Cost Accounting and Performance Management

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timer Asked: May 13th, 2017
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Question Description

1.1

Explain the relationship of cost accounting to financial and managerial accounting

1.2

Compare and contrast various Cost classification methods

1.3

Estimate inventory values using different methods

1.4

Differentiate between cost, profit, investment and revenue centres.

1.5

Separate the fixed and variable elements of total costs using a suitable method in a given situation

3.1

Explain and illustrate the difference between standard cost card under marginal and absorption costing

3.2

Compute and interpret price and usage variances for material, labour, and overhead inputs

3.3

Reconcile budgeted profit with actual profit under standard absorption costing.

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COLLEGE OF BANKING AND FINANCIAL STUDIES DEPARTMENT OF PROFESSIONAL STUDIES Assignment Front Sheet (Assignment – 1) Qualification Unit number and title Pearson BTEC Level 5 HND Diploma in Accounting. Cost Accounting and Performance Management Semester Batch - Spring 2016-2017 IV Student name Assessor name Ms. Shobhna & Ms. Vruti Student No. Internal Verifier (IV) name Dr. Roslin Date issued Completion date Assignment title Understand The Nature Source And Purpose Of Management Information And Cost Accounting Concepts And Be Able To Compare Actual Costs With Standard Costs And Analyse Variances. Learning Outcome Learning outcome Assessm ent Criteria 1.1 LO- 1 Understand the Nature source and purpose of management information and cost accounting concepts 1.2 Compare and contrast various Cost classification methods 1.3 Estimate inventory values using different methods Differentiate between cost, profit, investment and revenue centres. Separate the fixed and variable elements of total costs using a suitable method in a given situation Explain and illustrate the difference between standard cost card under marginal and absorption costing Compute and interpret price and usage variances for material, labour, and overhead inputs Reconcile budgeted profit with actual profit under standard absorption costing. 1.5 3.1 LO - 3 In this assessment you will have the opportunity to present evidence that shows you are able to: of cost Explain the relationship accounting to financial and managerial accounting 1.4 Understand and be able to compare actual costs with standard costs and analyse variances Submitted on 3.2 3.3 Task Evidence no. (Page no) 1 2 3 4 5 6 7 8 I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Student signature: pg. 1- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Date: In addition to the above PASS criteria, this assignment gives you the opportunity to submit evidence in order to achieve the following MERIT and DISTINCTION grades Grade Descriptor Indicative characteristic/s Contextualisation M1 Identify and apply strategies to find appropriate solutions To achieve M1, explore the relationship between Cost, Financial and Managerial Effective judgements have Accounting. (Task 1). To get M1 you should make the effective judgement between been made. M2 Select / design and apply appropriate methods / techniques A range of methods and techniques have been applied standard cost and standard costing. (Task 6) A range of sources of information has been used M3 Present and communicate appropriate findings The appropriate structure and approach has been used To get M2 you should be able to select suitable method to separate the fixed and variable elements of total costs and explain it. You should explain the concept of cost behaviour used in the identified method. (Task 5) To get M2 Use appropriate method to calculate sales variances accurately.(Task 7) To achieve M3 you will need to differentiate Inventory values and present the reasons of difference between the stock values. (Task -3). To get M3. You should be able to make judgement, of the responsibility centre and explain how managers of responsibility centres are responsible for the performance of their part of the organization and its activities and how the performance is measured.(Task 4).To get M3 Present and communicate appropriate findings to explain the concept of reconciliation statement using different methods.( Task 8) D1 Use critical reflection to evaluate own work and justify valid conclusions Realistic improvements have been proposed against defined characteristics for success To achieve D1 you should evaluate the process of inventory control system.(Task -3)To get D1 evaluate the reasons for the occurrence of adverse and favorable variances.( Task -7) D2 Take responsibility for managing and organising activities Autonomy/independence has been demonstrated To achieve D2- Recognize the interrelationship between variances.( Task 7) D3 Demonstrate convergent /lateral / creative thinking Innovation and creative thought have been applied A range of sources of information has been used pg. 2- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Assignment Brief Purpose of this Assignment: Involvement with costs is fundamental to the role of management accountants. Any Business, whether it manufactures goods or provides a service, needs to know how much its product or services cost and how these costs might change in response to decisions made. This assignment will help you understand the nature source and purpose of management information and cost accounting concepts and to compare actual costs with standard costs and analyse variances. It also helps to understand performance measurement models: Balanced scorecard, benchmarking, types of benchmarking. Task 1 (LO-1 AC -1.1) P,M1 1.1 Explain the