Sample of management accounting exercise with solutions

Management accounting is an important part of the business, especially the management and development of the business, with the main role being to help the business get the right view and build the right direction in the future. future. Therefore, this is also one of the issues that many economic researchers, accountants or students are interested in. If you are also interested in this field, let's Johnson's Blog learn about Management accounting exercises with solutions through the article below.

Some commonly used management accounting formulas

As mentioned, the information that management accounting provides is presented in numerical form. After receiving the preliminary data set, the administrator needs to process them to produce the final estimate. To do this, we cannot lack formulas and each item will have different formulas. Here are a few how to calculate management accounting data popular.

Ensure balance charges

Contribution margin is the difference between revenue and variable expenses calculated in two ways:

• Contribution margin for all products = Revenue – Variable costs for all products
• Contribution margin of 1 product = Selling price of 1 product – Variable cost of 1 product

Contribution margin ratio

Contribution margin ratio and the ratio between the above balance when compared to the revenue of another instrument.

• Contribution margin ratio = (Total contribution margin / Total revenue) x 100%

In the case of calculating each product type separately, you can use the formula:

• Contribution margin ratio = [(Selling price – Variable costs) / Selling price] x 100%

Economic leverage

Economic leverage is a metric used to reflect the degree of structural influence business costs to pre-tax profit. 

• Operating leverage = (Profit growth rate / Revenue growth rate) > 1
• Leverage size = Contribution margin / Profit (before tax)

Break-even point

The breakeven point is the time to recover fixed costs:

• Break-even sales volume = Fixed cost / Contribution margin 1 unit
• Break-even revenue = Fixed costs / Contribution margin ratio

Output and revenue for sale

• Quantity to be sold = (Fixed cost + Desired profit) / Contribution margin of 1 unit
• Sales to be sold = (Fixed costs + Expected profit) / Contribution margin ratio

Safe balance

The margin of safety is meant to represent the difference between revenue and break-even:

• Safety margin = Realized revenue (expected revenue) – Breakeven revenue
• Safety margin ratio = (Safety balance / Realization turnover) x 100%

Consumption

• Sales volume = (Total contribution margin / Contribution balance of 1 product) x 100%

These are just the most basic management accounting formulas to show the relationship between 3 items of cost, volume and profit. There are also many more complex formulas that represent fluctuations in production costs or determine the selling price of a product. Today, in the context of digital economy integration, many accounting tools and applications have been born to help reduce the processing burden for accountants and at the same time ensure higher accuracy for data. .

>>>See more: Heads management accounting books in English should not be missed

Management accounting exercise data with solutions

Management accounting exercises presented as follows: Enterprise K currently has the following data (unit: 1,000 VND, applicable to the whole article):

• Monthly sales volume: 1,000 products
• Unit selling price: 500
• Variable charge unit: 300
• Monthly fixed fee: 100,000 VND

Request

Question 1: Prepare business results report (Business result report)

Question 2: Meaning of operating leverage

Question 3: Calculate the margin of safety

Question 4: If the manager intends to increase advertising costs by 12,000/month, the volume of products sold may increase by 10%. Should it be done?

Question 5: The manager intends to use better materials to produce higher quality products, the sales volume will increase by 20%. Better raw materials have higher prices causing the direct material cost to increase by 20/sp. Should it be done?

Question 6: The manager plans to reduce the selling price by 30/product, increase the advertising cost by 10,000/month, the sales volume can increase by 30%. Should it be done?

Question 7: The manager plans to change the way of paying the fixed sales staff salary of 15,000/month to the payment method of 5,000/month and 10/product sold, the sales volume can increase by 5%/month. Should it be done this way?

Question 8: Suppose in the month that a product is sold and has a loss of 20,000. There is a customer who wants to buy 200 products, the manager wants to make a total profit of 10,000 after selling 200 products. So how much should 200sp sell for?

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Instructions for solving management accounting exercises

With the given data, proceed to answer the following questions:

Question 1: Prepare business report

Statement of business results – management accounting exercise sample

In the “Total” column:

• Gross revenue = Sales volume * Unit selling price = 1,000 * 500 = 500,000 VND
• Total variable cost = Sales volume * Unit variable cost = 1,000 * 300 = 300,000
• Total contribution balance = Total revenue – Total variable costs = 500,000 – 300,000 = 200,000 VND

• Total fixed cost = 100,000
• Profit = Total contribution margin – Total fixed costs = 200,000 – 100,000 = 100,000 VND

In the column “Calculate for 1 sp”

• Unit selling price = 500
• Variable cost unit = 300
• Unit Contribution Balance = Unit Selling Price – Unit Variable Cost = 500 – 300 = 200

In the "Rate" column

• Revenue/Revenue Ratio = 100%
• Variable fee/revenue ratio = 300,000/500,000 = 60%
• Contribution margin ratio = 100% – 60% = 40%

>>> See more: What is management accounting?? Objectives of management accounting in business

Question 2: Meaning of operating leverage

• Leverage = (Total Contribution)/(Profit) = 200,000/(100,000) = 2

So if sales increase, profits increase.

