ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce MANA!ERIAL ACCOUNTIN!

("#$" C%EC&LIST SEMESTER AUTUMN, '$()

This packet comprises the following material: 1. 2. 3. #. %. Text Book (One) Course Outline ssignment !o. 1"2 ssignment $orms ( 2 sets ) &che'ule for assignment su(mission an' tutorial meetings.

)f *ou fin' an*thing missing in this packet" please contact at the a''ress gi+en (elow: A**+*tant Re,+*trar Ma+-+n, A--ama I./a- Open Un+0er*+t1 %2", I*-ama/a3 $#(24$#56((2(' Dr7 S7 M7 Am+r S8a8 (Course Coor'inator)

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

9ARNIN!
(7 '7 PLA!IARISM OR %IRIN! O: !%OST 9RITER(S :OR SOLVIN! T%E ASSI!NMENT(S 9ILL DEBAR T%E STUDENT :ROM A9ARD O: DE!REE;CERTI:ICATE, I: :OUND AT ANY STA!E7 SUBMITTIN! ASSI!NMENT(S BORRO9ED OR STOLEN :ROM OT%ER(S AS ONE<S O9N 9ILL BE PENALI=ED AS DE:INED IN >AIOU PLA!IARISM POLICY?7 Seme*terA A@t@mn, '$() Tota- MarB*A ($$ Pa** MarB*A #$

Co@r*eA Mana,er+a- Acco@nt+n, ("#$" Le0e-A M7Com

Note: You are required to solve all questions if you are unable to understand any question of assignment, do seek help from your concerned tutor !ut keep in mind that tutors are not supposed to solve the assignment questions for you

ASSI!NMENT No7 (
(Un+t*A (C4 ,. 1 a) Briefl* 'escri(e the following terms: (# D ($ i.-ifferential cost ii.)n+entoria(le cost iii.&tock out cost i+..erio' Cost /ow man* 'ifferent t*pes of costing s*stem are0 )n'icate the in'ustries where there are use'.

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,. 2 The manager of a compan* re1ueste' the work in process in+entor* figures on (a the a+erage cost (asis an' (/ the first2in" first2out (asis. The 'ata are: (($ 3nits in (eginning in+entor*" 4"5556 all materials" %57 la(our an' o+erhea'. Cost of (eginning in+entor*: material" 8s. 3"94#6 la(our" 8s. 2"1#46 o+erhea'" 8s. 19"9:4 3nits complete' an' transferre'" #2"555 3nits in process at the en'" :"5556 all materials" :57 la(our an' o+erhea' Re.@+re3A The costs assigne' to the work in process in+entor*. ,. 3 a) () -escri(e an' (riefl* 'iscuss the metho's of accounting for the (*2pro'uct in the 'etermination of the main pro'ucts. )llustrate *our answer with suita(le examples. (# D ($ The !ewport Chemical Compan* manufactures three pro'ucts" R" S" an' T. -uring !o+em(er" the following ;oint costs were incurre': materials" 8s. 2

145"5556 -irect <a(our" 8s. 155"5556 factor* o+erhea'" 8s. =5"555. ,uantities ;ointl* pro'uce' were: R" 25"5556 S" %5"5556 T" 35"555. ''itional costs after split2off were: D+rect La/o@r :actor1 O0er8ea3 R Rs. 2%"555 Rs. 1%"555 S 3%"555 2%"555 T 14"555 12"555 3nit &ales prices are: R" 8s. =6 S" 8s.%6 T" 8s.4 Re.@+re3A i. >ross profit for each pro'uct" assuming that all units pro'uce' were sol' an' that ;oint cost is allocate' using the market +alue metho'. ii. 'ecision as to whether .ro'uct 8 shoul' (e sol' at the split2off point for 8s.#.%5 per unit or processe' further an' sol' for 8s. = per unit. ,. # a) () ?hat 'o *ou un'erstan' (* la(our turno+er0 /ow it is measure'0 -iscuss the causes of la(our turno+er an' its effect on cost of pro'uction. (# D # )n what fun'amental wa*s 'oes acti+it*2(ase' costing ( BC) 'iffer from tra'itional costing metho's0 ?hat are unit2le+el" (atch2le+el" pro'uct2le+el" customer2le+el" an' organi@ation2sustaining acti+ities0

