- 20 Marks
Question
a) The data below relates to Azumah Enterprise for the month of August. The data relates to activities for his four areas of distribution in Accra.
| Distribution Area | Selling Price Per Unit (GHc) | Standard Variable Cost Price Per Unit (GHc) |
|---|---|---|
| Awoshie (A) | 120 | 80 |
| Banana-Inn (B) | 100 | 60 |
| Cantonments (C) | 80 | 45 |
| Dansoman (D) | 45 | 25 |
| Sales Units | Budgeted | Actuals |
|---|---|---|
| Awoshie (A) | 65,000 | 48,000 |
| Banana-Inn (B) | 45,000 | 55,000 |
| Cantonments (C) | 35,000 | 28,000 |
| Dansoman (D) | 25,000 | 28,000 |
Required:
Estimate the sales volume variance for each distribution area and in total for the month using a contribution income statement.
b) There are many models of evaluation available to a Management Accountant. Benchmarking is one of such models.
Required:
Under what circumstances would benchmarking be an effective model of evaluating performance?
c) IFAC describes Environmental Management Accounting as “The management of environmental and economic performance via management accounting systems and practices that focus on both physical information on the flow of energy, water, materials, and wastes, as well as monetary information on related costs, earnings and savings.” The above quotation shows the increasing relevance of Environmental Management Accounting.
Required:
Discuss with examples FOUR categories of environmental costs.
Answer
a) Contribution Income Statement – Standard
| A | B | C | D | Total | |
|---|---|---|---|---|---|
| Selling Price | 120 | 100 | 80 | 45 | 345 |
| Variable Cost | 80 | 60 | 45 | 25 | 210 |
| Contribution (a) | 40 | 40 | 35 | 20 | 135 |
| Actual sales | 48,000 | 55,000 | 28,000 | 28,000 | 159,000 |
| Budgeted sales | 65,000 | 45,000 | 35,000 | 25,000 | 170,000 |
| Volume variance (b) | 17,000 A | 10,000 F | 7,000 A | 3,000 F | 11,000 A |
| Sales VV @ Contribution (a x b) | 680,000 A | 400,000 F | 245,000 A | 60,000 F | 1,485,000 |
b) Circumstances for effective benchmarking
- It is important to select key aspects of performance for benchmarking. These are the aspects of performance that have to be successful and improved in order to gain a competitive advantage over rivals.
- It must be a continuous process, not a once only exercise. Competitors do not stand still, and successful competitors will continually innovate and improve. It is essential to keep repeating benchmarking exercises in order to avoid falling behind again as the business environment changes.
- Benchmarking should be a method of becoming better than competitors, not just for closing the gap on competitors and catching up. The aim should be to achieve superior performance.
- When benchmark partners are used for process benchmarking, the collaboration should be open and honest. A company should be prepared to give more information to its benchmark partner than it is hoping to obtain from the benchmark partner.
(4 points @ 1.25 marks each = 5 marks)
c) Categories of environmental costs
- Conventional costs: raw material and energy costs having environmental relevance
- Potentially hidden costs: costs captured by accounting systems but then losing their identity in ‘general overheads’
- Contingent costs: costs to be incurred at a future date – for example, clean-up costs
- Image and relationship costs: costs that, by their nature, are intangible, for example, the costs of preparing environmental reports.
(4 points well-explained @ 2.5 marks each = 10 marks)
- Topic: Environmental Management Accounting
- Series: MAR 2025
- Uploader: Samuel Duah
