You Are A Newly Qualified Management Accountant Recently Appointed: Management Accounting, UCD, Ireland

Question 1

You are a newly qualified management accountant recently appointed by JMP Limited. JMP is a long-established manufacturing company. The company manufactures and sells three products, Product 1, Product 2 & Product 3.

Product 3 has been attracting additional business with overheads increasing however Product 2 has been losing market share. JMP has approached you with a view to introducing a new costing system. Since its creation, JMP has been using a single direct labor cost percentage to assign overhead costs to products.

A team led by the senior management accountant has spent several weeks collecting data for the different activities and products. For the accounting period 31st December 2020, the following data relates to the three product lines for JMP.

• Calculate the overhead rate and the product unit costs for each product under the existing costing
• Identify the appropriate cost driver for each overhead activity, calculate the overhead absorption rate for each cost
• Calculate the product unit costs for each product using an activity-based costing
• Comment on the results of each costing system in particular the profits for each

Question 2

EFT Limited is a manufacturing company manufacturing specialised tables. The following information is available for the company for the year ended 30th December 2020.

Trial Balance extract for EFT Limited for the year ended 30th December 2020

 Additional information:

1. Rent is to be charged 75% to the factory and 25% to the
2. Depreciation has not yet been charged for manufacturing EFT uses straight-line depreciation for machinery at a rate of 25%.
3. Factory wages are 80% direct labor with the balance being indirect labor
4. Work in progress inventory was as follows: 1 January 2020 €12,100 31 December 2020                                    €14,300
5. Finished Goods inventory was as follows: 1 January 2020 €26,100 31 December 2020     €28,700

• Prepare the manufacturing account for the year ending 31st December
• Prepare the income statement for the year ending 31st December
• Prepare the extract from the Statement of Financial Position as at 31st December 2020.

Question 3

EXCEL Ltd manufactures 3 types of cabinet, the standard, the modern and the premium. The budgeted standard costs for each product are as follows:

The following information has also been provided:

Direct materials are a specialist rosewood which is priced at €10 per Sq Mtr

No stocks are being maintained and production volumes are the same as sales volumes Fixed overhead costs are absorbed on the basis of production units

Due to recent forest fires in the area where the wood supplier has based the supply of rosewood will be limited to 13,000 sq Mtr in the coming quarter.

• Calculate the total breakeven point in units
• Advise Excel on the optimum production plan detailing the mix of products they should produce during the next quarter to maximize their profits; calculations must be included in your advice note setting out optimum
• List Four are the assumptions of Cost Volume Profit Analysis?
• List Four limitations of Cost Volume Profit Analysis?
• The purchasing manager has advised that a management accountant would be of great benefit to the business, the managing director has asked you to provide details on the role of the management Four key points will be sufficient.