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?hat 'o *ou un'erstan' (* the term a(sorption costing0 /ow 'oes it 'iffer from -irect Costing0 (# D ($ () -ixon Compan* manufactures an' sells recreational e1uipment. One of the compan*As pro'ucts" a small camp sto+e" sells for 8s. %5 per unit. Baria(le expenses are 8s. 32 per sto+e" an' fixe' expenses associate' with the sto+e total 8s. 154"555 per month. Re.@+re3A i. Compute the (reak2e+en point in num(er of sto+es an' in total sales 'ollars. ii. )f the +aria(le expenses per sto+e increase as a percentage of the selling price" will it result in a higher or a lower (reak2e+en point0 ?h*0 ( ssume that the fixe' expenses remain unchange') iii. t present" the compan* is selling 4"555 sto+es per month. The sales manager is con+ince' that a 15 percent re'uction in the selling price woul' result in a 2% percent increase in monthl* sales of sto+es. .repare two contri(ution income statement" one un'er present operating con'itions" an' one as operations woul' appear after the propose' changes. &how (oth total an' per unit 'ata on *our statements. i+. 8efer to the 'ata in (iii) a(o+e. /ow man* sto+es woul' ha+e to (e sol' at the new selling price to *iel' a minimum net income of 8s. 3%"555 per month0 ,. : -ur(an Cetal .ro'ucts" <t'." makes specialt* metal parts use' in applications ranging from the cutting e'ges of (ull'o@er (la'es to replacement parts for <an' 3

8o+ers. The compan* uses an acti+it*2(ase' costing s*stem for internal 'ecision2 making purposes. The compan* has four acti+it* cost pools as liste' (elow: (($ Act+0+t1 Co*t PooAct+0+t1 Mea*@re Act+0+t1 Rate Or'er si@e .....................!um(er of 'irect la(or2hours 8s.1:.4% D 'irect la(or2hour Customer or'ers...........!um(er of customer or'ers 8s.325.55 D customer or'er .ro'uct testing .............!um(er of testing hours 8s.49.55 D testing hour &elling ...........................!um(er of sales calls 8s.1"595.55 D sales call The managing 'irector of the compan* woul' like information concerning the cost of a recentl* complete' or'er for hea+*2'ut* trailer axles. The or'er re1uire' 255 'irect la(or2hours" # hours of pro'uct testing" an' 2 sales calls. Re.@+re3A .repare a report summari@ing the o+erhea' costs assigne' to the or'er for hea+*2 'ut* trailer axles. ?hat is the total o+erhea' cost assigne' to the or'er0 ,. = The marketing 'epartment of Eessi Corporation has su(mitte' the following sales forecast for the upcoming fiscal *ear (all sales are on account): (($ (*t Q@arter 'n3 Q@arter )r3 Q@arter Et8 Q@arter B@3,ete3 @n+t *a-e* .......11"555 12"555 1#"555 13"555 The selling price of the compan*As pro'uct is 8s.14.55 per unit. Canagement expects to collect :%7 of sales in the 1uarter in which the sales are ma'e" 357 in the following 1uarter" an' %7 of sales are expecte' to (e uncollecti(le. The (eginning (alance of accounts recei+a(le" all of which is expecte' to (e collecte' in the first 1uarter" is 8s.=5"255. The compan* expects to start the first 1uarter with 1":%5 units in finishe' goo's in+entor*. Canagement 'esires an en'ing finishe' goo's in+entor* in each 1uarter e1ual to 1%7 of the next 1uarterAs (u'gete' sales. The 'esire' en'ing finishe' goo's in+entor* for the fourth 1uarter is 1"4%5 units. Re.@+re3A 1. .repare the compan*As sales (u'get an' sche'ule of expecte' cash collections. 2. .repare the compan*As pro'uction (u'get for the upcoming fiscal *ear. ,. 4 -awson To*s" <t'." pro'uces a to* calle' the Ca@e. The compan* has recentl* esta(lishe' a stan'ar' cost s*stem to help control costs an' has esta(lishe' the following stan'ar's for the Ca@e to*: (($ -irect materials: : microns per to* at 8s.5.%5 per micron -irect la(or: 1.3 hours per to* at 8s.4 per hour -uring Eul*" the compan* pro'uce' 3"555 Ca@e to*s. .ro'uction 'ata for the month on the to* follow: Direct materials: 2%"555 microns were purchase' at a cost of 8s.5.#4 per micron. %"555 of these microns were still in in+entor* at the en' of the month. Direct labor: #"555 'irect la(or2hours were worke' at a cost of 8s.3:"555. #

