ASSIGNMENT 1

Question 1
A management accountant fulfils the needs of the company by working in accounting,
finance, and management and preparing financial reports on the company's activities. It is to
aid management at the senior level use financial information to aid in their strategic decisions
and ensure long-term success for the organisation.

In order to develop a holistic view of a company's activities, financial and non-

financial data are used by management accountants. When the data on income, cash flow, and
outstanding obligations is compiled, trends, statistics, and day-to-day decisions can be
discovered.

Businesspeople in this business will keep an eye on the process of developing

accounting procedures and financial policies, as well as creating financial predictions,
budgeting, and risk analysis to aid in the process of developing financial reporting and
financial policies. Although all of these possibilities can be identified, holding management
systems accountable and using more effective and cost-saving techniques and approaches are
just two additional options.

Management accountants are highly regarded for their evaluation of corporate

performance and important financial data, which plays a critical part in the education of
senior management. The preparation and analysis of previous financial and non-financial data
in order to make educated judgments has been replaced by the preparation and analysis of
current financial and non-financial data with the goal of enabling informed decision-making
by management accountants. When it comes to making quick decisions in the business world,
budgeting and forecasting can be utilised to help. They can also be used to aid in the
evaluation of projects and the design of a long-term strategy aimed at ensuring long-term
growth and profitability.

These are the qualities and skills that are required for this position. If they want to be
successful, management accountants must have great numerical and analytical abilities, as
well as a keen eye for detail. It is vital for these specialists to be able to think critically and
strategically, and their approach should be exceptionally well-organized as well. In order to
be successful, one must possess excellent commercial awareness as well as the ability to
communicate and persuade at a high level.
 This profession offers a wide range of potential career paths. Managerial accountants
can be hired by any organisation that has an accounting or financial department, but they are
most commonly found in financial institutions. Once they have gained at least five years of
experience, these professionals can move on to higher roles such as financial controller,
finance director, or chief financial officer (CFO).

The role of the management accountant is to provide vital information to

management, who may make short-term decisions such as finding the best product mix,
determining whether to buy or lease, and determining the price of their products, as well as
long-term decisions such as investment appraisal, capital budgeting, and investment. The
duty of management accountants only includes the provision of information for decision-
making, with complete and dependable data. However, it is the management who has the
ultimate responsibility for making decisions. Thus, since management makes all of the
choices, neither the management accountant nor the internal accounting reports can have the
final say.

In raising finances, management accountants have a significant role to play. He must

decide how much of a mix of debt and equity to maintain. Debt financing is a cheaper method
of raising funds due of tax benefits. But because interest on debt must be paid regardless of
whether or not the business generates sufficient earnings, it is dangerous. The bottom line is
that while management accountants have to maintain an optimal capital structure and account
for multiple cost of capital theories, leverage, and the ability to trade on equity, they must
also look at alternative financing mechanisms.

Question 2

a)

A process costing system aggregates and allocates the costs of a manufacturing

process to the goods that compose the organization's output. A production report must be
prepared in accordance with the process costing system.

The process costing method is used to determine the cost of manufacturing in

industries where a product undergoes multiple processes or stages of production before
completion. Under process costing, each stage produces a finished product that serves as the
raw material for the future stage or subsequent process, all the way to the final stage of
completion. Process costing is frequently used in sectors such as chemicals, distilled
products, canned goods, food items, oil refineries, edible oils, soap, paper, and textiles, to
name a few.

The following sections discuss the fundamental characteristics of process costing.

Production is continuous. After a series of processes is completed, the end product is
produced. Homogeneous substance, A consistent and standardised product ensures the
product's quality. The processing sequence is predetermined and specific. The end result of
one process serves as the raw material for the subsequent processes up to and including the
final step. Costs are computed on a process-by-process basis.

Costing Principles in General. The general principles of process costing are as

follows. All costs, both direct and indirect, are amassed and grouped by process. Records are
kept for each process, including the quantity of production, scrap, and wastage. The average
cost per unit for the time is calculated by dividing the total cost of each procedure by the total
production. The process's cost is also transferred when the product is transferred to another
process. Production and inventory are expressed in terms of finished goods. The cost of
regular spoilage, wastage, and so forth is factored into the cost of the products.

The following are the primary characteristics of process costing: The manufacturing
process is divided into numerous steps (referred to as processes), with each stage being
carried out by a distinct cost centre or department. The manufacturing process is continuous,
and the final product is the result of a series of processes or operations. Each procedure's end
product is used as the raw material for the succeeding step. The processing of raw materials
can result in the formation of combined products and by-products Process costing also takes
into account the concept of equivalent production. This indicates that when units are in the
semi-completed stage, they should be stated in terms of comparable completed or effective
units. Profit and loss from costing are determined when the opening and closing balances of
finished goods are taken into consideration. The process accounts assist in valuing raw
materials, work-in-progress (semi-finished commodities), and finished goods appropriately.
These holdings are detailed on the Balance Sheet.
b)

When it comes to manufacturing, job costing is the process of painstakingly gathering

the production costs connected with individual units or groups of units. For example, a work
costing system would account for the manufacturing of a piece of furniture that was
specifically designed for the customer. It would be necessary to track the costs of each piece
of labour performed on that specific piece of furniture on a time sheet, which would then be
totaled together on a work cost sheet. Similarly, any wood or other components used in the
creation of the furniture would be charged to the production task connected with that piece of
furniture. This information can then be used to bill the customer for the labour and materials
that were used, as well as to track the amount of profit the company made on the production
job that was associated with that particular piece of furniture, among other things.

