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Different Types of Cost Report | Jeffery & Sons

   

Added on  2019-12-28

25 Pages5314 Words201 Views
Management Accounting

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Classifying different types of cost.........................................................................................11.2 Calculating unit cost and total job cost for Job 444..............................................................21.3 Computing the cost of Exquisite by using absorption technique..........................................41.4 Analyzing cost data of Exquisite for Jeffery & Sons..........................................................10TASK 2..........................................................................................................................................112.1 Preparing and analyzing the cost report..............................................................................112.2 Stating the performance indicators which help in assessing the areas for potentialimprovements............................................................................................................................122.3 Ways through which Jeffery & Sons can reduce cost and thereby enhance value or quality...................................................................................................................................................12TASK 3..........................................................................................................................................133.1 Purpose and nature of budgeting process ...........................................................................133.2 Selecting the appropriate budgeting method for Jeffery & Sons........................................143.3 Setting up production and material purchase budget for the month of July, August andSeptember..................................................................................................................................143.4 Preparing cash budget.........................................................................................................16TASK 4..........................................................................................................................................184.1 Calculating variances, identifying causes and recommending actions...............................184.2 Preparing operating statement reconciling budget..............................................................204.3 Reporting the findings to management...............................................................................21CONCLUSION..............................................................................................................................22REFERENCES..............................................................................................................................23

INTRODUCTIONManagement accounting is the most effective financial tool or technique which helpsorganization in evaluating monetary activities which are performed by the firm during thefinancial year (Management accounting, 2014). For this purpose, manager makes use of theprovisions of accounting information to derive the best result of their decision. This field ofaccounting provides assistance to the manager in making the most effectual short term decisionby taking into consideration both financial and statistical performance. It also provides deeperinsight into firm about the areas on which organization needs to make control namely cost,expenditure etc. All these aspects of management accounting aid in the sales and gross margin ofthe firm. This report will examine the different types of cost which organization has to incur toproduce the product or services. Besides this, this report will also helps in understanding theways through which Jeffery & Sons can reduce cost and thereby enhance the quality or value ofthe product which are offered by them. In this report, importance of budgeting process to thebusiness organization will also be analyzed. Further, this report will help in understanding thesignificance of different responsibility centres in the cost and performance control. TASK 11.1 Classifying different types of costCost includes all the expenditures which are incurred by Jeffery & Sons in manufacturingand selling & distribution of Exquisite. For instance: material labor, overhead, manufacturingetc. Different types of cost are enumerated below:Type of costFeaturesOn the basis of elements and natureMaterial It refers to the cost of raw material or semi-finished goods which areincurred by the firm to manufacture finished foods. LaborCost of labor is sum of all the wages and salaries which are paid by thebusiness organization to their employees.OverheadIt consists of all the costs except material and labor cost. Overheadexpenses include insurance, advertisement, legal and other office expenses1

which organization has to incur for smooth functioning of the businessactivities and operations (Kaplan and Atkinson, 2015). On the basis of functionsProduction costIt is the cost which is paid by firm during the production of product orservices such as material, labor etc. It provides assistance to the firm incalculating per unit cost of the product and price as well.Selling anddistribution costThis cost entails the amount which are incurred by Jeffery & Sons in theselling and distribution of Exquisite productResearch anddevelopmentIn the strategic business environment, company has to conduct research toevaluate the taste and preferences of the customers. It also imposesfinancial cost in front of the firm.On the basis of behaviorFixed costThis is a cost which has to pay by the organization irrespective of thebusiness activities. Fixed costs include salary of the employees, rent of thebuilding etc. which does not change when changes take place in unit ofoutput produced.Variable costThis cost is highly associated with the volume produced by Jeffery & Sons.It varies with an increase or decrease in the level of output produced (Otleyand Emmanuel, 2013). It increases as volume of production increases orvice versa.Semi-variable costIt is the summation of fixed and variable expenditures which are paid bythe corporation for the manufacturing of product or services (CostAccounting - Classification of Cost, 2016). Wages, electricity expenses, etcare fixed to some extent and become variable as level of productionexceeds.1.2 Calculating unit cost and total job cost for Job 444Unit cost may be defined as expenditure which is paid by the firm in the manufacturingof per unit of product or service (Fullerton, Kennedy and Widener, 2014). One can easily assessthe unit cost by dividing the total cost of production from number of units which are produced bythe firm.2

Unit and total cost which are incurred by Jeffery & Sons in the manufacturing of product are asfollows:On the basis of the above mentioned calculation, it has been identified that Jeffery &Sons has to incur £770 to manufacture per unit of exquisite. 1.3 Computing the cost of Exquisite by using absorption technique3

a.) Allocation and apportion of overhead to the production department of machine X. Yand assembly b. Reapportion of the cost of service and support department to the production department4

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