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COST AND REVENUES INTRODUCTION 1

   

Added on  2020-11-12

17 Pages4150 Words352 Views
COST AND REVENUES

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Purpose of internal reporting.................................................................................................11.2 Relationship between various costing system within organisation.......................................11.3 Identify the responsibility centres, cost centres, profit centres and investment centres........2Cost centres:................................................................................................................................2Profit centres:..............................................................................................................................21.4 Characteristics of different types of cost classification and its uses in costing.....................21.5 Explain the difference between marginal and absorption costing. ......................................3TASK 2............................................................................................................................................32.1 Record cost information for material, labour and expenses in accordance with organisationcosting procedures.......................................................................................................................32.2 Analyse cost information for material, labour and expenses in accordance withorganisation's costing procedures................................................................................................32.3 Define various stages of inventory........................................................................................32.4 Value of inventory.................................................................................................................42.5 Behaviour of costs.................................................................................................................62.6 Record cost information using cost system...........................................................................6TASK 3............................................................................................................................................73.1 Attribute overhead costs to production and services cost centre..........................................73.2 Calculate overhead absorption rates......................................................................................73.3 Adjustments for under or over recovered overhead costs.....................................................8Adjustments:...............................................................................................................................83.4 Methods of allocation, apportionment and absorption at regular intervals, implementingagreed changes to methods..........................................................................................................83.5 Communicate with relevant staff to resolve any queries in overhead cost data...................9TASK 4..........................................................................................................................................104.1 Compare budget costs with actual costs, noting any variances..........................................104.2 Analyse variances for management reports........................................................................10

4.3 Information for budget holders of any significant variances, making valid suggestion.....104.4 Prepare management reports in an appropriate format, presenting these within the requiredtimescales..................................................................................................................................10TASK 5..........................................................................................................................................115.1 Preparation estimates of future income and costs for decision making using:...................115.2 The effect of changing activity levels on unit costs............................................................115.3 Calculate the effect of changing activity levels on unit costs.............................................115.4 Identify factors affecting short-term and long-term decision making................................12REFERENCES..............................................................................................................................13

INTRODUCTIONIn every organisation cost and revenue is the essential financial components to produce,retail, research and manufacture something. Cost in monetary values which has to be paid inorder to buy something.(Clotfelter, 2014).Revenue is the income that company earn from sellingof product and services. Organisation chosen for this report is ABC Ltd. which is located inLondon, UK. The aim of report is to identify nature and role of costing system in organisation.Cost information for material, labour and expenses records and analysis are mentioned in thisreport. Various stages of inventory and value inventory are explained by using FIFO AND LIFO.Absorption cost are mentioned according to ABC Ltd. Analysis deviation from budget and reportalong with this for decision making assist to costing systems are mentioned in this report.TASK 11.1 Purpose of internal reporting.Internal reporting is an important financial components and collection of other data whichis accumulated by employees and distributed within company to improve the performance. Ithelps organisation to understand performance of business at operational level. The purpose ofthis report is to provide the clear information about financial position of business. ABC Ltd. usedthis report to know that performance of enterprises which helps them to take strategic decisions.Also, it provides accurate information about the using of cash, financial, internal audit, budgetreports, variance analysis. It provides accurate information to management as this reports areprepared after preparing cash report, budget books, internal audit reports and variance reports.1.2 Relationship between various costing system within organisation.Costing system is the framework used to estimation of product cost for valuation ofinventory, cost control and profit analysis (Jeziorski, 2014). Some of various costing system usedin the ABC Ltd. are mentioned below:Standard costing system:In this systemstandard cost are determined and variance analysis and measurement aredone to control the cost. In ABC Ltd. this system is used as it provides them base for stockvaluation and work in progress.Marginal costing:1

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