UNIVERSITY OF TEG INTERNATIONAL

SUNDERLAND COLLEGE

MANAGEMENT ACCOUNTING

Nguyễn Trương Diệu Trinh

Student Name/ID Number:
ID : B200011

Unit Number and Title: Unit 5 Management Accounting (H/508/0489)

Academic Year: 2020-2021

Unit Assessor: Nguyen Thi Tuong Tam

A1: Management accounting systems and techniques

Assignment Title:
for Hoang Binh Manufacturing Co.

Issue Date: 30 October 2020

Submission Date: 30 November 2020

Internal Verifier Name:

Date:

Learning Outcomes 1: Demonstrate an understanding of management accounting systems.

Task 1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
 I. Concepts of management accounting and management accounting systems
Concepts of management accounting
The specialized area of accounting is aimed at capturing the current situation, especially the
financial situation of the business. Thereby helping business managers make the most optimal
operating decisions. Management accounting information is especially important in operating a
business, and at the same time serves to control and evaluate that enterprise.
Goal of the account manager
- Know each cost component, calculate and sum up production cost, price for each product, each
type of service.
- Develop budget estimates for the target activities.
- Control implementation and resolve personnel the difference between project cost and reality.
- Provide the necessary information to make sound business decisions.
II. The roles of management accounting and management accounting systems
The roles of management accounting
A managerial accountant is to collect and deliver relevant and prompt information to managers to
perform operations, control organizational operations, and make decisions. Production managers
often plan and make decisions on production plans and schedules, and marketing managers make
decisions about advertising, promotion, and pricing. Chief financial officers often make capital
mobilization and investment decisions. In general, for each goal, managers need information for
decisions. Management accountants will provide useful information for managers at all levels of
the organization. Therefore, a requirement for management accountants is that they must be
knowledgeable about the decision-making situations of managers.
The importance of management accounting for businesses
There are four importance things of management accounting
1.Responsible for the planning concept
For businesses that want to do business successfully, there must be a strategy matching the set
goals. That goal will be associated with fixed timelines, such as a week, month, year, or quarterly
goals. Therefore, business directors need to have a specific plan connection between departments
to have a master plan table. At this time, the management accountant will be responsible for
reviewing and making an assessment of whether this development plan is appropriate or not
before giving it to the review board to proceed.
2.Manage internal operations
A business organization that wants to function properly must certainly have someone to oversee
and manage its actual operations. Therefore, the accountant will be the person to support along
with the human resources department to propose ways to manage related resources to supervise
and help the departments operate better.
3.Control business goals
After making specific implementation plans, do executives have the experience of evaluating and
verifying that the plan is appropriate? Certainly, in that assessment process, it is indispensable
for the appearance of the management accountant. They will be the same researcher and give
specific comments to the CEO that this plan is in line with the goals set out earlier or not? If not
suitable, they must reassess and research a new plan more suitable to the company's financial
situation.
4.Give decision
Management accountants have the right to choose from different reasonable options to review
and present results. During the operation of the business, there are certainly many jobs that
require management accountants to make timely decisions to solve immediate problems. This
job requires calm, quick intelligence and consistency in thinking to be able to make the most
accurate decision, otherwise it will bring certain damage to the business.
III. An explanation of the principles of management accounting.
To operate the most effective management accounting requires a highly qualified accountant.
they must ensure that these four international principles are applied in everyday activities
1. Influence
Management accounting is based on the need for decision-makers, thereby, promoting
communication. This need-based communication can be customized according to the individual
style, the process, or the knowledge of the listener.
Encouraging managers to actively exchange information is aimed at eliminating the risk of
misleading and heterogeneous information. This means that only the most relevant information
can be used for classification and analysis, increasing the influence of management accounting.
Information-based decision-making provides an overview of the past and present state of the
business and helps to predict the future. Any predictions, discussions, or reports must be based
on sources of information that are accurate, reliable, transparent, and impactful on the business.
2. Analyse
Relevant information is used to develop scenario scenarios to analyze the impact and impact of
opportunities and risks on the future of the business. These scenarios help businesses to consider
each action and evaluate situations that require decision-makers to have a thorough
understanding of the business model and macroeconomic situation. Based on the values and
logic obtained from the case scenarios, the business and decision-makers can align future
directions, adjust goals and needs to be more relevant, and Exploiting when there is an
opportunity or should minimize investment to avoid risks.
3. Trust
Foundation for any relationship, trust plays a particularly important role in the business world.
Management accountants are, in theory, reliable, ethical, and transparent individuals because
they have the power to make decisions that affect any activity or individual in the business. The
top priority of a management accountant is to ensure that all business operations and decisions
are in compliance with local laws and accounting codes of conduct. Preserving the integrity and
professional ethics is a way to help accountants preserve the value and social responsibility of a
business.
4. Relevant
Accurate information that affects decision-making, such information must be related to the
production and business situation. If you think that historical data is not necessary and useful,
that is not true. As such, there is a need to strike the right balance between: Information relating
to the past, present and future; Internal and external information; Financial and non-financial
information (including environmental and social issues). If that information tells us which
activities bring high profits and which activities are not effective, then that information is still
valuable for us to exploit more. The job of the management accountant is to review all available
databases and extract only the parts that best match the current needs, then sift and push these
data through analysis.
IV. Differrent types of Management Accounting Systems

