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Accounting Costing and Budgeting INTRODUCTION 3 TASK 13 1.1 Classification, Preparing and Analysis of Cost Reports

   

Added on  2020-01-21

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Management Accounting:Costing and Budgeting1
Accounting Costing and Budgeting INTRODUCTION 3 TASK 13 1.1 Classification, Preparing and Analysis of Cost Reports_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Classification of different types of cost.................................................................................31.2 Using different costing methods............................................................................................41.3 Calculating costs using appropriate tools..............................................................................51.4 Analysis of cost data using appropriate techniques...............................................................72.1 Preparing and analysis of routine cost reports.......................................................................72.2 Use of performance indicators to identify potential improvements.......................................82.3 Suggesting improvements to reduce costs and enhance value as well as quality..................9TASK 2..........................................................................................................................................103.1 Purpose and nature of budgeting process.............................................................................103.2 Appropriate budgeting methods for organization and its need............................................113.3 Preparing budget..................................................................................................................123.4 Preparation of cash budget...................................................................................................134.1 Calculating variances, identifying possible causes..............................................................144.2 Preparation of operating statement reconciling...................................................................154.3 Reporting findings to management......................................................................................15CONCLUSION .............................................................................................................................15REFERENCES .............................................................................................................................172
Accounting Costing and Budgeting INTRODUCTION 3 TASK 13 1.1 Classification, Preparing and Analysis of Cost Reports_2
INTRODUCTIONManagement accounting is referred to as the procedure of preparing management reportsas well accounts that assist in offering accurate financial and statistical information on time.Such is needed by the managers for the purpose of making short term decision on regular basis.Management accounting produces monthly and weekly reports for the internal audience of thebusiness that includes department managers as well as chief executive officer. Such reportsdemonstrates the amount of orders in hand, state of accounts payable, accounts receivables,outstanding dents, raw material as well as inventory. Further it is comprised of trend charts,variance analysis and other statistics (Beard, 2009). In the present report management accounting has been discussed with respect to ABCLtd. The study entails to make analysis of cost information in the firm. Further it includesmethods to reduce costs and enhance value in the organization. The report involves performancemonitoring against budgets within organization. TASK 11.1 Classification of different types of costCost is being divided into several manner that depends upon its nature and particularpurpose. Such categorization makes the information relating cost meaningful for the firm. Theclassification of cost is done is the manner as follows:On the basis of nature: By the nature of expenses, classification of cost can be done intomaterial, labour and overhead. Raw material is considered an essential part of the productthat is being traced by ABC Ltd in an appropriate manner. The cost of labour are the onethat are traced to individual units of products (Bhagwat and Sharma, 2007). On the basis of behavior: With the alteration in the extent of business activities there ischange in certain cost with the alteration in output but some does not alter. Based on thebehavior classification of cost can be done into fixed, variable and semi variable cost.Fixed cost can be defined as the cost that remain fixed and does not change with thealteration in the level of output (Götze, Northcott and Schuster, 2008). Variable cost arethe one that get changed with the alteration in output level. Semi variable cost includesthe attributes of both fixed and variable cost. 3
Accounting Costing and Budgeting INTRODUCTION 3 TASK 13 1.1 Classification, Preparing and Analysis of Cost Reports_3
On the basis of element: Such classification is on the basis of association of cost elementswith the objects of cost. The division is done into direct as well as indirect cost. Theexpenses that are incurred by ABC Ltd on material and labor and are traceable forproduct, service and job economically is referred to as direct cost. On the other handindirect cost is defined as the expenses that are not chargeable directly into the production(Goyenko, Holden and Trzcinka, 2009). On the basis of controllability: Under this classification of cost is done into controllableand uncontrollable cost. Controllable cost is are the one that are controlled by particularmembers of t he firm. Example of this includes material as well as labour cost. In contrastto this uncontrollable cost is referred to as the one that are not regulated by particularmember. For instance, factory rent and salary are regarded as uncontrollable cost (Haka,2006). 1.2 Using different costing methodsThere are several kind of costing techniques that can be used by ABC Ltd. This includesjob costing, process costing, material costing as well as batch costing.Job costing: Under this method entire direct and indirect cost that are attached with separate jobof ABC Ltd will be identified with the aim to calculate total cost. For example, method of jobcosting is being applied here for calculating cost of job no. 450 of 20000 units. This is as below:Table 1: Calculation of job cost for job no. 450ParticularsPer unit costTotal costs for 20000 unitsDirect material5100000Direct labour240000Direct overheads 120000Fixed overheads75000Total costs 235000Fixed overheads for 40000 direct labor hours = £100000Direct labour hours per unit for job no. 450= 34
Accounting Costing and Budgeting INTRODUCTION 3 TASK 13 1.1 Classification, Preparing and Analysis of Cost Reports_4

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