Management Accounting and Cost - Report
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Added on 2020-01-23
Management Accounting and Cost - Report
Added on 2020-01-23
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MANAGEMENTACCOUNTING & COSTS
Table of ContentsINTRODUCTION...........................................................................................................................1TASK...............................................................................................................................................1Q.1 Major elements of cost with example..................................................................................1Q. 2 Costing................................................................................................................................1Q. 3 Cost concepts.......................................................................................................................2Q. 4 Manufacturing statement and income statement.................................................................2Q. 5 Cost concepts......................................................................................................................4Q.6 Understanding the entries in the Materials Control account ...............................................4Q. 7 Understanding the entries in the Accrued Payroll account................................................5Q. 8 Payroll: direct and indirect labour.......................................................................................6Q. 9 Activity Based Costing........................................................................................................7Q. 10 Direct, step and reciprocal methods of overhead allocation.............................................8REFERENCES..............................................................................................................................10
INTRODUCTIONAccording to the topic the report covers major cost elements, costing of product,concepts of cost, manufacturing statement, income statement, entries of Materials Controlaccount and Accrued Payroll account. The payroll of labour, Activity Based Costing andreciprocal methods of overhead allocation are also included in the present report.TASKQ.1 Major elements of cost with exampleThere are three major elements of cost which is included in a production of a product.Materials cost:- The cost which is incurred in the procurement of materials which isused in the manufacturing of the products(Fullerton, Kennedy, & Widener 2013).Material is the substance, from which a product is made. Therefore, it may be in a raw ora manufactured state. It can be direct or indirect.Labour cost:- The cost which is incurred in the form of remuneration paid to theemployees or workers of the company. The workforce to convert material into finishedgoods in known as labour. It can be direct or indirect.Overhead cost:- The costs which has incurred during the production process. It is of twotypes i.e. variable manufacturing overhead and fixed manufacturing overhead. Thevariable overhead changes according to per unit change. While the fixed overheadchanges when the total unit changes(Li, & et.al. 2012).Example:ABC ltd. has purchased raw materials of $20, wages to labour of $25, variable overhead is of $5and fixed overhead is of $10.The total cost = 20+25+5+10 = $60Q. 2 CostingThree examples of products where more detailed recording of costs is required are as follows:Manufacturing of spare parts of vehicleManufacturing of auto-mobilesManufacturing of clothesThree examples of products where averaging techniques may be appropriate are as follows:1
Assembling of auto-mobilesAssembling of cell phonesManufacturing of booksQ. 3 Cost conceptsPrime cost – the direct cost of a commodity in terms of the materials and labour involved in itsproduction but excluding fixed costs(Kaplan & Atkinson, 2015).Product cost – This cost refers to the costs which is used to produce a product. It includes directlabour, direct materials, consumable production supplies and factory overhead.Period cost – Any cost which cannot be capitalized into prepaid expenses, inventory or fixedassets.Conversion cost – This cost is the combination of direct labour costs plus manufacturingoverhead costs.Q. 4 Manufacturing statement and income statementCalculation of inventoriesParticulars Opening ClosingDifferencesFinished goods700002500045000Raw Materials1100001600094000WIP materials1500070008000WIP labour900050004000WIP expenses600030003000Manufacturing Statement for SeptemberDr.Cr.Particulars Amount($)Particulars Amount($)To Raw material purchase500000By Sales 1700000To Inward charges220002
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