1. Concept of Cost Accounting Systems

Cost accounting is the process of recording, classifying, analyzing, summarizing, and allocating
the costs associated with a process, and then developing different action keys to control costs. Its
goal is to advise management on how to optimize business processes and processes based on
efficiency and cost affordability. Cost accounting provides the details that managers need to
control current operations and plan for the future.
2. Types of Cost Accounting Systems
Inventory valuation methods : Allows a company to provide a monetary value for the items that
make up their inventory. Inventories are often the current largest asset of a business, and
measuring them is necessary to ensure accurate financial reporting. If inventory is not accurately
measured, costs and sales cannot be properly combined and a company may make poor business
decisions.
 Traditional costing system
Traditional cost accounting refers to a factory's general allocation of costs to manufactured
products consumed. This cost is usually applied based on the number of units of production, the
number of direct labor hours and the number of hours the machinery is used. Sometimes the
overall factory cost can be much higher than on an allocation basis. Traditional cost system is the
method used to predict profitability.
 Activity-based costing
Activity-based Costing (ABC) is an alternative cost accounting model to traditional accounting
methods. ABC method determines the entire source of operating expenses, then allocates the
above costs to activities related to products and services provided to customers. Therefore, ABC
method can help managers to optimize shareholder investment value and improve company
performance.
+ Cost Accumulation methods :
 Job order costing : A work order costing system will require a record of separate
business costs for each item (or job or special order). The cost of work profile reports
each direct material, the direct labor used, and an allocated production cost.
 Process costing : A type of operating cost used to determine the cost of the product at
each process or production stage. Costs are averaged over the units produced during the
period. The process costs are suitable for industries that produce homogeneous products
and where production is a continuous flow. A process can be called an organization's sub-
unit that is specifically defined for cost-collection purposes.
 Inventory valuation : The determination of the appropriate monetary value for the stock
of raw materials, semi-finished products, and finished products of an enterprise.
 Activity-based costing : ABC has identified all sources of operating costs, and
then allocate those costs by product and service based on the volume of activity or
transaction occurring in the provision of a service or product. Therefore, the ABC
method can help managers to optimize shareholder investment value and improve
company performance.
 Traditional costing : An estimate of the costs to produce a unit of product and the
costs incurred in the manufacturing process, collected by the management
accountant from the organization's accounting system
 Inventory management System : A planning method for determining when to place an
order and how much to order so that the cost of ordering and the storage costs can be
optimally effective without causing production loss. discontinuity.
 Price-Optimization System : The process of finding that pricing sweet spot or
maximizing price against the customers' willingness to pay. Companies up and down the
supply chain settings rightly dedicate a massive amount of time towards price
optimization to ensure that their products will sell quickly at the right price while still
making a decent profit.
V. The use of techniques and methods used in management accounting by
presenting calculations for allocation overhead costs applying traditional costing
and activity-based-costing.
Cost Allocation method :
1. Traditional costing :
Overhead cost = €1,200,000
Labour hour production = €80,000
Overhead cost rate = 15 ( € / h )
A cost budget per unit :
Economy Adjusted
Direct Material Cost €100 €150
Direct Labour Cost €40 €60
Manufacturing Overhead Cost €60 €90
Total cost per unit €200 €300
Explain :
Overhead cost = Assembly cost + Receiving cost + Tesing cost

