Accg Tutorial Answer

Topics: Costs, Management accounting, Variable cost Pages: 7 (1400 words) Published: March 11, 2013
Week 2 – Commencing 5th March


These three levels of managers require different forms of management accounting information because of the very different nature of the decisions that they make and their different areas of responsibility. For example, senior managers may spend considerable time making strategic decisions for the entire organisation so require information about markets, customers and competitors. They also need to monitor the financial performance of the entire organisation, therefore require a financial summary of the organisation. Middle managers need information that relates to their area of responsibility – a division or department. Operations managers need detailed and frequent information to help them manage the dayto-day decisions and problems in the operational areas of the business.


The important differences between management accounting and financial accounting are listed below. (a) Management accounting information is provided to managers and employees within the organisation, whereas financial accounting information is provided to interested parties outside the organisation. Management accounting reports are unregulated, whereas financial accounting reports are legally required and must conform to Australian accounting standards and corporations law. The primary source of data for management accounting information is the organisation’s basic accounting system, plus data from many other sources. These sources will yield data such as rates of defective products manufactured, physical quantities of material and labour used in production, occupancy rates in hotels and hospitals and average take-off delays in airlines. The primary source of data for financial accounting information is almost exclusively the organisation’s basic accounting system, which accumulates financial information. Management accounting reports often focus on sub-units within the organisation, such as departments, divisions, geographical regions or product lines. These reports are based on a combination of historical data, estimates and projections of future costs. The data may be subjective and there is a strong emphasis on reporting information that is relevant and timely. Financial accounting reports tend to focus on the enterprise in its entirety. These reports are based almost exclusively on verifiable transaction data. The focus is often on reliability rather than relevance and the reports are not timely.

(b) (c)


2.8 Cost objects are items for which managers need separate measures of cost. Examples are:

Cost object customer



‘Real life’ examples IAG policy holders, hotel industry guests, bar patrons, restaurant patrons IAG policies, hotel industry accommodation, food and beverage; high technology TVs, cameras, printers and so on; a film; an ounce of gold IAG claims handling; hotel room cleaning; assembling TVs; film editing; drilling for gold IAG policy and claims departments; hotel accommodation and food and beverage departments; high technology research and development and administrative departments; film location logistics; gold refining

Reason for management interest to find out if particular customers are profitable to find out if a product is profitable


to obtain activity cost / per unit of activity for estimating the costs of other cost objects such as products, as well as for benchmarking to evaluate performance against a budget.

PROBLEM 2.32 Product cost classification: manufacturer
1 Total prime costs:

Direct material Direct labour: Wages Labour on-costs Total prime costs 2 Total manufacturing overhead:

$1 050 000 242 500 47 500 $1 340 000 $ 57 500 70 000 22 500 50 000 15 000 4 500 27 500 20 000 $ 267 000

Depreciation on factory building Indirect labour wages Production supervisor’s salary Service department costs Indirect labour: labour on-costs Labour on-costs for production supervisor Total overtime premiums paid Cost...
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