Question 1

a) Helping Forecast the longer term:

Forecasting aids decision-making and answering questions, such as: If the

company spend money on more equipment? Should it diversify into different
markets? Should it buy another company? Management accounting helps with
answering these critical questions and forecasting the longer term trends running
a business.

Helping in Make-or-buy Decisions:

Would it be cheaper to obtain materials or a product from a 3rd party or

manufacture them in-house? Cost and production availability would be the
deciding factors within this choice. Through management accounting, insights is
going to be developed that can enable decision-making at both operational and
strategic levels.

Forecasting Cash Flows:

Predicting cash flows along with the impact of money flow around the business is
essential. Simply how much cost will the organization incur in the future? Are you
going to its revenues come from and definately will the revenues decrease or
increase in the future? Management accounting involves designing of budgets
and trend charts, and managers use this information to determine the best way
to allocate money and resources to generate the projected revenue growth.
Helping Understand Performance Variances:

Business performance discrepancies are variances between the thing that was
predicted and what is actually achieved. Management accounting uses analytical
techniques to conserve the management expand positive variances and manage
the negative ones.
Absorption Costing
Yogurt(RM)
Direct Material 100 000
Direct Labour 400 000
Fixed Overhed 80 000
Variable Manufacturing Overhed 20000
Total 600 000

Product Cost Per Pack(RM) 600 000/200 000

RM 3.00

Marginal Costing

Yogurt(RM)
Direct Material 100 000
Direct Labour 400 000
Variable Manufacturing Overhed 20000
Total 520 000

Product Cost Per Pack(RM) 520 000/200 000

RM 2.60
Total 400 000

Product Cost Per Pack(RM) 400 000/100 000

RM4.00

Marginal Costing
Milk (RM)
Direct Material 70 000
Direct Labour 250 000
Variable Manufacturing Overhed 30000
Total 350 000

Product Cost Per Pack(RM) 350 000/100 000

RM 3.50
 Seehat Sdn Bhd
Income Statement-Absorption Costing For The Month Of January 2018

RM RM

Sales (190 000 pack x RM4.50)+(80 000 X RM5.50) 1295 000

(Less):Cost of goods sold
Beginning Inventory 0
Add:Cost of goods manufactured (200 000 X RM3.00)+(100 000 X RM4.00) 1000 000
Cost of goods available for sale 1000 000
(less):Ending Inventory(10 000 packs x RM3.00) +(20 000 X RM 4.00) (110 000) 890 000
Gross Profit 405 000
(Less):Sales & Adminstrative Expenses
Fixed (RM 75 000 + RM50 000) 125 000
Variable (RM 60000 + RM30000) 90 000
215 000
Net Income 190 000
 Seehat Sdn Bhd
Income Statement-Marginal Costing For The Month Of January 2018

RM RM
Sales (190 000 pack x RM4.50)+(80 000 X RM5.50) 1295 000
(Less):Variable costs
Cost Of Goods Sold
Beginning Inventory 0
Add:Cost of goods manufactured (200 000 X RM 2.60)+(100 000 X RM3.50) 870 000
Cost of goods available for sale 870 000
(less):Ending Inventory(10 000 packs x RM 2.60) +(20 000 X RM 3.50) (96 000)
774 000
Add:Variable Sales &Adminstrative Cost 90 000
864 000
Contribution Margin 431 000
(Less):Fixed Costs
Manufacturing Overhed 130 000
Fixed marketing &adminstrative cost 125 000
255 000
Net Income 176 000
 Absorption Costing Net Income (Ia) - = Ending inventory units x
Marginal Costing Net Income (Im) manufacturing overhed per unit

RM 190 000 -RM176 000 (RM 0.40 X 10000 packs

RM14000 (RM 0.50 X 20000 packs)
RM 14000

Manufacturing Overhed per unit (Yogurt) RM 80 000/200 000

RM0.40

Manufacturing Overhed per unit (Soya) RM 50 000/100 000

RM0.50

When production exceeds sales units

When sales exceeds production units

 b) Predetermined Overhead Rate = Estimated Total Manufacturing Overhed Cost
Estimated Total Activity Or Allocation Base

