MANAGEMENT ACCOUNTING with a STRATEGIC PERSPECTIVE Assignment -
This Assignment is designed to give students an opportunity to:
1. Integrate traditional, contemporary and advanced theoretical and technical management accounting knowledge for planning, control and evaluation, as well as decisions making
2. Critically apply traditional, contemporary and advanced theoretical and technical accounting knowledge and skills to solve emerging and/or advanced management accounting problems that require planning, control and evaluation, as well as decisions making from a strategic perspective
3. Apply the information literacy, numeracy and computer skills required by accountants to access relevant data from research and business literature sources and use contemporary and advanced analytical techniques.
Part A -
Perpetual Clocks is a manufacturer of clocks. It makes two products:
- Homeware Clocks- medium wall clocks made from Plastics.
- Custom Clocks- large free-standing clocks made from Tasmanian oak.
The budgeted direct cost inputs for each product in 2018 are:
|
Homeware line
|
Custom line
|
|
Plastic framing
|
4 square metres
|
0
|
|
Tasmanian oak framing
|
0
|
10 square metres
|
|
Plastic links
|
8
|
0
|
|
Tasmanian oak links
|
0
|
8
|
|
Direct manufacturing labour
|
6 hours
|
10 hours
|
Unit data pertaining to the direct materials for March 2018 are:
|
Actual beginning direct materials inventory (1 March 2018)
|
|
Homeware line
|
Custom line
|
|
Plastic framing (square metres)
|
80
|
0
|
|
Tasmanian oak framing (square metres)
|
0
|
60
|
|
Plastic links
|
200
|
0
|
|
Tasmanian oak links
|
0
|
80
|
|
Target ending direct materials inventory (31 March 2018)
|
|
Homeware line
|
Custom line
|
|
Plastic framing (square metres)
|
48
|
0
|
|
Tasmanian oak framing (square metres)
|
0
|
80
|
|
Plastic links
|
160
|
0
|
|
Tasmanian oak links
|
0
|
88
|
Unit cost data for direct cost inputs pertaining to February 2018 and March 2018 are:
|
February (actual) $
|
March (budgeted) $
|
|
Plastic framing (per square metre)
|
288
|
320
|
|
Tasmanian oak framing (per square metre)
|
230
|
250
|
|
Plastic links (per link)
|
22
|
24
|
|
Tasmanian oak links (per link)
|
34
|
36
|
|
Manufacturing labour cost per hour
|
60
|
60
|
Manufacturing overhead (both variable and fixed) is allocated to each clock on the basis of budgeted direct manufacturing labour-hours per clock. The budgeted variable manufacturing overhead rate for March 2018 is $70 per direct manufacturing labour-hour. The budgeted fixed manufacturing overhead for March 2018 is $85 000. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.
Data relating to finished goods inventory for March 2018 are:
|
Homeware line
|
Custom line
|
|
Beginning inventory in units
|
40
|
10
|
|
Beginning inventory in dollars (cost)
|
$20 960
|
$9 700
|
|
Target ending inventory in units
|
60
|
30
|
Budgeted sales for March 2018 are 1,480 units of the Homeware line and 780 units of the Custom line. The budgeted selling prices per unit in March 2018 are $2,040 for the Homeware-line clock and $3,200 for the Custom-line desk. Assume the following in your answer:
- Work-in-process inventories are negligible and ignored.
- Direct materials inventory and finished goods inventory are costed using the FIFO method.
- Unit costs of direct materials purchased and finished goods are constant in March 2018.
Required -
1. Prepare the following budgets for March 2018:
a. revenues budget
b. production budget in units
c. direct materials usage budget
d. direct materials purchases budget
e. direct manufacturing labour budget
f. manufacturing overhead budget
g. ending inventories budget (direct materials and finished goods)
h. cost of goods sold budget.
Part B -
"A flexible budget is one that is allowed to adjust based on a change in the assumptions used to create the budget during management's planning process. A static budget, on the other hand, remains the same even if there are significant changes from the assumptions made during planning." Perpetual Clocks is considering adopting a flexible budgeting process.
(a) Briefly describe the purpose of Perpetual Clocks using a flexible budget approach to its budgeting
(b) Briefly describe the advantages to Perpetual Clocks of using a flexible budget approach to its budgeting as opposed to using a static budgeting approach. (300 words)