MANAGERIAL ACCOUNTING

“PRODUCTION BUDGETING COMPANY”

BY:

I Gusti Ngurah Friday Palaguna

NIM. 1306205006

Attendance Number: 02

FACULTY OF ECONOMICS AND BUSINESS

UDAYANA UNIVERSITY

2015

Total Production Unit 3200 3400 3600 3800 4000 4200 4400Variable Cost

Material 35$ 112,000$ 119,000$ 126,000$ 133,000$ 140,000$ 147,000$ 154,000$ Labor 56$ 179,200$ 190,400$ 201,600$ 212,800$ 224,000$ 235,200$ 246,400$ Electricity 0.64$ 2,048$ 2,176$ 2,304$ 2,432$ 2,560$ 2,688$ 2,816$

Total 293,248$ 311,576$ 329,904$ 348,232$ 366,560$ 384,888$ 403,216$

Fixed CostWerehouse 10,000$ 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$ 2,000$ Electricity 3,850$ 3,850$ 3,850$ 3,850$ 3,850$ 3,850$ 3,850$ 3,850$ Inspections 1,710$ 1,710$ 1,710$ 1,710$ 1,710$ 1,710$ 1,710$ 1,710$

Total 17560 17560 17560 17560 17560 17560 17560Total Production Cost $310,808 $329,136 $347,464 $365,792 $384,120 $402,448 $420,776

Company XAbsorting Budgeting

FOR 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

f(x) = 0.69 x + 3578R² = 0.604571428571429

Series2Linear (Series2)

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

kg), it’s shows that the price of this raw material mostly increase. There are some

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

July

14

August

14

September

14

October

14

November

14

December

14

January

15

3.1 3.3 3.2 3.1 3.3 3.4 3.5

And based on my assumption, it will increase for 3.5 in the beginning of 2015. As the

additional information, to make 1 unit, 10 kg of raw materials are needed. And for each

product means it will cost $35 of raw materials.

2. Based on the table 5th about monthly labor rate growth in the past 4,5 years (per hour),

it’s shows that the cost of labor is increasing slowly. There are some assumption based on

the increasing of the production units that could be made in 2014 to the beginning of

2015 as follows

July

14

August

14

September

14

October

14

November

14

December

14

January

15

6.0 6.0 6.5 6.5 6.5 6.5 7.0

And based on my assumption, it will increase for 7.0 in the beginning of 2015. As the

additional information, to make 1 unit, 8 hours of labor are needed. And for each product

means it will cost $56 of labor.

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 = $ 100,000−$ 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 fixed cost and

variable cost (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 high-low method

Variable cost =cost changes

output changes =

5,450−5,000700

= 0.64

In calculating fixed cost, I use information in 2011.

Cost = Fixed Cost + Variable Cost

$5,450 = FC + 0.64 (2,500)

Fixed Cost = 3,850

5. Inspection cost can be determined by using high-low method. We use data from table 8th.

cost changesoutput changes

= $ 2,650−$ 2,500150−100

= $3

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. To get this goal, the company should decrease 36 hours of

inspection in every year ( 180:5=36) and the cost as $570 ($2,850:5= $570).The decrease

of the inspection time and cost will be explained in the table as follows:

Perio

d

Inspection

time (hours)

Cost

($)

2013 180 2,850

2014 144 2,280

2015 108 1,710

2016 72 1,140

2017 36 570

2018 0 0

Based on those calculation, I assumed that in 2015 there are 108 hours in inspection time.

So the fixed cost are :

108 hours x $3= $324

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 = 7,000

Estimation of demand in 2014 = 7,000 x 106.8% = 7,476

Estimation of demand in 2015 = 7,476 x 106.8% = 8,000

Because of Company 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. And the variation

of flexibility is 200 with 7 scenarios, which are 3,200; 3,400; 3,600; 3,800; 4,000; 4,200;

and 4,400.