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  5. MAC2601 - Principles Of Management Accounting (MAC2601)

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MAC2601 - Full Summary with Formats

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  • Course
  • MAC2601 - Principles Of Management Accounting (MAC2601)
  • Institution
  • University Of South Africa (Unisa)

Finding the subject daunting, struggling to get through all the study material? Need a quick recap before the test? Or just want to get ahead of the curve? This is a condensed summary with additional formats (filled with notes and formulas - to make it easier to understand).

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  • June 4, 2023
  • June 4, 2023
  • 30
  • 2022/2023
  • Summary

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  • mac2601 summary amp formats

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  • University of South Africa (Unisa)
  • MAC2601 - Principles Of Management Accounting (MAC2601)
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MAC2601
SUMMARIES
OF EACH TOPIC


FORMATS
WITH CALCULATIONS

, Mac2601
Nature and Behaviour of Cost
Cost object, classification and behaviour Cost‐Volume‐Profit (CVP) Analysis
Any activity/unit used to measure cost Used to investigate change in profit that
Classified as: results from: Activity levels
Estimation Techniques & Linear Equation Per unit selling price
Direct cost Indirect cost The Linear Equation (pg. 21) Per unit variable cost
(Traceable) (Not Traceable) Variable cost per unit Total fixed cost
Manufacturing Cost Non‐Manufacturing Cost Total Cost Y=a+bx Activity level CVP Assumes: Selling price is constant,
(Used to make product) (Not part of making product) Total fixed cost * All costs are linear (can be divided into V & F
Direct Labour Marketing 1) High & Low method (Variable cost per unit) elements), V & F costs remain constant,
Direct Material Selling & distribution cost All Highest Cost – All Lowest Cost (Rand) Sales mix constant for all goods, Inventory levels
Direct Expenses Administrative cost Highest Activity – Lowest Activity (Level) don’t change & it only applies to relevant range
Manufacturing Overhead * Fixed costs are determined by: Upper & lower activity in which org. normally
= TC for activity Level – (VC p/u x related activity level.) operates.
Indirect
Indirect Indirect Other Manufacturing
Other
Indirect
Material
material Labour
Labour: Cost Manufacturing 2) Scatter diagram Contribution: (what’s left to cover FC (fixed cost))
(e.g. oil cost
(e.g.forOil for (e.g.
(Wages (Rent, Water & Lights) ‐ Not as accurate (blot TC on Y‐axis & Volume Contribution Ratio: % Sales available to
(e.g. Rent, = Sales – Total Variable Cost
wages for
machine)
Machine) for Admin) water & lights on the X‐axis), can use more than one value/cost Contribution Ratio: % Sales available
= Contribution/Sales x 100% to cover FC
admin)
Pg. 23 = Contribution/Sales
Breakeven x 100%
Point: Total contribution = Total FC
All costs can be: Prime (Direct) 3) Simple Regression Analysis Breakeven Point: Total contribution
In Units: Contribution/Sales x 100% = Total FC
Calc. In Units: Contribution/Sales x 100%
Or Conversion cost (Convert Raw materials: ‐ Used to determine the fixed & variable portions In Value: Breakeven Units x Selling Price per unit
Direct Cost + Manufacturing OH) of Manufacturing OH In Value:
ORBreakeven Units x Selling
Total FC/contribution Price per unit
ratio
OR Total FC/contribution ratio.
‐ Use different data points with a strong Breakeven graph on pg. 45
correlation (e.g. months.) Margin of Safety:
VC x Sum Volume
FC x Sum Calc. In Units: Total sales – Breakeven sales
Ratio: Margin of safety/ Total sales x 100%
Target Profit:
Calc. In Units: Fixed cost + Expected profit
Number of observations
Contribution per unit
Solve b by eliminating a & get the same In Value: Fixed cost + Expected profit
coefficient for both equations pg. 24‐26 Contribution ratio
NOTE: Fixed Cost – Stays the same
Semi‐Fixed – Increases in fixed increments/steps, e.g. R200, R400, R600.
Variable – Changes in direct proportion to production quantity – cost per unit.
Semi‐Variable – Fixed based cost, but variable cost added on top e.g. Phone line fixed,
but Airtime depends on calls made.

