Managerial Accounting For Journal Of Accounting Education

Role of Management Accountant in Asset Protection and Fraud Prevention

Discuss about the Managerial Accounting for Journal of Accounting Education.
 

Management Accountant has critical position in a company having the responsibility of securing the assets of the organization and monitoring it from Frauds activities. The management accountant is risk taker, owners of the assets, organizers and the strategists of the organization. As an accountant of the association, it is an essential obligation to guarantee that the individual interest ought not to tracking stock into the contention with the enthusiasm of the organization (DRURY 2013). Employees and colleagues who involve in fraud, they must be suspended immediately.

Furthermore, if such situation occurs, it must be instantly conveyed to the compliance and fraud department as well as the HR department of the company. As an Accountant the following steps should be taken – The diverting of organization’s assets for individual use is an unethical movement and cannot be acknowledged. Primarily action will be taken that, take away all control of the asset for any suspicious activity of the organization, investigation will be conducted, and clues against him have to be collected and report it. He is my colleague or the immediate supervisor it will not be a good to approach to talk to him face to face because it is related to organization’s asset and the matter is quite genuine. (Braun 2013)

2. Cost of goods manufactured is 1617600 the calculation is given in Table 1.

Cost of goods sold is 2076600, the calculation is given in the Table 1.

Details	Amount	Amount
Direct:
Material	378000
Labor	480000
Prime cost		858000
Indirect:
Material	84000
Labor	186000
Dep. Of manuf. Equip.	264000
misc. Plant O/H	135000
Property tax on manuf. Plant building	28800
Plant Utility	92400
Factory cost (Gross)	790200
opening W-I-P	140400
Closing W-I-P	-171000	759600
Factory cost (Net) or cost of goods manufactured		1617600
General office expenses	305400
Depreciation of office equipment	123600	429000
Cost of production		2046600
Open. Fin. Goods	540000
Close. Fin. Goods	-510000	30000
Cost of Goods Sold		2076600
Marketing distr. Cost		30000
Cost of Sales		2106600

Table 1: Cost Sheet

(c) Inventorial cost are direct and indirect raw material which is 378000 and 84000 respectively, opening and closing W-I-P and Finished goods which are 140400 & 171000 and 540000 & 510000 respectively. Whereas period cost is general expenses, depreciation on office equipment and marketing and distribution cost which are 305400, 123600 and 30000 respectively.

(d) The value of the cost of goods manufactured in the income statement is Rs. 1617600. However, Cost of goods manufactured schedule is used to determine the period cost of producing products. This amount is achieved after transferring it finished goods statement. Example is discussed below in Table 3.

COST SHEET
Particulars	amt	amt
Direct materials used
Opening R. M.	5200
Cost of R.M. Purchased	40000
total R.M.	45200
Closing R.M.	-4000
Total R.M. used		41200
Direct labor		100000
Manuf. O/H
Indirect R.M. & Labor	40000
dep. And other fact. Exp.	13850	53850
Total manuf. O/H		195050
Open. WIP	120000
Close. WIP	-95000	25000
Cost of goods manuf.		220050
Income Statement
Particulars	amt	amt	amt
Sales			450000
COGS
Open. Fin. Goods		14200
Cost of goods Manuf.		22300
Total good avail. For sale		36500
Close. Fin. Goods		-10900
COGS			25600
Gross Profit			424400
Selling exp.		86300
Admin. Exp:
Off. Salary	30000
Dep. Off. Equip.	11500
insurance	15000
Total Admin exp.		56500
Total operate. Exp			142800
EBIT			567200
Interest			-4562
EBT			562638
Tax			-15632
NET INCOME			547006

Table 3. Cost Sheet

3. Budgeted manufacturing overhead rate of each department is given below in Table 4.

Manuf. O/H rate Depart. 100	= 57500/4000
	=14.35/machin. Hr.
Manuf. O/H rate Depart. 200	= 62500/8000
	=7.18/ machine hr.

Table 4. Budgeted overhead manufacturing head

• Journal Entries

Sl.no.	Particular	Dr.	Cr.
1.	Material Control Deprt. 100 A/c	110000
	To, Accounts Payable A/c		110000
2.	W-I-P Control Depart. 100 A/C	32500
	Manuf. O/H Control Depart. 100 A/C	7500
	To, Material Control Depart. 100 A/c		40000
3.	W-I-P Control Depart. 100 A/C	52500
	Manuf. O/H Control Depart. A/C	11000
	To, wages payable control A/C		63500
4.	Manuf. O/H Control Depart. 100 A/C	17250
	Lease payable control A/C		16250
	To, Utilities payable control A/C		1000
5.	W-I-P Control Depart. 100 A/C	11500
	To, Manuf. O/H Allocated A/C		11500

 Total cost of the Job A in given below in Table 5.