relationship of cost accounting to financial and managerial accounting. Context- Relevant to L.O.1.1 (P, M1) Financial accounting system provides information about profits and so on to shareholders and to the other interested parties. Management Accounting system provide information specifically for the use of managers within an organization. Cost accounting is a part of management accounting and provides a data for the management accountants to use. Pass: To get the Pass Grade explain briefly Cost accounting, Management Accounting and Financial Accounting and explore the relationship between them. M1- To achieve M1, make an effective judgement by differentiating Cost, Financial and Managerial Accounting. Task 2. (LO-1 AC 1.2 ) Compare and contrast various Cost classification methods. Tested in semester – 3 Management Accounting Costing and Budgeting. (Learning Outcome 1.1) Classify different types of cost. Task 3 (LO -1 AC 1.3) P, M3, D1 1.3 Estimate inventory values using different methods. Scenario-1 Inventory can be defined as items of value held for use or sale by an enterprise and usually comprise of raw material supplied used for production work in progress and finished goods at the end of an accounting period. Different methods are used to value inventory. It is the means by which store ledger account of goods is debited with the value or amount of goods received and credited with the value of goods disposed of or sold during the accounting period. pg. 3- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Al Kans is a construction Company. The company discloses the following information about the stock for the month of January 2017: Date 1st January 4th January 7th January 10th January 11th January 15th January 20th January 25TH January 27th January 28th January Purchases/Sale Opening Stock Sale Purchase Sale Sale Purchase Purchase sale Purchase sale Kgs 1000 500 300 400 200 450 200 475 350 500 Cost per unit ($) 12.00 11.50 10.00 9.25 9.00 Pass - To achieve Pass grade you should be able to estimate inventory values of Al Kans Company on 31st January using FIFO and AVCO methods. M3 - To achieve M3 you need to present appropriate findings by differentiating Inventory values calculated above and present the reasons of difference between the stock values. D1- To achieve D1 you should evaluate the process of inventory control system and justify it. Task 4 (LO-1 AC- 1.4) P,M3 1.4 Differentiate between cost, profit, investment and revenue centres. Scenario: Seasons is a chain of hotels located in middle east region. Booking can be made directly with the hotel or via a call centre. Each hotel has a restaurant which is open to the public as well as the guests. The hotel manager has a capital expenditure budget although the head office makes all decision regarding the purchase of new hotels. Difference between cost, profit, revenue and Investment centres are important for allocating responsibilities. Suggest which of the following responsibility centres would be categorised as a cost centre, revenue centre, profit centre and investment centre. 1. 2. 3. 4. Booking call centre The Hotel The restaurant. Housekeeping department Pass- To get the Pass grade explain responsibility accounting and differentiate between cost, profit, investment and revenue centres. M3- To get M3 grade present appropriate findings of the above scenario and link them with the appropriate responsibility centres and communicate how managers are responsible for their centre’s performance and how the performance is measured. Task 5 (LO-1 AC- 1.5) P,M2 pg. 4- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 1.5 - Separate the fixed and variable elements of total costs using a suitable method in a given situation. Scenario- 3 Albatross Plc. is a subsidiary of a British packaging Company, it is preparing its budget for the year to 30th June 2017. In respect of Fuel oil consumption. It is desired to estimate the fuel cost based on the data available to the year ending 30th June 2015: Months July August September October November Machine Hours (000) 34 30 34 39 42 Fuel Expenses ($) (000) 640 500 620 590 620 Variable cost per unit and total fixed cost is constant within this range of activity. Pass- To get the pass grade you should be able to separate the fixed and variable elements of total costs using a suitable method in a given scenario. M2 - To get M2 you should be able to select suitable method to separate the fixed and variable elements of total costs and explain it. You should explain the concept of cost behaviour used in the identified method. Task 6 (LO-3 AC- 3.1) P,M1 3.1 - Explain and illustrate the difference between standard cost card under marginal and absorption costing. Scenario Moosa Ltd. makes one product “Mash”. Standard cost details regarding the product is given below: Direct Materials Material X – 4Kg at $4 per Kg Material Y – 9 Litre at $2 per litre Direct Labour: Grade A – 6 Hours per unit at $1.50 per hour Grade B – 7 Hours per unit at $2.00 per hour Variable Overheads 13 hour at $0.50 per hour Budgeted production is 1,000 units and budgeted fixed overheads are $28,000, absorbed according to the Grade B labour hours per unit. Pass-To get pass grade use the above date to draw the standard cost card under marginal and absorption costing and explain the difference between them. M1-To get M1 you should make the effective judgement between standard cost and standard costing, pg. 5- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Task 7 (LO-3 AC- 3.2) P,M2,D1,D2 3.2 - Compute and interpret price and usage variances for material, labour, and overhead inputs Scenario- 5 Task 7 (LO-3 AC- 3.2) P,M2,D1,D2 Deadeye Company operated a standard costing system in which all inventories are