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Management Accounting Costing Budgeting Assignment

   

Added on  2021-01-02

15 Pages3716 Words148 Views
Management Accounting:Costing and Budgeting

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Fixed ,variable and semi-variable cost along with other ways of cost classification............11.2 Computation of total cost and unit cost.................................................................................21.4 Graphical representation and analysis...................................................................................31.3 Computation of inventory using various methods................................................................3TASK 2............................................................................................................................................52.1 Report for various inventory methods...................................................................................52.2 Performance measuring metrics along with their success factors.........................................62.3 Suggestions of reducing cost.................................................................................................8TASK 3............................................................................................................................................83.1 Definition and Purposes of budgets......................................................................................83.2 Various methods of preparing budget...................................................................................93.3 Preparation of various budgets..............................................................................................93.4 Preparation of cash budget..................................................................................................10TASK 4..........................................................................................................................................114.1 Preparation of budgeted income statement.........................................................................114.2 Determination of variances and preparation of reconciled statement.................................124.3 Recommendations...............................................................................................................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13

INTRODUCTIONManagement accounting is a process of preparing managerial accounts and reports inorder to better management of the organisation. The aim objective of this project report is todiscuss and explain various budgetary methods along with several costing methods in order tohave a better understanding about organisational elements such as inventory, production,budgetary control and financial statements. In this project report several inventory managementmethods are explained along with various other questions which includes preparation of budgets,cost reduction technique and others. TASK 11.1 Fixed ,variable and semi-variable cost along with other ways of cost classificationa. Columnar table of fixed, variable and semi-variable costFixed cost – These are the costs which are static in nature and does not change withchanging activity. This cost is does not depended on the volume of goods and services producedby an organisation. These expenses are time related and referred as overhead costs. Some of theexamples of these costs are salaries, insurance, depreciation, rent etc (Bennett, 2013).Variable cost – These costs are flexible in nature and change according to the level ofproduction and business operations. Variable or marginal costs increase and decrease accordingto the business activities of an organisation. Some of the examples of these costs are directmaterial, direct labour, production supplies, shipping costs etc.Semi variable cost – Semi variable costs are the combination of both fixed and variablecosts. Part of these expenses are fixed which does not change and some part of these expensesare variable which may change according to the level of business operations. Some of theexamples of these these expenses are commission charges and semi variable labour costs(Bovens, 2014).Fixed costFactory rentPower for sewing machine infactory(per unit of electricity)Variable costFactory supervisor wagesPackaging materialOffice rates1

Material for clothesSemi variable costTelephoneFactory heatingDelivery drivers payb. Few other ways of classification costsFewer other ways of classification of costsCosts are the expenses which are needed to be paid by the organisation. These costs canbe categorized by various ways and few of them are discussed below:By Function – Under to this classification, costs are divided according to their relatedfunctions for which they are incurred. Broad classes included in this classification areproduction, administration, selling and distribution (Chiwamit, 2014). By Nature - Expenditures occurred in an organisation can be classified according to theirnature of activity for which they are incurred, such activities are production,administration, selling and distribution etc.Level of controllability – Under this, expenses are divided into two classes. Firstcategory is of costs which can be controlled by the management like direct labour, directmaterial etc. whereas another category is of uncontrollable expenses such as salaries, rentetc.By time – According to this classification, expenses are divided into two categories andthey are historical costs and pre determined cost. Historical costs are the expenses whichare ascertained after they are incurred in past and predetermined costs are estimated orprojected cost which are ascertained for future using trend analyses. By normality – Costs are classified as normal costs and abnormal costs under thisclassification. Normal costs are the expenses which are incurred due to normal or regularbusiness operations and abnormal costs are the expenses which are incurred due toirregular business situations such as fire or theft (Edwards, 2012).1.2 Computation of total cost and unit costComputation of the Total cost for the production various unitsParticularUnits (15000)Units (20000)Units (25000)(A)Direct Variable cost:1. Material (@5 per units) 750001000001250002

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