Management Accounting Costing and Budgeting
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Added on 2020-09-08
Management Accounting Costing and Budgeting
Added on 2020-09-08
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Management accountingcosting and budgeting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Q1................................................................................................................................................1a) Classify costs into fixed, variable and semi-variable costs.....................................................1b) Other ways of classifying costs..............................................................................................2Q2................................................................................................................................................3a) Compute the total cost and cost per unit at different level of unit..........................................3b) Analyse cost using graphical presentation..............................................................................3Q3................................................................................................................................................51. FIFO........................................................................................................................................52. LIFO........................................................................................................................................53. Average cost............................................................................................................................5Q4 Prepare COGS report for FIFO, LIFO and Average cost.....................................................6Q5................................................................................................................................................7a) Two critical success factors and KPI......................................................................................7b) Suggestion...............................................................................................................................8Cost reduction.............................................................................................................................8Value and quality enhancement..................................................................................................9Q6................................................................................................................................................9a) Describe budget.......................................................................................................................9b) Purpose of budget...................................................................................................................9c) Methods of budget................................................................................................................10Q7..............................................................................................................................................10a) Sales budget..........................................................................................................................10b) Production budget.................................................................................................................11c) Raw material budget.............................................................................................................11d) Labour budget.......................................................................................................................12e) Total overhead budget...........................................................................................................12Q8 Cash budget.........................................................................................................................12Q9..............................................................................................................................................13
a) Budget profit.........................................................................................................................13b) Actual profit .........................................................................................................................14c) Material and labour sub variances........................................................................................15d) Operating statement for reconciling budgeted and actual profit...........................................15Q10 Recommendation...............................................................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
Index of TablesTable 1: Classification of costs........................................................................................................1Table 2: Cost per unit and total cost................................................................................................3Table 3: Closing stock of FIFO.......................................................................................................5Table 4: Closing stock of LIFO.......................................................................................................5Table 5: Closing inventory of Average cost....................................................................................5Table 6: COGS report of FIFO method...........................................................................................6Table 7: COGS report of LIFO method...........................................................................................6Table 8: COGS report of Average cost method...............................................................................6Table 9: Sales budget.....................................................................................................................10Table 10: Production budget..........................................................................................................11Table 11: Raw material budget......................................................................................................11Table 12: Labour budget................................................................................................................12Table 13: Overhead budget............................................................................................................12Table 14: Cash budget...................................................................................................................12Table 15: Budgeted Profit..............................................................................................................13Table 16: Actual profit...................................................................................................................14Table 17: Reconciliation statement................................................................................................15Illustration IndexIllustration 1: Material and labour variances.................................................................................15
INTRODUCTIONRole of management accounting increases with the increasing external market difficultieslocated in the external business environment. This project is about using several techniques ifbudgeting in identifying all the problems incurred in business along with the proper managementof financial resources. This report also emphasises on different kinds of costs incurred in anentity.TASK 1Q1a) Classify costs into fixed, variable and semi-variable costsTable 1: Classification of costsParticipantsFixed costsVariable costsSemi-variable costsMaterial for clothesFactory rentPower for sewingmachinesFactory supervisor'swagesPackaging materialsTelephoneOffice ratesDelivery driver's payFactory heatingIn the above classification of costs of various expenses incurred in the business in severalcriteria such as fixed cost, variable cost and semi variable costs. Three colours are taken in orderto reflect the three different costs (Management accounting, 2017). Above classification of cotsis shows like a matrix in which an entity will easily identify which expenses falls under whichparticular category in order to help an entity in reducing the current cost incurred in the business.1
Performance of the business is regarded as one of the important aspects to be considered by anenterprise owner in uplifting their existing business conditions (Leite, Fernandes and Leite,2016). It can be seen from the classification matrix that majority of costs incurred in the Smartlooks entity falls under the category of semi variable costs which ave constituent of both costssuch as variable as well as fixed costs incurred in the business. Semi variable costs is widelyincurred in the corporation but due to its wrong classification an employer is not able to identifyits nature and categorise them as fixed costs or variable costs which in turn induces the overallcosts incurred in the business.b) Other ways of classifying costsDirect costs- It is that type of costs incurred in the business which is directly attributableto a product such as raw material used in the making of a particular product. Expensesincurred by an enterprise owner which is related directly with the manufacturing of asingle product. Direct costs of a singular product can be easily traced out by themanagement as this falls under the nature of costs.Indirect costs- Another costs incurred in a firm is opposite version of the above mentioncosts in which the costs is indirectly associated with the making of a product. Lubricatingoil used in improving the condition of machine helps in manufacturing of a product.These costs are considered as indirect as there is no close relationship among thisparticular costs with the manufactured product in the business enterprise.Function costs- Costs are also segregated in an entity according to various businessfunction such as productions, finance, human resource and marketing, selling anddistribution and information technology. All these functions are performed by anemployee in achieving desired aims and targets in the business concern (Leite, Fernandesand Leite, 2016). Sole responsibility of business manager is to emphasise on each andevery factors included in an entity as this helps in achieving desired aims and targetsframed by an enterprise owner. It includes products costs which is regarded as that typeof costs which helps in producing or manufacturing single product in an entity.Production costs incurred in the business such as cost of raw material. Raw material isregarded as basic factor of costs included in the business. Marketing costs involved in anentity includes cost of advertising incurred in the business for creating market awareness2
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