Sample on Analysis Of Accounting
See What Our Writers Deliver Through Our Free Samples!
Get Your Assignments at the Best Prices NOW!!
14943 Downloads I Published: 14 Mar ,2017
Managers play a crucial role in the organizations as they make policies, analyse operational difficulties and take better decisions to remove hazards and run the business successfully. Management accounting is a process of identifying, analysing and interpretation of the financial information in order to take qualified decisions. In the present project report, its importance will be discussed in accordance with a manufacturing organization named Jeffrey & Son's. The company has a wide range of popular and branded product called Exquisite.
In the present age, competition is rising at exponential rate. Thus, management accounting plays a satisfactory role in the firms as it provides reliable and prominent information’s to the managers and help to take effective decisions. In this report, numerous managerial tools such as cost sheet, budgeting process and variance analysis have been discussed. The report determines that how the techniques contribute to achieve organizational targets and ensure long term survival.
The scenario depicts material, labour, fixed and variable overheads for 200 units. Thus, unit cost can be determined by assigning these expenditures to job no. 444 (Mohapatra, 2015). On the basis of above computation, it can be reported that per unit cost for Job no. 444 will be 770£.
Jeffrey & Son's product cost can be determined through absorption costing method. The technique uses a fair allocation basis to identify the cost of Exquisite (Fisher and Krumwiede, 2015).
OAR = Total overheads/Direct labour hours
Machine X = 434905.88£/200000 = 2.17£
Machine Y = 349960.92£/150000 = 2.33£
Assembly = 250133.2£/200000 = 1.25£
Product cost = Material+Labour+Overhead
= 8£ +15£ + (2.17£*2) + (2.33£*1.5) + (1.25£*1)
= 8£+15£+4.34£+3.50£+1.25£ = 32.09£
Difference: Overhead cost of all the production departments were 5.44£, 5.83£ and 25.01£ using machine hours basis. Thus, total overhead cost and product cost are 10.35£ and 33.35£ respectively. However, on the basis of labour hours, production department overhead cost get changed to 2.14£, 2.3£ and 1.25£. Therefore, total overhead and product cost is 9.09£ and 32.09£ comparatively lower than machine hour basis. Henceforth, it can be concluded that this allocation basis is more superior as it declined the Exquisite product cost.
Comment on variances: Jeffrey & Son's material variance indicate favourable balance of 1200£. It arises due to lowering the sales unit to 1900 from 2000 budgeted units. However, material prices variance is nil as both the budgeted and actual material rate is 12£. Labour cost variance indicate adverse balance of 1000£ as labour rate got inclined to 10£ per unit. Electricity cost get declined by 375£ due to lower the production. Further, maintenance is a stepped cost that decreased by 200£ due to declined production volume.
easuring the performance is very important for all types of organizations as it helps to determine areas for making improvement. In context to Jeffrey & Son's Ltd, the performance indicators are discussed below:
Nature of budgeting process: Jeffrey & Son's managers need to forecast the amount of probable revenues and expenditures for FY. Revenues can be determined through sales estimation on the basis of probable consumer demand and previous year sales. Further, expenditures can be forecasted through identifying the material, labour and overhead payments to produce require number of units. Comparison between revenues and expenses will results in deficit or surplus. For instance, higher the revenues than expenses will indicate surplus otherwise deficit. Thereafter, Jeffrey & Son's managers have to determine the actual operational performance for variance computation. Adverse variance need to be eliminated through taking corrective actions as actual expenses are higher and actual incomes are lower than set budgeted.
Purpose of budgeting process: Jeffrey & Son's Ltd construct budget for an estimating future performance. It aims at determining operational performance of the company for future years. The budgetary tools helps to maintain business profits through controlling cost to set targets and maximize revenues (Zimmerman and Yahya-Zadeh, 2011). This in turn, Jeffrey & Son's can achieve its target objectives to a great extent. Moreover, it aims at ensure optimum allocation of business resources in various operating functions. At last, variance elimination mainly aims at meet organizational objectives for long term success of the company.
Budget must be prepared in an appropriate manner as it provides reliable and most accurate estimate towards the future period. It is beneficial because it helps to take right decisions with right cost and at right time. The present scenario depicts that sales volume is the key component in Jeffrey & Son's budget manual. Moreover, paramount takes place in order to establish co-ordination. Henceforth, it became clear that incremental technique has been applied to prepare Jeffrey & Son's budget. Thus, the marketing manager as a budget holder will face many problems. The reason behind that is this method increased all the incomes and expenses by a fixed percentage or amount without examining their future importance (cost and mangement accounting, n.d). Further, historical budget is the basis of company's budgeting process hence, it do not make proper analysis of operating functions in future context.
Zero base budgeting will be considered as most effective techniques for budget construction. The need of adopting this technique will be arise because it identifies the importance of all the operating activities for the FY (Glass, Stefanova and Prinzivalli, 2014). Thus, it helps to cut off undesired expenditures and reduce business cost. Further, through sales maximization and optimum allocation of resources, Jeffrey & Son's can improve their profit earnings. This in turn, operational performance can be improved to a large extent.
