HI5017 Managerial Accounting

Unit Code: HI5017

Unit Name: Managerial Accounting

Question 2, (Week 3):

Part a:

The total cost of manufacturing Job No X10 is $44400.

Part b:

In the given case, the cost per unit manufacturing is amounting to be $296.

Part c:

Per unit cost information is very important in any decision making process. It helps to determine the overall cost and decision about price positioning is also taken after analysis of per unit cost. It is also used for determining the breakeven point.

Question 2 (week 5):

Part 1:

One should estimate or know about the total cost and number of activities for the purpose of calculating the cost of an activity. It can be known through preparation of a cost sheet.

Part 2:

The total overhead cost of the activity amounts to $4035000. The cost is $4035000 when the activity consumes a certain amount of machine hour, setup and inspections. The amount of these factors used by the activity is mentioned in the table. Overhead cost is $155.19 when a total of 26000 units are manufactured by the plant.

Part 3:

The profit earned by the company is more than what it has targeted. The amount of profit earned is $625(1600-975). The rate of manufacturing overhead is reduced to $155.19. There is no change in the rate of consumption of labor and material in the production process. The cost which was estimated by the traditional overhead costing method was more than the actual cost. The cost is $975.19 which is lower than the estimated cost.

Question 3, week 6:

Part a:

The sales forecast is attached in Appendix 1:

Part b:

Material purchase requirement in attached in appendix 2

Part c:

Workings:

Question 2- Week 8:

Part a:

Variable production cost for minimum transfer pricing is taken into consideration only if the plant has enough capability to meet both internal and external product need. In the given case the minimum transfer price that is considered is $3. It is also the cost of producing.

Part b

In a case where the company has the ability to meet only one need that is either external or internal, transfer pricing will consider the higher price amongst the both. Transfer price will consider the higher price to increase the profit for the department. Here the market price is greater than the internal price. Hence, the product will be recorded at $4 when it is bought by the perfume department from bottling department.

Part c:

The company can directly purchase the product from the market at a price of $3.5. When the market price is $3.5, then the maximum price that can be reimbursed by the presume department can be $3.5.

Part d:

Production capacity of a manufacturing plant helps in determination of the cost based transfer price and market based transfer price. Market based transfer price will be applied in the case where the ability of the manufacturing plant is limited. Cost based transfer price is used in the case where the company has enough capacity to meet both internal and external needs for the products.

Question 3 (Week 10)

1. Based on the problem given in the assignment, the weighted average unit of contribution margin is as follows:

A margin of $235 will be used in respect to produce one single unit of a product. $235 is the amount of weighted average contribution margin. All these information can be known and understood from the table given above. The table gives information about weighted average contribution margin per unit.

1. The break-even sales in Unit = Total fixed cost / Average Contribution Margin

= $5,000,000 / 235 = 21,277 units

Breakeven point for printer

Alpha = 21,277 * 50% = 10,638 units

Beta = 21,277 * 40% = 8511 units

Gamma = 21,277 *10% = 2128 units

IPM should sell 8511 units of beta, 21277 units of alpha and 2128 units of gamma as per the calculation. Production of these units is necessary to achieve the breakeven point by the business.

1. Projected sales = 25,000 units

Breakeven point sales = 21,277 units

Margin of Safety = 25,000 – 21,277 = 3723 units

Question 3 (Week 11)

GEM would incur a total cost of $1,470,000 as per the table and information provided. GEM has a capability to sell 10,000 units. Through the use of this information the minimum acceptable price is calculated. The minimum acceptable price stands at $147. The minimum acceptable price is considered as the price in which a product should be sold to gain some amount of profit.

The products in this case have blemishes because of which it is not possible to sell them at normal price. So it would be relevant to consider administration and variable cost which stands at $10.20. The company should sell the products at a minimum price of $10.20 in order to cover the minimum cost. A cost of $12.20 covers both administration and variable cost.

A consistent or similar future cost over the year has no use. They even do not play a significant role in decision making process. If incremental fixed cost changes then the future cost changes. Future cost plays an important role for making decisions related to future expenses but it is not used in all kinds of decision making.

References:

Juranek, S., Schindler, D. and Schjelderup, G., 2018. Transfer pricing regulation and taxation of royalty payments. Journal of Public Economic Theory, 20(1), pp.67-84.

HOOZÉE, S. and HANSEN, S.C., 2018. A Comparison of Activity-Based Costing and Time-Driven Activity-Based Costing. Journal of Management Accounting Research, 30(1), pp.

Asongu, S.A., Uduji, J.I. and Okolo-Obasi, E.N., 2019. Transfer pricing and corporate social responsibility: Arguments, views and agenda. Mineral Economics, 32(3), pp.353-363.

Rossing, C.P., Cools, M. and Rohde, C., 2017. International transfer pricing in multinational enterprises. Journal of Accounting Education, 39, pp.55-67.

Juranek, S., Schindler, D. and Schjelderup, G., 2018. Transfer pricing regulation and taxation of royalty payments. Journal of Public Economic Theory, 20(1), pp.67-84.

Appendix 1

Appendix 2:

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