Reference no: EM131984790

Introductory Management Accounting Assignment

Unit Learning Outcomes covered in this assessment - The purpose of this assignment is to assess the following Learning Outcomes:

a. Describe and discuss the function and role of management accounting in the contemporary business environment.

b. Demonstrate broad knowledge of management accounting and explain appropriate approaches to generate cost information.

c. Produce business reports which present analyses of financial solutions to management issues.

d. Apply knowledge to generate adaptable and flexible approaches to problem solving and decision making.

e. Apply management accounting practices and theories to analyse and solve business and management problems.

Assignment Description - This assessment task is comprised of two parts.

In part 1, students review current literature relating to various product costing systems, approaches to applying overhead costs to each product, and write a report comparing costs and benefits of various approaches to applying overhead costs.

In part 2, students write a memo to the monthly management meeting comparing economic consequences of using different approaches to overhead cost allocations.

Part II: Calculation of costs

The telecommunication industry is one of the most price sensitive and consumer driven industries in Australia's business market. Singtel is a manufacturer of electronic products and assemblies for the telecommunications industry. The Singtel produces two different telephone systems for the corporate market, i.e. "Basic" and "Advanced" telephone systems. The cost estimates for the "Basic" and "Advanced" telephone systems for the current year are as follows.

Cost information of Basic and Advanced telephone models

	Basic ($)	Advanced ($)
Direct material	800	1600
Direct labour (20 hrs @ $30 per hour)	600	600
Manufacturing overhead (Predetermined overhead rate is $40 per direct labour hour.)	800	800
Total	2200	3000

Each model of telephone system requires 20 hours of direct labour. The basic system requires 5 hours in Fixing Department and 15 hours in Testing Department. The advanced system requires 15 hours in Fixing Department and 5 hours in Testing Department. The budgeted overhead costs in these two production departments are as follows:

	Fixing Department	Testing Department
Variable cost	$ 32 per direct labour hour	$8 per direct labour hour
Fixed cost	$400,000	$400,000

The Singtel's management expects to operate at level of 20000 direct labour hours in each production department during the current year.

The following table provides manufacturing overhead costs with the activity cost pools and activity driver data. Additionally, you are provided the information relating to various cost pools and activity drivers.

Activity	Activity cost ($)	Total	Activity drivers
			Basic	Advanced
Machine setup	200000	200 setups	50 setups	150 setups
Material receiving	120000	80000 kilograms	30000 kilograms	50000 kilograms
Inspection	160000	1600 inspections	700 inspections	900 inspections
Machinery related	840000	60000 machine hours	20000 machine hours	40000 machine hours
Engineering	280000	7000 engineering hours	3000 engineering hours	4000 engineering hours
Total overhead	1600000

Singtel plans to produce 1000 units of each model.

Required - Just need solution for first two questions;

1. Calculate cost per Basic telephone system and Advanced telephone system using departmental rates (traditional volume based approach).

2. Calculate cost per Basic telephone system and Advanced telephone system using Activity Based Costing approach.