Poduction budget: Jeffrey & Son's production budget helps to determine required number of units of Exquisite product to meet customer demand efficiently (Burns and Scapens, 2000).
Closing inventory: It is maintained at 15% of the budgeted sales of following months.
July = 15% of 9000o units = 13500 units
August = 15% of 105000 units = 15750 units
September = 15% of 110000 units = 16500 units
Material purchase budget: It helps to determine the quantity of raw material need to be purchased for producing required number of units of Exquisite product.
Cash budget: It is a summarized statement of future probable cash revenues and payments. Excess of cash revenues over the cash payments called surplus cash balance while excess of cash payments over the revenues known as deficit balance (Mongiello, 20)
July = (567000+247500+85500) = 900000
August = (486000+236250+99000) = 821250
September = (567000+202500+94500) = 864000
Material variance: Nil material price variance indicates that budgeted and actual prices are constant to 2.4£. Another, material usage variance of 60(A) implies that budgeted quantity was 1400 while actual quantity used is 1425 impact operations adversely. It may be arise due to loss of material, material wastage and poor material management. Effective material management through making policies and reduce scrap will be helpful to eliminate it.
Getting Top Grades is No Longer a Dream for You.
Labour variance: Both the labour rate and efficiency variance are favourable. Jeffrey & Son's decided labour rate to 8£ while actually labour are paid at 7.8£ thus, it reduce labour cost. Furthermore budgeted hours are 350 while actual labour hours are 345. It indicates that workers are efficient and performing well.
Sales and profit variance: Lower the actual selling price and sales volume results in adverse sales variance of 180(A). It can be remove by increasing product prices in the market. Furthermore, profit variance arises due to existed sales and cost variance. Jeffrey & Son's adverse profit variance of 1120£ arise because actual sales are lower and actual cost are higher. Thus, it can be remove through achieving targeted sales and reducing cost.
Jeffrey & Son's responsibility centres play a major role in eliminating variances through taking necessary decisions. Its cost centre is responsible for controlling the product cost. As above computed variance, it can be reported that material cost variance arise due to higher uses of material quantity. Therefore, it must be advised that Jeffrey & Son's cost centre should reduce material waste to eliminate the variance. Labour overhead implies favourable variance hence, it create positive impact to the profits.
Another, revenue centre is responsible for maximizing company's sales to enhance revenues. The reason for decreasing the centre performance is company's actual selling price are lower to 3.94£ than target selling price of 4£ resulted in lower the business revenues. Thus, centre should enhance customer demand in order to increase business sales. Through achieving the sales target and minimize the cost, Jeffrey & Son's will be able to meet their profit targets and improve their actual operational result.
The above project report concluded that management accounting tools provide correct information to the managers for analytical objectives. Managers can evaluate necessary information and take better quality of decision through such tools. It provides assistance to reduce the production cost, maintain effective cash balance, control expenditures, maximize revenues and eliminate adverse variances. This in turn, firms can achieve their set target; make business growth and development for long term period.
Datar, S. M. and et. al., 2013. Cost accounting: a managerial emphasis. Pearson Higher Education AU.
Drury, C. M., 2013. Management and cost accounting. Springer.
Fisher, J.G. and Krumwiede, K., 2015. Product Costing Systems: Finding the Right Approach. Journal of Corporate Accounting & Finance.
Glass, V., Stefanova, S. and Prinzivalli, J., 2014. Zero-based budgeting: Does it make sense for universal service reform?. Government Information Quarterly.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Type: Assignment I
Published: 15 Dec ,2018 I
Introduction to Accounting Theory The act and method which taken into account in order to make the particular legislations and frameworks for reduce the negative influences on the business as well as government leaders which highly support to the business entity is known as lobbying. The person...ReadMore
Type: Assignment I
Published: 27 Aug ,2018 I
Introduction to Pat PAT which is considered as the most significant tool because it gives full information regarding to the actual transaction which take place in business world (Gunderson and et.al., 2013). This method helps to convert all accounting transaction and make effective predictions...ReadMore
Type: Assignment I
Published: 14 Aug ,2018 I
Introduction Wesfarmer is a multinational company which have many retailers and small kind of retail firms in the group or industry of retail. The aim of the report is to analyse the unethical practise of some retailers and suppliers discount which creates contravenes of several accounting...ReadMore
Type: Assignment I
Published: 02 Jul ,2018 I
Executive Summary Intangible assets of an organization can be definite or indefinite in nature which should have to be evaluated effectively and efficiently as per the accounting standard of AASB 138 and 136. Evaluation of intangible assets through recognition, acquisition and amortization should...ReadMore
Type: Assignment I
Published: 29 May ,2018 I
A Review Of Accounting And Ethical Practices As Well As An Analysis Of Internal Control System On Performance Improvement: a Case Study On a To z Vehicle Hire Company Terms of reference There are several terms of references behind conducting such study as follows: The rationale behind the...ReadMore
If the samples impressed you and you want to place an order with us just submit your queries with us and place your order.Chat With Expert
Now take our online assignment writing services in Australia.