Particulars	Amt(Rs.)
Direct Material Depart. 100	32500
Direct Material Depart. 200	13500
Direct Manufacturing Labor depart. 100	52500
Direct Manufacturing Labor depart. 200	53500
Manufacturing O/H Depart. 100	11496
Manufacturing O/H Depart. 200	2343
TOTAL	165839

Table 5. Total job cost

• An allocation base is the premise whereupon a substance dispenses its overhead expenses. (Kaspina et al. 2014) An allocation base appears as an amount, for example square footage involved. Taken a toll designations are for the most part used to dole out overhead expenses to created stock, as needed by a few accounting systems. The normal portion process in a multi-division organization is:
• Assign working division costs to items and administrations.
• Allocate administration division expenses to working offices.

Calculation of Cost of Goods Manufactured and Cost of Goods Sold

A decision marker that a designation base is fitting is when changes in the portion base relate to changes in the real cost. Here are a few cases of appropriation allocation bases:

• The PC administrations office allots its costs taking into account the quantity of PCs utilized by each working division, or by the quantity of administration calls to each working office.
• The HR office distributes its costs given the quantity of representatives working in each working division. 

            Most associations utilize a little number of assignment bases to allot overhead expenses; however, a point by point movement based costing system may utilize a significant expansive number of them. Supervisors ought to know about each allotment base being utilized, since it is the premise for overhead charges being allocated to their specializations. They may adjust the exercises of their areas of expertise to decrease their utilization of every designation base, subsequently lessening the costs allotted to the department.

 For example: Allocating Manufacturing Overhead Via Direct Labor

Particular	Product A	Product B	TOTAL
Units of product to be manufacturer	7563	15235
Direct labor hours/ unit	13	20
Total Direct labor hours expected	98319	304700
Total annual expenses. Manufac. O/H Costs	–	–	1260000
Manuf. O/H Cost per Direct labor hours	–	–	5
Manuf. O/H alloca./Unit of Product	20	30
Manuf. O/H Alloc. To all items	491595	1523500

4 Production cost worksheet if spoilage is recognized and the weighted-average method is used is given in Table 6.

Production Cost Worksheet
Flow of Production	Physical Unit	Direct Material	Conversion
WIP- Begin.	37500
Started During Period	55000
Total account	92500
Goods Units Completed	75000	75000	75000
Normal spoilage	3000	3000	3000
WIP-ending	14500	14500	8700
Accounted for	92500	92500	86700
Costs	Total	Direct Mat.	Conversion
WIP-Begin	35000	25000	10000
cost added during period	156406.25	113750	42656
Total costs to account for	191406.25	138750	52656
Divided by equivalent units		92500	86700
Equivalent Unit Costs	2.10733564	1.5	0.60733564
Assignment OF COST
Cost trans. Out	158050.173
Normal Spoilage	6322.00692
WIP Ending:
Direct Material	21750
Conversion	5283.82007
Cost accounted for	191406

Table 6.  Production Cost Worksheet and Assignment of cost 

• Cost accumulation refers to collection and maintenance of the database of the cost occurred from business in the process of operation (Kaplan and Atkinson 2015) .Two most important cost accumulation are of two types, Job order system and Process costing system. From our research we have found out Process Costing has an advantage over cost accumulation because of the following reason:

Cost management – Process costing creates mistakes in the production system. Administration bookkeepers must figure equal units in the process costing framework. Comparable units speak to the measure of unfinished merchandise left in a procedure toward the end of a bookkeeping period. This count may just be a best figure or an appraisal by administration bookkeepers (Horngren et al. 2014)

Consistency – Many companies gives permission to their department individually (Ellul et al. 2015). Through the execution of a procedure costing framework, an organization will guarantee that each division, paying little heed to work, works in a uniform way. This will permit individuals from the assembling store network to be in a state of harmony with each other.

Inventory Control – The IRS utilizes this data to precisely esteem the business with the goal that duty appraisals can be made. –  The IRS requires all organizations that keep up a stock to fastidiously track and report its supply. Tracking stock can be an awkward errand for extensive enterprises. This procedure can be streamlined, be that as it may, through the usage of a procedure costing framework.

Flexible – Entrepreneurs use process costing since it makes an adaptable creation process. (Kinney and Raiborn 2013)Organizations expecting to refine their procedure can basically include or expel a procedure as vital. This likewise permits organizations to bring down their generation cost for every great.

Reference List:

Braun, K.W. 2013, “Custom fabric ventures: An instructional resource in job costing for the introductory managerial accounting course”, Journal of Accounting Education, vol. 31, no. 4, pp. 400-429.

DRURY, C.M., 2013. Management and cost accounting. Springer.

Ellul, A., Jotikasthira, C., Lundblad, C.T. and Wang, Y., 2015. Is historical cost accounting a panacea? Market stress, incentive distortions, and gains trading. The Journal of Finance, 70(6), pp.2489-2538.

Horngren, C.T., Datar, S.M., Rajan, M.V., Wynder, M.B., Maguire, W.A.A. & Tan, R.C.W. 2014, Cost accounting: a managerial emphasis, 2nd edn, Pearson Australia, Frenchs Forest, NSW.

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Kaspina, R.G., Khapugina, L.S. and Zakirov, E.A., 2014. Employment of activity-based costing in the process of company business model generation. Life Science Journal, 11(8), pp.356-359.

Kinney, M.R. & Raiborn, C.A. 2013, Cost accounting: foundations and evolutions, 9th edn, South-Western, Cengage Learning, Mason, OH.