Re.@+re3A 1. Compute the following +ariances for Eul*: a. -irect materials price an' 1uantit* +ariances. (. -irect la(or rate an' efficienc* +ariances. 2. .repare a (rief explanation of the possi(le causes of each +ariance. ,. 9 ?expro" )nc." pro'uces se+eral pro'ucts from processing 1 ton of cl*pton" a rare mineral. Caterial an' processing costs total 8s.:5"555 per ton" one2fourth of which is allocate' to pro'uct F1%. &e+en thousan' units of pro'uct F1% are pro'uce' from each ton of cl*pton. The units can either (e sol' at the split2off point for 8s.9 each" or processe' further at a total cost of 8s.9"%55 an' then sol' for 8s.12 each. ($# Re.@+re3A &houl' pro'uct F1% (e processe' further or sol' at the split2off point0 !UIDELINES :OR ASSI!NMENT F ( The stu'ent shoul' look upon the assignments as a test of knowle'ge" management skills" an' communication skills. ?hen *ou write an assignment answer" *ou are in'icating *our knowle'ge to the teacher: Gour le+el of un'erstan'ing of the su(;ect6 /ow clearl* *ou think6 /ow well *ou can reflect on *our knowle'ge H experience6 /ow well *ou can use *our knowle'ge in sol+ing pro(lems" explaining situations" an' 'escri(ing organi@ations an' management6 /ow professional *ou are" an' how much care an' attention *ou gi+e to what *ou 'o. To answer a 1uestion effecti+el*" a''ress the 1uestion 'irectl*" (ring important relate' issues into the 'iscussion" refer to sources" an' in'icate how principles from the course materials appl*. The stu'ent must also (e a(le to i'entif* important pro(lems an' implications arising from the answer. $or citing references" writing (i(liographies" an' formatting the assignment" shoul' (e followe'. . format

ASSI!NMENT No7 '

This assignment is a research2oriente' acti+it*. Gou are re1uire' to select an* tra'ingD manufacturingDnon2tra'ing organi@ation of *our interest which supports *ou in preparing a report of a(out 1555 wor's on the topic allotte' to *ou" to (e su(mitte' to *our teacher for e+aluation. &elect one of the following topics accor'ing to the last 'igit of *our roll num(er. $or example" if *our roll num(er is .23#2=145 then *ou will select issue I 5 (the last 'igit): 2 TOPICSA %

5. 1. 2. 3. #. %. :. =. 4. 9.

)'entif* the +alue a''e' an' non2+alue a''e' acti+ities in *our selecte' organi@ation an' appl* the concept of acti+it* (ase' management. J+aluate the proce'ures for materials procurement an' use of *our chosen (usiness organi@ation. /ow 'oes an organi@ation works out the la(our costing0 /ow the efficienc* of a manager as well as the (usiness can (e impro+e' (* using the CB. anal*sis techni1ues0 8eport the Bu'geting proce'ure" which exists in the organi@ation. Canagerial usefulness of +ariance anal*sis .repare a comprehensi+e report on a managerial accounting information s*stem. /ow the 'eferential cost anal*sis is performe' in the organi@ation0 -escri(es the complete cost accumulation proce'ures in manufacturing organi@ations. Jxplain the concept of 'epartmentali@ation an' 'escri(es that how the +arious $actor* o+erhea's ha+e (een assigne' to 'ifferent 'epartments.

