Management Accounting: Costing and Budgeting Assignment

Management Accounting: Costing and
Budgeting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Classifying different types of cost.........................................................................................4
1.2 Using different costing methods............................................................................................5
1.3 Calculating costs using appropriate techniques.....................................................................6
1.4 Analysing costs data using appropriate techniques...............................................................8
2.1 Preparing and analysing routine cost reports.........................................................................8
2.2 Using performance indicators to identify potential improvement.........................................9
2.3 Suggesting improvements to reduce cost, enhance value and quality.................................10
TASK 2..........................................................................................................................................11
3.1 Purpose and nature of budgeting process.............................................................................11
3.2 Selecting appropriate budgeting methods for organization and its needs............................11
3.3 Preparing budgets according to the chosen budgeting method............................................12
3.4 Preparing cash budget..........................................................................................................13
4.1 Calculating variances, its causes and corrective actions......................................................14
4.2 Preparing a reconcile operating statement..........................................................................15
4.3 Reporting of findings to the management with identified responsibility centres...............16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
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INDEX OF TABLES
Table 1: Job cost..............................................................................................................................5
Table 2: Unit cost.............................................................................................................................5
Table 3: Absorption cost..................................................................................................................6
Table 4: OAR...................................................................................................................................7
Table 5: Costing basis of labour hour..............................................................................................8
Table 6: Cost data............................................................................................................................8
Table 7: Variances...........................................................................................................................9
Table 8: Production budget............................................................................................................12
Table 9: Material usage budget......................................................................................................13
Table 10: Cash budget...................................................................................................................13
Table 11: Variances analysis.........................................................................................................14
Table 12: Reconcile operating statement.......................................................................................15
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INTRODUCTION
Management accounting is the most imperative aspect of business as it facilities control
in the organization with the help of budgeting and costing techniques. Several aspects are
associated with management accounting such as budgetary control, interim reporting and
taxation as well as office services. Present report is based on Waitrose that deals in food services
in the supermarket along with online shopping. It is the sixth largest grocery retailer in the UK
which caters the need of large number of buyers. Furthermore, report covers different types of
cost and its methods for calculating appropriate selling price for the products and services.
Similarly, use of performance indicators for potential improvements in corporation has also been
explained. Apart from this, purpose and nature of budgeting process have also been described.
TASK 1
1.1 Classifying different types of cost
There are different types of cost which are based on the nature, behaviour and elements
of business. It affects sales price of products and services (Costing methods, 2015). These are as
follows-
On the basis of nature
According to the nature of business, cost is classified into different aspects like material,
labour and overhead. Here, raw material of food products depends upon the volume of
production (Bellah and et. al., 2013). On the other hand, labour cost is based on the productivity
of corporation. In addition to this, overhead consists of the costs such as fuel, water etc. used for
producing products.
On the basis of behaviour
In accordance with the behaviour, cost is segregated into different parts such as fixed,
variable and semi-variable. Fixed remains constant throughout the production cycle and does not
fluctuate as per the volume of output (Bonazzi and Iotti, 2014). However, variable cost tends to
change as per the output's volume. In addition to this, semi-variable cost is partly fixed and
partly variable. For this, the most effective example can be quoted of Telephone expenses. Here,
Waitrose needs to pay fixed amount of bill for phone expenses whether that is in use or not.
On the basis of element
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