MANAGEMENT ACCOUNTING ASSIGNMENT

PRODUCTION BUDGETING COMPANY X IN YEAR 2015

LECTURE: I Wayan Pradnyantha Wirasedana., M.Com

EMA 323 A1 CLASS

BY:

I Kadek Jati Asmara

NIM. 1306305081

Attend. 37

ECONOMY AND BUSINESS FACULTY

UDAYANA UNIVERSITY

2015

Total Production Unit 3200 3300 3400 3500 3600 3700Variable Cost

Material 34$ 108,800$ 112,200$ 115,600$ 119,000$ 122,400$ 125,800$ Labor 56$ 179,200$ 184,800$ 190,400$ 196,000$ 201,600$ 207,200$ Electricity 0.64$ 2,048$ 2,112$ 2,176$ 2,240$ 2,304$ 2,368$

Total 290,048$ 299,112$ 308,176$ 317,240$ 326,304$ 335,368$

Fixed CostWerehouse 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ 10,000$ Machineries 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ Electricity 3,594$ 3,594$ 3,594$ 3,594$ 3,594$ 3,594$ 3,594$ Inspections 1,710$ 1,710$ 1,710$ 1,710$ 1,710$ 1,710$ 1,710$

Total 17304 17304 17304 17304 17304 17304Total Production Cost 307,352$ 316,416$ 325,480$ 334,544$ 343,608$ 352,672$

Company XProduction Budgeting

Period in Year 2015

SCATTER PLOT METHOD

2100 2200 2300 2400 2500 2600 2700 2800 2900 30004700

4800

4900

5000

5100

5200

5300

5400

5500

5600

5700

R² = 0.604571428571429

Series2Linear (Series2)

#EXPLANATION

1. Based on table 4th about monthly raw material price growth in the past 4,5 years (per kg),

there are some assumption based on the pattern of price fluctuations in 2014 as follows.

July2014

August2014

September 2014

October 2014

November 2014

December 2014

January 2015

3.1 3.3 3.2 3.1 3.3 3.2 3.4 As the additional information, to make 1 unit, 10 kg of raw materials are needed. And for each product means it will cost $34 of raw materials. Assuming it uses the average to average prices in previous years for 4 years from 2010 through 2013.

2. Based on table 5th about monthly labor rate growth in the past 4,5 years (per hour), there are some assumption based on the increasing of the production units that could pmade in 2014 to the beginning of 2015 as follows.

July2014

August2014

September 2014

October 2014

November 2014

December 2014

January 2015

6.0 6.0 6.0 6.0 6.5 6.5 7.0As the additional information, to make 1 unit, 8 hours of labor are needed. And for each product means it will cost $56 of labor. Assuming using the average increase for the average price in the previous years for 4 years from 2010 through 2013.

3. Based on table 6th, the company’s fixed assets consist by office building, warehouse building, and machineries. We only count the depreciation which has relation with the production activity as follows.

Warehouse Building = $ 110,000−$10,000

10 years = $10,000/years.

Machineries = $ 17,000−$1,000

8 years = $ 2,000/ years.

This calculation uses the straight-line depreciation method.

4. In table 7th of electricity cost in the past 4 years, electricity is included as mix cost, so we need to separate the electricity into fix cost and variable cost using Scatter Plot method (attached in the previous page). In this method we need to find which costs that have same standard of deviation, which are 5,000 and 5,450. Then we find the variable cost by Scatter Plot method.

Variable cost = 5450−50002900−2200

= 0.64

In calculating fixed cost, I use information in 2012.Fixed Cost = 5450 – 0.64 (2900)

= 3,594

5. Based on table 8th of raw material inspections cost in past 4 years, there is an additional information that the management wishes to minimize this fixed cost and to get rid of this cost in the next 5 years until 2018. To get this goal, the company should decrease 36 hours of inspection in every year (180: 5= 36) and the cost is $570 ($2,850:5= $570).The decrease of the inspection time and cost will be explained in the table as follows.

Period

Inspection Time (hours)

Cost($)

2014 144 2,2802015 108 1,7102016 72 1,1402017 36 5702018 0 0

6. In determining total production unit, we need the number of market share and the demand. As the information, the Company X holds 40-45% market share. I am going to use 40% market share as the assumption that I use the lowest value from 40 to 45. For the economic growth in 2015 I use 6.8%, same with in 2014 because there is no additional information about that. The calculation of total production unit estimation is as follows.Demand in 2013 = 7,000Estimation of demand in 2014 = 7,000 x 106.8% = 7,476Estimation of demand in 2015 = 7,476 x 106.8% = 8,000Company X holds demand as 40% with the estimation of demand in 2015 as 8,000, so the total production expected is 40% x 8,000 = 3,200. Then, the variation of flexibility is 200 with 6 scenarios, which are 3,200; 3,300; 3,400; 3,500; 3,600; and 3,700.