Managerial Accounting Tutorial Set 1

Managerial Accounting Tutorial Set 1

• Question 1: Explains key managerial accounting terms:
  • Product cost: Costs directly related to producing a product, e.g., raw materials, direct labor.
  • Period cost: Costs not directly tied to production, but are incurred during a period, e.g., rent, salaries of non-production staff.
  • Prime cost: Direct materials plus direct labor.
  • Conversion cost: Direct labor plus manufacturing overhead.
  • Direct cost: Costs that can be traced directly to a specific product or activity.
  • Indirect cost: Costs that cannot be traced directly to a specific product or activity.

Question 2

• Manufacturing Overhead as Indirect Cost: Manufacturing overhead is considered an indirect cost because it's difficult to trace precisely to a specific product.

• Direct vs. Indirect Costs:

  • Direct labor factory costs: Direct
  • Factory supervisor's salary (for product produced): Indirect
  • Factory supervisor's salary (for manufacturing division): Indirect
  • Manufacturing overhead costs (for products produced): Indirect
  • Manufacturing overhead costs (for manufacturing division): Indirect

Question 3

• Variable vs. Fixed Costs: The statement "A variable cost is a cost that varies per unit of product, while a fixed cost is constant per unit of product" is incorrect.

• Correct perspective: Variable costs vary with the level of activity (e.g., per unit of output), while fixed costs remain constant in total, irrespective of activity, and thus vary per unit.

Question 4

• Data for Hajiashikishi Company: Provided financial data for a company. (Specific amounts and calculations omitted.)

• Required: Calculations of costs using the provided data were necessary. (Calculations omitted)

Question 5

• Cost Classification:
  • Rent on building: Fixed
  • Direct labor: Variable
  • Supervisor salaries: Fixed
  • Direct materials: Variable
  • Sales commissions based on units sold: Variable

Question 6

• Naya Ltd Financial Data: Provided information on selling expenses, direct materials for two components, and direct wages for two departments. (Specific values omitted.)
• Required: Calculations of costs were necessary. (Calculations omitted)

Question 7

• High and Low Method

• Utility Costs: Provided utility cost data for a company over six months, including months, total cost, and machine volume. (Specific values omitted.)

• Required: Calculation of variable cost per machine hour, total variable cost, monthly fixed cost, and total fixed cost were necessary. (Calculations omitted).

• Mixed Cost Function: Form the equation (y=a+bx) of the total cost and then use this calculation to extrapolate costs at different machine hours. (Calculations omitted.)