Question 1: Differences between management accounting and financial accounting (15 Marks)

You are the financial controller of a large manufacturing organization and intend to approach the human resources (HR) manager seeking to create two new positions: a financial accountant and a management accountant.


1 Prepare a briefing document for the HR manager which explains the differences between these two roles.

2 Formulate (and answer) the five likely questions that you anticipate the HR manager will ask you about these two positions when you meet.

Question 2: Product cost classification: manufacturer (15 Marks)

The following cost data for the current year relate to Heartstrings Pty Ltd, a greetings card manufacturer:


Service department costsl                  $ 50 000

Direct labour: wages                                               242 500

Direct labour: on-costs                           47 500

Indirect labour: on-costs                           15 000

On-costs for production supervisor                     4 500

Administrative costs                                                           75 000

Rental of office space for sales personnel2             7 500

Sales commissions                                                   2 500

Product promotion costs                            5 000

Direct material                                                               1 050 000

Advertising expense                                                   49 500

Depreciation on factory building                       57 500
Cost of finished goods inventory at year end 57 500

Indirect labour: wages                          70 000

Production supervisor’s salary                  22 500

Total overtime premiums paid                     27 500

Cost of idle time: production employees3             20 000

Calculate each of the following costs for the year:

1         Total prime costs.

2         Total manufacturing overhead costs.

3        Total conversion costs.

4         Total product costs (for external reporting


5        Total period costs.

Question 3: Cost behavior; engineered cost;  committed and discretionary costs: manufacturer (10 Marks)

HappyDaze T-shirts manufactures and prints customised designs on T-shirts. Below is a list of some of their major costs.


  • Cost of daily radio advertising on the local community radio station.
  • Cost of the fabric used to make the T-shirts.
  • Cost of the ink used in the designs.
  • Salary of the managing director.
  • Wages of the production employees who sew and print the T-shirts.
  • Cost of movie tickets provided for the Employee of the Month award each month.
  • Depreciation of the sewing machines, calculated on a units of production basis.
  • Cost of electricity used in the factory building.
  • Rent of the building.
  • Wages of the staff who package the T-shirts.
  • Cost of sewing machine maintenance.
  • Cost of the new advertising sign at the front of the
  • Cost of the company car used by the managing


For each cost:

1      Indicate whether it is fixed or variable.

2      If the cost is variable, indicate whether it is an engineered cost. Explain why.

3      If the cost is fixed, indicate whether it is committed or discretionary. Explain why.


Check this also Costing – You have just been appointed as the management accountant for Close Up and Personal (CUP) and HappyDaze

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