University of Sunderland
Programme: BTEC Higher National Diploma in Business
Unit Number and Name: Unit 5 Management Accounting
Level: Level 4
Assignment Title - Management Accounting
LEARNING OUTCOMES
On successful completion of this module, students will have demonstrated:
• Demonstrate an understanding of management accounting systems.
• Apply a range of management accounting techniques.
• Explain the use of planning tools used in management accounting.
• Compare ways in which organizations could use management accounting to respond to financial problems.
Unit Learning Outcomes:
LO1 Demonstrating and understanding of management accounting system.
LO2 Appling a range of management accounting techniques.
Assignment Brief Number 1
Scenario
ABC Co. Ltd. specialises in manufacturing electronic products. The range comprises of 2 products, Personal Computers (‘PC') and Video Players (‘VP'). The company's products have the data shown below.
Products PC VP
Maximum monthly demand Unit 10,000 20,000
Direct labour hours per unit hr 2 4
Selling Price $1,200 1,600
Unit variable costs
Direct Material $600 800
Direct Labour $200 400
Other variable O/H $200 200
The company has adopted the OAR in term of direct labour hour. The total estimated fixed cost and direct hours during the year is $2.4m and 30,000 hours respectively.
The company is planned to manufacture a new product, I-Phone (‘IP') with estimated contribution of $600 per unit.
The manager wants to prepare the budgets for the coming January to March, assuming that the company will manufacture only IP to fulfill a confirmed special order for 3,000, 3,000 and 4,000 units for Jan, Feb and March respectively. The only variable cost is direct raw material. To produce one unit of IP, the standard usage of raw material is 2 units at standard price of $70 per unit of IP.
Noted: The Production Department is responsible for the planning, organising and control of the manufacturing process while the Procurement Department is responsible for the purchase of all raw materials.
You need to advise the manager the following issues:
• Explain the meaning of management accounting, the different types of management accounting and role of management accountants (1.1, 1.2)
• Explain the classification of costs that would help the managementdecision-making (2.1)
• Calculate the unit costs of PC and VP based on absorption costing and marginal costing methods (2.2)
• There is a special order for 10,000 units of PC at $1050 per unit:
- which costing method should be used for the accept or reject decision (2.2);
- calculate the costs using the costing method recommended above (2.2);
• given that direct labour available is limited to 60,000 hours per month, advise the optimum production mix of PC and VP to maximise profit (2.3)
• calculate the break-even units of IP and if the manager is confident that a target profit of $1,200,000 is achievable, what would be the corresponding target units sold (2.1, 2.3)
• evaluate the proposal to spend an additional $600,000 to promote the IP so that selling price can be increased by $60 per unit to sell 6,300 units per month and discuss the corresponding pricing decisions (2.3)
Prepare a proposal to advise the manager who has no management accountingknowledge and background.
To achieve M1, you have to discuss other non-financial factors that may need to be taken into consideration when making the decisions in 2.2 and 2.3.
To achieve D1, you have to discuss other pricing strategies that may need to be taken into consideration when making the decisions in 2.2 and 2.3.
To achieve D2, you have to produce a clear, concise and structured proposal with technical language being accurately used for the manager.
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Grading Criteria
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Learning Outcome
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Pass
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Merit
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Distinction
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LO1 Demonstrating and understanding of management accounting system
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P1 Explain management accounting and give the essential requirements of different types of management accounting systems.
P2 Explain different methods used for management accounting reporting.
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M1: Evaluate the benefits of management accounting systems and their applications within an organisational context.
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D1: Critically evaluate how management accounting
systems and accounting
reporting is integrated within
organisation process.
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LO2 Appling a range of management accounting techniques
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P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption costs
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M2: Accurately apply a range of management accounting techniques and produce appropriate financial reporting documents.
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D2: Produce financial reports that accurately apply and
interpret data for a range of business activities.
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Assignment Brief Number 2
Unit Learning Outcomes:
LO3 Explaining the use of planning tools used in management accounting.
