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MANAGEMENT ACCOUNTING INTRODUCTION 3 TASK 13 1.1 Different types of costs3 1.2 different costing methods 3 1.3 Costing techniques 4 1.4 Analyse the cost data 5

   

Added on  2019-12-04

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MANAGEMENTACCOUNTING1
MANAGEMENT ACCOUNTING INTRODUCTION 3 TASK 13 1.1 Different types of costs3 1.2 different costing methods 3 1.3 Costing techniques 4 1.4 Analyse the cost data 5_1
Table of ContentsINTRODUCTION ...............................................................................................................................3TASK 1.................................................................................................................................................31.1 Different types of costs..............................................................................................................31.2 Different types of costing methods............................................................................................31.3 Costing techniques.....................................................................................................................41.4 Analyse the cost data..................................................................................................................51) Stable production, sales and inventory........................................................................................52) Stable sales but fluctuating production, sales and inventory.......................................................53) Stable production but fluctuating sales and inventory................................................................6TASK 2 ................................................................................................................................................72.1 Cost report and analysis.............................................................................................................72.2 Various performance indicators used to identify potential improvements.................................82.3 Ways to reduce costs, enhance value and quality......................................................................8TASK 3 ................................................................................................................................................93.1 Purpose and nature of budgeting process..................................................................................93.2 Budgeting method and its need................................................................................................103.3 Budget preparation...................................................................................................................10TASK 4...............................................................................................................................................121.1 Variance calculation, identify possible causes and recommend corrective actions.................121.2 Operating statement to deduce budget profit for May.............................................................131.3 Report the findings to management.........................................................................................14REFERENCES...................................................................................................................................15Index of TablesTable 1: Calculation of profitability by variable costing......................................................................5Table 2: Calculation of profitability by absorption costing..................................................................5Table 3: Calculation of profitability by variable costing .....................................................................5Table 4: Calculation of profitability by absorption costing.................................................................6Table 5: Calculation of profitability by variable costing......................................................................6Table 6: Calculation of profitability by absorption costing..................................................................7Table 7: Material purchase budget......................................................................................................10Table 8: Trade payable budgets..........................................................................................................11Table 9: Cash budget of Antonio for six months ending on 31st December, 2016............................11Table 10: Calculation of variances.....................................................................................................12Table 11: Operating statement to deduce budget profit for May........................................................132
MANAGEMENT ACCOUNTING INTRODUCTION 3 TASK 13 1.1 Different types of costs3 1.2 different costing methods 3 1.3 Costing techniques 4 1.4 Analyse the cost data 5_2
INTRODUCTION Looking at the present competitive business world, management accounting plays aninevitable role in the success of corporations. It is the process through which managers useinternally and external available information for the forecasting and decision-making process. Itcontributes to make planning, reviewing and evaluating the success of the business. Present projectreport is based on Bittern Ltd, it is a manufacturing concern who is engaged in production andselling of the products to meet customer demand timely. The report will demonstrated differenttypes of costs, costing method, budgeting process and variance analysis that assist business toachieve their target goals. TASK 11.1 Different types of costsElements: There are three types of costs that are material, labour and overheads. Being amanufacturing organization, expenditures that will be incurred by Bittern Ltd. to buy raw material iscalled material cost (Chen and et.al., 2009). However, labour's wages is called labour costs and allthe other expenditures that are directly related to the production functions are called overheads suchas royalty and cost of moulds etc.Nature: Direct costs are those which Bittern Ltd incurred directly for the goodsmanufacturing such as material, labour and production expenses (Smith and et.al., 2009). While, allthe other expenses which are not related to the production are called indirect costs such as officerent, stationery etc.Function: Production costs involve indirect expenses on production like factory rent,lighting etc. Administration costs includes expenses such as salaries, office rent, stationery, postageetc. However, all the expenses which Bittern Ltd, incurred to sale goods in the market are calledselling and distribution costs such as delivery charges, advertisement, free delivery costs etc. (Caoand et.al., 2009). Behaviour: Expenses which are not impacted by different production volume of Bittern Ltdare called fixed costs like depreciation, insurance etc. While, expenditures which increase ordecrease along with the rising and falling the production volume are called variable costs such asmaterial (Wait and et.al., 2013). On contrary, expenditures which is remains constant up to a fixedproduction volume and thereafter get changes according to the output level are called semi-variablecosts like electricity bill. 3
MANAGEMENT ACCOUNTING INTRODUCTION 3 TASK 13 1.1 Different types of costs3 1.2 different costing methods 3 1.3 Costing techniques 4 1.4 Analyse the cost data 5_3
1.2 Different types of costing methodsThere are number of costing methods available to businesses to ascertain their product costs,explained below:Job costing: It is the method which accumulates all the direct as well as indirect expenditureassociated to a specific job (Garrison and et.al., 2010). This method is suitable for the organizations who carry out their work after receiving customer order and their requests.Contract costing: This costing method applies to contract based work such as constructionof building (Zhang and et.al., 2011). This method assist managers to ascertain costs for the workcompleted till the period and after finishing the total work, it helps to determine total cost of thecontract.Process costing: In case, when production is carried out through the different stages orprocess involved is known as process costing (Darvas and et.al., 2012). This costing method helpsto ascertain costs of each process and transfer it into the next process and at the end, totalproduction costs will be identified.Service costing: This method is uses by service rendering organizations such as watersupply department and electricity department to determine the costs of provided services.1.3 Costing techniquesCosting techniques refers to the process through which organizations can allocateexpenditures effectively to determine their product costs. Marginal costing/variable costing: According to CIMA London, marginal costing is themethod that helps to ascertain product costs and determine the impact of changes in costs, pricesand volume on the profitability (Penny and et.al., 2011). This method segregate total productioncost into fixed as well as variable costs. This method is also known as variable costing because itexclude fixed costs in the cost ascertainment. Standard costing: This technique evaluate actual production costs with the standard so as toassess the effectiveness of business operations and aims at taking corrective actions to eliminateadverse performance. Absorption costing/Full costing technique: In this technique, all the fixed as well asvariable expenditures are taken into consideration to determine total product costs (Ogunlana andet.al., 2010). This method is also known as full costing technique because it take into account all theexpenditures whether fixed or variable related to the production. Historical costing: It is the technique to determine costs after incurred the expenditures sothat costs can be computed for the work done in the past. It helps to compare current costs with the4
MANAGEMENT ACCOUNTING INTRODUCTION 3 TASK 13 1.1 Different types of costs3 1.2 different costing methods 3 1.3 Costing techniques 4 1.4 Analyse the cost data 5_4

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