FNSACC517 - Provide Management Accounting Information

1) How to identify, analyse and classify cost transactions, record the transactions in the accounts (project on below )

2) How to prepare cost reports in accordance with the organisational policies and procedures and the Australian Accounting Standards. (project on below )

Project

Business Background: Jimmy Brewing is a GST registered manufacturer of cider which sells at wholesale and retail outlets. The entity has the following policies and procedures in relation to its manufacturing operations:

Materials Policy and Procedures:

All direct and indirect production materials are to be maintained and controlled in the Materials store and issued to production at the request of the Factory Manager.

Direct materials are to be accounted for using the First-in-first-out method of recording in accordance with the AASB Inventory standard with all per unit amounts on the Inventory card calculated to two decimal places.

Delivery costs on materials purchased to be included with cost of purchases as per the Australian Accounting Standard.

Labour Policy and Procedures:

All factory labour is controlled by the Human Resources department and allocated to the factory at the request of the Factory Manager.

PAYG taxation to be applied to fortnightly payroll at 20%.

The Superannuation Guarantee Contribution is to be applied to all factory wages in accordance with legislation and treated as a factory overhead cost.

Factory labour allocations: 70% of total labour costs are to be allocated directly to factory production and 30% to be treated as factory overheads.

Overheads Policy and Procedures:

Depreciation on factory equipment is to be applied at the end of each month using the Reducing Balance Method of depreciation at 30% p.a.

At month end factory overheads are to be applied to the factory at $1.00 per direct labour dollar used in production and any under or over applied overhead is to be transferred to Cost of Goods Sold.

Accounting Policy and Procedures :

Journal entries to be recorded in a General Journal on a daily basis and General Ledger maintained.

Control accounts required for Materials, Labour, Factory Overheads, Work in Progress and Finished Goods.

End of month reports required: Trial Balance, Manufacturing Statement, Income Statement and Balance Sheet.

Manufacturing Statement to be reconciled to Materials Control, Labour Control, Factory Overhead Control and Work in Progress Control.

Accounting balance and August transactions for Jimmy Brewing

Account balances:

1 - Aug Stock of raw materials 5,000 Units $ 55,000 Dr

Work in process on hand $155,000 Dr

Finished goods on hand $110,000 Dr

Bank $ 80,000 Dr

Factory equipment $1,000,000 Dr

Accu. depreciation-Fact. Equipment $100,000 Cr

Capital $1,310,000 Cr

Transactions:

2 - Aug Direct material purchased on credit 12,000 unit $144,000 +GST

Delivery costs on material purchased $ 1,440 +GST

3 - Aug Factory overhead invoices received on credit $ 1,500 +GST

8 - Aug Factory wages incurred paid&allocated $ 50,000

10- Aug Direct materials used in production 9,000 Unit To be calculated

12- Aug Direct materials purchased on credit 12,000 unit $138,168 +GST

Delivery costs on materials purchased $ 1,296 +GST

15- Aug Factory cleaning invoices received on credit $ 16,000 +GST

18- Aug Materials returned to supplier (purchased 900 unit To be calculated

on 12 Aug)

22- Aug Factory wages incurred paid & allocated $ 60,000

24- Aug Direct materials used in production 9,540 unit To be calculated

28- Aug Received account for advertising (on credit) $ 12,000 +GST

31- Aug Finished goods 80% of work in process has

been completed

Credit Sales 90% of goods in store were sold

at a 40% mark-up

CHECK LIST

Policy and Procedure Complete

Transactions recorded in General Journal

Materials inventory card maintained in accordance with AASB

Direct and indirect materials allocated

Direct and indirect labour allocated

Superannuation Guarantee Contributed recorded

Depreciation of factory assets provided

Overheads applied as per policy and procedures

Transactions posted to General Ledger

Trial balance prepared

Manufacturing statement prepared

Manufacturing statement reconciled

Income statement prepared

Balance sheet prepared

Overhead variance report