Management Accounting 1

Management Accounting 1

Part 1

Requirement A (Revenues budget)

Revenue Budget

 

Quantity

Values

Revenue

Large

3000

3

9000

Giant

1800

4

7200

Total Revenue

 

 

16200

Requirement B (Production budget in units)

 

Production Budget

Large

Giant

 

Unit required to meet sales budget

3000

1800

Add

Desired ending inventory

300

180

 

Total Unit Required

3300

1980

Less

Estimated beginning inventory

200

150

 

Planned production

3100

1830

Requirement C (Direct material usage budget and direct material purchases budget)

Direct material usage budget

Large

Giant

Planned production

3100

1830

Sugar Usage ($0.25 & $0.3)

775

915

Sticks Used ($0.3)

3100.3

549

 

3875.3

1464

Direct material purchases budget

Large

Giant

Sugar Usage

775

915

ending

240

480

Beginning inventory

1015

1395

Desired

125

125

 

890

1270

Requirement D (Direct manufacturing labor cost budget)

Direct manufacturing labor cost budget

Large

Giant

(3100*0.2) & (1830*0.25)

620

457.5

direct material labor hour cost (8)

4960

3660

Requirement E (Manufacturing overhead cost budgets for processing and set-up)

Manufacturing overhead cost budgets for processing and set-up activities

Large

Giant

Set-ups (3100/10) & (1830/10)

310

183

(310/20) & (183/20)

6200

3660

Processing OH (310**0.08*1.7) & (183*0.09*1.7)

42.16

27.999

Requirement F (Budgeted unit cost of ending finished goods inventory and ending inventories budget)

Budgeted unit cost of ending finished goods inventory and ending inventories budget

Large

Giant

Material (0.25*0.5)+(1*0.3) & (0.5*0.5)+(1*0.3)

0.425

0.55

Direct labor (0.2*8) & (0.25*8)

1.6

2

Over head ((0.08/10)*20) & (0.09/10)*20)

0.16

0.18

(0.8/10)*1.7

0.136

0.136

 

0.296

0.316

Per unit cost

2.321

2.866

Total value of finished goods ( total units 300)

696.3

515.88

Requirement G (Budgeted income statement)

Income Statement

For the Month Of December

 

Large

Giant

Sales

 

9000

7200

Cost of Goods Sold

 

 

 

Martial

2925.0

1755.0

 

Labor

10800.0

6480.0

 

Over Heads

1836.0

1101.6

Cost of Goods Manufactured

15561.0

9336.6

Beginning Finished goods inventory

600

600

Cost of goods Available for Sale

16161.0

9936.6

Ending Inventory

900

720

Cost of Goods Sold

15261.0

9216.6

Gross Profit

-6261.0

-2016.6

Marketing Expense (10% of Sales Revenue)

900.0

720.0

Net Income/loss

 

-7161.0

-2736.6

Part 2

Budgeting Gamesmanship

The research by Jensen , (2001) has analyzed the counterproductive effects of the usage of budgets which are set as estimated targets in any organization and the performance is measured in the organization through this. The compensation system is dependent on these estimations. The payments of the people on the basis of their performance are related to these estimations and this let the people to game the system for their own benefits. This thing destroys value in two major manners. Firstly that superior and subordinates both are part at the time of formulation of the budgets and due to this ashen the process of budgeting of the critically not bias information which is the requirement at the time of coordinating the activities of incongruent part of any relative organization. Furthermore the second thing is they try to game the actual realization of the budgets or the targets set through them and during the process the value is destroyed for the particular organizations. In spite of the fact there are various analysts who are aware of the fact that budget gaming is extensive , but a very few understand the massive affect they put on the costs of the organizations and also the profits associated with them.

The core intension behind conduction of the study was to make it more clarify that how all of this actually occurs and in what way the managers and organizations can cease these counterproductive cycles. The destruction is not the actual determination , but the fact is that changing the methods of the organizations for paying people is the real thing to be done. For doing so highly counterproductive behavior is required and the organizations must avoid the targets and the budgets in the compensation systems and also for the promotion systems for employees and managers. This is actually that all kind of knots , discontinuations and non-linear behaviors must be thrown out of the pay-for-performance profile ...