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Assignment on Cost and Management accounting

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Added on  2020-01-28

Assignment on Cost and Management accounting

   Added on 2020-01-28

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MANAGEMENTACCOUNTING
Assignment on Cost and Management accounting_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................4TASK 1............................................................................................................................................41.1 Different types of cost classification......................................................................................41.2 Calculating of job cost for 200 units using job costing method............................................51.3 Determination of Exquisite cost using Absorption Costing Technique.................................61.4 Analyzing cost data using appropriate techniques.................................................................8TASK 2............................................................................................................................................92.1 Preparation and analysis of routine cost reports....................................................................92.2 Application of performance indicators in order to identify potential improvements inbusiness......................................................................................................................................112.3 Recommendation for cost reduction and value enhancement for business.........................12TASK 3..........................................................................................................................................133.1 Explaining of purpose and nature of the budgeting process................................................133.2 Selection of appropriate budgeting methods in accordance with the needs of organization....................................................................................................................................................133.3 Preparation of production and material purchase budget....................................................143.4 Preparation of cash budget...................................................................................................15TASK 4..........................................................................................................................................164.1 Computation of variances along with the identification of possible causes andrecommendation for corrective actions......................................................................................164.2 Preparation of reconciliation operating statement...............................................................174.3 Management report in accordance with the identified responsibility centers......................17CONCLUSION..............................................................................................................................18REFERENCES..............................................................................................................................19
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INDEX OF TABLESTable 1: Calculating of job cost for 200 units..................................................................................6Table 2: Allocation and apportion of overheads..............................................................................7Table 3: Reapportion of service departments..................................................................................7Table 4: Calculation of overhead absorption rates..........................................................................8Table 5: Routine cost report of September......................................................................................9Table 6: Computation of standard budget at 1900 units..................................................................9Table 7: Production budget of Jeffrey and Son's .........................................................................14Table 8: Material purchase budget of Jeffrey and Son's ...............................................................14Table 9: Cash budget of Jeffrey and Son's ....................................................................................15Table 10: Computation of amount receivable from debtors..........................................................15Table 11: Computation of amount of overhead payment..............................................................15Table 12: Computation of production cost ...................................................................................15Table 13: Sales budget...................................................................................................................16Table 14: Computation of variances of Jeffrey and Son's ............................................................16Table 15: Reconciliation operating statement of Jeffrey and Son's ..............................................17
Assignment on Cost and Management accounting_3
INTRODUCTIONManagement accounting is identified as the important part of business accounting. Itprovides significant assistance to management of an organization while handling various tasksand business operations associated with costing and budgeting. These tools play vital role inevaluation of wide range of data which is related with cost of production. The rationale behindthe same is to apply cost control and production management strategies that are havingsignificant impact on the profitability and growth of business entity. By applying differentbudgeting approaches, management is able to forecast profitability of company and expenditureson several business operations (Drury, 2013). By using different type of management accountingtools such as costing, overhead management, etc., an organization can take appropriate decisionsrelated to pricing and quality management. It also supports management for developingappropriate business practices through which effectiveness of different business operations canbe enhanced. Present study carried out is a detail evaluation of wide range of costing techniquesby considering the case of Jeffrey and Son's Ltd. This report is going to evaluate different aspectsof management accounting that are associated with cost and budgets as well as theirimplementation as per the given case scenario. This report also determines the role of differentelements of management accounting in decision making process. TASK 11.1 Different types of cost classificationBasis ofclassificationType of costMeaningElementsMaterial, Labourand overheadMaterial cost is determined as expenditure made bycompany for purchasing the raw material. In additionto that payment of salary, wages and other benefits areconsidered as labour cost for organization (Bennouna,Meredith and Marchant, 201). Apart from the materialand labour cost, all the other expenses such as factoryrent insurance, utilities expenditure etc. are consideredas overhead for company. FunctionsProduction,administration,All the production expenses which are managed bybusiness entity during the production process for4
Assignment on Cost and Management accounting_4
sellinganddistribution.converting all kind of inputs into finished goods havebeen addressed as production expenditure. However,all the office expenses which are mainly associatedwith office rent, utilities, equipment and stationery arethe part of administrative expenditure (Method ofCosting, 2012). Selling and distribution contains allthe expenditures that are occurred while handling ofdifferent promotional and marketing expenditure forattainment of business goals. Nature Direct and indirectcost. Direct cost includes all the expenses such as materialand labour cost that are directly associated with theproduction process of different goods and services.However, all the other business expenses that do notdirect link with production process and cannot becharged in production cost are termed as indirect cost(Altman, 2012). It includes expenditures related tosupervision, rent and rates, insurances etc. BehaviourFixed, semi variableand variable Fixed expenditures which include all expenses thatare not influenced by the production volume aretermed as fixed cost such as cost of equipment, rent ofbuilding etc. Semi variable cost can be changed aftercertain level of production volume for example,electricity and telephone bill (Lasher, 2010).However, variable cost is directly correlated with theproduction quantity. For example: rise in cost ofmaterial due to increase in production quantity. 1.2 Calculating of job cost for 200 units using job costing methodJob costing method: It is an important costing approach in which cost of each and everyjob is assigned. It is a combination of all kind of expenditures that are associated with thematerial, labour as well as manufacturing overhead (Porter and Norton, 2009). In the given case,5
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the cost data have been provided for job no. 444 that is related to production of 200 units. Belowmentioned job sheet determine all kind of expenditures that has been made on particular job: Table 1: Calculating of job cost for 200 unitsName of Item AmountDirect material cost£40000Direct Labor cost£54000Production overhead:Variable exp.£36000Fixed exp.£24000Total cost of 200 units£154000Cost per unit£770Necessary working note:Particular Qty perunit Rate CalculationCostDirect materialexp. 50 kg.4£ per kg50kg*4£*20040000£Direct labourexp. 30 hours9£ per hour30hours*9£*20054000£Variableproductionoverhead 30 hours6£ per hour30 hours*6£*20036000£Fixed productionoverhead(80000£)/(20000 hours)*(30*200)24000£Cost per unit(154000£)/(200 Units)770£1.3 Determination of Exquisite cost using Absorption Costing TechniqueAbsorption costing: It is termed as the most important costing method in which differentmanufacturing overheads are allocated to the production and service departments with referenceto different measures (Dugdale and Lyne, 2010). As per given case, Jeffrey & Son's Company ishaving three production departments with a combination of two machines and are namely6
Assignment on Cost and Management accounting_6

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