Fareast International University

Assignment

Course Title: Management Accounting

Course Code: BUS 3213

Submitted to:
Mr. Sheikh Waleed Baksh
Lecturer
Department of Business Studies
Fareast International University

Prepared By:
Name: Fardin Ahmed
ID: 19301005
Program: B.B.A
Semister: Spring

Date of submission: 06, 2021.

1. Process management:
 Process management is an organizational discipline in which a corporation takes a step
back and examines all of its procedures individually and collectively. It examines the
current situation and identifies areas for change in order to make the company more
productive and profitable. An important a part of process management is that
the documentation of processes. The free modeling tool ARIS Express provides
various possibilities for documenting and visualizing processes. It supports all model
types, like the business model or the organizational chart, that you simply got
to ensure coherent and transparent process documentation.

Example: Master rag manufacturing company faced problem of storing huge raw
materials and finished products in the beginning of their journey. An incoming
warehouse was used to store vast quantities of raw materials. Three full-time material
stagers unloaded, processed, and distributed materials to assembly lines as required,
resulting in high operational costs. Management decided to get rid of the warehouse
while keeping production moving. For just-in-time production, a lean team collaborated
with suppliers to design a point-of-use kanban system. Flow manufacturing and 5S
workplace organization were also taught to the employees. Now these lean results them
to reduce warehouse cost and as a result volume of manufacturing increased.

2. a) Preparing the schedule of cost of goods manufacture

DIRECT MATERIALS:
Beginning raw materials inventory 50000
Add: purchase of raw materials 650000
Deduct: Ending raw materials inventory 50000
Direct materials used in production 650000
Conversion cost 435000
Manufacturing overhead cost 50000
Add: Beginning work in process inventory 120000
Deduct: Ending work in process inventory 130000

Cost of goods manufactured 1125000

b)
Product cost:
costs that involved in manufacturing a product are called Product Costs. Product costs include
materials, labor, production supplies and factory overhead. Product cost added in the financial
statements since it includes the manufacturing overhead that is required by both Accounting
standards GAAP and IFRS.

Examples of Product cost mainly includes the following expenses:-

 Direct material (DM)

 Direct labor (DL)

 Factory overheads (FOH)

Direct Material :

The raw materials that get transformed into a finished good by applying direct labor and factory
overheads are mentioned as direct material in accountancy . Direct materials are those raw
materials which will be easily identified and measured.

For example, an automobile manufacturing company typically requires plastic and metal to make
a car. the quantity of those resources are often easily counted or kept a record of. However,
manufacturing a car also requires lubricants like oils and grease. Still, it's very difficult or
insignificant to trace the low value of grease utilized in a specific vehicle hence mentioned as
indirect costs.

Direct Labor

Direct labors are the workers or the labor pool that gets directly involved in producing or
manufacturing finished goods from staple . The direct labor costs are the salaries, wages, and
benefits (like insurance) that are being paid to those labor forces against their services.

For example, the workers in an production line of an auto factory that weld the metal, fix the
screw apply oil and grease, and assembles pieces of metals and plastic into a car are direct
labors. a specific employee to be classified as direct labor, it must be directly related to a selected
job.

Factory Overheads
The indirect expense associated with manufacturing a finished product that can't be directly
traced is mentioned because the factory or manufacturing overheads. In other words, overheads
are that cost that's neither direct material nor direct labor. that's why overheads are mentioned as
an indirect cost that has indirect labor and material costs.

Period cost:
All expenses not included in product costs are referred to as period costs. Period costs are not
related to the manufacturing process. Period costs include overhead, also known as revenue,
general, and administrative costs. Period costs are thus recorded as expenditure in the accounting
period in which they arise.

Types of Period cost,

 Historical Expense – Expenses relating to the prior period. Such costs are already

incurred and are irrelevant during decision making.

 Current Expense – Expenses relating to the present period.

 Pre-Determined Expense– Expenses based on estimates of a future period. Such costs

are computed in advance for preparation of the budget, by considering all the factors that

can affect such cost. Such costs are to be kept well in mind while doing the decision

making.