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Assignment on Management Accounting Costing and Budgeting

   

Added on  2020-06-04

25 Pages4645 Words39 Views
MANAGEMENTACCOUNTING COSTINGAND BUDGETING
Assignment on Management Accounting Costing and Budgeting_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Different types of costs.........................................................................................................11.2 Various costing methods.......................................................................................................21.3 Cost calculation using appropriate techniques......................................................................21.4 Analysis of cost data using appropriate techniques..............................................................4TASK 2............................................................................................................................................42.1 Preparation and analysis of routine cost reports...................................................................42.2 Performance indicators to identify potential improvements.................................................52.3 Suggestion for ABC Ltd to reduce cost and enhance value as well quality of products......6TASK 3............................................................................................................................................63.1 Purpose and nature of budgeting process..............................................................................63.2 Budgeting methods for ABC Ltd and its requirements.........................................................73.3 Preparation of budget accounting to budgeting method.......................................................73.4 Cash budget for ABC Ltd.....................................................................................................9TASK 4..........................................................................................................................................114.1 Calculation of variances and causes behind variances as well recommendation for accurateaction.........................................................................................................................................114.2 Operating statement reconciling budgeted and actual results.............................................174.3 Finding and identification of responsibility centres............................................................18CONCLUSION..............................................................................................................................19REFERENCE.................................................................................................................................20
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INDEX OF TABLESTable 1: Classification of costs........................................................................................................1Table 2: Different costing methods..................................................................................................2Table 3: Cost calculation through FIFO, LIFO and AVCO method...............................................3Table 4: Variance analysis for incurred cost on business operations..............................................5Table 5: Sales budget for ABC Ltd..................................................................................................8Table 6: Production budget for ABC Ltd........................................................................................8
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ILLUSTRATION INDEXIllustration 1: Material usage budget for ABC Ltd..........................................................................8Illustration 2: Material purchase budget for ABC Ltd.....................................................................8Illustration 3: Cash budget for ABC Ltd........................................................................................10Illustration 4: Sales variance analysis............................................................................................12Illustration 5: Material variance analysis.......................................................................................13Illustration 6: Material usage variance analysis for ABC Ltd.......................................................13Illustration 7: Summary of material variance analysis..................................................................14Illustration 8: Direct labour variance analysis...............................................................................14Illustration 9: Direct labour efficiency variance analysis for ABC Ltd.........................................15Illustration 10: Time variance analysis..........................................................................................15Illustration 11: Summary of direct variance analysis....................................................................15Illustration 12: Overhead variance analysis...................................................................................16Illustration 13: Variable overhead efficiency variance..................................................................17Illustration 14: Summary of overhead variance analysis...............................................................17Illustration 15: statement reconciling budgeted and actual results................................................19Illustration 16: Actual gross profit for ABC Ltd...........................................................................19
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INTRODUCTION Management accounting is a multidisciplinary approach that is helpful for analysingorganisation's actual performance as well as decision-making process for further operations.Under this accounting , several tools and systems are involved like; costing, budgeting, varianceanalysis, investment appraisal and so on remains helpful for improving its efficiency. Thepresent report is based on understanding various decision-making tools for ABC Limited foradequate price determination and preparing strategies to improve its performance. In this regard,different costing methods including classifications and techniques for setting adequate price is tobe described. However, different ideas for cost effectiveness and enhancing quality value ofproduct services can be expressed. Including this, objectives and characteristics of budgetaryprocess is to be determined through this assignment for preparing planning procedure to befollowed on. Along with this, several budgets including cash, purchase, sales, inventory are to bepresented for decision making regarding business operations of ABC Ltd. Apart from this,variance analysis as difference between expected and actual result involving causes behind themas well solutions to overcome can be introduced for better quality services of organisation. Thus,learners are able to understand different tools and aspects of management accounting forperformance evaluation of entity and decision-making process through this report.TASK 11.1 Different types of costsCost of product services refers as value of money used for production and distribution ofgoods and services provided by entity. However, determination of actual cost of product isbased on expenses incurred in manufacturing and processing system including material andlabour cost and additional overhead (Bhimani and et.al., 2013). There are three kinds of costsdetermined such as; fixed, variable and semi-variable. In the given case scenario, eachdeterminate covers different classification of cost can be expressed as follows: -Table 1: Classification of costsFixedVariable Semi-variablePurchase of vanDirect materialTelephone billDepreciationDirect labourRent and rates Purchase of computerDirect expenses
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InsuranceMaintenanceOther overhead costsFixed cost: - For this cost classification, expenses incurred on business operation remainsunchanged as they cannot be change with production and distribution of products like;purchasing van, computer. In this regard, price for operating business activities will besame.Variable cost: - Fluctuation in costs for production and distribution of product servicesfor ABC Ltd comes under variable cost classification. For instance; cost incurred onpurchasing direct materials, overhead, labour cost etc (Christ and et.al., 2016). However,for different manufacturing and production, these prices remain dynamics.Semi-variable cost: - Under this cost classification, price is determined between fixedand variable cost. As telephone bill and rent of office can be fixed as well variable tooperate business activities. 1.2 Various costing methodsThere are several methods for costing and determining price of product for production ofgoods like; job costing, batch or process and contract as well service costing (Cinquini andTenucci, 2010). According to given costs for business operations, costing classifications can bedetermined as: -Table 2: Different costing methodsJob costingBatch costingProcess costingContract costingOther overheadcostsRent and rates Direct materialPurchase of vanMaintenanceTelephone Direct labourPurchase of computersDepreciationDirect expensesInsuranceUnder job costing method, manufacturing of products and maintenance involved whilefor batch or process costing, expenses incurred on production of goods are evolved for furtherbusiness operations. However, in contract costing, high level of investment as purchasing heavyequipment covers as well service costing involves for determining price on providing services.
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