managerial acoounting

ASB 4420 Assignment

You have been appointed as the management accountant at Riptide Plc and have been asked to provide information on overhead absorption.

The following budgeted information relates to the forthcoming period:

	Products
	XYI (000)	YZT (000)	ABW (000)
Sales and production (units)	50	40	30
	£	£	£
Selling price (per unit)	45	95	73
Variable cost (per unit)	32	84	65
	Hours	Hours	Hours
Machine department (machine hours per unit)	2	5	4
Assembly department (direct labour hours per unit)	7	3	2

Overheads allocated and apportioned to production departments were as follows:

Machine department £504,000

Assembly department £437,000

You ascertain that the above overheads could be re-analysed into ‘cost pools’ as follows:

Cost pool	£000	Cost driver	Quantity for the period
Machining services	357	Machine hours	420,000
Assembly services	318	Direct labour hours	530,000
Set-up costs	26	Set-ups	520
Order processing	156	Customer orders	32,000
Purchasing	84 ___	Suppliers’ orders	11,200
	941 ___

You have also been provided with the following estimates for the budget period:

	Products
	XYI	YZT	ABW
Number of set-ups	120	200	200
Customer orders	8,000	8,000	16,000
Suppliers’ orders	3,000	4,000	4,200

Required:

1. Prepare and present budgeted profit statements using:

(a) conventional absorption costing; and 15%

(b) activity based costing (ABC) 30%

(c) Comment on these results. 15%

2. The Managing Director at Riptide plc has commented to you that he believes that Activity Based Costing is often implemented because it’s fashionable and not because it provides extra information to management.

Discuss the above statement. 40%

The assignment should be submitted by hardcopy and also via turnitin.

The word count for part 2, should not exceed 2000 words