Cost & Management Accounting (ACT 301) : Department: BBA Group: 1
Cost & Management Accounting (ACT 301) : Department: BBA Group: 1
Cost & Management Accounting (ACT 301) : Department: BBA Group: 1
Department: BBA
Group: 1
Term Paper
Submitted
to
Suzona Asad
Lecturer, Faculty of Business Administration
Submitted
by
Farzanul Haque Mony (161200138)
Cost Accounting
Materials
The substance from which the finished product is made is known as material.
Labor
Fixed Costs expenses that do not alter in the short run in relation to
changes in output e.g. rent, insurance and depreciation. These costs are
linked to time rather the level of business activity
Variable Costs expenses that alter in the short run to changes in output
e.g. raw materials, packaging and components. They are payments for the use of
inputs
Semi Variable Costs expenses that vary with output but not in direct
proportion
e.g. maintenance costs. They often comprise a fixed element and a variable
element
Variable and absorption are two different costing methods. Almost all successful
companies in the world use both the methods. Variable costing and absorption
costing cannot be substituted for one another because both the systems have their
own benefits and limitations.
These costing approaches are known by various names. For example, variable
costing is also known as direct costing or marginal costing and absorption costing
is also known as full costing or traditional costing.
Traceable fixed costs arise because of the existence of a particular segment and
would disappear over time if the segment itself disappeared.
Common fixed costs arise because of the overall operation of the company and
would not disappear if any particular segment were eliminated.
For example, the landing fee paid to land an airplane at an airport is traceable
to the particular flight, but it is not traceable to first-class, business-class, and
economy-class passengers.
A budget is a detailed quantitative plan for acquiring and using financial and other
resources over a specified forthcoming time period.
Continuous budget is a 12-month budget that rolls forward one month (or quarter)
as the current month (or quarter) is completed
Sales Budget influences many of the other components of master budget either
directly or indirectly. This is due to the reason that the total sales figure provided
by sales budget is used as a base figure in other component budgets. For example
the schedule of receipts from customers, the production budget, pro forma income
statement, etc.
Production budget is prepared after sales budget since it needs the expected sales
units figure which is provided by the sales budget. It is important to note that only
a manufacturing business needs to prepare the production budget.
Direct labor budget shows the total direct labor cost and number of direct labor
hours needed for production. It helps the management to plan its labor force
requirements. Direct labor budget is a component of master budget. It is prepared
after the preparation of production budget because the budgeted production in units
figure provided by the production budget serves as starting point in direct labor
budget.
Manufacturing overhead budget contains all manufacturing costs other than the
costs of direct materials and direct labor (which are itemized separately in the
direct materials budget and the direct labor budget). The information in the
manufacturing overhead budget becomes part of the cost of goods sold line item in
the master budget.
Ending finished goods inventory budget calculates the cost of the finished goods
inventory at the end of each budget period. It also includes the unit quantity of
finished goods at the end of each budget period, but the real source of that
information is the production budget.
Selling and administrative expense budget is comprised of the budgets of all
non-manufacturing departments, such as the sales, marketing, accounting,
engineering, and facilities departments. In aggregate, this budget can rival the size
of the production budget, and so is worthy of considerable attention. The selling
and administrative expense budget is typically presented in either a monthly or
quarterly format. It may also be split up into segments for a separate sales and
marketing budget and a separate administration budget.
Cash Budget
All businesses need to maintain a safe level of cash to enable them to carry on
business activities. The managers of a business need to determine that safe level.
The cash budget is then prepared by taking into consideration, that safe level of
cash. Thus, if a cash shortage is expected during a period, a plan is made to borrow
cash.