Management Accounting Practices and Applications
Added on 2020-01-28
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Management Accounting:Costing And Budgeting
TABLE OF CONTENTSINTRODUCTION ..........................................................................................................................3TASK 1............................................................................................................................................31.1 Varied kind of classifications of cost.....................................................................................31.2 Unit cost as well as total cost for job 444..............................................................................51.3 Calculation of cost.................................................................................................................51.4 Analysis of cost data of exquisite using appropriate technique.............................................7TASK 2............................................................................................................................................82.1 Preparation as well as analysis of cost report........................................................................82.2 Utilization of several performance indicators used for identification of areas for potentialimprovement................................................................................................................................92.3 Suggestion of ways for reduction of costs, enhancing value as well as quality .................10TASK 3..........................................................................................................................................113.1 Purpose and nature of procedure of budgeting to holders of budget of Jeffery and Sons Ltd.....................................................................................................................................................113.2 Appropriate methods of budgeting for organization and its requirements .........................123.3 Preparation of production budget and material purchases budget ......................................123.4 Preparing cash budget..........................................................................................................13TASK 4..........................................................................................................................................154.1 Calculation of variances, identification of possible outcomes and recommending correctiveactions .......................................................................................................................................154.2 Preparation of operating statements reconciling budgeted as well as actual outcomes.......164.3 Reporting of findings to management as per the identified centres of responsibility.........16CONCLUSION .............................................................................................................................17REFERENCES..............................................................................................................................182
INTRODUCTION The term management accounting is includes preparation as well as offering financial andstatistical information that is accurate as well as on time. Such is needed by the executives formaking day to day and short term decisions. The management accounting reports are forwardlooking and are confidential as well as can used for internal purpose only (Demski, 2013). Therole of management accounting is suitable in making development of reports on weekly andmonthly basis for internal audiences which is comprised of departments of executives and chiefexecutive officer. Under management accounting executives makes utilization of provisions ofaccounting information for the sake better informing themselves before making decision on thematters in the firm. This assist in the management as well as performance of the controlfunctions. In the present report management accounting has been discussed with respect to Jefferyand Sons. The study entails to understand the classification of varied kinds of cost. Further itincludes calculation of the costs by using suitable tools. Along with this the present reportinvolves the purpose as well as nature of the budgeting process. TASK 11.1 Varied kind of classifications of costCost includes all the expenses of the firm that are incurred in producing the products inthe organization. The cost classification is done on several basis that have been discussed in themanner stated as below:ElementsThere is presence of three elements of product cost that includes labor, material as well asoverhead. Jeffery and Sons is required to purchase material for manufacturing its product.Therefore the expenses are incurred on material is considered as material cost. For example, inautomobile organization steel is used for production. It is the core part of the product. Lack ofmaterial might nit lead to production with effectiveness. Along with this expenses of labour areincurred due to payment made to personnel. In contrast to this expenses includes all theexpenditures of organization that are attached with manufacturing carried out by Jeffery andSons in the market. For instance, payment done for consumables is considered direct expenses. 3
FunctionOn the basis of function classification of cost is done under the categories that are asfollows. Such is comprised of expenses relating with manufacturing and non manufacturing. Theexpenses of manufacturing are regarded as production expenses that are incurred in the processof production by cited firm (Method of costing, 2014). The whole overheads of factory will beincluded under manufacturing expenses by Jeffery and Sons. In contrast to this nonmanufacturing expenses are not associated with manufacturing procedure of Jeffery and Sons.This is comprised of office, marketing expenditure and stationery that are not related withmanufacturing. NatureThere is existence of two cost types under this which includes indirect and direct cost.Direct cost is regarded as prime cost that is attached to specific object of cost. For instance,direct cost includes material, labor, production and manufacturing expenses (Albrecht, Stice andStice, 2010). In contrast to this expenditures that are not related with manufacturing carried outby Jeffery and Sons are indirect cost. This involves offices rent and rates. BehaviorOn the basis of behavior cost is categorized as follows. Such is comprised of fixed,variables, semi-variable and stepped fixed cost. Fixed cost does not relate with product volumeand hence it remains constant. Moreover it is not influenced by the increase or decrease withinthe production. In contrast to this variable cost is regarded as one that changes with alteration inthe production volume. Building rent, salary of watchmen, insurance and depreciation areconsidered fixed cost (Fullerton, Kennedy and Widener, 2013). However variable cost iscomprised of material as well as wages to labor. Further stepped fixed cost is one which isconstant to certain limit of production and then it enhances to high level after attaining certainproduction limit. Following this another one is semi-variable cost which is similar to certain limitof production and then it alters with the increase or decrease in the production. For example,semi-variable cost involves telephone bills and electricity. 4
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