LO4 Comparing ways in which organisations could use management accounting to respond to financial problems.
Assignment Brief:
Scenario
ABC Co. Ltd. specialises in manufacturing electronic products. The range comprises of 2 products, Personal Computers (‘PC') and Video Players (‘VP'). The company's products have the data shown below.
Products PC VP
Maximum monthly demand unit 10,000 20,000
Direct labour hours per unit hr 2 4
Selling Price $ 1,200 1,600
Unit variable costs
Direct Material $ 600 800
Direct Labour $ 200 400
Other variable O/H $ 200 200
The company has adopted the OAR in term of direct labour hour. The total estimated fixed cost and direct hours during the year is $2.4m and 30,000 hours respectively.
The company is planned to manufacture a new product, I-Phone (‘IP') with estimated contribution of $600 per unit.
The manager wants to prepare the budgets for the coming January to March, assuming that the company will manufacture only IP to fulfill a confirmed special order for 3,000, 3,000 and 4,000 units for Jan, Feb and March respectively at $200 each. The only variable cost is direct raw material. To produce one unit of IP, the standard usage of raw material is 2 units at standard price of $70 per unit of IP. The actual sale and material purchase for last December is 2,500 units and 50,000 units respectively.
Noted: The Production Department is responsible for the planning, organising and control of the manufacturing process while the Procurement Department is responsible for the purchase of all raw materials.
Give your advice on the following issues:
Part A:
Analyse and evaluating ABC's financial performances by using the various management accounting technique, and make the possible recommendations in dealing with the financial problems and the price strategies in revising its price (3.2, 4.1, 4.2)
Part B: Budgeting Process:
• the major functions of budgeting process (3.1)
• the advantages and disadvantages in operating a budgetary control system (3.1);
Part C: Budgetary Planning:
• whether fixed or flexible budgets should be prepared for the coming January to March (3.1)
• based on information provided in question, prepare the monthly budgets as follows: (3.1, M3)
- sales budget
- cash collection budget from sales (assuming 40% of current month sales being paid within the same month with the remaining 60% payable in the following month)
- production budget (assuming monthly production units equals to monthly sales units)
- raw material purchase budget (assuming the company purchases the exact quantity of raw material in each month to meet the monthly production requirement)
- cash payment budget for raw material purchases (assuming payment being made in the month following the month of purchase)
• prepare the monthly cash budget (assuming that the only other item is cash payment of $300,000 in January for the purchase of production equipment and that the projected cash andbank balance as at 1 January is $20,000) (3.1, M3)
Part D: Budgetary Control:
• if the actual purchase and usage of raw material amounted to $435,600 in January, calculate the raw material variance (4.1)
• it is found that the actual purchase price of raw material is $66 per unit and the actual purchase and usage quantity is 6,600 units to produce 3,000 units of IP in January. Compute the raw material price and usage variances to analyse the raw material variance in question (4.1)
• prepare a cost reconciliation statement reconciling budgeted and actual raw material costs for the month of January (4.1)
• it is discovered that raw material was purchased in January from a new supplier not on the company's approved vendor list. Report your findings to the manager in accordance with the responsibilities of the relevant departments and recommend possible corrective actions for theidentified variances (4.1, 4.2, M3 and M4).
Prepare a proposal to advise the manager.
To achieve D3, you have to evaluate how the planning tools respond appropriately to solving the financial problems to lead the organization to sustainable success.
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Grading Criteria
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Learning Outcome
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Pass
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Merit
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Distinction
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LO3 Explaining the use of planning tools used in management accounting.
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P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary control.
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M3: Analyse the use of different planning tolls and their application for preparing and forecasting budgets.
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D3: Evaluate how planning
tools for accounting
respond appropriately to
solving financial problems
to lead organisations to sustainable success.
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LO4 Comparing ways in which organisations could use management accounting to respond to financial problems.
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P5 Compare how organisations are adapting management accounting systems to respond to financial problems
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M4 : Analyse how, in responding to financial problems, management accounting can lead organisations to sustainable success,
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