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Unit 13 Costs and Revenues Assignment Solution

   

Added on  2021-01-01

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Unit 13 Costs and revenues

Table of ContentsINTRODUCTION...........................................................................................................................1LO 1.................................................................................................................................................11.1 Purpose of internal reporting and providing accurate information to management..............11.2 Relationship between various costing systems ....................................................................11.3 Responsibility centres, cost centres, profit centres and investment centre...........................21.4 Characteristics in different types of cost classifications and their use in costing.................21.5 Difference between marginal and absorption costing...........................................................3LO 2.................................................................................................................................................32.1 Cost information for material, labour and expenses in accordance with organisation'scosting procedures.......................................................................................................................32.2 Cost information for material, labour and expenses in accordance with organisation'scosting procedures.......................................................................................................................42.3 Various stages of inventory...................................................................................................42.4 Value inventory with FIFO, LIFO and weighted average ...................................................52.5 Describe behaviour of different costs such as fixed, variable, semi-variable and stepped...82.6 Record cost information with using job, batch, unit, process and service costing systems..8LO 3.................................................................................................................................................93.1 Attribute overhead costs to production and service cost centres in accordance with agreedbases............................................................................................................................................93.2 Calculate overhead absorption rates in accordance with suitable bases of absorption suchas machine hours and labour hours.............................................................................................93.Prime cost.................................................................................................................................93.3 Make adjustment for under and over recovered overhead costs in accordance withestablished procedures..............................................................................................................103.4 Review methods of allocation, apportionment and absorption at regular intervals withimplement agreed changes to methods.....................................................................................113.5 Communicate with relevant staff to resolve queries...........................................................11LO 4...............................................................................................................................................124.1 Compare budget costs with actual costs and noting any variances.....................................124.2 Analyse variance for management reports..........................................................................124.3 Provide information for budget holders of any significant variance, making validsuggestions for remedial actions...............................................................................................124.4 Prepare management reports in appropriate format with required timescales....................13LO 5...............................................................................................................................................135.1 Prepare estimates of future income and costs for decision making....................................135.2 Effect of changing activities levels on unit costs................................................................135.3 Calculate effect of changing activity levels on unit costs...................................................145.4 Factors affecting short term and long term decision making..............................................14CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16

INTRODUCTIONIn every business, revenue generated with generated product equals to the costs whichincurred in producing, selling and delivering products to ultimate customers. Break even analysisblends with cost and revenue analysis that assists to determine new product or services to solvefinancial sense (Ghiyasi, 2017). Present study based on Marks and Spencer which deals in retailsector business. It is British multinational retailer which specialise products in selling ofclothing, home products and luxury food. For gaining insight information of the present study, it covers relationship betweendifferent costing systems. Furthermore, Value inventory also measure with LIFO, FIFO andweighted average method. Moreover, it provides description of allocation, apportionment andabsorption at regular intervals with implement agreed changes to methods. At last, factorsidentifying that affect short and long term decision making. LO 11.1 Purpose of internal reporting and providing accurate information to managementIn the Marks and Spencer, internal reporting consider important role which involvescompilation of financial and operational information on frequent basis. It is distributed in thebusiness to improve performances. It helps to provide accurate information to managementwhich includes expense trends, failure rates, detailed sales data, etc. (Shepherd, 2015). Objectiveof financial reporting has been analysed and accomplish purpose to examine resources to manageenterprise. It is also important to provide information regarding financial position, performanceand changes in enterprise. Economic decisions also taken to management to accomplish goalsand objectives. 1.2 Relationship between various costing systems There are different types of costing systems that accumulate information based oneffective approach that mixes and matches to meet with needs. Following are different costingsystems:Historical costing: In this type of costing system, costs ascertained after it is incurred.Main objective to ascertain cost which occur in the past. In Marks and Spencer,accumulation of cost incurred in systematic manner. Hence, actual figures comparedwhen standards develop (Nguyen, 2018). 1

Absorption costing: Under this costing, all fixed and variable costs allotted with cost unitand total overheads that absorbed as per activity level. In this system, Marks and Spencerconsider fixed manufacturing overhead that are allocated in stock valuation.Direct costing: In this aspect, method of costing included in which product is chargedwith cost which vary with volume. In Marks and Spencer, variable and direct costsincluded such as direct material, direct labour and variable manufacturing expenses(Weisbach, Heme and Nou, 2018). In respect to consider relationship between these costing, it can be stated that mainobjectives of all costing is to set future price of product. Furthermore, it is also used for stockvaluation that helps to charge price to gain revenue and ascertained traditional form of costascertainment. 1.3 Responsibility centres, cost centres, profit centres and investment centreFollowing are different centres in Marks and Spencer:Responsibility centre: Responsibility centre is organisational unit that headed by managerand responsible for different activities and results. In this aspect, Marks and Spencer musttake responsibility accounting which included revenues and cost information that arecollected and reported by responsibility centres.Cost centre: Cost centre is a part of an organisation in which costs may be charged foraccomplish accounting purposes (Yang and Chen, 2018). Profit centre: Profit centre is a part of an organisation with assignable revenues and costfor ascertainable profitability. Investment centre: Investment centre is a classification which used in the enterprise andessential element to measure its use of capital in term of raw costs or profits. 1.4 Characteristics in different types of cost classifications and their use in costingIn different types of cost classification, costing considered arriving at a company'scontribution. These types of information have been used for break even analysis. Fixed and variable costs: In Marks and Spencer, expenses separated into differentaspects such as variable and fixed cost. Revenue can be contributes as margin withinformation that is used for break even analysis (Bai, Chen and Xu, 2017). Departmental costs: Expenses are assigned to Marks and Spencer which is responsiblefor staff. This information, trend to examine ability. 2

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