Adeeb Ahmed K BAIBF 08002

Assignment Brief
BA (Hons.) International Business & Finance

Academic Year 2018-19
Module Information:
Qualification: BA (Hons.) International Business & Finance
Module Code & Title: BAIBF 08002 Fundamentals of Management Accounting.
Individual Report
Component Weighting: 30%
Date of Issue:1 Oct 2018 Due date 22 Oct 2018, 5 PM
To be filled by the student:

Student ID: 5777BA18
Date of Submission:22/10/2018
*All work must be submitted on or before the due date. If an extension of time to submit work is required, a Mitigating
Circumstance Form must be submitted.
Has an extension been approved? Yes No
If yes, please provide the new submission date ….…/.…./……., and affix appropriate evidence.
First Marker: Second Marker:
Agreed Mark: Refer: Yes / No
Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Student ID: 5777BA18 Subject: Management Accounting Page | 1
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Statement of Originality and Student Declaration
I hereby, declare that I know what plagiarism entails, namely to use another’s work and to present it
as my own without attributing the sources in the correct way. I further understand what it means to
copy another’s work.
1. I know that plagiarism is a punishable offence because it constitutes theft.
2. I understand the plagiarism and copying policy of the University of the West of Scotland.
3. I know what the consequences will be if I plagiaries or copy another’s work in any of the
assignments for this program.
4. I declare therefore that all work presented by me for every aspect of my program, will be my
own, and where I have made use of another’s work, I will attribute the source in the correct
way.
5. I acknowledge that the attachment of this document signed or not, constitutes my agreement
on it.
6. I understand that my assignment will not be considered as submitted if this document is not
attached to the attached.
Student’s Signature: Date: 22/10/2018

TASK 1
Omahana manufactures a standard coffee table. The standard cost appears as follows:
Materials 25 meters @$0.50 12.50
Labour 2 hours @$2 4.00
Variable overhead2 hours@$1 2.00
Fixed overhead 2 hours @1.50 3.00
21.50
Selling Price 25.00
Standard Profit 3.50
Budgeted output sales were 2000 tables for week 2.
Actual results for week 2 were as follows:
Production cost (of1,800 tables) $
Materials54,000 meters @$0.45 per meter 24,300
Labor 3,500 hours worked 7,630
Variable overhead 3,440
Fixed overhead 6,325
Total production cost 1800 tables 41,695
Closing inventory 200@ 21.50 (4,300)
Cost of Sales 37,395
Sales 1,600 tables 46,200
Profit 8,805
Required
a) Calculate all appropriate costs and sales variances.
b) Produce an operating statement reconciling budgeted and actual profits.
c) Produce a revised statement using a standard marginal costing format.

TASK 2 SOLO
Solo makes a single product for which the budgeted costs and activity for a typical month are as
follows:
Budgeted sales and production 15,000 units
Budgeted unit costs:
Direct Labour 46
Direct Materials 30
Variable overheads 24
Fixed overheads 80
180
During October, only13, 600 units were produced and sold. At the start of a month, there were
unexpected increase of 8% in material prices and 2% in wage rates, but labor efficiency increased by
5%.Variable overheads increased by 1$ per unit and fixed overheads increased by a total of
$175,000.
The budgeted selling price of $250 was exactly achieved.
Required
a) Produce a columnar statement showing the profit achieved:
(i) For the original budget.
(ii) For a budget flexed on activity alone.
(iii) For the actual results.
b) Briefly discuss the figures you have produced in answer to part (a)
Total word Limit: 1500

Acknowledgement
I would like to express my special thanks of gratitude to my teacher Mrs.Anns who gave me
the golden opportunity to do this wonderful project on the topic which also helped me in
doing a lot of research and I came to know about so many new things I am really thankful to
them.
Secondly I would also like to thank my parents and friends who helped me a lot in finalizing
this project within the limited time frame.

Content
Task 1 Page No.

Costs and sales variances
• Sales volume variances 9
• Cost Variances 10
• Operating statement reconciling 12

budgeted and actual profits
• Absorption Costing : Profit 13

Reconciliation Statement
• Marginal Costing : Profit Reconciliation 14

Statement
• Profit Reconciliation Statement 15
Task 2 Page No.
• Original Budget 16
• Flexed Budget 17
• Actual Budget 18
• Findings 19

Introduction
This project has been to successfully accomplish the tasks given above. The task 1 has been
to prepare costs and sales variances, an operating statement reconciling budgeted and actual
profits and produce a revised statement using a standard marginal costing format.
The task 2 is to prepare the budgets on the data and report the findings.