The report shoul' follow the following format: 1. Title page 2. cknowle'gements 3. n a(stract (one page summar* of the paper) #. Ta(le of contents %. )ntro'uction to the issue ((rief histor* H significance of issue assigne') :. .ractical stu'* of the organi@ation (with respect to the issue) =. -ata collection metho's 4. &?OT anal*sis (strengths" weaknesses" opportunities H threats) rele+ant to the issue assigne' 9. Conclusion (one page (rief co+ering important aspects of *our report) 15. 8ecommen'ations (specific recommen'ations rele+ant to issue assigne') 11. 8eferences (as per . format) 12. nnexes (if an*) !UIDELINES :OR ASSI!NMENT F 'A 1.% line spacing 3se hea'ers an' su(hea's throughout all sections Organi@ation of i'eas ?riting skills (spelling" grammar" punctuation) .rofessionalism (rea'a(ilit* an' general appearance) -o more than repeat the text Jxpress a point of +iew an' 'efen' it. 9OR&S%OPS The workshop presentations pro+i'e stu'ents opportunit* to express their communication skills" knowle'ge H un'erstan'ing of concepts learne' 'uring practical stu'* assigne' in assignment I 2. :

Gou shoul' use transparencies an' an* other material for effecti+e presentation. The transparencies are not the presentation" (ut onl* a tool6 the presentation is the com(ination of the transparencies an' *our speech. ?orkshop presentation transparencies shoul' onl* (e in t*pe' format. The transparencies shoul' follow the following format: 1) Title page 2) n a(stract (one page summar* of the paper) 3) )ntro'uction to the issue ((rief histor* H significance of issue assigne') #) .ractical stu'* of the organi@ation (with respect to the issue) %) -ata collection metho's :) &?OT anal*sis (strengths" weaknesses" opportunities H threats) rele+ant to the issue assigne' =) Conclusion (one page (rief co+ering important aspects of *our report) 4) 8ecommen'ations (specific recommen'ations rele+ant to issue assigne') !UIDELINES :OR PRESENTATIONA Cake e*e contact an' react to the au'ience. -onKt rea' from the transparencies or from report" an' 'onKt look too much at the transparencies (occasional glances are accepta(le to help in recalling the topic to co+er). 1%2minute presentation can (e practice' se+eral times in a'+ance" so 'o that until *ou are confi'ent enough. &ome people also use a mirror when rehearsing as a su(stitute for an au'ience. 9EI!%TA!E O: T%EORY G PRACTICAL ASPECTS IN ASSI!NMENT F ' G 9OR&S%OP PRESENTATIONS ssignment I 2 H workshop presentations are e+aluate' on the (asis of theor* H its applica(ilit*. The weightage of each aspect woul' (e: Theor*: :57 pplica(ilit* (practical stu'* of the organi@ation): #57

NoteA
ssignments an' .resentation carr* 355 Carks: ssignment 51 ssignment 52 (&u(mission) ssignment 52 (.resentation) 155 Carks 155 Carks 155 Carks

MANA!ERIAL ACCOUNTIN! (Co@r*e O@t-+ne

UNITC( COST AND MANA!EMENT ACCOUNTIN! SYSTEMS 1.1 The Concept of Cost Canagement 1.2 The Basics of Cost ccounting )nformation &*stem =

1.3 1.# 1.% 1.: 1.= 1.4 UNITC'

The Canufacturing Cost ccounting C*cle Cost of >oo's Canufacture' &tatement Eo( Or'er Cost ccumulation .roce'ures .rocess Costing The Cost of .ro'uction 8eport -ifficulties Jncountere' in .rocess Costing

