Costs and Revenues Assignment

Costs and Revenues

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of internal reporting and providing accurate information to management:............1
1.2 Relationship between various costing systems within an organisation:...............................1
1.3 Responsibility centres, cost centres, profit centres and investment centres within an
organisation:................................................................................................................................2
1.4 Characteristics of different types of cost classifications and their use in costing:................2
1.5 Differences between marginal and absorption costing:........................................................3
TASK 2............................................................................................................................................4
2.1 Record of cost information for material, labour and expenses:............................................4
2.2 Analysis of cost information for material, labour and expenses:..........................................4
2.3 Various stages of Inventory:.................................................................................................5
2.4 Valuation of inventories:.......................................................................................................5
2.5 behaviour of these costs:.......................................................................................................7
2.6 Record of cost information using different costing systems:................................................7
TASK 3............................................................................................................................................8
3.1 Attribution of overhead cost to production and service cost centres:...................................8
3.2 Calculation of overhead absorption rate:..............................................................................8
3.3 adjustment for under and over recovered overhead cost:......................................................9
Overhead rate per machine hours: -............................................................................................9
Over and under absorption: -.......................................................................................................9
3.4 Methods of allocation, apportionment and absorption at regular intervals:........................10
3.5 Communication with staff to resolve queries related to overhead cost data.......................10
TASK 4..........................................................................................................................................10
4.1 Comparison of budgeted and actual costs noting any variances.........................................10
4.2 Analysis of variances for management reports...................................................................11
4.3 Information for budget holders of any significant variances:.............................................11
4.4 Formulation of management reports in an appropriate format...........................................12
TASK 5..........................................................................................................................................12

5.1 Estimates of future income and costs for decision making................................................12
5.2 Effect of changing activity levels on unit costs..................................................................13
5.3 The effect of changing activity levels on unit costs............................................................13
5.4 Factors affecting short-term and long-term decision making.............................................14
CONCLUSION .............................................................................................................................14
Books and journals....................................................................................................................15

INTRODUCTION
Cost and revenues can be termed as a total cost of manufacturing and delivering a
product. In simple words, cost can be said as what is spent where revenue as what is earned. It is
found in the annual accounting statement of a company. Cost and revenues include expenses like
wages, administration cost, marketing and advertising costs, etc. In this report the discussion is
all about nature and role of costing system within an organisation, recording and analysing cost
information. Also, apportion costs according to organisational requirements, analysing deviations
from budget and reporting these to management and use of collected information from costing
system to assist decision-making (Burchell and Listokin, 2012).
TASK 1
1.1 Purpose of internal reporting and providing accurate information to management:
Internal management reporting system is the part of management control system which
provides necessary business information and financial outcomes. The main purpose of internal
reporting is to improve decision making ability with responsiveness to subjective issue. It also
helps to find out the problems in an organisation with there best alternative solutions (Terpstra
and Verbeeten, 2014).
1.2 Relationship between various costing systems within an organisation:
There are different types of costing systems which can be implemented by an
organisation according to the nature of entity which are as follows:
 Marginal costing: It is a costing technique wherein the marginal cost, i.e. variable
cost is charged to unit of cost, while fixed cost for the period is completely written
off against the contribution.
 Absorption costing: Absorption Costing is a method of costing a product in which
all fixed cost and variable cost are calculated to cost centre where they are
accounted for using absorption rates.
 Standard costing: It is the method of costing, where certain standard rates are set
to compare with actual cost for determining causes of variance so corrective
measures can be taken for enhancement.
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