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Report on Different Types of Costs Incurred in Business | Jeffrey & Sons

   

Added on  2020-02-05

23 Pages4665 Words77 Views
MANAGEMENT ACCOUNTING

TABLE OF CONTENTSINTRODUCTION ..............................................................................................................1Task 1................................................................................................................................11.1 Classification of different types of cost....................................................................11.2Calculation of unit cost and total job cost for job 444...............................................31.3Calculation of cost of Exquisite ...............................................................................41.4 Analysing the cost data of Exquisite by using appropriate techniques...................5Task 2................................................................................................................................62.1Analyse and preparation of cost report for the month of September.......................62.2 Performance indicators to identify areas for potential improvements.....................82.3Ways to reduce costs and to enhance value and quality.........................................8Task 3................................................................................................................................93.1Purpose and nature of the budgeting process to the budget holders of Jeffrey andSon's..............................................................................................................................93.2Appropriate budgeting method need to be used by the organisation and its needs.....................................................................................................................................103.3Formulation of production and material purchase budgets....................................103.4 Preparation of cash budget...................................................................................11Task 4..............................................................................................................................124.1Calculation of variance, assessment cost and recommend corrective actions.....124.2Preparation of operating statements which reconcile both budgeted and actualresults..........................................................................................................................144.3Finding to management in accordance with identified responsibility centres........15Conclusion.......................................................................................................................15References ......................................................................................................................15

INTRODUCTION Accounting related to managerial activities is related with preparing differenttypes of financial statements in order to analyse the financial and statistics data. It isperformed to achieve long term as well as short term objectives. It can also beconsidered as the activity of recording information which affects the business activities.This report will talk about the different types of costs which are incurred in thebusiness. A company named Jeffrey & Sons has been considered. Along with that costof exquisite is also evaluated by using different kinds of approaches. Methods related tocost improvements are also mentioned in the study. In this report, purpose and nature of the budgeting process are discussed. Alongwith this, appropriate budgeting method that can be used by Jeffrey & Son's is alsodiscussed. Further cash budget related to the company has been prepared in order tofind the amount of cash inflow and cash outflow. Along with this, variance is alsocalculated (Abdel-Kader and Luther, 2008).1

TASK 11.1 Different types of costsFollowing are the costs on the basis of behaviour Fixed cost:- It is the cost which does not change from time to time. Fixed costincludes the cost of building, factory rent and legal bills.Semi-variable cost: - This cost is of fixe nature and remain fixed tillpredetermined limit and then started changes. In other words it could be said thatthe cost of the goods produced remain fixed till the certain limit is not cross andonce the limit exceeds the cost became variable. For example: Charges likeelectricity, phone bills are considered semi-variable costs.Variable cost:- This kind of cost keeps on changing with the change in theoutput. For example: - cost of purchasing goods (Ahrens and Chapman, 2007). Following are the costs on the basis of functions Production cost: -. It is the cost which is beard by the firm during the productionof goods and services. Commercial cost: - This kind of cost is incurred by the firm while performing itsdifferent types of operations and functions. Commercial cost includes theadministration and selling & distribution cost. Following are the costs on the basis of elementsMaterial:- This kind of expenses arises while the course of conversion of rawmaterials into the finished goods. Labour:-It is the cost which is related to the human resource. It includes the costof wages and salaries to the employees, employees insurance and tax benefits.Overhead:- This kind of expense cannot be conveniently traced to or identifiedwith any particular cost unit (Bisbe, Batista-Foguet and Chenhall, 2007).1.2 Calculation of unit cost and total job cost for job 444Cost sheet is documented in order to accumulate the costs related informationwith the product. 2

Hence the company is required to obtain £770 for the production of units.(Purpose and nature of budgeting, 2016).3

1.3 Calculation of cost of Exquisite A) Allocation and apportion of overhead to the production department of machine X. Yand assembly Production departmentServicedepartment ParticularsBasis ofallocationTotal in(£)Machine X(£)Machine Y(£)Assembly 1 (£)Stores (£)Maintenance (£)Indirectwages andsupervisionAllocated362000.001000009950092500100006000IndirectmaterialAllocated253000.001000001000004000040009000light andheatingAreaoccupied50000.0020000500015000150005000rentAreaoccupied100000.002000010000300003000010000 insuranceandmachineryBookvalue ofmachinery 15000.0079474,96699334975 96.096depreciationBookvalue ofmachinery 150000.0079.47049,6689993349705960Insuranceof buildingAreaoccupied25000.0050002500750075002500salaries ofworkmanagementNo. ofemployees80000.0024000160002400080008000Sub totals346,4128763421992779961010564

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