Solution
Task 1:
a) Costs & Sales Variances
Sales Volume Variances
Absorption Costing
(Actual quantity – Budgeted Quantity) * Standard Profit
(1,600-2,000) * 3.5 = 1,400 (Adverse)
Marginal Costing
(Actual quantity – Budgeted Quantity) * Standard Contribution Per Unit
(1,600-2,000) * 6.5 = 2,600 (Adverse)
Sales Price Variance
(Actual quantity – Budgeted Price) * Actual Quantity
(46,200 / 1,600 - 25) * 1,600 = 6,200 (Favourable)

Cost Variances
Material Cost Variance
(Actual quantity * Actual Price)
= (54,000 * 0.45) = 24,300
Material Price Variance = 2,700 (Favorable)
(Actual Quantity * Standard Price)
= (54000 * 0.50) = 27,000
Material Wage Variance = 4,500 (Adverse)
(Standard Quantity * Standard Price)
= (1800 * 25 * 0.50) = 22,500
Total Variance = 1,800 (Adverse)
Labour Cost Variance
(Actual hours * Actual rate)
= (3,500 * Actual rate) = 7,630
Labour Rate Variance = 630 (Adverse)
(Actual hours * Standard Price)
= (3500 * 2) = 7,000
Labour Efficiency Variance = 200 (Favorable)
(Standard hours * Standard Rate)
= (1,800 * 2 * 2) = 7,200
Total Variance = 430 (Adverse)

Variable Overhead Variances
(Actual hours * Actual rate)
= (3,500 * Actual rate) = 3,440
Expenditure Variance = 60 (Favorable)
(Actual hours * Standard rate)
= (3,500 * 1) = 3,500
Efficiency Variance = 100 (Favorable)
(Standard hours * Standard rate)
= (1,800 * 2 * 1) = 3,600
Total Variance = 160 (Favorable)

b) Operating statement reconciling budgeted and actual profits
$ $
Standard sales price per unit 25.00
Direct Materials 12.5
(25m * $ 0.50)
Direct Labour 4
(2 hours * $ 2)
Variable Overhead 2
(2 hours * $ 1)
Standard Marginal Cost (15.5)
Standard Contribution per 6.5

Unit
Standard Fixed Overhead (3)
(2 hours * $ 1.50)
Standard Profit Per Unit 3.50

Absorption Costing : Profit Reconciliation Statement
Budgeted Profit 7,000
(2000 * 3.50)
Sales Variances (F) (A)
$ $
Sales Price Variance 6,200
Sales Profit Volume 1,400

Variance
[Add]4,800
11,800
Cost Variance
Direct Material Price 2,700
Direct Material Wage 4,500
Direct Labour Rate 630
Direct Labour 200

Efficiency
Variable Overhead 60
Expenditure

Efficiency
3,060 5,130
[Less] (2070)
Actual Profit 9,730

Marginal Costing : Profit Reconciliation Statement
Budgeted Profit 7,000
(2000 * 3.50)
(Add) Budgeted 6000

Fixed Cost (2000*3)
Budgeted 13000
Contribution
Sales Variances (F) (A)
$ $
Sales Price Variance 6,200
Sales Contribution 2,600

Volume Variance
3,600
16,600
Cost Variance (F) (A)
$ $
Direct Material Price 2,700
Direct Material Wage 4,500
Direct Labour Rate 630
Direct Labour 200

Efficiency
Expenditure

Efficiency
3,060 5,130
(2070)
Actual Contribution 14530
Budgeted Fixed 6,000

Overhead
Fixed Overhead 325

Expenditure
Variance
6,325
Actual Profit 8,205
c) Profit Reconciliation Statement
$ $
Actual Profit (Marginal 8,205

