Management Accounting Techniques of Jeffrey and Sons : Report

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Types of cost classification....................................................................................................1
1.2 Calculation of job costs.........................................................................................................2
1.3 Absorption costing technique................................................................................................3
1.4 Analysing the cost data..........................................................................................................5
Task 2...............................................................................................................................................6
2.1 Preparation and analysis of cost report..................................................................................6
2.2 Performance indicator for areas of improvements.................................................................7
2.3 Methods to reduce the cost, improve quality.........................................................................8
Task 3...............................................................................................................................................9
3.1 Budgeting process..................................................................................................................9
3.2 Budgeting methods for Jeffrey and Sons.............................................................................10
3.3 Preparation of production and material budget...................................................................11
3.4 Preparation of cash budget...................................................................................................12
Task 4.............................................................................................................................................13
4.1 Identify variances, its causes and taking corrective actions................................................13
4.2 Preparation of operating statement......................................................................................14
4.3 Report the findings..............................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

List of tables
Table 1: Classification of Costs.......................................................................................................1
Table 2: Calculation of unit cost and total job cost for job 444......................................................2
Table 3: Allocation of overheads to the production department.....................................................3
Table 4: Reapportioning the service or support department costs to the production departments..4
Table 5: Calculation of Overhead Absorption Rates.......................................................................5
Table 6: Calculation of overhead charge.........................................................................................5
Table 7: Calculation of overhead absorption rates using labour hours as a basis...........................5
Table 8: Calculation of cost.............................................................................................................5
Table 9: Calculation of Actual Costs for business...........................................................................6
Table 10: The difference between the highest and lowest costs......................................................6
Table 11: Cost Report......................................................................................................................6
Table 12: Production budget of Jeffrey & Son's............................................................................11
Table 13: Material purchase budget of Jeffrey & Son's................................................................12
Table 14: Cash Budget...................................................................................................................12
Table 15: Calculation of variances................................................................................................13
Table 16; Operating Statement......................................................................................................14

INTRODUCTION
Management accounting is a branch of accounting which helps in taking different types
of managerial decisions for the company. The interpretation of figures assists in adopting
strategic actions. The purpose of this research study is to analyse the cost information within the
business. It shows the impact of budgeting process on the organization (Jorgensen, Patrick and
Soderstrom, 2012). Further the development of cost reduction and management procedures are
also shown. The report shows how the data is collected, compiled and evaluated. The whole
information is processed to make it useful for the business managers. At last the report will end
in investigating the process of budgetary planning and control. The study is in context with a
manufacturing organization named Jeffrey and Sons. It will discuss all the various management
accounting practices and technique for achieving the organizational goals.
TASK 1
1.1 Types of cost classification
Following types of costs can be allocated for Jeffrey and Sons for better decision making
Table 1: Classification of Costs
Classification Types of costs
Nature  Labour Costs
 Material Costs
 Overheads
Behaviour  Semi Variable Costs
 Variable costs
 Fixed Costs
Function  Joint costs
 Operating costs
 Contract costs
 Process costs
Element  Sunk costs
 Marginal costs
 Opportunity cost
1