Management Accounting Assignment task
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Added on 2020-01-23
Management Accounting Assignment task
Added on 2020-01-23
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MANAGEMENTACCOUNTING1
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INTRODUCTIONIn the modern era, top level manager plays a crucial role in the business growth and survivalas they make plans, strategies and policies for the successful running. Smart Looks is a clothmanufacturing retailer that produce variety of clothing goods to satisfy their clients. The presentproject report targeted at examining the significance of various budgeting planning and costclassification with the practical illustrations for aids in decision-making. Moreover, the report willalso analyze the usefulness of variance analysis for taking corrective measures for cost-minimization and revenue maximization to attain defined targets. TASK 1Q.1. (A) Different types of cost behaviourCost accounting is a major field or area of accounting that measures, examine and inspectthe production cost, so that, cost can be computed accurately which aids in rationalized businessdecisions (Angelakis, Theriou and Floropoulos, 2010). In the given scenario, it has been stated thatSmart Looks is a cloth manufacturing retailer that produce variety of clothing goods to satisfy theirclients. Cost behaviour indicates that whether particular expenditures will changes with the changein the production level or not. On the basis of it, cost has been segregated in the followingcategories that are enumerated underneath:As its name, these expenses do not alter at the higher and lower production level and incureven at nil production level also. In other words, it can be stated that all those expenditures whichremains constant or fixed at distinctive output volume are known as fixed cost i.e. rent. Variable cost:Unlike the above, expenditures that undertook proportionate change with thehigher and lower production level in the same direction falls in this category. Being a cloth retailercompany, Smart Looks has to buy more quantity of material for exceeding their overall productionunits which shows that material is a variable cost (Schaltegger, Gibassier and Zvezdov, 2013). Semi-variable cost: This also can be referred as mixed costs which comprises both the fixed& variable elements. To a fixed level, it remains constant and thereafter it changes in the directionof change in total volume of production. High-low method is often used by the firms to segregatemixed cost into fixed and variable (Burritt and Schaltegger, 2010). ExpendituresType of costMaterial for clothesVariable costs3
factory rentFixed costspower for sewing machines in factoryVariable costsfactory supervisors’ wagesSemi-variable costpackaging materialsVariable coststelephoneSemi-variable costoffice ratesFixed costsDelivery drivers’ paySemi-variable costfactory heatingFixed costs(B) Other ways of types of costsThere are many other type of costs that a Smart Looks can incur while executing theirregular functioning and business practices, that are described hereunder:On the basis of traceability: Direct cost: As name, expenditures that are directly associated and can be traced to the eachproduction unit are called direct cost. With the given scenario, the quantity of clothing material thatSmart Looks use in their production functions is an example of direct cost. Indirect costs: In contrast to the above, indirect costs include all those payments made bySmart Looks that cannot be directly traced to each item produced by the company. On the basis of function:Factory cost: It comprises all the factory related expenditures incurred by the Smart Lookswhile producing the cloth items i.e. factory rent, power etc (Li and et.al., 2012). Administrative cost: As its name, it consists of office-related payments that are paid inconnection with the administrative purpose for handling regular operations. Marketing cost: Smart Looks encourage and motivate their consumers for the growth indemand, therefore, they advertise their goods and services which are the part of marketing cost i.e.cost of advertisement (Chouhan, Soral and Chandra, 2017). ExpendituresTraceabilityFunction Material for clothesDirect cost Factory cost factory rentIndirect costs Factory costpower for sewing machines in factoryDirect cost Factory costfactory supervisors’ wagesIndirect costs Factory costpackaging materialsDirect cost Marketing costtelephoneIndirect costs Administrative costoffice ratesIndirect costs Administrative costDelivery drivers’ payIndirect costs Administrative costfactory heatingIndirect costs Factory cost4
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