95142.9 |
- Concluding the accurate cost of the product`
- Helps in decision making
- Reduces the cost
- Advantage in the service industry. (Sigüenza Guzmán, Abbeele and Cattrysse, 2014).
5.
|
Calculation of Variances of BB Bottling Company P/L |
||
|
Particulars |
Outcome |
Favorable/ Unfavorable |
|
Direct material Price Variance |
$ 4,100.00 |
Favorable |
|
Direct Material Quantity Variance |
$ (3,400.00) |
Unfavorable |
|
Direct Labor rate |
$ 2,475.00 |
Favorable |
|
Efficiency variance |
||
|
Labor |
$ 322,600.00 |
Unfavorable |
|
Material |
$ (8,500.00) |
Unfavorable |
6.1)
|
Calculation of Contribution Margin Unit of Maxie Pty. |
|||
|
Product Type |
Sales Price |
Variable Cost |
Contribution Margin |
|
Plain |
$ 20.00 |
$ 12.00 |
$ 8.00 |
|
Fancy |
$ 35.00 |
$ 24.50 |
$ 10.50 |
3.
|
Calculation of Weighted Average Contribution Margin of Maxie Pty. |
||
|
Product Type |
Sales Mix |
Contribution Margin |
|
Plain |
60% |
$ 8.00 |
|
Fancy |
40% |
$ 10.50 |
|
Weighted Average |
$ 9.00 |
4.
|
Calculation of Break Even Sales of Maxie Pty. |
||||
|
Product Type |
Sales Mix |
Sales Price |
Break-Even Volume |
Sales Revenue |
|
Plain |
60% |
$ 20.00 |
3000 |
$ 60,000.00 |
|
Fancy |
40% |
$ 35.00 |
2000 |
$ 70,000.00 |
|
Fixed Cost |
$45,000 |
|||
|
Weighted Average |
$ 9.00 |
|||
|
Break- Even Point units |
5000 |
|||
|
Break- Even Sales |
$ 130,000.00 |
5.
|
Calculation of Units of Maxie Pty for Fancy Shoes |
||
|
Particulars |
Amount $ |
|
|
Sales Revenue |
$ 70,000.00 |
|
|
Price per unit |
$ 35.00 |
|
|
No. units sold |
2000 |
|
|
NO. of units to be sold for target profit |
900 |
|
7.1)
|
Statement of Cost of product of Neo Solar Ltd |
|
|
Particulars |
Amount($) |
|
Direct Material |
250000 |
|
Direct Material handling and storage |
25000 |
|
other overhead |
108000 |
|
Direct Labor Rate |
240000 |
|
Price of the job |
623000 |
2)
|
Calculation of Price @10% up on Material of Neo Solar Ltd |
|
|
Particulars |
Amount($) |
|
Direct Material |
275000 |
|
Direct Material handling and storage |
27500 |
|
other overhead |
108000 |
|
Direct Labor Rate |
240000 |
|
Price of the job |
650500 |
Reference:
Orlova, L.V. and Afonin, Y.A., 2015. Modern management tools: benchmarking and leasing. Oxford Journal of Scientific Research, 3(1), p.292.
Qin, B. and Han, S.S., 2013. Emerging polycentricity in Beijing: Evidence from housing price variations, 2001–05. Urban Studies, 50(10), pp.2006-2023.
Risthaus, T. and Grimme, S., 2013. Benchmarking of London dispersion-accounting density functional theory methods on very large molecular complexes. Journal of chemical theory and computation, 9(3), pp.1580-1591.
Sigüenza Guzmán, L., Van den Abbeele, A. and Cattrysse, D., 2014. Time-driven activity-based costing systems for cataloguing processes: a case study.