Management accounting Assignment Example | Topics and Well Written Essays - 1750 words

precaution accounting - Assignment Example235 hardened smash muckle efficiency 378 laid overhead volume capacity 516 ----------- ----------- 2129.1 325.5 (2129.1) ---------- (1803.6) ------------ Computation of the Unit Cost Units (Kg/Number of labour) append cost (?) Per unit cost (?) Total Production (units) Units required for actual Standard production Units required for Standard moderate literal M3 1050 1680 1.6 2100 0.5 2130 1065 Direct Material M7 1470 2793 1.9 2100 0.7 2130 1491 Labour 525 3675 7 2100 0.25 2130 532.5 Variable production overhead 1260 2100 based on labour hours 2130 532.5 Fixed production overhead 4725 2100 based on labour hours 2130 532.5 Profit calculation of actual units Sales (2100 x ?14.5) ? 30,450 Direct Material M3 (? 1,680) Direct Material M7 (? 2,793) Direct Labour (? 3,675) Variable production overhead (? 1,260) Fixed production overhead (? 4,725) Net Income 16,317 Profit calculation of budgeted profits Sales (2130 x ?15) ? 3 1,950 Direct Material M3 (1065 x ?1.55) (? 1,650.75) Direct Material M7 (1491 x ?1.75) (? 2,609.25) Direct Labour (532.5 x ?7.2) (? 3,834) Variable production overhead (532.5 x ?2.1) (? 1,118.25) Fixed production overhead (532.5 x ?9) (? 47922.5) Net Income ? 17,945.25 From the detailed analysis of the computations of the operating statements and the training provided by the company, it is evident that the company is producing and selling units less than its budgeted figures show. The variance analysis is the most commonly utilise tool for evaluating the performance of a business by comparing its costs and revenues against the industry standards (Needles, Powers & Crosson, 2011) and discipline that honest steps are taken for any kind of deviations or variances so that it underside make infallible changes and reap...The chief(prenominal) components of this statement are sales, cost of goods sold and expenses the primary areas of focus are the revenue list and expenses amount (Slater, 2012). Every organisation tries to keep a tight control on its expenses so that it can fulfil the requirements of its business effectively. Being a cost effective organisation allows the organisation to maintain a strong monetary position and also with their savings they can work upon other business strategies such(prenominal) as expansion strategies and forming business units. For instance, if the equipment maintenance cost is increasing, then it can consider replacing it with a virgin one (Hansen, Mowen & Guan, 2009). Replacing with a new one may seem a strenuous expense initially but when compared to the replacement costs on a constant mode, buying the new equipment would be a cost effective choice. In every business, there are two main classifications of costs or expenses i.e. variable and fixed costs and they fate to be adequately monitored so that fitting amount of profit can be earned (Tulvinschi, 2010). All costs and expenses in the business need to be careful ly recorded and analysed so that further decision making is according to the current financial scenario of the business. In the manufacturing business like Ash PLC, the variable cost is of utmost importance as it has to ensure that it can produce the units according to the industry standards and within its budget range.