= €200,000 + €400,000 + €600,000 = €1,200,000

= €1,200,000
Labour hour production = Number of unit produced economy * Direct Labour Economy
Number of unit produced* Direct Labour Adjusted
= €14,000*4 + €4,000*6
= €80,000
Overhead cost rate = Overhead cost : Labour hour production
= 1,200,000 : 80,000

= 15 ( € / h )
ManufacturingOverhead Cost Economy = Overhead cost rate * Direct Labour Cost (Economy)
ManufacturingOverhead Cost Adjusted = Overhead cost rate * Direct Labour Cost ( Adjusted )
Total Cost per unit Economy = Direct Material Cost + Direct Labour Cost (Economy)
Total Cost per unit Adjusted = Direct Material Cost + Direct Labour Cost ( Adjusted )
2. Activity-based Costing
Total receiving report = 4,000 + 4,000
= 8,000 ( report )
Report per unit = €400,000 : 8,000
= €50
Total assembly hour for produced = 14,000 * 4 + 4,000 * 6
= €80,000
Assembly Cost = €200,000 : 80,000
= 2.5 ( € / h )
Total testing = 400 + 1,600
= 2,000 ( test )
Testing cost per unit = 600,000 : 2,000
= €300

A cost budget per unit :

Economy Adjusted
Direct Material Cost 100 150
Direct Labour Cost 40 60
Assembly Cost 10 15
Receiving Cost 14.3 50
Testing Cost 8.6 120
Total cost per unit 172.3 395

Explain :
Assembly cost ( economy ) = €10 * 4
= €40
Receiving cost ( economy ) = ( €50 * 4,000 ) : 14,000
= €14.3
Testing cost ( economy ) = ( €300 * 400 ) : 14,000
= €8.6
Assembly cost ( adjusted ) = €2.5 * 6
= €15
Receiving cost ( adjusted ) = ( €50 * 4,000 ) : 4,000
 = €50
Testing cost ( adjust ) = ( €300 * 1,600 ) : 4,000
= €120
The summary table between the two method Activity Based Costing vs Traditional Costing

Traditional costing ABC

When
Economy 200 172.9

Adjusted 300 395

comparing 2 methods, the traditional cost system is easier and faster than the ABC system.
However, traditional cost systems are not as accurate as ABC systems, but traditional cost
systems can also lead to significantly high variability.

Task 2: Explain different methods used for management accounting

reporting.
1. Different types of management accounting reports

 Budgeting report : Compare the actual results of your business with your budget.
This report is issued to anyone responsible for a line item in the income statement,
usually meant for department managers. The budgeting report is used to determine
which level of spending is too high, from which actions can be taken to lower the
spending back to the projected level. This report is one of the most frequently used
tools to maintain control over a business's financial results
 Accounts Receivable Aging report : A periodic report that classifies the company's
accounts receivable by the time an invoice was outstanding. It is used as a yardstick to
determine a company's client's financial position. If aging receivables show that the
company's receivables are being collected much slower than normal, this is a warning
that the business registration could be slowed down or that the company is taking risks.
Credit risk is greater in your sales activities.
 Job cost report : A management tool used to evaluate a project's performance or
production against a known standard or estimate. They are used in many fields of
 business and respective industries. The main purpose of the cost of work report is to
identify any discrepancies or beneficial outcomes, often in the form of financial value.
 Inventory and Manufacturing report : An inventory manufacturing report is a
summary of the amount of inventory a business has at a given time. The inventory report
is a physical or electronic document with numbers representing products you can sell
right now, the inventory you're ordering, or the inventory you need to use within the
business.
 Income stament : This report reflects the cumulative results of all business activities of a
company or enterprise at a given time. Income Statement shows how the business works
and brings profit or not. Or to understand another way is the real profit of the business
loss or profit.

