Cost and Revenue Assignment Solution

COSTS
AND
REVENUES

Table of Contents
INTRODUCTION ........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of internal reporting and its importance for the management............................1
1.2 Interrelation of various costing systems .........................................................................1
1.3 Identification of the responsibility of costs centre, profit centre, investment centre within
organisation............................................................................................................................2
1.4 Classification of different types of costs and their uses in costing...................................2
1.5 Differences between marginal costing and absorption costing........................................3
TASK 2 ...........................................................................................................................................3
2.1 Cost information for material, labour and expenses in accordance with the organisation’s
costing procedure....................................................................................................................3
2.2 Analysation of cost information for material, labour and expenses in accordance with the.4
Organisation...........................................................................................................................4
2.3 Several stages of Inventory valuation...............................................................................4
2.4 Valuation of inventory by using First In First Out(FIFO) and Last In First Out Method 4
2.5 Nature of Fixed, variable and Semi variable costs...........................................................6
2.6 Analysing the costs information by costing system ........................................................7
TASK 3............................................................................................................................................7
3.1 Abstraction of overhead costs to production and service cost centres in accordance with
agreed bases............................................................................................................................7
3.2 Calculation of overhead absorption rates in accordance with suitable bases of absorption. 7
3.3 Make adjustments for under or over recovered overhead costs in accordance with
established procedures............................................................................................................9
3.4 Implementation of changes to methods at regular intervals in absorption ...................10
3.5 Communicate with relevant staff to resolve any queries in overhead cost data ..........11
TASK 4..........................................................................................................................................11
4.1 Comparison of the budget costs with actual costs, finding of variances........................11
4.2 Analysing variances for managerial information...........................................................12
4.3 Information for budget holders for the potential variances ..........................................12

4.4Preparation of managerial reports.................................................................................12
Work backwards from there and create customs fields and filters in system of accounting ........12
TASK 5..........................................................................................................................................12
5.1 Presentation of estimated future income and costs for decision making:.....................12
5.2 Examining the effect of changing activity levels on unit costs......................................13
5.3 Evaluation of both the effect of changing activity levels on unit costs. ........................13
5.4 Identifying factors that influences short-term and long term decision making..............14
CONCLUSION..............................................................................................................................14
..............................................................................................................................................14
REFERENCES .............................................................................................................................15

1INTRODUCTION
The terms cost and revenues are associated with manufacturing (Automotive) company,
the costs refers to the expense incurred in order to manufacture goods and services with the
motive to generate the profit and revenues for the business organisation. Under manufacturing
process the goods or services are produced, the manufacturer sells them in the market to several
retailers and consumers. The consumers pays prices for buying goods or services to the producer
or retailer (Burchell and Listokin, 2012). This becomes the income source of the producer. So in
order to, the producer incurred the expenditure while the process of manufacturing (purchase of
raw material, labour, machinery cost etc.) to purchase factors of production and then receives
money from the consumers by selling those goods and services to them.
This report pertain the knowledge about the costs and revenues, methods of managing
the inventory, costing techniques as well as the budgeting methods. This report helps in better
understanding of the cost and revenues concepts of the business organisation.
2TASK 1
1.1 Purpose of internal reporting and its importance for the management
Internal reporting means the consolidate financial statements that are prepared to know
the business performance of the organisation and these information pertain costs, revenues,
profits are concluded in profit and loss statement and the final statement of balance sheet, which
shows the overall performance of the business and the important thing is that preparation of these
consolidate statements are called internal report of business and it reporting to managers, Board
of directors, CEO and other internal users in order to make decisions regrading future business
operations. The management needs this annual report because these information pertains the
useful information regarding the tax, gross profit, profit after tax etc. and these are the material
facts that are essential to disclose as the mandatory requirement by IFRS, as these material are
base of future planning and future decision makings.
1.2 Interrelation of various costing systems
The costing system is used to calculate the cost incurred in performing the business
operations in order to generate profits for the organisations. Costing system are intended for
internal use and not for reporting requirements but are essential to find-out the outcomes from
the business operations which are to be shown in internal reports. The costing system pertains
1