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Managerial Accounting | Cost Accounting

   

Added on  2020-06-06

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MANAGEMENT ACCOUNTING COSTING AND BUDGETING

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Explaining various kinds of costs.....................................................................................11.2 Explaining different kinds of costing methods.................................................................21.3 Measuring costs for closing inventories by various methods...........................................21.4 Appropriate techniques for analysing the cost data..........................................................4TASK 2............................................................................................................................................52.1 Calculating the routine cost report with variance analysis...............................................52.2 Potential improvements for ABC Ltd with the help of performance indicators..............62.3 Suggestion for reducing costs as well as improving quality and value............................6TASK 3............................................................................................................................................63.1 Explaining budgeting process and its nature as well as objective....................................63.2 Appropriate budgeting technique for the organisation and its needs...............................73.3 Analysis of various budgets for ABC Ltd........................................................................73.4 Calculation cash budget for ABC Ltd..............................................................................9TASK 4............................................................................................................................................94.1 Measuring variances.........................................................................................................94.2 Calculations for operating statement..............................................................................144.3 Report finding in context with identifying responsibility centres of management........15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17

INTRODUCTIONManagement accounting includes various tools that will be fruitful for organisation tomake control over the internal performance = of firm. It includes various kinds of budgetingtools such as cost sales, purchase which in turn helps in doing variance analysis and therebyhelps in taking corrective actions within the suitable time frame. The present report is based onthe case situation of ABC Ltd, which will shed light on budgeting tools as well as suggestionsthat can be considered for improving the performance of firm.TASK 11.1 Explaining various kinds of costsCosts may be presented as a sum of the expenses incurred for the production ormanufacturing, distributing as well as advertising the product. It includes various terms such aslabour hour, machine hours as well as their efforts in completing the particular activities forproducing a unit (Goddard and Simm, 2017). There have been three kinds of costs such asvariable costs, fixed costs and semi-variable cost. As per the scenario there are various expensesincurred by the organisation for manufacturing the units which can be classified in the followingmanner such as follows:Variable costSemi-variable costFixed costMaintenanceRent and ratesInsuranceOther overhead costsTelephone billVan purchasedDirect labourDepreciationDirect materialComputer purchasedDirect expensesVariable cost: This kind of costs are every changing or fluctuating as per the changes inthe volume or output. Costs vary as per the units of manufacturing products, distributingproducts as well as advertising them (Hopper and Bui, 2016). There have been high fluctuationsover expenses such as direct material, direct expenses, direct labour, and maintenance andoverhead expenses etc.Semi-variable cost: These cost has the variable of both the costs fixed and variable whichis facilitates professionals deciding the favourable costs for production (Aouni, McGillis and1

Abdulkarim, 2017). The expenses like telephone and rent will remain fixed or will be fluctuateas per changing conditions.Fixed cost:It denoted as the costs of product which remains same or unchanged at eachlevel of output. It will be same in every aspect of business operations like office rent, salary ofworkers etc.1.2 Explaining different kinds of costing methods.Categorization of cost is based on the different kinds of business operations which is going to beheld in the organisation (Bathurst and Schwartz, 2017). Each process and piece of work has itsown costs or expenses which are need to be done as to give the proper outcome. ABC ltd.Company has incurred various expenses which are to be categorised in the various costingtechniques such as:Batch costingJob costingService costingContract costingProcess costingTelephoneOverheadexpensesMaintenanceComputerpurchasedDirect labourRentDepreciationVan purchasedDirect MaterialInsuranceDirect expensesThere has been classification of various expenses into these five costing categories. Batchcosting includes rents and rates as well as telephone expenses. Services costing havemaintenance, depreciation as well as insurance expenses which are the services that have beenprovided by organisation apart from main functional operations (Kabinlapat and Sutthachai,2017). Contract costing includes purchase of Van as well as Computer. For production of unitsthere has been use of various direct costs such as labour machinery that helps in manufacturingthe particular units.1.3 Measuring costs for closing inventories by various methodsLIFO technique: This method helps in dispatching units at first which has last inputtransaction in organisation (Mo and et.al., 2017). It will be beneficial for selling units at higherrates. Rates over the products are increasing till business starts operating than there will befruitfulness in selling the last input material to be first. However, here are calculations for ABCLtd using LIFO method in selling the units:2

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