Management Accounting Practice Problems

1.Bench Marking

To assess the financial strength of the different entities and industries norms benchmarks are used. There are different of ways of assessing the positions of company performances. ( Orlova and Afonin, 2015).

Difference between types of benchmarks:

In house benchmarkingis an assessment of a business course to a similar course inside the group.
Competitive benchmarkingis a direct participant-to-participant comparison of a process, method, product or service.
Industrial benchmarkingis an evaluation to alike or indistinguishable practices within the similar or comparable purposes outside the instantaneous industry.
Process benchmarkingsketchily theorizes dissimilar business processes or functions that can be experienced in the similar or comparable ways irrespective of the trade.

2.A)

Calculation of Break-Even point of Hi-Sierra P/L Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Particulars	Units	Amount ($)
sales		3960000
No. of units sold	960
Sales price/ Unit		4125
Cost of goods sold-Variable		1680000
Selling and Administration Expense-Variable		168000
Total Variable Cost		1848000
Total Variable Cost/ unit		1925
Contribution Margin/unit		2200
Cost of goods sold-Fixed		540000
Selling and Administration Expense-Fixed		156000
Total Fixed Cost		696000
Break- Even point in Units		316.36

Calculation of Margin of Safety of Hi-Sierra P/L
Particulars	Amount ($)
Sales	3960000
Less-Cost of goods sold-Variable	1680000
Selling and Administration Expense-Variable	168000
Contribution	2112000
PV Ratio	53%
Selling and Administration Expense-Fixed	156000
Cost of goods sold-Fixed	540000
Total Fixed Cost	696000
Break-Even Sales	1305000
Margin of Safety at present sales level in $	2655000

Calculation of Increase or decrease in Profit
Particulars	Units	Amount/unit ($)	Amount ($)
Sales price /unit	15	3380
Sales			50700
less- Cost of goods sold Variable	15	1750	26250
Selling and Administration Expense-Variable	15	155	2325
Total Variable Costs			28575
Contribution			22125
Less- Cost of goods sold fixed cost			540000
Selling and Administration Expense-Fixed			156000
Total Fixed Cost			696000
Profit Before Tax			-673875

Answer to 2 D
Particulars	Units	Amount/unit ($)	Amount ($)
Sales price /unit	12	3730
Sales			44760
less- Cost of goods sold Variable	12	1750	21000
Selling and Administration Expense-Variable	12	175	2100
Total Variable Costs			23100
Contribution			21660
Less- Cost of goods sold fixed cost			540000
Selling and Administration Expense-Fixed			156000
Total Fixed Cost			696000
Profit Before Tax			-674340

The profit calculated on both the order shows loss but the loss in order 3 is less by $ 465. Therefore, order 3 is more attractive. The loss can be transformed in profits as the company has capacity of producing more units and in this order; there is scope of reducing the variable cost that is packing cost.

3.A)

Calculation of Contribution Margin Unit of Gold Coast Surfing P/L
Product Type	Sales Price	Invoice Cost	Sales Commission	Variable Cost	Contribution Margin
Grommit	$1,250.00	$ 890.00	$ 60.00	$ 950.00	$ 300.00
Kermie	$ 720.00	$ 510.00	$ 40.00	$ 550.00	$ 170.00

Calculation of Weighted Average Contribution Margin Unit of Gold Coast Surfing P/L
Product Type	Sales Mix	Contribution Margin
Grommit	40%	$ 300.00
Kermie	60%	$ 170.00
Weighted Average	$ 222.00

Calculation of Break-Even Sales Volume of Gold Coast Surfing P/L
Product Type	Sales Price	Sales Mix	Break-Even Volume	Sales Revenue
Grommit	$ 1,250.00	40%	68	$ 84,459
Kermie	$ 720.00	60%	101	$ 72,973
Fixed Cost	$37,500
Weighted Average	$ 222.00
Break- Even Point units	169
Total Revenue	$ 157,432

Computation of Cost under Traditional Method of The Outback Camping Company
Particulars	Desert Strom	Alpine
Direct Material	4256000	882000
Direct Labor	4659200	1528800
Overhead	256000	84000
Total Cost	9171200	2494800

Computation of Cost under ABC method of The Outback Camping Company
Particulars	Desert Strom	Alpine
Set up	42000	18000
Construction of Machines	130000	70000
Inspections	12857	7143
Total Cost	184857.14	95142.9

Concluding the accurate cost of the product`
Helps in decision making
Reduces the cost
Advantage in the service industry. (Sigüenza Guzmán, Abbeele and Cattrysse, 2014).

Calculation of Variances of BB Bottling Company P/L
Particulars	Outcome	Favorable/ Unfavorable
Direct material Price Variance	$ 4,100.00	Favorable
Direct Material Quantity Variance	$ (3,400.00)	Unfavorable
Direct Labor rate	$ 2,475.00	Favorable
Efficiency variance
Labor	$ 322,600.00	Unfavorable
Material	$ (8,500.00)	Unfavorable

6.1)

Calculation of Contribution Margin Unit of Maxie Pty.
Product Type	Sales Price	Variable Cost	Contribution Margin
Plain	$ 20.00	$ 12.00	$ 8.00
Fancy	$ 35.00	$ 24.50	$ 10.50

Calculation of Weighted Average Contribution Margin of Maxie Pty.
Product Type	Sales Mix	Contribution Margin
Plain	60%	$ 8.00
Fancy	40%	$ 10.50
Weighted Average		$ 9.00

Calculation of Break Even Sales of Maxie Pty.
Product Type	Sales Mix	Sales Price	Break-Even Volume	Sales Revenue
Plain	60%	$ 20.00	3000	$ 60,000.00
Fancy	40%	$ 35.00	2000	$ 70,000.00
Fixed Cost	$45,000
Weighted Average	$ 9.00
Break- Even Point units	5000
Break- Even Sales	$ 130,000.00

Calculation of Units of Maxie Pty for Fancy Shoes
Particulars	Amount $
Sales Revenue	$ 70,000.00
Price per unit	$ 35.00
No. units sold	2000
NO. of units to be sold for target profit	900

7.1)

Statement of Cost of product of Neo Solar Ltd
Particulars	Amount($)
Direct Material	250000
Direct Material handling and storage	25000
other overhead	108000
Direct Labor Rate	240000
Price of the job	623000

Calculation of Price @10% up on Material of Neo Solar Ltd
Particulars	Amount($)
Direct Material	275000
Direct Material handling and storage	27500
other overhead	108000
Direct Labor Rate	240000
Price of the job	650500

Reference:

Orlova, L.V. and Afonin, Y.A., 2015. Modern management tools: benchmarking and leasing. Oxford Journal of Scientific Research, 3(1), p.292.

Qin, B. and Han, S.S., 2013. Emerging polycentricity in Beijing: Evidence from housing price variations, 2001–05. Urban Studies, 50(10), pp.2006-2023.

Risthaus, T. and Grimme, S., 2013. Benchmarking of London dispersion-accounting density functional theory methods on very large molecular complexes. Journal of chemical theory and computation, 9(3), pp.1580-1591.

Sigüenza Guzmán, L., Van den Abbeele, A. and Cattrysse, D., 2014. Time-driven activity-based costing systems for cataloguing processes: a case study.

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