Part A: Portfolio of calculations and comments
Preparation of Income Statement Under Marginal Costing
Marginal Costing Income Statement (Year 1) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (2900×100) |
290000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (2900×15) |
43500 |
||
Direct Labour (2900×10) |
29000 |
||
Variable Production Overhead (3700*5) |
18500 |
91000 |
|
Contribution |
199000 |
||
Fixed Costs |
|||
Total fixed indirect production overhead |
100000 |
||
Interest expense |
1000 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Corporation Tax (290000*15%) |
55100 |
246100 |
|
Net Profit |
|
|
43900 |
Marginal Costing Income Statement (Year 2) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (3300×100) |
330000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (3300×15) |
49500 |
||
Direct Labour (3300×10) |
33000 |
||
Variable Production Overhead (4100×5) |
20500 |
103000 |
|
Contribution |
227000 |
||
Fixed Costs |
|||
Total fixed indirect production overhead |
100000 |
||
Interest expense |
1500 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Corporation Tax |
62700 |
254200 |
|
Net Profit |
|
|
75800 |
Marginal Costing Income Statement (Year 3) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (4500×100) |
450000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (4500×15) |
67500 |
||
Direct Labour (4500×10) |
45000 |
||
Variable Production Overhead (3900×5) |
19500 |
132000 |
|
Contribution |
318000 |
||
Fixed Costs |
|||
Total fixed indirect production overhead |
100000 |
||
Interest expense |
1000 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Corporation Tax |
85500 |
276500 |
|
Net Profit |
|
|
173500 |
Preparation of Income Statement Under Absorption Costing
Absorption Costing Income Statement (Year 1) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (2900×100) |
290000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (2900×15) |
43500 |
||
Direct Labour (2900×10) |
29000 |
||
Total fixed indirect production overhead |
100000 |
172500 |
|
Gross profit |
117500 |
||
Interest Expense |
1000 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Variable Production Overhead (3700×5) |
18500 |
||
Corporation Tax (290000×19%) |
55100 |
164600 |
|
Net Profit |
|
|
172500 |
Absorption Costing Income Statement (Year 2) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (3300×100) |
330000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (3300×15) |
49500 |
||
Direct Labour (3300×10) |
33000 |
||
Total fixed indirect production overhead |
100000 |
182500 |
|
Gross profit |
147500 |
||
Interest Expense |
1500 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Variable Production Overhead (4100×5) |
20500 |
||
Corporation Tax |
62700 |
174700 |
|
Net Profit |
|
|
182500 |
Absorption Costing Income Statement (Year 3) |
|||
|
|
Amount (£) |
Amount (£) |
Sales Revenue (4500×100) |
450000 |
||
Marginal Cost of Sales |
|||
Add: |
|||
Direct Materials (4500×15) |
67500 |
||
Direct Labour (4500×10) |
45000 |
||
Total fixed indirect production overhead |
100000 |
212500 |
|
Gross profit |
237500 |
||
Interest Expense |
1000 |
||
Fixed Administrative overheads |
60000 |
||
Fixed Distribution overheads |
30000 |
||
Variable Production Overhead (4100×5) |
20500 |
||
Corporation Tax |
85500 |
197000 |
|
Net Profit |
|
|
212500 |
As per the application of the Marginal costing the following results are inferred:
As per the application of the Absorption costing the following results are inferred:
Some of the main reasons for the difference in the profit figures under the absorption costing and marginal coting are listed as follows:
Part B- Presentation
Slide 1
Management Accounting definition, roles and principles
8 Management Accounting reports with their contents and purpose
The contents of the financial report will include profit and loss statements which will depict the overall earnings and breaking these numbers into groups. The purpose of this report is seen with summarizing the total profits earned[3].
The pro forma cash flow depicts the total sum of money expected in short and medium-term accounting periods and amount anticipated on the spending. This managerial accounting report is aimed at providing a month-by-month summary for the outgoing and incoming cash and at the same time predict the shortfalls and surpluses[4].
The contents show the sources of your company’s revenue and enumerates the avenues which are least and most successful for the company. This report is intended to highlight the areas in which the business activities earn the most income, such as wholesale versus retail sales in particular accounts.
This management account tool is conducive for portraying the overall sales in each category for understanding the areas in which the business is most profitable. The purpose of such a report is defined to produce the breakdown costs associated to labor, materials and other expenses such as fees and licenses.
These reports are evaluated as very critical in measuring the performance of a company which is considered as a whole for any organization. Each company prepares such a report to understand the grand scheme of their business.
These reports include all the necessary information about the accounts receivable from the trade debtors. The purpose of such a report is seen with Breaking down the remaining balances as per specific time periods, which allows the managers for identifying the defaulters and any issue which exists in the collection process.
Managerial accounting is responsible for calculating the costs of articles that are manufactured. This report offers the details of the capacity to procure the cost prices of items against their selling prices.
These reports are aimed at reviewing the performance of the companies as a whole for the individual employees. These reports are used for taking key strategic decisions about the future of an organization[5].
Slide 6
Management accounting benefits and their application within an organization
Slide 7
Critical evaluation of integration
The various types of the advantages of the planning tool are
The various types of the disadvantages of the planning tool are
The use of different planning tools and their application for preparing and forecasting budgets useful for
The organizations are adapting management accounting systems to respond to financial problems in the following manner:
Responding to financial problems, management accounting can lead organizations to sustainable success in the following manner
Planning tools for accounting respond appropriately to solving financial problems in the following manner:
References
Coad, Alan, Lisa Jack, and Ahmed Othman Rashwan Kholeif. “Structuration theory: reflections on its further potential for management accounting research.” Qualitative Research in Accounting & Management 12.2 (2015): 153-171.
Cooper, David J., Mahmoud Ezzamel, and Sandy Q. Qu. “Popularizing a management accounting idea: The case of the balanced scorecard.” Contemporary Accounting Research34.2 (2017): 991-1025.
Fullerton, Rosemary R., Frances A. Kennedy, and Sally K. Widener. “Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices.” Journal of Operations Management 32.7-8 (2014): 414-428.
Kaplan, Robert S., and Anthony A. Atkinson. Advanced management accounting. PHI Learning, 2015.
Kihn, Lili-Anne, and Eeva-Mari Ihantola. “Approaches to validation and evaluation in qualitative studies of management accounting.” Qualitative Research in Accounting & Management 12.3 (2015): 230-255.
Malmi, Teemu. “Managerialist studies in management accounting: 1990–2014.” Management Accounting Research31 (2016): 31-44.
Otley, David. “The contingency theory of management accounting and control: 1980–2014.” Management accounting research 31 (2016): 45-62.
Tappura, S., et al. “A management accounting perspective on safety.” Safety science 71 (2015): 151-159.
Wagenhofer, Alfred. “Exploiting regulatory changes for research in management accounting.” Management Accounting Research 31 (2016): 112-117.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order formOnce we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignmentAs soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download