, Accounting For:
Material Overheads
Recording Procedures: Labour Actual OH: OH:
Actual Applied OH: BudgetedOH:
Budgeted OH:
Applied OH:
1) Perpetual Inventory Accounting System: Direct Labour Indirect Labour Actually incurred
Actually Allocated
Allocated toto Estimated
Estimated costcost
Used to record movements in material inventory Can be traced to Can’t trace cost, during year
incurred departments
departments budgeted
budgeted
(as it occurs) up to date. individual units treated as part of during the beginning
beginning ofof yr.
year
2) Physical inventory count: of products Manufacturing OH the year
Must be done from time‐to‐time Total Labour cost = Gross amount payable to employee + Employee benefits Under Applied Over Applied
(Confirms if perpetual inventory is correct) Departments’ part of Labour Cost control: Applied < Actual Applied > Actual
Accounting entries: General Ledger: ‐ HR: Appoint people & determine salaries See journals Pg. 103‐105 Study Guide 1
‐ Stock bought: Dr Inventory control acc. ‐ Timekeeping Department: Keeps record of time Overhead Recovery Rate:
& Cr Accounts payable/bank & work done (proper management vital Budgeted Manufacturing OH cost
‐ Raw material issued for production: e.g. time clock method (large firms), time clock cards, Estimated Production
Dr WIP/Manufacturing OH/ non‐manufacturing OH time sheets or Job cards. Appropriate capacity to use as denominator:
Cr Inventory control account. ‐ Salary/Payroll department: calc. & pay gross/net wages. ‐ Theoretical:Volume of activity under ideal conditions
When stock is returned just do the opposite ‐ Cost accounting department: Allocate labour cost, ‐ Practical:Volume of act. with unavoidable interruptions
Inventory planning & Control: compares what must be done (production units) ‐ Normal Average:Take fluctuations into account
to what was done & budgeted to actual labour costs. ‐ Budgeted:Capacity/ Activity level needed for new
Transaction Precautionary Speculative Payroll accounting: financial year
Motive: Motive: Motive: Allocation of OH:
Hold only enough Hold inv. future Hold more/less Inv. due to 2 Step procedure to Types of ‐ Blanket OH Rate: Account for all products with
Inv. for daily sales Demand/Supply price increase/decrease process time‐keeping data Remuneration: common allocation basis.
. ‐ Calc. & prepare ‐ Fixed Monthly Salary ‐ Departmental OH: Each department separate.
Inventory Holding (ordering) cost Formula: payroll ‐ Time wage (clock system) *Primary: Assigned directly to organisation’s
‐ How much inventory you order at a time ‐ Distribute costs to ‐ Piece wage system production (type), service (support functions)
. to minimise annual ordering/carry cost. Jobs, processes & department (per hour/job) non‐manufacturing departments (cost centres).
Annual usage (Demand) in units *Secondary: Re‐apportionment of a service dep.
VC of placing an order Cost accounting terms used in Payroll: OH cost. One department supports all other dep.
Overtime premium: Anything paid above normal rate or time
(Interdepartmental services)
Gross remuneration: Amount earned for hours worked, incl. all
allowances & overtime Budgeted Labour Recovery Rate:
Other Variable
Taxable income: Remainder after all deductions (e.g. provident fund) Total budgeted annual labour
Inventory holding Purch. Price Interest rate Cost to company: Gross remuneration + employer contributions
Total budgeted annual production hours
Cost p/a per unit Per unit (use only when Net Remuneration: take home pay
given) Labour related deductions: Pension, Provident fund contribution (not
more than 7.5% of pensionable remuneration), PAYE, UIF (1% of gross
income), Sundry deductions (medical aid, subscriptions etc.)
Role of Labour & level of technology used: Small batch, mass production
& continuous production process (accounting entries Pg.87)

, Inventory Valuation & Methods:

Inventory Valuation Definition First‐in‐First‐out (FIFO) Method Weighted Average Method (WAM)
Process of assigning cost to inventory Purchased first Issue first ‐ Assume each batch made up with same quantity.
Flow of materials does not dictate flow of cost ‐ No attempt made to identify time purchased,
Any tangible Property (Issue and sale not the same) (assume average price from this year & last)
bought, manufactured,
processed, developed or
sold by an organisation
In Inventory ledger Calculate:

Categories of Inventory: Returns to supplier: Returns from factory: Total cost of materials (per “class”) .
‐ Raw Materials (Direct materials): Used in the Negative purchase Negative issue Number of units (per “class”)
manufacturing process (natural & unprocessed). Or Receipt = Average price
‐ Consumables: Smaller items kept in store used
for all departments, e.g. Stationary, light bulbs etc. Inflation = Profit *NO change in cost price per unit after issues.
* Indirect Material: Issue to production With FIFO
* Non‐Production OH: Issue to non‐ Deflation = Profit Returns
manufacturing department.
‐ Work in Process (WIP): Partially completed
Supplier Factory
Accounting for Closing Inventory ‐ At actual At last issued
products. cost price average price
Absorption/ Indirect method ‐ FIFO:
‐ Finished (or completed) goods, products, units or
inventory: Finished products ready for sale. current year closing inventory (units) (variable + fixed
X manufacturing cost) The new average price must be determined after
units manufactured this year
every purchase or return.

Accounting for Closing Inventory ‐ Accounting for Closing Inventory ‐
Direct method ‐ FIFO: Absorption/ Indirect method ‐ WAM:

(units left x (units left x current year closing inventory (units) X value of goods
open inventory price) + closing inventory price) (open + manuf. units available for sale) available for sale

* Closing inventory in units: available units – units sold
Accounting for Closing Inventory ‐
Direct method ‐ WAM:

current year closing inventory (units) X variable cost of
(open + manuf. units available for sale) goods available
for sale

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