Management Accounting Wildwood Creation Ltd

Question: Discuss about the Management Accounting for Wildwood Creation Ltd. Answer: Introduction: The Wildwood creation Ltd Company is a major service provider of the repairing and restoring of the outdoor wooden furniture such as coffee tables, chairs and tables. The service provided is the repairing of the chairs and making varieties of furniture. The costing system of the company is suspected to be inappropriate and there has been witnessed the difference between the estimated budget profit and the actual profit earned by the company. The changes have been witnessed in terms of the wages and the salary paid to the staffs of the company. The company has been experiencing the high budgeted cost and the revised budget shows that the profit earned by the company has increased due to their services. This thing has prompted the business to perform the substantive analysis of their budgeted costing system and the alternative method needs to be proposed to reallocate the costing system (Banks Giliberti 2003). Identification of the problem: The company has been witnessing the increase in the actual cost and the budgeted cost is less than the actual cost which is impacting the operating profits of the Company. The expenses incurred in terms of the salaries and the wages paid by the company has been more than the estimated or the budgeted figures. The actual fixed cost which is incurred by the company is more than the budgeted fixe cost and this has impacted the actual operating profit earned by the company. There is problem lying in the companys costing system. This depicts that the management of the company has been inefficient in optimally utilizing the available resources and they have not been efficient enough to perform their task in an efficient manner as the actual cost incurred by the company is high than the budgeted cost (Hammonds 2006). Investigation of the problem: The first and the foremost issue is that the companys costing system suffers from flaws. This is so because the actual cost incurred and the budgeted cost of the company is different. The difference is mainly attributed to the wages and salaries that the company keeps on changing and it is always than the estimated wages and salaries. The other factors attributable to this are the companys expenses have increased regarding the advertisement and the rent paid for the office area. The major and minor repair expenses have also increased (Wiseman 2010). This depicts that there is a problem of the inappropriate allocation of the resources. Therefore, the second issue is the inappropriate allocation of the resources. Another issue is the actual profits earned by the company are different from the budgeted or estimated profits. The actual cost incurred by the company for the present year is $ $902016 and the figure is less than the budgeted cost of $847409. Analysis: The difference between the actual cost incurred by the company and the budgeted cost has been analyzed and such difference has impact on the profits of the company. Therefore, the analysis of the profits of the company has also been done. The actual profits of the company for the current year are compared with the budgeted figures of the previous year. The actual operating profits earned by the company ash reduced due to increase in the budgeted fixed costs. However, the factors attributing to this increased cost and hence the decreased operating profits of the company are the difference in the actual and the budgeted amount of bonus salary provided to the staffs. This actual expense has increased. The actual salaries paid for the major repairs has also increased in the current years which is much high then the estimated figures for the previous years. The actual expenses for the miscellaneous have reduced and the depreciation costs have remained the same. The actual operating profits of the company have also reduced due to the expenses incurred by the company. The salaries paid to the staffs for the minor repair has also increased which has contributed to the increment in the actual cost incurred. The wages paid for the rush job has also increased that is the actual cost incurred regarding this is more than the $ 278. The actual figure is more than $278. The actual transport cost incurred is more than the budgeted figures and the amount is more than $ 44289. The bonus paid to the staffs has also increased to $50160 as compared to $ 47390. The actual advertising expenses and the rent paid for office has also increased. This has push up the actual cost of the company. The actual budgeted cost of the company has increased to $902016 as compared to the $847409 which is the budgeted cost. The actual salaries paid for the restoration of the job has also increased to $ 795600 as compared to the budgeted figure $388800. Conclusion: Due to the increase in the actual cost incurred by the company, the actual profits of the Wildwood creations limited are less than the budgeted profits. This disparity shows that the management is not efficient in optimally utilizing the available resources. The profits of the company have been indirectly reducing due to the higher wages and the salaries paid to the staffs. The allocation of the cost would be accurately done and the long run costs which are indirect should be weighed against the costs that are incurred in extra terms of the costing systems. It can also be concluded that the overall cost behaviour of the company is not aligned with the desired benchmark or the management views regarding the allocation of the budget. The company needs to review the costing system on a periodical basis. The costing system need to estimate accurately the long run costs to be incurred. The amount of costs needs to be allocated and dissected into small pools. Therefore, the actual costs incurred should be less than the budgeted cost so as to increase the actual profits earned. References Banks, A. Giliberti, J. (2003)Budgeting. Macquarie Park, N.S.W.: McGraw-Hill. Donovan, S. (2006)Budgeting. Minneapolis: Lerner Publications Co. Hammonds, H. (2006)Budgeting. North Mankato, MN: Smart Apple. Klasky, C. (2000)Budgeting. 2nd edition. Belmont, Calif.: Fearon Education. Wiseman, B. (2010)Budgeting. New York, NY: Weigl Publishers. Moose, C. (2004)Budgeting. 2nd edition. Vero Beach, FL: Rourke Publications.