UGB106 Introduction to Management Accounting
Learning outcomes:
Knowledge
1. Awareness of the role of management accounting.
2. An understanding of the basic models, concepts and
techniques in management accounting.
3. An understanding of basic budgeting
Skills
4. Applied fundamental costing techniques and models
5. Engaged in basic budget preparation
This assessment brief has four (4) questions in all. You are required to ANSWER
ANY THREE QUESTIONS OF YOUR CHOICE. All questions carry equal marks. The
maximum mark in any question is 33 with 1 additional mark to be awarded for
good presentation of works.
Assessment weight:
100% of the module
Word Count – 3,000 words (plus or minus 10%)
Please note that this is an individual assignment and the policy of the University on “Policy
on Cheating, Collusion and Plagiarism” applies.
Question 1: Woodrock Limited
Woodrock Limited is setting up a company to manufacture and sell wooden desks and filing
cabinets. The Finance Manager knows first few months of a business are crucial to its success
and wants to draw up some initial plans for the first six months of trading. The company will be
selling to large retail chains that have asked for 90-day credit terms. In turn, the Finance Officer
and the Management Accountant have managed to negotiate 60-day credit terms from the
company’s materials suppliers. All other amounts will be paid for in the month they are
incurred. The company will manufacture to order and all goods are manufactured in the month
they are delivered. In the same way all materials are purchased in the month they are
consumed.
Desk
Cabinet
Selling Price (£)
30
50
Materials (£)
10
12
Labour hours
30 minutes
40 minutes
Forecast Demand:
Month 1
700
400
Month 2
500
300
Month 3
600
350
Month 4
800
400
Month 5
1,000
650
Month 6
1,100
800
The business is renting a small manufacturing unit and will be paying £12,000 for the first six
months’ rent, this rent is payable in advance. The company has decided to lease the necessary
machinery to produce the wooden desks and filing cabinets at a cost of £2,500 per month.
Marketing and advertising costs will total £8,000 and will be incurred in equal cash payments
across the first four months of the start-up. The company will be paying a manager £3,000 per
month and insurance of £4,000 for this period is payable at the start of trading.
The company is paying for labour at a rate of £12 per hour if the standard production times are
adhered to.
Required:
(a) Prepare the Cash Budget for Woodrock Limited the first six months of trade.
(17 marks)
(b) Comment on the cash position within the business, analysing what Woodrock Limited
could do to improve cash flow.
(4 marks)
(c) Critically examine those issues of relevance in behavioural aspects of behavioural
aspects of budgeting which may lead to problems in a business entity.
(12 marks)
Question 2: Plaistead Plc
Plaistead Plc makes electric kettles that they currently sell at £13 each. The management of the
company believes that the company's equipment could currently produce up to 70,000 units of
electric kettles per year. However, the budget for the coming year is 53,000 units of electric
kettles and costs are estimated as follows:
Variable Costs (per unit)
Materials
Labour
Variable overheads
£5.25
£2.95
£1.85
Fixed costs:
Production
£59,000
Selling etc.
£47,600
Required:
a. What is the contribution that each electric kettle makes towards covering fixed costs if it
is sold for £13?
(2 marks)
b. What is the break-even point and margin of safety in terms of both units and revenue if
each electric kettle is sold for £13?
(5 marks)
c. Calculate the profit Plaistead Plc makes if it produces and sells 53,000 electric kettles at
£13 per kettle.
(4 marks)
d. If Plaistead Plc wants to make £90,000 profit, how many electric kettles will they need to
make and sell, if the selling price is £13 per electric kettle?
(4 marks)
e. At what price would Plaistead Plc have had to sell 53,000 electric kettles to make a
profit of £90,000?
(4 marks)
f. Plaistead Plc is considering whether to spend £45,000 on marketing and advertising but
consequently raising the selling price by 9%. At this new sales price and with the
advertising, sales (in units of electric kettles) will increase by 17%. Analyse whether this
is a good strategy for Plaistead Plc?
(7 marks)
g. Briefly discuss the underpinning assumptions attached to the break-even model.
(7marks)
Question 3: Crawford Plc
Crawford Plc manufactures book shelves. The company has two production cost centres:
Assembly Department and Joinery Department, and one service cost centre:
Canteen Department.
The following information relates to the year ending 30th June 2020:
Indirect costs:
Total (£)
Basis for allocation
Indirect labour
28 000
Number of employees
Indirect material
22 000
Direct materials
Heating & lighting 13 000
Floor space
Rent rates
14 000
Floor space
Depreciation
19 000
Value of machinery used in each cost centre
Supervision
15 000
Number of employees
Power
9 000
Kilowatt hours
Total
120 000
The following information is also available about each cost centre:
Total
Assembly
Joinery
Floor space (sq. meters)
8 000
3 000
4 000
Book value of machinery (£) 93 000
50 000
40 000
Number of employees
25
12
10
Kilowatt hours of power
3 000
1 500
1 300
Direct materials (£)
17 000
8 000
Direct labour (£)
8 000
7 000
Maintenance hours
1 300
1 000
Labour hours
2 100
1 400
Canteen
1 000
3 000
3
200
Additional information:
(i) The canteen is used by both production cost centres. Canteen costs are allocated based on
number of employees.
(ii) During the year Crawford Plc produced a special product, Soft Stool. It took 4 hours of the
Assembly time, and 6 hours in the Joinery Department to produce one unit of Soft Stool. The
total direct material and direct labour costs amounted to £85 per unit of Soft Stool.
Required:
(a) Calculate an overhead cost rate based on labour hours for the:
i.
Assembling Department.
ii.
Joinery Department.
(20 marks)
(b) Calculate the total production costs of producing 10 units of Soft Stool.