In light of these explanations of task and process costing, it becomes clear that there
are significant differences between the two costing methodologies. The product's one-of-a-
kindness. Job costing is used for one-of-a-kind objects, whereas process costing is used for
standardised products and services. The scope of the work. The job costing method is used
for extremely small production runs, while the process costing method is utilised for large
production runs. Keeping track of things. Because time and materials must be attributed to
specific jobs, job pricing necessitates a large increase in the amount of documentation
required. Costing is the process of aggregating costs, which necessitates less record keeping.
Customers are being billed. Due to the specificity of the expenses incurred by customer-
commissioned projects, job costing is more likely to be utilised for customer billings than any
other method.

When a company has a mixed production system that produces large quantities of
completed goods but then customises them before distributing them, components of both job
costing and process costing systems can be combined to form a hybrid production system.

Techniques such as job costing and process costing are useful in both human and
automated accounting contexts, depending on the situation.
 ASSINGMENT 2

The following Information’s are given in the question

Sale Price per Unit = RM 110

Variable Cost per Unit = RM 65

Fixed Cost = 49500

a)

I.) We will calculate Contribution Margin

Formula of Contribution Margin

= Selling Price per Unit - Variable Cost Per Unit

= 110 - 65

= 45

Hence: RM 45 is the per unit contribution margin of the cake

II.) Contribution Margin rate

Formula of Contribution Margin rate

= (Selling Price per unit - Variable cost per Unit) / Selling Price per unit

= (110 - 65) / 110

= 45 / 110

= 0.4090

= Or say, 40.90%
 Contribution Margin Rate is 40.90% of Selling Price of the cake

b)

I. We will calculate Breakeven point in Units

Formula of Breakeven Point

= Fixed Cost / (Selling Price Per Unit - variable Cost per unit)

= 49500 / (110 - 65)

= 49500 / 45

= 1100 Units

Hence: Break Even Point of Cake is 1100 Units

II. We will calculate Breakeven point in sales Revenue

Formula of Breakeven point in sales Revenue

= Fixed Cost / (Contribution rate per unit / Selling Price Per Unit)

= 49500 / (45 / 110)

= 49500 / 0.4090

= RM 121000

Hence: Break Even Point of Cake in sale revenue is RM 121000

c.)

Now, we will calculate number of units need to be sold to achieve target profit of RM29700

Formula of number of units to be sold to generate profit

= Break Even Point in Unit + (Profit / Contribution Margin Per unit)

= 1100 + (29700 / 45)

= 1100 + 660

= 1760 Units

Hence : 1760 Units need to be sold in order to achieve a target profit of RM 29700

d)

In each organisation, the cost information system is critical to making decisions. The
company does all it can to limit costs in addition to everything else. In order to fulfil the goals
of organisations such as production control, quality control, internal control, and stocks
control, it is essential to monitor the results of all-department activities and have adequate
cost information to do so. The careful examination of all the organisational activities and
costs, as well as the calculation of production costs, all serve to give a solid financial
foundation upon which managerial decisions can be made.

REFERENCE

1. Finance Strategists. (2021, June 22). What is Process costing?- Definition, Features,
Procedure and Example. https://learn.financestrategists.com/explanation/cost-
accounting/analysis-of-cost/what-is-process-costing/
2. Management accountant | ACCA Global. (2020, April 1). -.
https://www.accaglobal.com/in/en/qualifications/why-acca/competency-framework/
job-profiles/corporate-and-business-accounting/management-accountant.html
3. Pant, S. (2015, October 26). 7 Roles of Management Accountant. Your Article
Library. https://www.yourarticlelibrary.com/accounting/management-accountant/7-
roles-of-management-accountant/65109
4. What Management Accountants Do. (2021, June 1). Investopedia.
https://www.investopedia.com/articles/professionals/041713/what-management-
accountants-do.asp
5. Graybeal, P. (2018, July 24). Distinguish between Job Order Costing and Process
Costing – Principles of Accounting, Volume 2: Managerial Accounting. Pressbooks.
https://opentextbc.ca/principlesofaccountingv2openstax/chapter/distinguish-between-
job-order-costing-and-process-costing/
6. 3.1 Process Costing Vs. Job Order Costing | Managerial Accounting. (2021, June 1).
-. https://courses.lumenlearning.com/tcc-managacct/chapter/chapter-1/