Management Accounting technique
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Added on 2020-01-21
Management Accounting technique
Added on 2020-01-21
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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Classification of cost on the basis of nature.....................................................................11.2 Calculation of unit cost.....................................................................................................21.3 Calculation of the cost by using absorption costing technique........................................21.4 Calculation of overhead absorption rate using direct labor hours....................................4TASK 2............................................................................................................................................52.1 Preparation of cost sheet and variance analysis...............................................................52.2 Various performance indicators used to identify the areas of potential improvements...62.3 Ways to reduce cost, enhancing value and quality...........................................................7TASK 3............................................................................................................................................83.1 Nature and purpose of budgeting process........................................................................83.2 Appropriate budgeting method for the organization and its need....................................93.3 Material purchase budget and production requirement budget........................................93.4 preparation of cash budget..............................................................................................10TASK 4..........................................................................................................................................114.1, 4.2 Variance analysis and recommendation corrective actions.....................................114.3 Findings of management in accordance with responsibility centers..............................13CONCLCUSION...........................................................................................................................13REFERENCES..............................................................................................................................14
INDEX OF TABLESTable 1: Calculation of total cost and per unit cost for a job...........................................................2Table 2: Calculation of overhead absorption rate using direct labor hours.....................................4Table 3: Preparation of budgeted and actual cost (In £)..................................................................5Table 4: Variance analysis...............................................................................................................5Table 5: Production budget for July, August and September (In Units).........................................9Table 6: Material purchase budget (In Kg)....................................................................................10Table 7: preparation of Cash budget..............................................................................................10Table 8: Calculation of budgeted cost for 4000 units....................................................................11Table 9: Operating statement reconciling both budgeted and actual results.................................11Table 10: Calculation of per unit variances...................................................................................12
INTRODUCTIONCost play an important role in growth of an organization's because it is cost by payingwhich firm earn revenue. All issues related to cost are handled by using management accountingtechnique. In the report all methods of management accounting are used. In the report costs areclassified and they are explained in detail in the report. Apart from this, in the report budget isalso given and necessary comments are made on same in the report. At the end of the report,variance analysis is done and actual results are compared with the budgeted results in order toidentify variance in the company performance. After that results are also interpreted in propermanner. At the end of the report, responsibility centers are also explained in detail in the report.TASK 11.1 Classification of cost on the basis of natureFollowing are the categories in which costs are classified.Elements of cost- There are three elements of cost namely material, labor and overheadcost. Material cost refers to the cost which is incurred in purchasing raw material fromsuppliers. On other hand, labor cost refers to the wages that are paid to the employees fortheir involvement in production process. Overhead refers to the indirect expenses that areincurred in relation to the production of goods and services (Kaplan and Atkinson, 2015).All these costs are combined in order to identify per unit cost of the product.Function- Function refers to the costs that are related to various departments that areoperating in Jeffrey and sons. With expansion in activities of the departments, costs of anorganization also increase. Hence, firm is required to take some steps in order to makesure that expenses will remain in control.Nature- On the basis of nature, cost can be divided into various parts like direct andindirect cost. Direct cost refers to the expenses which are directly related to theproduction of goods and services. Example of direct expenses is labor and material cost(Zimmerman and Yahya-Zadeh, 2011). On the other hand, indirect expenses refer to theexpenses that are indirectly related to the production of goods. Examples of indirect costare carriage expenses etc.Behavior- From the behavior point of view, cost can be divided into three parts fixed,variable and semi variable cost. Fixed cost refers to the cost that never changes duringlifetime of the company. Plant and machinery expenses are the best example of fixed1| P a g e
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