Costing)
Finished goods inventory @ (3,700)

marginal costing (200*18.50)
Finished goods inventory @ 4,300

marginal costing (200*21.50)
600
8805

TASK 2
Original Budget
Units 15,000
Sales 3,750,000
Cost of Sales:
Direct Materials (450,000)
Direct Labour (690,000)
(1140000)
Variable Overhead (360,000)
Fixed Overheads (1,200,000)
Total 1,050,000
Workings:
Sales: 15000(units) * 250(selling price per unit) = 3,750,000
Direct Materials: 15000(units) * 30 = 450,000
Direct Labour: 15000(units) * 46 = 690,000
Variable Overheads: 15000(units)* 24 = 360,000
Fixed Overheads: 15000(units) * 80 = 1,200,000

Flexed Budget
Units 13,600
Sales 3,400,000
Cost of Sales:
(1,033,600)
Total 840,000
Workings:
Sales: 13,600(units) * 250(selling price per unit) = 3,400,000
Direct Materials: 13,600(units) * 30 = 408,000
Direct Labour: 13,600(units) * 46 = 625,600
Variable Overheads: 13,600(units)* 24 = 326,400
Fixed Overheads: 13,600(units) * 80 = 1,200,000

Actual Budget
Units 13,600
Sales 3,400,000
Cost of Sales:
(1,046,846)
Total 638,154
Workings:
Sales: 13,600(units) * 250(selling price per unit) = 3,400,000
Direct Materials: 13,600(units) * [30+2.4] (8% increase in material price) = 408,000
Direct Labour: 13,600(units) * [(46 – 95/100) * 102% ] (Decreased labour price due to
increase in labour efficiency (5%) and increase in wage rates (2%) ) = 625,600
Variable Overheads: 13,600(units)* [24+1] (Variable overheads increased by $1 per unit) =

326,400
Fixed Overheads: [13,600(units) * 80] + 175,000 (Fixed overheads increased by $175,000) =

1,375,000

Findings
The three sets of figures for original, flexed and actual results show noticeable differences.
The original budget figures are of limited use except as a benchmark by which the flexed
budget figure can be derived and possibly as an indicator to show the nominal shortfall in
performance.


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Assignment Brief

BA (Hons.) International Business & Finance

Module Code & Title: BAIBF 08002 Fundamentals of Management Accounting.

Component Weighting: 30%

Date of Issue:1 Oct 2018 Due date 22 Oct 2018, 5 PM

To be filled by the student:

Has an extension been approved? Yes No

First Marker: Second Marker:

Agreed Mark: Refer: Yes / No

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Word Processing Rules

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Statement of Originality and Student Declaration

Student’s Signature: Date: 22/10/2018

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Materials 25 meters @$0.50 12.50

Labour 2 hours @$2 4.00

Variable overhead2 hours@$1 2.00

Fixed overhead 2 hours @1.50 3.00

Selling Price 25.00

Standard Profit 3.50

Budgeted output sales were 2000 tables for week 2.

Actual results for week 2 were as follows:

Production cost (of1,800 tables) $

Materials54,000 meters @$0.45 per meter 24,300

Labor 3,500 hours worked 7,630

Variable overhead 3,440

Fixed overhead 6,325

Total production cost 1800 tables 41,695

Closing inventory 200@ 21.50 (4,300)

Cost of Sales 37,395

Sales 1,600 tables 46,200

a) Calculate all appropriate costs and sales variances.

b) Produce an operating statement reconciling budgeted and actual profits.

c) Produce a revised statement using a standard marginal costing format.

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Budgeted sales and production 15,000 units

Budgeted unit costs:

The budgeted selling price of $250 was exactly achieved.

a) Produce a columnar statement showing the profit achieved:

(i) For the original budget.

(ii) For a budget flexed on activity alone.

(iii) For the actual results.

Total word Limit: 1500

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Task 1 Page No.

• Sales volume variances 9

• Operating statement reconciling 12

• Absorption Costing : Profit 13

• Marginal Costing : Profit Reconciliation 14

• Profit Reconciliation Statement 15

Task 2 Page No.

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Name: Adeeb Ahmed.K Module Code: BAIBF 08002

Sales Volume Variances

(Actual quantity – Budgeted Quantity) * Standard Profit

(1,600-2,000) * 3.5 = 1,400 (Adverse)

(Actual quantity – Budgeted Quantity) * Standard Contribution Per Unit

(1,600-2,000) * 6.5 = 2,600 (Adverse)

Sales Price Variance

(Actual quantity – Budgeted Price) * Actual Quantity

(46,200 / 1,600 - 25) * 1,600 = 6,200 (Favourable)