valued at a standard cost. The company has obtained the following budgeted information regarding cost and revenue for its only product DYE for the year 2016: Direct material 2 Kg at $2.5per kg Direct labour, 2 Hours at $4.5 per hour Variable production Overhead, 2 Hours at $1.5 per hour Fixed production Overhead 2 hour at $2.5 per hour 5.00 9.00 3.00 5.00 The budgeted selling price per product is $30 and Deadeye budgeted to produce 12,000 units and sell 10,000 units a year During 2016, 11,000 units were actually produced and 9,750 units were sold, actual selling price was $33.50 per unit. Relevant actual details of production are as follows: Materials 22,500 Kgs costing Labour 21000 hours were worked and total wages were Variable production overhead was Fixed production overhead was $65,000 $100,000 $35,625 $59,375 Compute and Interpret price and usage variances for material, labour, overhead (fixed and variable) and sales. Pass- Compute and interpret price and usage variances for material, labour, overhead (fixed and variable). M2 - To get M2 Use appropriate method to calculate sales variances accurately. D1 - To get D1 evaluate the reasons for the occurrence of adverse and favourable variances. D2- Variances should not be looked at in isolation. One variance might be inter-related with another, take a responsibility for managing and organising your activity and recognize the interrelationship between variances calculated above. Task 8 (LO-3 AC- 3.3) P, M3 3.3- Reconcile budgeted profit with actual profit under standard absorption costing. Pass: To get the pass grade prepare the reconciliation statement (using task 7 above) and actual profit statement and match the profits under absorption costing using appropriate format. M3- To get M3 Present and communicate appropriate findings to explain the concept of reconciliation statement using different methods. pg. 6- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Evidence checklist Summary of evidence required by student Task 1 Essay identifying and explaining the relationship of cost accounting to financial and managerial accounting. Task 2 Tested before Task 3 Calculation showing stock valuation using different methods. Task 4 Based on the case evidence identify responsibility centres. Task 5 Calculation showing the segregation of fixed and variable part of the total cost. Task 6 Drafting standard cost card under marginal and absorption Costing. Task 7 Calculation and interpretation of Variances. Task 8 Drafting statement to reconcile actual and budgeted profits. Evidence presented Guidance notes: 1. Use standard document formats and structures. 2. Word process the documents. 3. Use 12 point Arial or Times New Roman script. 4. Provide a list of references and use the Harvard referencing system. 5. Complete the title page and sign the statement of authenticity. 6. Upload the entire assignment in MS word format only on Turnitin. 7. Staple only once to keep the pages of your work together. 8. Late submission, late work will only be marked on the next occasion the unit is taught. 9. Submit the work along with the Turnitin report to the respective assessors in their offices. 10. Collect the assignment submission form duly signed by the assessor and the learner. 11. Grades are subject to External Verification. Resources: List of Websites 1. www.accagloabl.com 2. www.cimaglobal.org.uk 3. http://www.ICAEW.co.uk 4. http://www.aicpa.org List of Books: 1. FIA, FMA, Management Accounting, ACCA Paper F2 (2016), BPP Learning Media. 2. William Lanen, Shannon Anderson, Michael Maher: Fundamentals of Cost Accounting, McGrawHill/Irwin; 3 edition (January 7, 2010), ISBN-10: 0073527114, ISBN-13: 978-0073527116 | Edition: 3 1. James Jiambalvo: Managerial Accounting, 2nd Edition, Wiley, June 2012, ©2004, ISBN: 978-0-47013718-5. Word limit – 2500 words. pg. 7- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 Achievement Summary Pearson BTEC Level 5 HND Diploma in Accounting Qualification Unit Number and title Cost Accounting and Performance Management Student Number Criteria Reference Assessor name Ms. Shobhna IV name Dr. Roslin Student name To achieve the criteria the evidence must show that the student is able to: Achieved? (tick) LO1 1.1 Explain the relationship of cost accounting to financial and managerial accounting 1.2 Compare and contrast various Cost classification methods 1.3 Estimate inventory values using different methods 1.4 Differentiate between cost, profit, investment and revenue centres. 1.5 Separate the fixed and variable elements of total costs using a suitable method in a given situation LO-3 3.1 Explain and illustrate the difference between standard cost card under marginal and absorption costing 3.2 Compute and interpret price and usage variances for material, labour, and overhead inputs 3.3 Reconcile budgeted profit with actual profit under standard absorption costing. Higher Grade achievements (where applicable) Grade descriptor Achieved? (tick) M1: Identify and apply strategies to find appropriate solutions Grade descriptor D1: Use critical reflection to evaluate own work and justify valid conclusions M2: Select/design and apply appropriate methods/techniques D2: Take managing activities M3: Present and appropriate findings D3: Demonstrate convergent/lateral /creative thinking communicate pg. 8- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 responsibility for and organising Achieved? (tick) Assignment Feedback Summative Feedback: Assessor to Student Action Plan Formative feedback Feedback: Student to Assessor Assessor Signature Date IV Signature Date Student Signature Date pg. 9- HND- SEM-IV- ASSIGNMENT – CAPM – SPRING 2016-2017 ...
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Tutor Answer