Question 3: Calculate the margin of safety

• Breakeven output = (Fixed cost)/(Contributing balance per unit) = 100,000/(200) = 500
• Break Even Revenue = (Fixed Costs)/(Contributing Margin Ratio) = 100,000/(40%) = 250,000
• Safe balance criteria:
• Safety margin = Revenue achieved – Breakeven revenue = 500,000 – 250,000 = 250,000
• Safety margin ratio = (Safety balance)/(Realization turnover) *100% = (250,000)/(500,000) *100% = 50%

Question 4: If the manager intends to increase advertising costs by 12,000/month, the volume of products sold may increase by 10%. Should it be done?

(Fixed costs and volume of products consumed change)

We have:

Contribution balance per unit = 200

Increased output 10% = 1,000 * 10% = 100 (sp)

So: Total additional contribution margin = 200 * 100 = 20,000

Fixed fee increased by 12,000 VND

↪ Increased profit = Increased total contribution margin – Increased fixed costs

= 20,000 – 12,000 = 8,000

Thus, the above plan increases profits, should be implemented.

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Question 5: The manager intends to use better materials to produce higher quality products, the sales volume will increase by 20%. Better raw materials have higher prices causing the direct material cost to increase by 20/sp. Should it be done?

(Variable cost and output change)

We have:

Unit variable cost increased by 20 → Unit contribution margin decreased by 20

Estimated unit contribution margin = 200 – 20 = 180

(Unit Contribution Balance = Unit Selling Price – Unit Variable Cost)

Estimated sales volume = 100% + 20% = 120%

So:

Total Estimated Contribution Balance=Estimated Volume*Estimated Unit Contribution Balance 

= 1.000 * 120% * 180 = 216.000

Total current contribution balance = 200,000

↪ Total additional contribution balance = 216,000 – 200,000 = 16,000

Combined with fixed fixed cost unchanged.

In conclusion, the profit increased by 16,000, so the above plan should be implemented.

Question 6: The manager plans to reduce the selling price by 30/product, increase the advertising cost by 10,000/month, the sales volume can increase by 30%. Should it be done?

(Decrease the selling price, increase the volume of products consumed)

We have:

Unit selling price reduced by 30 → Contribution margin of unit reduced by 30

↪ Estimated unit contribution balance = 200 – 30 = 170

(Unit Contribution Balance = Unit Selling Price – Unit Variable Cost)

Estimated sales volume = 100% + 30% = 130%

So:

Total Estimated Contribution Balance=Estimated Volume*Estimated Unit Contribution Balance

= 1.000 * 130% * 170 = 221.000

Total current contribution balance = 200,000

↪ Total additional contribution balance = 221,000 – 200,000 = 21,000

Combined with a fixed fee increase of 10,000

In conclusion, the profit increased by 21,000 – 10,000 = 11,000, so the above plan should be implemented.

>>> See more: Cost management accounting what? Objectives and methods of cost management accounting

Question 7: The manager plans to change the way of paying the fixed sales staff salary of 15,000/month to the payment method of 5,000/month and 10/product sold, the sales volume can increase by 5%/month. Should it be done this way?

We have:

Unit variable cost increased by 10 → Unit contribution margin decreased by 10

Estimated unit contribution margin = 200 – 20 = 190

(Unit Contribution Balance = Unit Selling Price – Unit Variable Cost)

Expected sales volume = 100% + 5% = 105%

So:

Total Estimated Contribution Balance=Estimated Volume*Estimated Unit Contribution Balance

= 1.000 * 105% * 190 = 199.500

Total current contribution balance = 200,000

↪ Total reduced contribution balance = 200,000 – 199,500 = 500

Combined with fixed fee reduction of 10,000

In conclusion, the profit increased by 9,500 , so the above plan should be implemented.

>>> See more: Accounting and financial management what? How does it apply to businesses?

Question 8: Suppose in the month that a product is sold and has a loss of 20,000. There is a customer who wants to buy 200 products, the manager wants to make a total profit of 10,000 after selling 200 products. So how much should 200sp sell for?

Currently, the seller has sold some products and is losing 20,000. So, if you want the total profit after selling the next 200 products to be 10,000, then the 200 products sold need to have a profit of 30,000 for the 200sp.

↪ Profit should be over 1 product = 30,000/200 = 150

The unit variable cost is 300.

Fixed costs are already included in the products sold in advance, so there is no need to compensate for 200 products later.

Thus, the selling price of a product must be: 300 + 150 = 450

Epilogue

Above is a Management accounting exercise sample which you can refer from Johnson's Blog. Hope the information above will help you, especially students who are interested in this field.

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