Cost Assessment and Review of Financial Statements

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................3
TASK 2............................................................................................................................................3
P3. Cost assessment and review of the financial statements by the method of marginal
and absorption........................................................................................................................3
TASK 3............................................................................................................................................7
P4. Limitations and drawbacks of budget management techniques in planning....................7
TASK 4............................................................................................................................................9
P5.MAS use to resolve and overcome financial issues..........................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The term MA is defined as a method of actually creating records, with the support of
monetary and non - monetary details within company to make crucial decision. There is a range
of methods, including absorption, marginal for creating financial reports to describe the net
income (Arroyo, 2012). The report includes detailed information relevant to particular
accounting processes, planning techniques and MAS to address monetary issues. The company
selected for this particular project is Prime Furniture Limited.
TASK 2
P3. Cost assessment and review of the financial statements by the method of marginal
and absorption.
Micro business methods:
Cost: this might be expressed as the total amount of expenses that emerges to complete various
types of operations as well as facilities of businesses. There are specific costs to regard as fixed
costs that continue with increases in supply level while variable costs tend to adjust as per
increases in output volume. Direct rates are directly connected to the conduct of company
operations, and additional costs are conversely.
CV analysis: Cost-benefit assessment is a structured method for the definition of advantages and
disadvantages of options used to determine the right effect approach while maintaining costs,
also referred to as cost-benefit assessment.
Variability in cost: this can be regarded as a process of assessing the variability proportion
between real cost as well as expected cost throughout a particular program within business
during accounting period. This is presented in ways that are unfavourable and beneficial to the
company.
The description of some costing methods which help to prepare statement and extract net
profit is stated as follows:
Absorption costing method: It is a category of costing methodology which calculates and
usually allocates the values of different operation of business. The worth of the item is defined as
continuous and unfixed spending (Chenhall and Moers, 2015).
Calculation of net profit as per absorption costing.
Quarter 1

Particulars Amount
Sales 66000
Less: Cost of sales
Production Cost (78000* 0.65) 50700
Semi variable (78000 * 0.20) 15600
Total variable cost 66300
Less: Closing stock 10200 56100
Gross Profit 9900
Less: Expenses 400
9500
Selling and distribution as fixed 5200
Net Profit 4300
Quarter 2
Particular
Amoun
t
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*.20) 13200
Production cost (66000*0.20) 42900
Total variable cost 66300
Less: Closing stock 3400 62900
Gross Profit 11100
Less: Selling expenses 2800
8300
Fixed expenses 5200
Net profit 3100
Working notes
Fixed costs 16000
Budgeted cost of production
80000 per
unit
Budgeted fixed cost 0.2
Variable cost per unit 0.65
Marginal pricing method: This methodology could be viewed as a way to assess the
costs associated with specific operations. The fixed values were measured as time charge and
contingent costs are called unit payments in a financial period.
Quarter 1
Particulars
Amoun
t
Sales 66000
Less: Cost of sales