Introduction to Costs and Reveanes

COSTS AND REVENUES

Table of Contents
INTRODUCTION...........................................................................................................................1
1. The nature of costing system and its role within Marks and Spencer.........................................1
1.1 Internal reporting and its purpose.....................................................................................1
1.2 Different costing systems and their relationships ............................................................1
1.3 Identification of responsibility, profit, investment and cost centres................................2
1.4 Classifications of cost and their uses................................................................................2
1.5 Marginal and absorption costing differences ..................................................................3
2. Cost information examination and recording .............................................................................3
2.1 Recording information......................................................................................................3
2.2 Analysis the cost information...........................................................................................4
2.3 Different stages in inventory ...........................................................................................4
2.4 Value inventory method...................................................................................................5
2.5 Cost behaviours................................................................................................................7
2.6 Costing systems and cost information..............................................................................8
3. Apportion cost..............................................................................................................................8
3.1 Describing overhead cost of production and service cost centre.....................................8
3.2 Calculating overhead absorption rates using methods....................................................8
3.3 Adjustments for overhead cost.......................................................................................10
3.4 Reviewing method of allocation, apportionments and absorption.................................10
3.5 Communicate when the queries in overhead..................................................................10
4. Deviation from the budget.........................................................................................................10
4.1 budget cost and actual cost and variances......................................................................11
4.2 analyse the variance .......................................................................................................11
4.3 Presenting the information for budget holder.................................................................11
4.4 management report.........................................................................................................11
5. Costing systems and decision-making.......................................................................................12

5.1 Preparing the estimates of future income.......................................................................12
5.2 The impact of changing activity levels on unit costs.....................................................13
5.3 Calculate the effect of changing activity level...............................................................13
5.4 Impacts on short-term and long-term decision making..................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
The below mentioned report identifies the significance of Costs and Revenues in context
of Marks and Spencer. Marks and Spencer is a major British multinational retailer specialising in
selling of luxury food products, home products and clothes. The report develops an
understanding of the nature of costing within the context of the chosen organisation. Also, it
understands their role and what significance they play within the organisational environment of
Marks and Spencer. The report briefly analyses and evaluates cost information. In the report, the
costs of apportion are explored as well. The proper usage of information gathered from costing
system in order provide an assistance in decision making for the organisation is briefly
evaluated. These evaluations will help in the determination the importance of revenue and cost
within Marks and Spencer.
1. The nature of costing system and its role within Marks and Spencer
1.1 Internal reporting and its purpose
Marks and Spencer is required to regularly compile the organisation's financial and
operational information in order to improve the value and performance of the organisation. The
process of internal reporting allows Marks and Spencer to compile this information and
distribute it to its stakeholders in order to make the necessary changes and improve the
organisation's performance (Capocchi, 2019). The report includes useful information such as
sales data, failure rates, expense trends etc. and are not meant to shared by the organisation to
any 3rd party.
Along with it, the generation of the accurate information helps Marks and Spencer to
make necessary assumptions and improve its performance. Accurate information will also help
the organisation to reach its required goals and objectives properly.
1.2 Different costing systems and their relationships
Historical Costing: The process of historical costing allows the costs to be established
after they are incurred. Marks and Spencer uses this costing system to analyse the actual incurred
costs.
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