College of banking and financial studies department of professional

COLLEGE OF BANKING AND FINANCIAL STUDIES
DEPARTMENT OF PROFESSIONAL STUDIES
Assignment Front Sheet
Assignment – 3.

 

Course:    Cost Accounting and Performance Management .

-Assignment:    Understand The Nature Source And Purpose Of Management Information And Cost Accounting Concepts. L.O. 3 Be Able To Compare Actual Costs With Standard Costs and Analyse Variances.

 

 

pg. 1- HND- SEM-W- ASSIGNMENT- CAPM – SPRING 2016

 

 
 

 

Assignment Brief

Purpose of this Assignment: Involvement with costs is fundamental to the role of management accountants. Any Business, whether it manufactures goods or provides a service, needs to know how much its product or services cost and how these costs might change in response to decisions made. This assignment will help you understand the nature source and purpose of management information and cost accounting concepts and to compare actual costs with standard costs and analyse variances. It also helps to understand performance measurement models: Balanced scorecard, benchmarking, types of benchrnarking.

Task 1 (L01 AC 1.1) P,M1 1.1 Explain the relationship of cost accounting to financial and managerial accounting. ContextRelevant to L.0.1.1 (P, M1) Cost accounting and financial accounting help the management formulate and control organization policies. Management accounting collects data from cost accounting and financial accounting. Thereafter, it analyzes and interprets the data to prepare reports and provide necessary information to the management. On the other hand, cost books are prepared in cost accounting system from data as received from financial accounting at the end of each accounting period.

Required:

in relation to the above explain the relation of cost accounting to Financial and Management AccoUnting and how it helps management in decision making.

Pass: To get the Pass Grade explain briefly Cost accounting, Management Accounting and Financial Accounting and explore the relationship between them.

Ml- To achieve Ml, differentiate Cost, Financial and Managerial Accounting.

Task 2. (LO1 AC 12 )

Tested in semester 3 Management Accounting Costing and Budgeting. (Learning Outcome 1.1) Classify different types of cost.

Task 3 (10 1 AC 1.3) P, M3, D1 1.3 Estimate inventory values using different methods. Scenario1

The Smith manufacturing Company discloses the following information about the stock for the month of. April 2016:

pg..1- HNC- SEM-1V- ASSIGNMENT CAPtvl — SPRING 2016

 

 
 

 

Date

Purchases/ Sale

Units

 Cost per unit ($)

Beginning of April

Opening Balance

400

4

10th April

Sale

200

 

11th April

Purchases

800

5

15th April

Sale

500

 

18th April

Sale

200

 

20th April

Purchases

200

5.50

24th April

Purchases

100

7.00

27th April

Sale

500

 

28th April

Purchases

250

7.50

30th April-

Sale

150

 

Pass – To achieve Pass grade you should be able to estimate inventory values using FIFO and AVCO methods.

M3 – To achieve M3 you will need to apply appropriate structure to calculate stock value using the above methods.

D1- To achieve Dl you should get the difference between the stock values using above methods and evaluate the reasons of differences.

Task 4 (LO-1 AC- 1.4) P,Ml,M3

1.4 Differentiate between cost, profit, investment and revenue centres.

Scenario:

A media company has several divisions. One is a magazine publishing division. This division is divided into three operating units: fashion magazines, sports magazines and business magazines, which operate from different offices. The fashion magazines unit has three main functions: commissioning, editing and printing, and marketing and sales.

The media company might organize its cost and management system as follows:

·      Each of the divisions in the media company, including the magazines division, might be an investment centre. The senior manager of the_ magazines division might have the authority to incur capital expenditure to acquire new assets for the division. The performance of the magazines division might be measured by its annual return on investment (ROl).

·      Within the magazines division, the fashion magazines unit, sports magazines unit and business magazines unit might be profit centres. The manager of each unit might be responsible for the revenues and costs of the unit, and the performance of each unit would be measured by the profit that it makes.

·      Within the fashions magazine unit, each of the operating functions (commissioning, editing and printing, and marketing and sales) might be a cost unit. The manager in charge of each unit is responsible for costs, and the performance of the cost unit might be measured by comparing the actual costs of the cost centre with its budgeted costs:

pg. 5- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016

 

Pass- To get the Pass grade explain responsibility accounting and differentiate between cost, profit, investment and revenue centres.

1‘111- To get M1 grade you should be able to make judgement, of all the divisions in the above scenario and link them with the appropriate responsibility centre.

M3 — To get M3 you should present the information given in the scenario in an appropriate format and explain how managers of responsibility centres are responsible for the performance of their part of the organization and its activities.

Task 5 (10-1 AC- 1.5) P,M2, D1

1.5                                  Separate the fixed and variable elements of total costs using a suitable method in a given

situation.