Nadalchukwu
School: UCLA

Attached.

1.1 Relationship of cost accounting to financial and managerial accounting.
Cost accounting is an accounting process that focuses on recording and studying
the amount spent by a company. The aim is to determine where savings are
possible and most times arrive at a selling price after analyzing and summarizing the
data or in general, it aids the management of a company to measure their financial
performance.
Financial accounting is a branch of accounting that involves reporting the financial
position and performance of a company through the financial statement that are
given to external users like investors or lenders. It basically involves summarizing,
analyzing and reporting these statements of financial transactions that is done by a
company, a firm or an entity. Its main purpose is not to report the value of the
company but to give enough information for the external users to assess the value of
the company themselves.
Managerial accounting is a branch of accounting that involves recording, analyzing
and recording financial information for use by internal users such as the managers
and entrepreneurs. Its main use is in the area of planning and budgeting, decision
making and a means of measuring performance of a business.
Cost accounting considers money as a measure of economic performance while
financial accounting on the other hand considers money as the economic factor of
production. Managerial accounting deals with internal users while financial
accounting deals with external users. They are all related in the sense that they are
all tools used for recording, assessing and analyzing financial documents.

1.2 Compare and Contrast Cost classification methods
Cost can be classified as follows:
a) Product costs and Period cost
Products costs are costs assigned to products that are manufactured and
recognized for financial reporting when they are sold. Examples are factory
wages, direct labor, etc. they can be further classified into direct materials,
which is the cost that can be associated with the product at a reasonable
cost, direct labor, which represents the cost of labor that was spent on a
particular product, and manufacturing overhead, which represents all the
production costs absent direct materials and direct labor.
Period costs are costs that are not product costs. Examples are cost of
marketing, administration costs, etc.
b) Prime costs and Conversion costs
Prime costs is the summation of all direct costs such as direct labor, direct
materials and any other cost associated with these two.
Conversion costs on the other hand are all the costs that are incurred to
convert every raw material into finished products. It is the summation of direct
labor, direct cost and manufacturing overheads.
c) Fixed costs and Variable costs
Any cost that does not vary but remains constant over a given period of time
and a range of activity irrespective of the fluctuations in production is known
as fixed cost. Examples are rents, insurance charges, etc.

But any cost that varies directly in proportion with every increase or decrease
in the volume of production is termed variable cost. Examples are wages of
laborers, power, etc.
d) Direct and Indirect costs
Direct costs are costs that are incurred on a material and on labor that are
easily traceable for a product, a job, or for a service that is rendered.
Indirect costs are costs that are incurred on items that are not directly
chargeable to production. Examples are salaries of storek...

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awesome work thanks

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