COSTIN! BY2PRODUCTS AND HOINT PRODUCTS 2.1 !ature of B*2.ro'ucts an' Eoint .ro'ucts 2.2 Costing B*2.ro'ucts an' Eoint .ro'ucts 2.3 Cetho's of Costing B*2.ro'ucts 2.3.1 8ecognition of >ross 8e+enue Cetho' 2.3.2 8ecognition of !et 8e+enue Cetho' 2.3.3 8eplacement of Cost Cetho' 2.3.# Carket Balue Cetho' 2.# Cetho's of llocating Eoint .ro'uction Cost to Eoint .ro'ucts 2.#.1 Carket Balue Cetho' 2.#.2 +erage 3nit Cost Cetho' 2.#.3 ?eighte' +erage Cetho' 2.#.# ,uantitati+e 3nit Cetho' 2.% 3se of Eoint Cost nal*sis in Canagerial -ecisions MATERIAL AND LABOR COSTIN! 3.1 Caterial .rocurement an' 3se 3.2 Caterial Costing Cetho's 3.3 Jconomic Or'er ,uantit* 3.# Caterial Controls 3.% Basics of <a(or Cost Control 3.: <a(or .erformance 8eports 3.= 8ecor'ing <a(or Costs 3.4 )ncenti+e ?age .lans PLANNIN! AND CONTROL O: :ACTORY OVER%EAD #.1 $actor* O+erhea' (.re2'etermine' rate" applie' H actual) #.2 $O/ Bariance nal*sis #.3 The Concept of -epartmentali@ation #.# -epartmental O+erhea' 8ates an' Bariances #.% O+erhea' -epartmentali@ation in !on2Canufacturing Business COST BE%AVIOR C ANALYSIS AND USE %.1 Cost Beha+ior .atterns %.2 Baria(le Costs L )ts )mplications %.3 $ixe' Costs an' 8ele+ant 8ange %.# The Contri(ution $ormat 4

UNITC)

UNITCE

UNITC#

%.% %.: %.= %.4 %.9 UNITC6

Cost Bolume .rofit 8elationships Cost &tructure pplications of CB. Concept Break J+en nal*sis The Cargin of &afet*

BUD!ETIN! :.1. The Basic $ramework of Bu'geting :.2. -ifference (etween .lanning an' Control :.3. -efinition" '+antages of Bu'gets :.#. .rinciples of Bu'geting :.%. The Bu'get Committee :.:. The Caster Bu'get L !etwork of )nter2relationship :.=. &ales" .ro'uction an' Cash Bu'gets :.4. Mero2(ase' Bu'geting :.9. .ro;ecte' $inancial &tatements :.15. The concept of $lexi(le Bu'get L -ifferent -imensions CONTROL T%ROU!% STANDARD COSTS =.1. &tan'ar' Cost -efine' =.2. Comparison of Bu'gets an' &tan'ar's =.3. &etting &tan'ar's L )'eal Bersus .ractical &tan'ar's =.#. Bariances" Calculation an' nal*sis =.%. 8esponsi(ilit* an' Control of Bariances COSTS IN DECISION MA&IN! 4.1. The (sorption Bs -irect costing 4.2. $ixe' O+erhea' an' (sorption Cost of .ro'uct 4.3. 8econciliation of -irect Costing an' (sorption Costing 4.#. The Contri(ution pproach 4.%. Cost Concepts for -ecision Caking 4.:. )'entif*ing 8ele+ant Costs 4.=. Cake Bersus Bu* -ecision 4.4. The Catter of Opportunit* Costs ACTIVITY BASED COSTIN! (ABC 9.1 <imitations of Tra'itional Costing &*stems 9.2 cti+it*2Base' Costing 9.3 cti+it* )'entification an' Classification 9.# <e+els of Cost an' -ri+ers 9.#.1 3nit <e+el Costs 9.#.2 Batch <e+el Costs 9.#.3 .ro'uct <e+el Costs 9.#.# .lant <e+el Costs 9.% BC an' .ro'uct Cost -istortion 9

UNITC5

UNITC"

UNITC4

9.: 9.=

&trategic '+antage of BC cti+it*2Base' Canagement

"ecommended !ooks 1. 2. 3. #. %. Cost ccount .lanning an' Control" Cat@ 3sr*" pu(lishe' (* !ational Book $oun'ation )slama(a'.) Canagerial ccounting (* 8onal' ?. /ilton (<atest J'ition) Canagerial ccounting" 8a* /. >arrison" )r+ine" 3& . (<atest J'ition) Canagement an' cost accounting" B* lnoor Bhimani" Charles T. /orngren" &rikant -atar" >eorge $oster Cost Canagement ccounting an' Control" (* /ansen H Cowen

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