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Various Type of Costs of the Cited Firm | Assignment

Added on - 14 Feb 2020

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Management Accounting: Costing andBudgeting
Table of ContentsIntroduction.....................................................................................................................................3Task 1...............................................................................................................................................3Q1.................................................................................................................................................3Q2.................................................................................................................................................4Q3.................................................................................................................................................6Q4................................................................................................................................................7Q5.................................................................................................................................................8Task 2.............................................................................................................................................10Q6...............................................................................................................................................10Q7...............................................................................................................................................11Q8...............................................................................................................................................12Task 3.............................................................................................................................................12Q9...............................................................................................................................................12Q10.............................................................................................................................................14Conclusion.....................................................................................................................................14References......................................................................................................................................152
INTRODUCTIONManagement accounting can be defined as form of accounting which enable organizationin conducting their operation with more efficiency. It gives statistical information to themanagers so that they can take effective decisions for the growth of the companies. That is thegreat tool that assists in planning, budgeting, controlling and measuring the overall performanceof the entity to great extent(Lobo and Zhao, 2013). For the present report Smart Looks is beingtaken into account which is a cloth making organization and supply its products to variousretailers. Current assignment will classify the various type of costs of the cited firm. It willcalculate the unit cost and these costs will be analyzed in graphical way. Furthermore, FIFO,LIFO and average cost methods will be used in order to compute the inventory. Sales,production, labour, total overhead budget will be prepared in this study.TASK 1Q1A) Classification of costsFixed cost:It is the type of cost which remain constant in each situation. These areoperating expenditures which are necessary for the entities for running the businesssmoothly. These are unavoidable spending which help the management of Smart Looksin analyzing the break even point(Schreinemachers, Ebert and Wu, 2014).Variable costs: This is another type of expenditures that are directly depended upon thequantity of output. If production volume get changed then it affects the variable costs aswell.Semi variable costs:It is the type of costing which is nature of both fixed and variablecosts. It is fixed when amount of spending is within specific level but when it getssurpassed then it turns into variable thus, called as semi-variable costs(Tsai P. and et.al,2015).Classifications of costs are as following:Fixed costVariable costSemi-veritable costMaterial for clothsFactory rent3
Power for sewing machinesin factoryFactory supervisors wagesPackaging materialTelephoneOffice ratesDelivery drivers payFactory heatingb) Other ways of classifying the costsThere are many other ways of classifying the costs, which are described as below”Controllable and Uncontrollable costsControllable cost can be defined as such expenditures which can be influenced by themanagement decision. Direct material, direct labour are such decision for that managers of SmartLooks are responsible and individual can take decision on these matters. For example salesmanage can make control over salaries of employees, individual can give commission to themrather than fixed wages. On other hand uncontrollable costs are such spending over whichmanagers have no control. For example rent, corporate overhead allocation etc(Vasin,Kartunova and Weber, 2013).Normal and abnormal costsNormal costs are those expenditures which takes always place in the normal conditions.For instance maintenance, salaries paid etc. On other hand abnormal costs are such spendingwhich are irregular such as destruction due to fire, lock outs etc.Historical and pre-determined costsPre-determined costs are which expenditures which are computed before thestarting of production process in process. Historical expenditures are such cost which areavailable when production gets completed(Robbins and Simonsen, 2012).Q2a) Total cost and unit costParticularsUnit cost15000 units20000 units25000 units4
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