Management Accounting

Unit:    ACC203 – Management Accounting

Task Description

You are required to finish each of these questions, total 40 marks. Please give the solutions in detail, show calculations and submit the solutions to Moodle using a single file, it can be Excel format, Word format or PDF format, no requirement on word limits, if use any references, please refer to Harvard style.

Question 1: Designing a new management accounting system (10 Marks)

You have just been appointed as the new management accountant to manage the transition of the existing Royal Adelaide Hospital to the proposed new site. The hospital has a number of separate departments responsible for direct patient care, such as Accident and Emergency, Intensive Care, Neurology, and Cardiology, as well as a number of support departments such as Radiology and Patient Records. You are a little uncertain as to what your role will be in this new hospital, as consultants have been engaged to design the new management accounting systems. You thought that as a management accountant you would be responsible for developing the new systems!

Required:

1. Write a report to senior management explaining how you, as the management accountant, may contribute to the design and operation of the new management accounting systems for the new hospital.

2. Outline the types of management accounting information that you believe senior managers may require on a regular basis (say, weekly and monthly) to manage the operations of the new hospital. Consider both financial and non-financial information.

3. The new hospital plans to invest in the latest computer technology to run various aspects of the organisation, including the management information systems. Discuss the opportunities that this may present for the way in which you supply weekly and monthly reports to managers.

Question 2: Schedules of cost of goods manufactured and sold; income statement (10 Marks)

The following data refer to Flintoff Fashions for the current year:

Sales revenue                                   $570 000

Work in process inventory, 31 December       18 000

Work in process inventory, 1 January   24 000

Selling and administrative expenses                 90 000

Income tax expense                        54 000

Purchases of raw materials             108 000

Raw material inventory, 31 December   15 000

Raw material inventory, 1 January                   24 000

Direct labour                                   120 000

Electricity: plant                              24 000

Depreciation: plant and equipment                  36 000

Finished goods inventory, 31 December         30 000

Finished goods inventory, 1 January     12 000

Indirect material                              6 000

Indirect labour                                 9 000

Other manufacturing overhead                48 000

Required:

1  Prepare the schedule of cost of goods manufactured for Flintoff Fashions.

2  Prepare the schedule of cost of goods sold for Flintoff Fashions.

3  Prepare the income statement for Flintoff Fashions.

4  Construct an Excel® spreadsheet to solve all the preceding requirements. Include formulas in your spreadsheet wherever possible. Show how both cost schedules and the income statement will change if:

(a)     raw material purchases amounted to $110 400.

(b)     indirect labour was $9600.

Question 3: Job costing; department overhead cost allocation: tour operator(10 Marks)

Asian Adventure Holidays offers a series of holiday packages aimed at families, seniors and corporate groups. The financial controller, Jack Tallis, is preparing for the annual board meeting and is concerned about the loss that the business sustained in the past year. He has examined the profits for each of the three departments of the business—family, seniors and corporate—and it seems that the corporate department is the source of the problem.

Jack has asked you to assist him to look more closely at the three packages offered by the corporate department to see which holiday packages are yielding profits and which are not. The three packages are to Thailand, Malaysia and Indonesia. The sales and direct costs of each corporate package for last year are as follows:

	Bali Adventure	Thailand Discovery	Malaysian Orienteering
Number of packages sold	10	20	10
Number of people per package	5	6	8
Revenue per person	$18 000	$12 000	$14 000
Direct cost per package:
Tour leader	$5 000	$12 000	$9 000
Tour assistant	2 000	3 000	6 000
Air travel	28 000	30 000	32 000
Accommodation	15 000	26 000	24 000
Equipment hire	4 000	0	9 000
Meals	18 000	15 000	8 000

To calculate the profitability of each package, a proportion of the overhead costs of running the corporate department needs to be allocated to the three packages. Jack has suggested that these costs could be allocated to each package in proportion to actual sales revenue. For last year these overhead costs were as follows:

Salaries	$200 000
Phone	2 000
Depreciation on equipment	5 000
Utilities	2 000
Rent and property taxes	9 000
Other department costs	12 000
Total	$230 000

Required:

1. Calculate the profit per package and the total profitability of each of the three corporate packages.

2. Compare the profitability of the three corporate packages.

3. Do you consider that the allocation of the corporate department overhead to packages using actual sales revenue is appropriate? Can you suggest a better method?

4. Suggest what actions the company could take in regard to the three corporate packages. 

Question 4: Cost of goods manufactured; overapplied or underapplied overhead; journal entries (10 Marks)

Cool Cooking Tools Ltd, manufacturer of gourmet cooking utensils, uses job costing. Manufacturing overhead is applied to production at a predetermined overhead rate of 150 per cent of direct labour cost. Any overapplied or underapplied manufacturing overhead is closed to cost of goods sold at the end of each month. Additional information:

Page 163

Job SR22, consisting of ceramic spoon rests, was the only job in process on 31 January, with accumulated costs as follows:

Direct material                       $4000

Direct labour                         2000

Applied manufacturing overhead    3000

Total                              $9000

Jobs BS67, TR29 and GT108 were started during February.

Direct materials requisitions during February totalled $26 000.

Direct labour cost of $20 000 was incurred during February.

Manufacturing overhead incurred in February was $32 000.

The only job still in process on 28 February was job number GT108, with costs of $2800 for direct material and $1800 for direct labour.

Required:

1   Calculate the cost of goods manufactured for February.

2  Calculate the amount of overapplied or underapplied overhead to be closed to cost of goods sold on 28 February.

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