2. Calculation of Job costing

Total Direct Material cost = Materials inventory beginning – materials inventory ending +
2 , 14 , 16 / October
= ( €38,430 + €16,470 ) – ( €36,442 + €15,618 ) + €14,400 +
€16,220 + €11,780
= €45,240
Direct Material cost Job 1 = €45,240 * 40%
= €18,096
Direct Labour cost job 1 = 226 * €30
= €7,980
Direct Material cost Job 2 = €45,240 * 60%
= €27,144
Direct Labour cost job 2 = 184 * €28
= €5,152
Budgeted manufacturing overhead cost
Predetermined overhead rate =
Budgeted amount of cost driver
36,000
= = 80 ( € / h )
450

Manufacturing Overhead cost applied job 1 = Actual direct labour job 1 * Predetermined
overhead rate
= 266 * 80 = €21,280
 Cost of goods manufactured Job 1 = Opening WIP Inventory + Manufacturing cost during
period – closing WIP Inventory
= €32,060 + ( €18,096 + €7,980 + €21,280 ) – €47,323
= €32,093
Manufacturing Overhead cost applied job 2 = Actual direct labour job 2 * Predetermined
overhead rate
= 184 * 80 = €14,720
Cost of goods manufactured Job 2 = Opening WIP Inventory + Manufacturing cost during
period – closing WIP Inventory
= €13,740 + ( €27,144 + €5,152 + €14,720 ) – €20,281
= €40,475
Cost of goods sold Job 1 = Beginning Inventory + Purchases during the period - Ending
inventory
= €26,880 + €32,093 – €8,432
= €50,541
We do not have the cost of good sold job 2 because it is still in the process

Net operating income = Total selling price – Administrative cost – Distribution cost – Cost
of goods sold
= €375,000 – €120,500 – €70,600 – €50,541
= €133,359
The unit cost for Job 1 = Cost of goods sold Job 1 ÷ 40 unit
= €50,541 ÷ 40 = €1263.525
Income statement

Raw material inventory beginning 54,900

Add purchase of raw materials 42,400
Deduct raw material inventory ending 52,060
Raw material used in job 1 18,096
Raw material used in job 2 27,144
 Direct material ued 45,240
Total manufacturing cost 94,372

Labour hour in Job 1 226

Labour hour in Job 2 184
Hour rate Job 1 €30
Hour rate Job 2 €28
Direct labour cost job 1 €7980
Direct labour cost job 2 €5,152
Manufactured overhead cost applied job 1 €21,280
Manufactured overhead cost applied job 2 €14,720

Learning Outcomes 2: Apply a range of management accounting techniques.

Task 3: Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
1. Absorption costs.

November December
Variable per unit produced 28 28
Direct material cost 15 15
Direct labour cost 9 9
Manufacturing variabale overhead 4 4
cost
Manufacturing fixed overhead cost 6.75 11.25
Production cost per unit 34.75 39.25

Explain :
Variable per unit produced = Direct material cost + Direct labour cost + Manufacturing variabale
overhead cost
= 15 + 9 + 4 = €28
Manufacturing fixed overhead cost ( November ) = Fixed per month ÷ Units produced during the
year
= 135,000 ÷ 20,000 = €6.75
Manufacturing fixed overhead cost ( December ) = Fixed per month ÷ Units produced during the
year
= 135,000 ÷ 12,000 = €11.25
Production cost per unit November = Variable per unit produced + Manufacturing fixed
overhead cost ( November )
= 28 + 6.75 = €34.75
Production cost per unit December = Variable per unit produced + Manufacturing fixed overhead
cost ( December )
= 28 + 11.25 = €39.25

2. Income Satement Absorption

November December
Sale 1,120,000 1,120,000

Cost of goods sold 556,000 610,000

Gross profit 564,000 510,000

Variable selling and admin cost 80,000 80,000

Fixed variable selling and admin 75,000 75,000

cost
Net operating income 409,000 355,000

Explain :
Sale = Sale price per unit * units sold during the year
= 70 * 16,000 = €1,120,000
Variable selling and admin cost = Units sold during the year * variable per unit sold
= 5 * 16,000 = €80,000
Cost of goods sold ( November ) = Production cost per unit November * Units sold during the
year
= 34.75 * 16,000 = €556,000

