The following information was extracted from the accounting records of Minu Ltd for the year ended 30 Nov 2011 and from their budget for the year ending 30 Nov 2012

Actual Budget                                                    2011                       2012

NB: Stock is valued according to the first in first out method. The value of opening stock for 2005 was R56000

Required:

Draft the budgeted income statement for the budgeted financial year ending 30 Nov 212 according to-

1. The direct (marginal) costing method (10 Marks)
2. The absorption costing method (11 Marks)
3. Reconcile the profits between the two methods (9 Marks)

As well as updating standards, Emily Queda, Finance Director, thinks we might find additional cost savings if we introduce a zero based budgeting (ZBB) approach. It has been suggested that we pilot ZBB in our warehouse and if successful we can look to adopt this more widely across the organisation. I had a quick chat about this with Pax Ghandi, Head of Finished Goods Warehouse, and will send you some notes from our conversation. (See Reference Material).

Sara Gomez, Human Resources Director has expressed concern that our attempts to drive down costs may result in resistance from the work force. She questioned why managers have only limited involvement in budget setting and suggested that we move to a more participative approach.

Another area of concern is inventory. Our financial statements for the year ended 30 June 2021 show that our inventory holding period is still extremely high, although it has decreased from 106 days in 2020 to 96 days in 2021. We need to see this ratio improve further. Therefore, I need to prepare some information to explain the costs/risks of holding inventory to Emily so she can work with the SMT to develop and approve an action plan.

1. Please can you produce a draft report that covers the following areas:

How standards are used for planning and control, and issues with increasing the previous year’s standard costs by 3%, suggesting an alternative                                   (15 Marks)

1. The costs/risks of holding high levels of (15 Marks

As a management Accountant, you overhear some of your colleagues who work in the production department arguing on whether Financial and Management Accounting are different or its is one and the same thing. You have decided to be of assistance

1. In tabular form differentiate between management accounting and financial

Johannesburg cc, a subsidiary of Pretoria Results Producers cc has received various orders for the manufacturing of different types of steel tables. The tables are manufactured in batches, each batch being a specific type of table and the production costs of these batches are accounted for using a job costing system.

At the beginning of June the business was already working on Jobs T405 and T406 and two new Jobs namely, Job T407 and Job T408 were started during June. The following data refer to the activities for the month of June 2006:

Work in progress 1 June 2012

 Direct material issued

 Direct labour hours worked

 Manufacturing overhead was applied to the various jobs at a rate of R45 per direct labour hour

Additional information: 

• Depreciation of manufacturing assets amounted to R32 000
• Indirect material used, R18 000
• Indirect labour costs incurred, R15 500
• Miscellaneous manufacturing overhead costs of R42 500 were incurred during the month
• Jobs T405, T406 and T407 were completed

REQUIRED:

 Calculate the cost of the jobs completed and the cost of the work in progress on JobT408

(10 Marks)

1. Calculate the amount of manufacturing overheads over or under applied

(10 Marks)

Get Answers on Above Questions on Cost and Management Accounting

Answer 1: The budgeted income statement for the budgeted financial year ending 30 Nov 212 as per all the three methods is performed as follows:

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