Scenario- 3

The following table shows the number of patients treated and total costs for the hospital for each of the past four months

 

Months

Patients

Total Cost ($)

1

5,000

37,500

2

8,400

45,660

3

8,300

45,050

4

5,900

39,420

Variable cost per unit and total fixed cost is constant within this range of activity.

Pass- To get the pass grade you should be able to separate the fixed and variable elements of total costs using a suitable method in a given scenario.

M2 – To get M2 you should be able to select suitable method to separate the fixed and variable elements of total costs and explain it.                                                                                                   .

D1 — Using the identified method you should calculate the total costs (to the nearest $) in month 5 if number of patients are 7,500 and justify valid conclusions.

Task 6 (10-3 AC- 3.1) P,M1

3.1 – Explain and illustrate the difference between standard cost card under marginal and absorption costing.

Scenario

DLL products Ltd. Manufactures and assembles one type of furniture unit. Company is fully automated based on simple machine intensive process. Company plans to produce 5,000 units in a year. Based on historical data the Company calculated the following standards concerning direct Inputs:

pg. 6- NNE}- SEM-IV- ASSIGNMENT- CAN A – SPRING 2016


 

 

 
 

 

 

 

 

Direct materials:

 

Material X 4 Kg $15per Kg

 

 

Material Y 2 Kg at $20 per Kg.

 

 

Direct labour:

 

 

0.5 hours at $5 per hour.

 

 

Machine Hours:

 

 

5 hours at $6 per hour

 

 

Variable overhead:

 

 

5 hours at $3 per hour                                                                                        .

 

 

Fixed production overhead cost is $75,000 and is absorbed according to the machine hour basis.

 

 

Pass-To get pass grade usethe above date to draw the standard cost card under marginal and absorption costing and explain the difference between them.

 

 

Ml-To get M1 you should make the effective judgement between standard cost and standard costing.

 

 

Task 7 (LO-3 AC- 3.2) P,M2,D1,D2

 

 

3.2 – Compute and interpret price and usage variances for material, labour, and overhead inputs

 

 

Scenario- 5

 

 

Task 7 (10-3 AC- 3.2) P,M1,M2,D1,D2

 

 

Carrypack Limited manufactures and sells laptop bags

 

 

Standard costs relating to one bag have been calculated as follows:

 

 

Per unit(5)

 

 

Direct material 50 Kg at $5per kg                                      250

 

 

Direct labour, 5 Hours at $8 per hour                                 40

 

 

Variable production Overhead, 5 Hours at $2 per hour          10

 

 

Fixed production Overhead 5 hour at $1 per hour                  5

305

 

 

The budgeted selling price of one bag is $450 and Carrypack budgeted to produce 1,020 units a month.

 

 

During December 1,000 units were produced and sold, selling price was $488 per unit.

 

 

Relevant_details of production are as follows:

 

 

Materials 45,000 Kgs. costing $ 370,000

 

 

Labour 4,100 hours were worked and total wages were $32,000

 

 

Variable production overhead was $12,500

 

 

Fixed production overhead was $4,900

 

 

Pass- To get pass Compute and interpret price and usage variances for material, labour, overhead (fixed and variable).

 

pg. 7- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016

 

 
 

 

 

 

 

M2 – To get M2 Use appropriate method to calculate sales variances accurately.

D1-   To get D1 evaluate the reasons for the occurrence of adverse and favourable variances.

D2-   Variances should not be looked at in isolation. One variance might be inter-related with another, Recognize the interrelationship between variances calculated above.

Task 8 (LO-3 AC- 3.3) P, M3, D2.

3.3Reconcile budgeted profit with actual profit under standard absorption costing.

Pass: To get the pass grade prepare the reconciliation statement (using task 7 above) under absorption costing using appropriate format.

M3- To get M3 use appropriate structure to reconcile the budgeted profit with actual profit and explain the use of the reconciliation statement.

D2 – To get D2 take responsibility for managing and organising the reconciliation and actual profit statement.

Evidence ••

checklist
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.                                     .

etifkiene&                                   ow’           by St4de

               •–                                                                                                                                                                                                              

.                                                                               

Evidence

Or6* —

Task 1

Essay identifying and explaining the relationship of cost accounting to financial and managerial accounting.

 

Task 2

Tested before

 

Task 3

Calculation showing stock valuation using different methods.

 

Task 4

Based on the case evidence identify responsibility centres.

 

Task 5

Calculation showing the segregation of fixed and variable part of the total cost.

 

Task 6

Drafting standard cost card under marginal and absorption Costing.

 

Task 7

Calculation and interpretation of Variances.

 

Task 8

Drafting statement to reconcile actual and budgeted profits.

 

 

1.      

pg. 8- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016

 

 
 

 

 

 

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