Preparing and analysing cost reports

This presentation provides an overview of the process of preparing and analysing cost reports in management accounting. It covers the steps involved, such as gathering information, itemizing tangible cost, categorizing intangible cost, conducting cost benefit analysis, and using performance indicators to identify potential improvement. The presentation also includes examples and case studies to illustrate the concepts discussed.

TASK-2
Management Accounting

Preparing and analysing cost reports
Scenario of Next plc, multinational clothing company is
selected. It deals in home products and footwear to large
number of buyers.
Gathering information-Next plc will collect all important
information related to cost. Total sales turnover is taken into
account so as to refer number of units sold during particular
time span.

Itemize tangible cost
It includes tangible cost such as
Labour
Material
Other related stock incurred during production process
It assists management of Next plc to keep record related to actual
expenses incurred during particular time span.
Continued...

Contiued...
Categorize intangible cost-Under this part intangible cost will be
recorded such as expenses made for goodwill of business.
Preparing structure of report-Here, production cost, distribution
and selling expenses will be recorded.

Contiued...
Conduct cost benefit analysis-Analysing cost data wherein
finance personnel analyse the cost in the light of benefit derived.
Calculating payback time- This is part of analysis of cost data
under which finance department tends to assess the benefits
derived after recovering initial cost.

Using performance indicators to identify potential
improvement
The performance indicators are explained as follows-
High profitability-Profitability is one of the most performance
indicator that provide detail information to management regarding
decrease and increase in earning per share. For example in case
Next plc is having higher profitability then it indicates favourable
results for organization.

Sales turnover-In case of high sales turnover company can take
decision related to appropriate investment project. On the other hand,
low sales turnover is the sign of Next plc can take appropriate measures
for increase overall flow of production.
Customer retention-This customer retention in Next plc is also
effective or favourable performance indicator. On the contrary, lower
satisfaction level of buyers reflects that organization must take initiative
to improve product or service quality.
Continued...

Continued...
Cost reduction-Significant reduction in cost of products and
services is also favourable aspect which depicts that organization
can easily operate its business at global level. This tends to
enhance profitability.

Improvements to reduce cost
There are several measures can be taken by organization to reduce cost and
enhance value as well as quality of products and services. These
improvements are listed as follows-
Cost reduction-The most effective method for reduction in reducing cost
through restructuring production process, review overall process of
production which in turn company can easily reduce cost of production.
Effective management- In term of material, workforce and other related
factors. Here, Next plc can provide training for its workforce so as
enhance their skills and knowledge so as to support production activities.

Value enhancement and Improvement in service
quality
 For value enhancement of business competent workforce must
be there in organization which tends to improve service quality
 Communicate regarding requirement of consumers
 Research and development activities should be focused
 Total quality management can be applied in business

References
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management
accounting. PHI Learning.
Łukaszewski, T. and Wilk, S., 2016. Classification with test costs
and background knowledge. Knowledge-Based Systems. 92. pp. 35-
42.
Malhotra, R. and Temponi, C., 2010. Critical decisions for ERP
integration: Small business issues. International Journal of
Information Management. 30(1). pp.28-37.
McKevitt, D. and Davis, P., 2013. Microenterprises: how they
interact with public procurement processes. International Journal of
Public Sector Management. 26(6). pp.469 - 480.

Thank You