Question

1. The following cost data for the year just ended pertain to Devere company, a greeting card manager:

	USD
Direct Material	2,100,000
Advertising expense	98,000
Depreciation on factory building	115,000
Direct Labour: wages	505,000
cost of finished goods inventory at year-end	115,000
indirect labour: wages	140,000
production supervisor's salary	47,000
service department cost	100,000
Direct Labour: Fringe benefits	87,000
Indirect labour: fringe benefits	31,000
Benefits for a production supervisor	10,000
total overtime premiums paid	55,000
Cost of idle time: production employees	40,000
administrative costs	150,000
office space for sales personnel	15,000
sales commissions	5,000
product promotion costs	10,000

* All services are provided to manufacturing departments.

*Cost of idle is an overhead item; it is not included in the direct-labour wages given above.

* the rental of sales space was made necessary when the sales office was converted to storage space for raw material.

Required:

Calculate each of the following costs for the year just ended:

a. total prime costs

b. total manufacturing overhead costs

c. total product costs

d. Total Period costs

e. list and describe five (5) important differences between managerial and financial accounting.

Answer 1

a.

Calculation of Prime Cost
Direct Material	2,100,000.00
Direct Labor Wages	505,000.00
Direct Labor-Fringe Benefits	87,000.00
Total Prime Cost	2,692,000.00

b.

Calculation of manufacturing Overhead Cost
Depreciation on Factory Building	115,000.00
Indirect Labor Wages	140,000.00
Production Supervisors Salary	47,000.00
Service Department Cost	100,000.00
Indirect Labor: Fringe Benefits	31,000.00
Benefits for a production supervisor	10,000.00
total overtime premiums paid	55,000.00
Cost of idle time: production employees	40,000.00
Total manufacturing Overhead cost	538,000.00

c.

Calculation of product costs
Total Prime Cost	2,692,000.00
Total manufacturing Overhead cost	538,000.00
Total Product Cost	3,230,000.00

d.

Calculation of Period Cost
Advertising expense	98,000.00
Administrative costs	150,000.00
office space for sales personnel	15,000.00
sales commissions	5,000.00
product promotion costs	10,000.00
Total Period costs	278,000.00

e.

1. Managerial Accounting focuses on the particular item For example Profit/loss by a Product, region, Department and Customer. However financial Accounting focuses on the results of complete business. So Financial Accounting is broader in scope than managerial Accounting.
2. Managerial Accounting is only for insiders which are used for the decision making however Financial Accounting is both are insiders and outsiders.
3. Managerial Accounting is used for insiders so they dont complusion of the usage of accounting standard however for financial accounting usage of accounting standards is a must
4. Managerial Accounting are based on estimates, Trends however Financial accounting are actual.. it shows that managerial accounting is future oriented also
5. Managerial Accounting reports have no time period so its more frequent however financial accounting reports are done as per the end of an accounting period