Management Accounting Assignment (MA)

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Added on 2019-12-03

Management Accounting Assignment (MA)

Added on 2019-12-03

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TABLE OF CONTENTSIntroduction..........................................................................................................................................4Task 1...................................................................................................................................................41.1 Different types of classification of cost.................................................................................41.2 Computation of total cost and unit cost of job 444 by making use of job costing................51.3 Computation of cost of exquisite by making use of absorption costing technique...............51.4 Analysis of cost data of exquisite using appropriate techniques...........................................7Task 2...................................................................................................................................................82.1 Preparation and analysis of routine cost reports....................................................................82.2 Use of performance indicators in order to identify potential improvements in business....102.3 Recommendation for cost reduction and value enhancement for business.........................10Task 3.................................................................................................................................................113.1 Explanation of purpose and nature of the budgeting process..............................................113.2 Selection of appropriate budgeting methods in accordance with the needs of organization...................................................................................................................................................123.3 Preparation of production and material purchase budget....................................................123.4 Preparation of cash budget...................................................................................................13Task 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 centres.....................17Conclusion..........................................................................................................................................18References..........................................................................................................................................192

INDEX OF TABLESTable 1: Computation of cost of Job 444.........................................................................................5Table 2: Computation of total cost of exquisite...............................................................................5Table 3: Allocation of cost of support departments on the basis of machine hours........................6Table 4: Allocation Criteria of cost.................................................................................................6Table 5: Units to be produced.........................................................................................................6Table 6: Statement showing computation of exquisite....................................................................7Table 7: Statement showing computation of exquisite....................................................................7Table 8: Routine cost report of September......................................................................................8Table 9: Computation of standard budget at 1900 units..................................................................8Table 10: Production budget of Jeffrey and Son's smake..............................................................13Table 11: Material purchase budget of Jeffrey and Son's smake...................................................13Table 12: Cash budget of Jeffrey and Son's...................................................................................13Table 17: Computation of variances of Jeffrey and Son's smake..................................................16Table 18: Reconciliation operating statement of Jeffrey and Son's smake...................................173

INTRODUCTIONManagement accounting is field of accounting which combines norms of costing andbudgeting. By making use of these techniques, organization can determine cost of theirproduction and operational activities in order to make viable decisions. For this aspect, they arerequired to record their cost and expenses by making use of appropriate costing technique(Banks, 2008). These techniques assist organization in making reduction in their costs in order toenhance their profitability. Present study is based on the practical and theoretical description ofvarious costing techniques. For this aspect, different types of cost and budgets will be explainedalong with its practical applicability in the given case scenario. In addition to this, cost reportwill be prepared in order to analyse information of business and making viable decisions. TASK 11.1 Different types of classification of costCost can be termed as expense incurred by an organization for the completion of businessactivities. Cost of business can be classified on the basis of following elements:Elements- Element factor classifies cost into direct and indirect cost. Direct costs areexpenses incurred for the production activities of business. Example of direct cost is material,labour, lighting and heating etc (Burns, Hopper and Yazdifar, 2004). Further, indirect cost isincurred for smooth run of production activities. Example of indirect cost is lubricating oil, smalltools etc. Function- Classification of cost can also be done on the basis of various functions andactivities. Common classification of costs are Administration, Distribution, Finance, Production,Quality Check, Research and Development and selling.Nature- On the basis of nature of expense, cost can be classified into material, labour andoverhead expenses (Zawawi and Hoque, 2010). Material expenses are incurred for the purchaseof raw material, labour expenses are made for the payment of wage rate to the human resourcesand overhead expenses are related to the other costs of business organization.Behaviour- By considering the behavior factor, cost can be classified into fixed, variableand semi variable cost. Fixed costs are those expenses which does not fluctuate with the change4

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