Cost of goods sold ( December ) = Production cost per unit December * Units sold during the
year
= 39.25 * 16,000 = €610,000
Net operating income ( November ) = Sale - Cost of goods sold -Variable selling and admin cost
November - Fixed variable selling and admin cost November
= 1,120,000 – 80,000 – 75,000 – 556,000 = €409,000
Net operating income ( November ) = Sale - Cost of goods sold -Variable selling and admin cost
November - Fixed variable selling and admin cost November
= 1,120,000 – 80,000 – 75,000 – 610,000 = €355,000

3. Marginal cost

November December
Variable per unit produced 28 28
Production cost per unit 28 28
Explain:  
Variable per unit produced = Direct material cost + Direct labour cost + Manufacturing variabale
overhead cost
= 15 + 9 + 4 = €28
Because marginal costing only takes the total cost, no details are needed
4. Income Statement Marginal

November December

Sale 1,112,000 1,120,000

Variable Cost 528,000 528,000

 Contribution Margin 592,000 592,000

Fixed Cost 210,000 210,000

Net operating income 382,000 382,000

Explain :
Sale = Sale price per unit * units sold during the year
= 70 * 16,000 = €1,120,000
Variable Cost = ( Variable per unit sold + Variable per unit produced ) * Units sold during the
year
= ( 28 + 5 ) * 16,000 = €528,000
Contribution Margin = Sale – Variable Cost
= 1,120,000 - 528,000 = €592,000
Fixed Cost = Fixed cost manufacturing + Fixed cost per month
= 135,000 + 75,000 = €210,000
Net operating income = Contribution Margin - Fixed Cost
= 592,000 – 210,000 = €382,000
5. Calculate and interpret the influence of product sales mix to profit.
Total expected units sold per year = 120,000 + 80,000 = 200,000 unit synonym 100%
Economy expected 120,000 per year synonym 60%
Standard expected 80,000 per year synonym 40%
Contribution Margin in per unit economy = selling price per unit – variable cost per unit
= ( 150 – 60 ) * 60% = €54
Contribution Margin in per unit sandard = selling price per unit – variable cost per unit
= ( 180 – 80 ) * 40% = €40
Total contribution margin = 54 + 40 = €94
¿ cost 479,400
Break-even Point =
Contribution margin
=
94
= 5,100

Economy Standard
Q 3,060 2,040
Sale 459,000 367,200
 Variable Cost 183,600 163,200
Contribution Margin 275,400 204,000
Total contribution margin 479,400
Explain :
Q economy = Break-even Point * 60% Sale standard = Q * Selling price per unit
= 5,100 * 60% = 3,060 = 2,040 * 180 = €367,200
Sale economy = Q * Selling price per unit Variable Cost Standard = Q * Variable Cost
per unit
= 3,060 * 150 = €459,000
= 2,040 * 80 = €163,200
Variable Cost economy = Q * Variable Cost
per unit Contribution Margin standard = Sale
economy - Variable Cost Standard
= 3,060 * 60 = €183,600
367,200 – 163,200 = €204,000
Contribution Margin economy = Sale
economy - Variable Cost economy Total contribution margin = Contribution
Margin standard + Contribution Margin
= 459,000 – 183,600 = €275,400
economy
Q standard = Break-even Point * 40%
= 275,400 + 204,000 = €479,400
= 5,100 * 40% = 2,040
Sale Budget
January February March 2020
Volume 1600 1800 2200 5600
( units )
Price ( £ ) 100 100 100 100
Sale ( £ ) 160,000 180,000 220,000 560,000

Sale = Volume * price

Sale Reciepts
Month January February March
AP on 1 January 0
2020
Term 1 32,000 72,000 40,000
Term 2 36,000 81,000
Term 3 44,000
Total £32,000 £108,000 £165,000
Term 1 = 160,000 * 20% = £32,000
Term 2 = 160,000 * 45% + 180,000 * 20%
= 72,000 +36,000
= £108,000
Term 3 = 160,000 * 25% + 180,000 *45% + 220,000 * 20%
= 40,000 + 81,000 + 44,000
= £165,000

