MANAGEMENT ACCOUNTING ASSIGNMENT

PRODUCTION BUDGETING COMPANY X IN YEAR 2015

LECTURE: I Wayan Pradnyantha Wirasedana., M.Com
EMA 323 A1 CLASS

BY:
I Kadek Jati Asmara
NIM. 1306305081
Attend. 37

ECONOMY AND BUSINESS FACULTY

UDAYANA UNIVERSITY
2015

SCATTER PLOT METHOD

5700
5600
5500

R = 0.6

5400
5300
5200
5100
5000
4900
4800
4700
2100220023002400250026002700280029003000

Linear ()

#EXPLANATION
1. Based on table 4th about monthly raw material price growth in the past 4,5 years (per kg),
there are some assumption based on the pattern of price fluctuations in 2014 as follows.
July
August
September
October
November
December
January
2014
2014
2014
2014
2014
2014
2015
3.1
3.3
3.2
3.1
3.3
3.2
3.4
As the additional information, to make 1 unit, 10 kg of raw materials are needed. And for
each product means it will cost $34 of raw materials. Assuming it uses the average to
average prices in previous years for 4 years from 2010 through 2013.
2. Based on table 5th about monthly labor rate growth in the past 4,5 years (per hour), there
are some assumption based on the increasing of the production units that could pmade in
2014 to the beginning of 2015 as follows.
July
August
September October November December January
2014
2014
2014
2014
2014
2014
2015
6.0
6.0
6.0
6.0
6.5
6.5
7.0
As the additional information, to make 1 unit, 8 hours of labor are needed. And for each
product means it will cost $56 of labor. Assuming using the average increase for the
average price in the previous years for 4 years from 2010 through 2013.
3. Based on table 6th, the companys fixed assets consist by office building, warehouse
building, and machineries. We only count the depreciation which has relation with the
production activity as follows.
$ 110,000$ 10,000
Warehouse Building =
= $10,000/years.
10 years
Machineries

$ 17,000$ 1,000
8 years

= $ 2,000/ years.

This calculation uses the straight-line depreciation method.

4. In table 7th of electricity cost in the past 4 years, electricity is included as mix cost, so we
need to separate the electricity into fix cost and variable cost using Scatter Plot method
(attached in the previous page). In this method we need to find which costs that have
same standard of deviation, which are 5,000 and 5,450. Then we find the variable cost by
Scatter Plot method.
54505000
Variable cost = 29002200 = 0.64
In calculating fixed cost, I use information in 2012.

Fixed Cost

= 5450 0.64 (2900)

= 3,594

5. Based on table 8th of raw material inspections cost in past 4 years, there is an additional
information that the management wishes to minimize this fixed cost and to get rid of
this cost in the next 5 years until 2018. To get this goal, the company should decrease 36
hours of inspection in every year (180: 5= 36) and the cost is $570 ($2,850:5= $570).The
decrease of the inspection time and cost will be explained in the table as follows.
Perio
d
2014
2015
2016
2017
2018

Inspection
Time (hours)
144
108
72
36
0

Cost
($)
2,280
1,710
1,140
570
0

6. In determining total production unit, we need the number of market share and the
demand. As the information, the Company X holds 40-45% market share. I am going to
use 40% market share as the assumption that I use the lowest value from 40 to 45. For
the economic growth in 2015 I use 6.8%, same with in 2014 because there is no
additional information about that. The calculation of total production unit estimation is
as follows.
Demand in 2013
= 7,000
Estimation of demand in 2014
= 7,000 x 106.8% = 7,476
Estimation of demand in 2015
= 7,476 x 106.8% = 8,000
Company X holds demand as 40% with the estimation of demand in 2015 as 8,000, so the
total production expected is 40% x 8,000 = 3,200. Then, the variation of flexibility is 200
with 6 scenarios, which are 3,200; 3,300; 3,400; 3,500; 3,600; and 3,700.