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Management Accounting Assignment: UCK Furniture Management And Reporting Strategies

Assignment Brief and Guidance Task

1: Apply a range of management accounting techniques You must answer the following:

1.1 Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption costs. UCK Furniture produce one product – desks. Each desk is budgeted to require 4 kg of wood at £3 per kg, 4 hours of labour at £2 per hour, and variable production overheads of £5 per unit. Fixed production overheads are budgeted at £20,000 per month and average production is estimated to be 10,000 units per month. The selling price is fixed at £35 per unit. There is also a variable selling cost of £1 per unit and fixed selling cost of £2,000 per month. During the first two months X plc expects the following levels of activity: January February Production 11,000 units 9,500 units Sales 9,000 units 11,500 units (a) Prepare a cost card using absorption costing and marginal costing

1.2 Accurately apply a range of management accounting techniques and produce a financial reporting document.

1.3 Produce financial reports that accurately apply and interpret data for a range of business activities. Make the interpretation of the both costing methods and explain the potential merits and demerits of the both methods.

Task 2: Explain the use of planning tools used in management accounting. You must answer the following The UCK Furniture has noticed considerable fluctuation in its amount of time spent and expenses incurred, as shown below: Month Hours spent Expenses (£) January 630 7960 February 505 7410 March 705 8285 April 555 7535 May 780 9110 June 795 9820

You must answer the following:

2.2 Using the high-low method estimate the expenses if the number of hours required for July and August is 650 and 750 respectively.

2.3 Explain the purpose of budget and prepare a cash budget with the given information for coming months. I. The cash balance at the beginning of September is £ 9,000 ii. Actual sales for July and August and expected sales for September are as follows: July August September Cash sales £ 19,000 £ 29,000 £ 39,000 Sales on account £ 5,600 £ 5,520 £ 8,400 iii. Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 80% collected in the following sale, and 7% collected in the second month following sale. The remaining 3% is uncollectible. iv. Purchases of inventory will total £ 24,000 for September. 20% of month’s inventory purchases are paid for during the month of purchase. The accounts payable remaining from Augusts’ inventory purchases total £ 15,000, all of which will be paid in September. v. Selling and administrative expenses are budgeted at £ 13,000 for September. Of this amount £ 4,000 is for depreciation. vii. The company maintains a minimum cash balance of £ 5,000. An open line of credit is available from the company’s bank to bolster the cash position as needed.


(1) Prepare a schedule of expected cash collections for September

(2) Prepare a schedule of expected cash disbursements for merchandise inventory purchases in September.

(3) Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September.

Task 3: Compare ways in which organisations could use management accounting to respond to financial problems.

3.1 Compare how organisations are adapting management accounting systems to respond to financial problems The UCK Furniture is trading its two divisions the Table Division and Drawer Division. UCK Woodworks manufactures components and parts used in desks. UCK Woodworks sells the components to UCK Furniture and the rest of the world. Both companies are part of a group named as UCK group of companies The financial results for the two companies for the year ended 31 May 2015 are as follows Compare the Performance of UCK Woodworks and each division of UCK Furniture, calculating and using the following three performance measures: (i) Return on capital employed (ROCE) (ii) Asset turnover (iii) Operating profit margin UCK Furniture. UCK Woodworks Design Division Gear Box Division £ £ £ External Sales 13000 24,900 8150 Sales to Gearbox 7430 Sales to Gearbox 15580 Cost of Sales 4,150 16,000 5,065 Administration cost 2,960 4,100 2,930 Distribution costs - 1200 630 Operating Profit 5,890 3,600 6995 Capital Employed 23,100 31,930 81230 3.2 Analyse how management accounting can help improve the financial performance of both companies to achieve the sustainable success. 3.3 Evaluate the planning tools used in management accounting to reduce the financial problems to achieve the success. (Guide lines learner should evaluated the use of the following techniques. E.g. budgeting, budgetary control, Project Appraisal or Evaluation, Standard costing and Analysis of Cost Variances, Ratio analysis)

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