Production budget

Month January February March Quarter

Sale Volume ( units 1600 1800 2200 5600
)
Ending finished 360 440 480 480
goods
Total demand 1960 2240 2680 6080
Begin finished 0 360 440 0
goods
Demanded of 1960 1880 2240 6080
finished good
produced

Ending finished goods January = 1800 * 20% = 360

Ending finished goods February = 2200* 20% = 440
Ending finished goods March = 2400 * 20% = 480
Total demand of January = Sale volume + Ending finished goods
= 1600 + 360 = 1960 units
Total demand February = Sale volume + Ending finished goods
= 1800 + 440 = 2240 units
Total demand March = Sale volume + Ending finished goods
= 2200 + 480 = 2680 units
Demand of finished goods produced of January = Total demand - Begin finished goods
= 1960 – 0 = 1960
Demand of finished goods produced of February = Total demand - Begin finished goods
= 2240 – 360 = 1880

Demand of finished goods produced March = Total demand - Begin finished goods
= 2680 – 440 = 2240

Month January February March Quarter

Demand finished goods 1960 1880 2240 6080
Material consumed 0.5 0.5 0.5 0.5
( meter/unit )
Demand material for 980 940 1120 3040
( metre ) production
Ending materials 98 94 112 112
Total demand 1078 1034 1232 3152
Beginning material 180 98 94 180
Purchased material 898 936 1138 2972
( metres )
Price ( £ / metre ) 12 12 12 12
Cash need for purchasing 10776 11232 13656 35664
Direct meterial expenses 11760 11280 13440 36480
Direct Material Budget

Ending material = 10% * demanded material for production

= 980 * 10% = 98
Total demand = Ending materials + Demanded material for production
Purchased materials = Total demand – Beginning materials
Cash need for purchasing = Purchased materials * price
Direct materials expenses = Demanded meterials for production * price
Cash payment
Month January February March Quarter
Apply on 9000
31/12/2019
Term 1 5388 5388
Term 2 5616 5616
Term 3 6828
Total cash 5388 11004 12444
payment

Direct Labour Forecast

Month January February March Quarter
Demand 1960 1880 2240 6080
finished goods
Hours 2 2 2 2
consumed by
one products
Total hours 3920 3760 4480 12160
needed
Hours rate 20 20 20 20
Direct labour 78400 75200 89600 243200
expenses

Total hours needed = Demand finished goods * hours consumed by one products
Direct labour expenses = Total hours needed * hours rate
Overhead Cost forecast
Month January February March
Direct labour hours 6860 6580 7840
Variable overhead 30 30 30
cost / hour
Total variable 205,800 197,400 235,200
 overhead costs
Fixed overhead costs 104,00 104,000 104,000
Total overhead cost 309,800 301,400 339,000
Depreaciation 20,800 20,800 20,800
Payment for overhead 289,000 280,000 318,000
costs

Direct labour hours = Demand finished good produced * hour variable overhead per unit
= 1960 * 3.5 = 6860
January = 60% * 104,000 = 62,400 ( A )
February = 30% * 104,000 + 60% * 104,000 = 93,600 ( A )
March = 30% * 104,000 + 60% * 104,000 = 93,600 ( A )
Total = 104,000 * 3 = 312,000
Depreciation = ( 312,000 - A ) / 3 = 62400 /3 = 20800

Month January February March Quarter

Direct materials 11760 11280 13440 36480
cost
Direct labour 78400 75200 89600 243200
cost
Material 309800 301400 339200 950400
manufaturing
overhead cost
Total cost of 399,960 387,880 442,240 1,230,080
goods
manufactured
Cost of goods 219,657
manufactured
per unit
Cost of goods manufactured Budget

Cost of goods manufactured per unit = Total cost of goods / Sale volume

Month January February March Quarter

Cost of goods 399,960 387,880 442,240 1,230,080
manufactured
Beginning 0 79076,52 96649,09 0
finished goods
inventory
Cost of good 399,960 466956,52 538889,09 1230080
sold available
for sale
Ending finshed 79076,52 96649,09 105435,36 105435,36
goods inventory
Cost of good 320883,48 37030707,43 433453,73 1124644,64
sold