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HA2011 Report on Activity based Costing and Budgeting

Added on - 28 May 2020

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Running Head: Management AccountingManagement Accounting
Management Accounting2Executive Summary:This report consists of 2 cases on is based on activity based Costing and another onBudgeting. The case of Activity based costing is about the US Bright Product Companywhich produces cakes and pastries. This case is about the allocation of cost on the basis ofactivity driver and total product cost of the company and per unit cost. The cost is calculatedby using Activity based costing. In first part per unit cost is calculated by using the activitydrivers allocated for each cot. In the second part the billing amount and the cost per unit hasbeen calculated of Lamington division and in the last part the additional cost required tocalculate the product cost is mentioned as without that the calculation of the total cost will beincomplete.The case of budgeting is about Hawthorn Leisure Works which offers tennis courtsand other physical fitness facilities to its members. They want to implement a new planregarding the membership fee of HLWs as under old plan the revenue is generated frommembership fee and court fee and in the new plan the revenue only comprise of membershipfee. The company wants to plan revenue according to the new plan as they think that as perthe new plan their revenues will increase. They want a complete analysis as the revenuecomparison in between the old plan and the new plan.
Management Accounting3Table of ContentsTask A...................................................................................................................................................4Introduction:......................................................................................................................................4Part (a)...............................................................................................................................................4Part (b)...............................................................................................................................................5Part (c)...............................................................................................................................................5Conclusion:........................................................................................................................................6Task B...................................................................................................................................................7Introduction:......................................................................................................................................7Part (a)...............................................................................................................................................9Part (b)...............................................................................................................................................9Part (c)...............................................................................................................................................9Conclusion:........................................................................................................................................9References:..........................................................................................................................................10
Management Accounting4Task AIntroduction:Activity Based Costing is the method of costing in which the indirect cost are allocated on thebasis of cost drivers. The total cost is estimated and then it is divided with the annualproduction to arrive at cost per unit. The activities are differentiated on the basis of the natureof the cost and then allocation of indirect cost is made on the basis of the activity drivers.This case is about the costing system of US Bright Product Company which isproducer of cakes and pastries. The cost per unit and the total cost of manufacturing arecalculated using ABC costing techniques (Wiese, 2009). In first part cost per unit iscalculated by allocating cost as per the cost drivers and the total cost for producing one unit iscalculated by summing up all the allocated cost . In second part the bill of activities ofLamington has been prepared and then the cost per unit of producing cakes and pastries iscalculated and in the last part additional cost required to calculate the product cost estimatedis mentioned as without adding that cost the cost of product cannot have a true value.Part (a)The cost per unit is calculated by allocating the cost to the cost drivers. Through this the costof producing one unit is also calculated by adding all the cost (Potts, Keith and Ankrah,2014). The cost drivers are as per the nature of the cost all the costs have their cost driversbased on the nature and type of cost. The allocation is done by dividing the cost with its costdrivers.Calculation of Cost per UnitActivityActivity CostActivityQuantity ofActivityDriverRate perunitPrepare annual Accounts5,000.00Process Receivables15,000.0050003.00Process payables25,000.00250010.00Program production28,000.00100028.00Process Sales Order40,000.00400010.00Dispatch sales Order30,000.00250012.00Develop and test products60,000.00Load Mixers14,050.00100014.05Operate Mixers45,900.002000000.23Clean mixers6,900.0010006.90Move mixture to filling3,450.002000000.02Clean Trays20,000.00160001.25Fill trays16,000.008000000.02Move to Baking8,000.00160000.50Set up ovens50,000.00100050.00
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