MANAGEMENT ACCOUNTING

Costing and Budgeting

Costing and Budgeting

Task 1.1

Cost accounting is concerned with the classification, collection, control and cost allocation. The costs can add up for accounts, jobs, processes, products or business segments. The costs used in general are used for three purposes:

Provide reports on the utility costs to measure and evaluate the inventory (the income statement and balance sheet).

Provide information for the administrative control of operations and business activities (monitoring reports).

Provide information to support management planning and decision making (analysis and special studies).

The formal system of cost accounting generally provides cost information and reports for the realization of the first two objectives. However, for purposes of planning and decision making of management, this information will generally be reclassified, rearranged and supplemented with other relevant economic and trade reports taken from sources outside the normal system of cost accounting. An important function of cost accounting is to assign costs to products manufactured and to compare these costs.

The following table summarizes the classification of costs for the company

Accounting periods

Role

Nature

Method of allocation to units of product

Type of variability

Current Cost

Driving force

Wages

Salaries

Etc.

Estimated Costs

Regular social charges

Deferred Costs

Insurance

Rentals

Start-up costs

Depreciation

Industrial

Producers A-Centers Cost Center A

B Cost Centre B

C Cost Center C

Service Centers

Direct

Maintenance

Plant

Boiler

Indirect

Storage of materials

Laboratory

Administration

Commercial

Financial

Materials

Raw material A

Raw Material B

Raw Material C

Wages

3. Plant load

Driving force

Lubricants

Royalties

Depreciation

Insurance

Salaries

Social charges. Direct

Raw material

Wages

Royalties

Indirect

Driving force

Lubricants

Depreciation

Insurance

Variables

Fixed

Semi- Fixed

The various costs of production unit of the Boom Boom Company are as follows:

Direct

Raw material

Wages

Royalties

Indirect

Driving force

Lubricants

Depreciation Insurance

The manufacturing cost elements are:

Raw materials: All those physical elements are essential to consume during the process of developing a product, its accessories and packaging. This with the condition that the input consumption should relate proportionally to the number of units produced.

Direct labor: Value of work done by the workers who contribute to the production process.

The amount of raw materials and direct labor costs are the prime cost. The combination of direct labor and factory overhead is the cost of conversion.

Cost is a resource sacrificed or forgone to achieve a specific goal. The production cost is the value of all goods and efforts that have been incurred or will incur, you should consume manufacturing centers to obtain a finished product ready to be delivered to the commercial sector. The objectives and functions of the costing are as follows:

Serve as a basis for setting sales prices and to establish marketing policies.

Facilitate decision-making.

Allow the valuation of inventories.

Check the efficiency of operations.

Contribute to planning, control and management of the company.

Task 1.2

This company manufactures garments and sportswear for every-age individuals. The company used the reverse costing technique. For a t-shirt that the company sells at £ 100, with a profit margin of 25 %, needs to manufacture the t-shirt for £ ...