RM 69 800
13 800

RM 5.00

c) Description RM RM
Raw material AA 5885
Account Payable 5885
(Purchase direct material on credit )
Work In Progress 100
Material 100
(Purchase additional direct material )
Manufacturing Overhed 54
Material 54
Purchase indirect material)
Work In Progress 40 000
Wages &Salaries Payable 40 000
(Direct labour cost)
Manufacturing Overhed 720
Prepaid Insurance 720
(Payment of company vehicles's insurance)
Manufacturing Overhed 18000
Wages & Salaries Payable 18000
(Payment of indirect labour wages)
Manufacturing Overhed 5000
Accumulated Deprication 5000
(Deprication of sewing machine)
Work In Progress 27500
Manufacturing Overhed 27500
Overhead Factors

Power bills, unprocessed trash, labor, employees, equipment and everything that
factors into producing a product or service will enter the predetermined overhead
rate calculation. Historic overhead minute rates are helpful for analyzing
consistent expenses and expenses that spike seasonally. The pace is based on the
quantity of expected production. After weighing the total costs to the period
contrary to the resulting supply, the predetermined rate is reached with a per-
unit basis.

Pricing Benefits

Knowing the estimated cost-per-unit after production is a powerful tool for

businesses. Having the figure estimated in advance makes pricing strategy much
easier. A small business can analyze competitor pricing, and will base a strategy
on that business' production costs to keep up profitable margins, while
maximizing market potential.

Overhead Variability

Predetermined overhead minute rates are not static, and businesses may change
the pace, based on unforeseen overhead fluctuations. The freedom with this
model provides for responsiveness to major modifications in the overhead
structure. Employing a predetermined rate on short, time-period cycles, makes
fluctuation adjustments a simple accounting process.
Profitability: The task costing system enables you to assign costs separately to
individual operations and calculate the gain margin you%u2019ll receive on each
job. Using this method, you can choose which operations will be more profitable
for creating a certain product. Even if this particular function indicates that the
machine is acceptable particularly for nokia's that handle custom orders,
technology-not only by manufacturer who wants to get detailed statistics
regarding individual manufacturing operations.

Performance: Work order costing system also allows you to look at the
performance of one's employees. Unlike process costing, which ascertains the
qualities of your entire workgroup or department, job order costing provides
sufficient information that may help you evaluate individual performance data in
terms of productivity, efficiency, and price-control. With the help of this tool,
you'll be able to find out the employees who are not able to meet performance
expectations.

Accessibility: The machine provides accessibility to the expenses incurred on

every job, even through the manufacturing process. This offers you the
opportunity check costs one after the other, identify every item included, and
realise why they happened. Depending on your findings, it is possible to develop
specific strategies to control costs better in the foreseeable future.

Flexibility: The task order costing strategy is flexible enough to assist you calculate
particular indirect costs, like manufacturing overhead. Calculating this cost
without needing the device is quite difficult especially since it consists of various
items, which might add some salaries of certain employees for the grease found
in machines. To be of assistance, a complicated algorithm in the job costing
system traces every item involved with manufacturing overhead, transforming a
really complex calculation assignment in a not hard operation.

Accuracy: The work costing product is extremely accurate. Based on particular

criteria, it directs specific kinds of costs towards appropriate accounts. The
machine, by way of example, automatically groups selling and marketing costs,
which are period expenses, within the income statement rather than
manufacturing overhead account.

Scalability: Delivering an extremely scalable solution, the work costing system

could be created to match many different processes, regardless of whether
they're associated with very complex manufacturing operations in large
companies or simple tasks in smaller businesses, for example advertising agencies
and law firms. What this means is used the work order costing system regardless
of the height and width of your organization.