Report on Strategic and Competent Policy Framework
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Added on 2020-02-12
Report on Strategic and Competent Policy Framework
Added on 2020-02-12
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3Question 1....................................................................................................................................3a. Classifying cost in terms of fixed, variable and semi-variable................................................3b. Explaining other ways of cost classification...........................................................................3TASK 2............................................................................................................................................5Question 2....................................................................................................................................5a. Computing total and unit cost at different production level....................................................5b. Analyzing cost data through graphical presentation................................................................6Question 3....................................................................................................................................6Computing inventory by using various methods.........................................................................6a. First in, first out \.....................................................................................................................6b. Last-in first out........................................................................................................................7c. Average cost method................................................................................................................8Question 4....................................................................................................................................9Preparing a report of cost of goods sold in accordance with different methods..........................9Question 5....................................................................................................................................9a. Evaluating critical success factors and associated them with suitable performance indicators.....................................................................................................................................................9b.................................................................................................................................................101. Assessing the manner in which cost can be reduced.............................................................102. Presenting the ways to enhance quality.................................................................................11TASK 2..........................................................................................................................................11Question 6..................................................................................................................................11
a. Definition of budget...............................................................................................................11b. Purpose of budgets.................................................................................................................12c. Assessing the different methods of budget preparation and suggesting the most suitable onefor Smart looks..........................................................................................................................12Question7...................................................................................................................................14a. Sales budget...........................................................................................................................14b. Production budget..................................................................................................................14c. Raw material budgets.............................................................................................................14d. Labor budgets........................................................................................................................15e. Total overhead budget............................................................................................................15Question 8..................................................................................................................................16Preparing cash budget for Smart Looks for the year ended at 30th June 2017...........................16TASK 3..........................................................................................................................................17Question 9..................................................................................................................................17a. Calculating budgeted profit for March 2017.........................................................................17b. Computation of actual profit..................................................................................................17c. Calculating material and labor sub-variances........................................................................17d. Preparing an operating statement reconciled budget and actual profit..................................18Question 10................................................................................................................................18Explaining reason behind the deviations and giving recommendations for improvement........18CONCLUSION..............................................................................................................................19REFERENCES..............................................................................................................................21
INTRODUCTION Management accounting may be served as a decision making tool which in turn providesmanager with the valuable input. Hence, by undertaking the reports of budget, cost and profitbusiness unit can develop highly strategic and competent policy framework. Managerialaccounting reports help in getting deeper insight about the monetary position and performance.Hence, by making evaluation of the departmental performance in both monetary and non-monetary terms higher management team can take significant action for improvement. Thisproject report is based on the case situation of Smart Looks that offers clothes or apparel to thecustomers. In this, report will furnish information regarding the manner in which cost can beclassified and presented. Besides this, it will also shed light on the different types of inventoryvaluation methods and techniques. Further, report also develops understanding about the variousbudgeting tools and techniques which in turn facilitates optimum use of financial resources. TASK 1Question 1a. Classifying cost in terms of fixed, variable and semi-variable Categorization of costs incurred by Smart Looks is as follows:CostCategoryMaterial for clothesVariableFactory rentFixedPower for sewing machines in factorySemi-variableTelephone expensesSemi-variableOffice ratesFixedDelivery driversSemi-variableFactory heatingVariableb. Explaining other ways of cost classification Cost implies for the money which business unit incurs to manufacture and offer productsor services to the customers. Assessment of suitable cost is the prior requirement which in turnhelps business unit in determining suitable price of the products or services offered. Moreover,
by dividing the total cost from the number of units produced business unit can determine unitprice. Hence, by considering such aspect it can be stated Smart looks can set suitable price ofclothes by identifying the cost level (Baldvinsdottir, Mitchell and Nørreklit, 2010). To carry outbusiness operations and functions smoothly firm has to incur several cost which can be classifiedin following categories: On the basis of typeMaterial: It implies for the cost which business unit incurs for getting raw material tomanufacture clothes. In the context of Smart looks cost of raw fabric is considered asdirect material cost. Labor: It presents the cost of the labor time which in spent by them to manufacture theproduct (Modell, 2010). Thus, in Smart Looks, labor cost implies for the wages paid bythe firm to labors related to their work. Overhead: Cost which is incurred except material and labor is known as overhead cost.Such expenditure of firm includes promotional, insurance and others which are requiredto carry out smooth functioning. On the basis of traceability Direct cost: Such cost is also known as prime which is directly associated with theproduction or manufacturing aspect. Hence, material, wages of the workers etc aretermed as direct cost. Indirect cost: In order to ensure smooth functioning of business operations and functionsfirm has to incur various cost such as advertising, depreciation, maintenance etc. On the basis of behavior Fixed cost: Rent of building, salaries of personnel etc. are the main examples of fixedcost. Hence, fixed cost is the one which remains same at each level and does not affectfrom the output produced. Semi-variable cost: It may be served as one which remains fixed at specific at specificlevel of production and becomes variable after certain level (Lukka and Modell, 2010).Electricity, insurance expenses come under the category of semi-variable cost.
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