(6 marks)
(c) Explain the advantages and disadvantages of using a single rate for absorbing overheads
compared to departmental rates.
(7 marks)
Question 4: Jayrod Plc
Jayrod Plc produces standard electrical goods using a marginal cost accounting system.
Information, relating to Product PK65, which is made within one of the departments, is
provided below:
Product MH65
Standard Marginal Product Cost
per Unit (£)
Direct Material – 20 kilograms @ £3 per kg
60
Direct Labour – 3 hours @ £15 per hour
45
Variable Production Overhead*
12
Total
117
*Variable Production Overhead varies with units produced.
Budgeted Fixed Production Overhead per month: £200,000.
Budgeted Production of Product PK65:
10, 000 units per month.
Actual Production and costs for Month 6 are as follows:
Units of PK65 Produced: 9,000
Direct Materials purchased and used: 190,000kg
Direct Labour: 30,500 hours
Variable Production Overhead Incurred
Fixed Production Overhead Incurred
Total
(£)
579,500
451,400
106,000
202,000
1,338,900
Required:
(a) Prepare a columnar statement showing, by element of cost, the:
i.
Original Budget.
ii.
Flexed Budget.
iii.
Actual.
iv.
Total Variance.
(10 marks)
(b) Sub-divide the variances for direct material and direct labour shown in your answers (i)
to (iv) above to be more informative for managerial purposes.
(10 marks)
(c) Discuss the purposes of standard costing, highlighting some of the key values and
limitations associated with the use of variance analysis.
(13 marks)
Marking Guide: Marks will be awarded with respect to the following generic assessment criteria
Generic Assessment Criteria – Undergraduate
These should be interpreted according to the level at which you are working and related to the assessment criteria for the module
Grade
86 –
100%
76-85%
70 – 75%
Pass
60 – 69%
50 – 59%
Categories
Argument and
Critical Evaluation Presentation
Reference to Literature
Structure
The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge, understanding and skills appropriate to the Level of the
qualification. There is also ample excellent evidence showing that all the learning outcomes and responsibilities appropriate to that Level are fully satisfied. At this
level it is expected that the work will be exemplary in all the categories cited above. It will demonstrate a particularly compelling evaluation, originality, and
elegance of argument, interpretation or discourse.
The work examined is outstanding and demonstrates comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is
also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the
work will be outstanding in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument,
interpretation or discourse.
The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also
excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are satisfied. At this level it is expected that the work will
be excellent in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or
discourse.
Directly relevant to the
A substantial
Good
Generally coherent and May contain some
Well written, with Critical appraisal of uprequirements of the
knowledge of
analysis,
logically structured,
distinctive or
standard spelling to- date and/or
assessment
relevant material, clear and
using an appropriate
independent
and grammar, in
appropriate literature.
showing a clear
orderly
mode of argument
thinking; may begin a readable style
Recognition of
grasp of themes,
and/or theoretical
to formulate an
with acceptable
different perspectives.
questions and
mode(s)
independent
format
Very good use of
issues therein
position in relation
source material. Uses
to theory
a range of sources
and/or practice.
Some attempt to address Adequate
Some
Some attempt to
Sound work which
Competently
Uses a variety of
the requirements of the
knowledge of a
analytical
construct a coherent
expresses a
written, with only
literature which includes
some recent texts and/or
assessment: may drift
fair range of
treatment, but
argument, but may
coherent position
minor lapses
appropriate literature,
away from this in less
relevant material, may be prone
suffer loss of focus and only in broad terms from standard
though not necessarily
focused passages
with intermittent
to description,
consistency, with
and in uncritical
grammar, with
including a substantive
evidence of an
or to narrative,
issues at stake stated
conformity to one
acceptable
amount beyond library
appreciation of
which lacks
only vaguely, or
or more standard
format
texts. Competent use
its significance
clear analytical theoretical mode(s)
views of the topic
of source material.
purpose
couched in simplistic
terms
Relevance
Knowledge
Analysis
Fail
40 – 49%
Some correlation with the
requirements of the
assessment but there is a
significant degree of
irrelevance
Basic
understanding
of the subject
but addressing a
limited range of
material
Largely
descriptive or
narrative, with
little evidence of
analysis
A basic argument is
evident, but mainly
supported by assertion
and there may be a
lack of clarity and
coherence
Some evidence of
a view starting to
be formed but
mainly derivative.
35 – 39%
Relevance to the
requirements of the
assessment may be
very intermittent,
and may be reduced
A limited
understanding
of a narrow
range of
material
Heavy
dependence on
description,
and/or on
paraphrase, is
common
Little evidence of
coherent argument:
lacks development and
may be repetitive or thin
Almost wholly
derivative: the
writer’s contribution
rarely goes beyond
simplifying
paraphrase
A simple basic
style but with
significant
deficiencies in
expression or
format that may
pose obstacles
for the reader
Numerous
deficiencies
in expression
and
presentation;
the
writer may achieve
Some up-to-date and/or
appropriate literature
used. Goes beyond the
material tutor has
provided. Limited use
of sources to support a
point. Weak use of
source material.
Barely adequate use of
literature. Over-reliance
on material provided by
the tutor.
to its vaguest and
least challenging
terms
30 – 34%
15-29%
0-14%
clarity (if at all)
only by using a
simplistic
or repetitious style
The evidence provided shows that the majority of the learning outcomes and responsibilities appropriate to that Level are satisfied.
The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence
provided shows that some of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in some of the
indicators.
The work examined is unacceptable and provides little evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The
evidence shows that few of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in several of the
indicators.
The work examined is unacceptable and provides almost no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification.
The evidence fails to show that any of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority
or all of the indicators.