5964 management accounting

Unit 9 Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Classifying the different types of cost...................................................................................3
1.2 Calculating the unit cost and total job cost for job 444 by using job costing method..........4
1.3 calculating the cost of Exquisite by using appropriate techniques.......................................5
b. reapportion of the cost of service and support department into the production department...6
1.4 Analyzing the overhead absorption rate by using direct labor hours....................................7
Task 2...............................................................................................................................................7
AC 2.1 Preparation of cost report for Jeffrey & Sons.................................................................7
AC 2.2 performance indicators that identify the areas of potential improvements.....................9
AC 2.3 Enhance business value, reduce cost and improve quality.............................................9
TASK 3..........................................................................................................................................10
3.1 Stating the purpose and nature of the budgeting process to the marketing manager of
Jeffery & Son's..........................................................................................................................10
3.2 Appropriate budgeting method for the organization and its need.......................................10
3.3 Preparation of the production and material purchase budget for Jeffery & Son's..............11
3.4 Preparation of the cash budget............................................................................................12
TASK 4..........................................................................................................................................13
AC 4.1 Variance analysis..........................................................................................................13
AC 4.2 operating statement that reconcile both the budgeted and actual figures.....................13
AC 4.3 Responsibility centers...................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting consists the technique through which manager of the
organization is able to make of the accounting information more effectively. It helps organization
in making management reports which provides deeper insight to them about the financial and
statistical information (Brender and Drazen, 2005). Besides this, management accounting also
helps organization in making control upon the cost and there by maximize their profitability
aspect. The present report is based upon the Jeffery and Son's which the manufacturing company
is. It offers many popular and branded products to their customers named as Exquisite. This
project report depicts the different types of cost which organization has to incur in order to
produce the product. Besides this, it will also develop understanding about the purpose and
nature of the budgeting process to the budget holder of the company. In addition to this, it also
depicts the ways through which organization can monitor their financial performance.
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TASK 1
1.1 Classifying the different types of cost
Cost may be defined as expenses which Jeffery & Son's has to incur in order to produce
the product and services (Khan and jain, 2006). Classification of the different types of cost is
enumerated below:
On the basis of nature
 Material cost: It consists of the cost of the raw material which Jeffrey & Son's purchase
in order to produce the finished product.
 Labor cost: Labor cost refers to amount which organization pay to workers by taking into
consideration to the working hours. It also includes the rate per hour while company
make computation of the labor cost such as wages paid to labors.
 Overhead cost: It consists of the expenses which organization incurred in the selling and
distribution of the products or services (Attwell and Laughlin, 2001). In addition to this,
it also includes the expenses which company incurred to make administration of the
business functions.
On the basis of the degree of the tractability of the product
 Direct expenses: It is also known as prime which is directly attributable to the production
of the product. It includes cost of material, labor and other production related expenses.
 Indirect expenses: Indirect cost refers to the expenses which are not directly accountable
to a particular cost object. It may be either fixed or variable which is highly dependent
upon the nature of the expenses incurred by Jeffery & Son's.
On the basis of the changes in activity or volume
 Fixed cost: It may be defined as those which remains fixed irrespective of the changes
which take place in the level of output or production. In this, cost per unit is decreases
when production increase and vice versa. Fixed cost includes the cost of rent, salary of
the workers, insurance etc.
 Variable cost: It is highly associated with the unit produced by an organization. Variable
cost consists of the cost which varies as changes take place in the level of output
produced. For instance, material cost and labor cost get increases with increasing the
business production.
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