INTRODUCTION
This particular part of management accounting provides crucial information about all essential costing method that is used for the purpose of calculating the net profit of UCK Group Plc. It is necessary to record the financial transactions in their respective set format so that maximum chances of getting valuable outcomes can be enhanced. This project report is entirely targeted merits and demerits of using planning tools for controlling the budget are explained under this report. The purpose of using cash budgets is analysed properly in this specific project module (Tessier, and Otley, 2012). All kinds of financial issues that are present in the cited company are evaluated by using certain ratios to determine the current financial position during the period of time.
TASK 1
1.1: Use of appropriate techniques of cost analysis to formulate income statement
Cost is an essential aspect for an organisation. It is used to determine total cost UCK group Plc is investing for the purpose of producing products and services during the time. Cost is related either directly or indirectly with production process. It seems to be value of amount which is given to get something. The role of project managers is make use appropriate costs that are essential for examine overall amount on production of one units of products for the company. They required regulating planning into order to manage and control their additional cost which enhanced efficiency as well as profitability at the same time. It has been identified that cost is affecting manufacturing of furniture and other goods of UCK group plc. They motive behind using effective costing techniques is to make valuable decision to manage their financial operation (Van der Stede, 2015). By the help of this, whole productivity can be analysing in order to increase growth and stability for the company during the period of time. There are different types of costing techniques that are essential in analysing current management position and other essential aspects those are related presented with UCK. Some crucial techniques are discussed underneath:
Absorption costing: According to this particular costing method which is applicable at the time of production of products. It consists of both variable and fixed cost because of this it is said to be full costing methods. In accordance with making vital decision for increasing profitability for the company it does not taken as that much effective. But for calculating net profit for UCK group plc they need to analyse gross profit generated during the time.
Marginal costing: It refers as one of the most effective costing techniques which is held responsible in case of additional production of a product. It use to considers only variable cost and fixed cost at not utilised during calculation of contribution per units. In respect of analysing efficiency for the company they need to take into account as more reliable and accurate sources of method.
|
NET INCOME AS PER ABSORPTION COSTING: |
January |
February |
|
Sales (35per units) |
315000 |
402500 |
|
less: |
||
|
Cost of Production (12+8+5+1.82) |
295020 |
254790 |
|
Gross Profit |
19980 |
147710 |
|
LESS: |
||
|
Fixed and variable cost: |
||
|
variable sales overheads (1 per unit) |
9000 |
11500 |
|
Fixed selling cost |
2000 |
2000 |
|
Total costs |
11000 |
13500 |
|
NET INCOME AS PER ABSORPTION COSTING: |
8980 |
134210 |
Computing net profit by using marginal costing
|
PARTICULARS |
January |
February |
|
Sales (35 per unit) |
315000 |
402500 |
|
less: |
||
|
Cost of Production (12+8+5) |
275000 |
237500 |
|
variable selling overheads (1 per unit) |
11000 |
9500 |
|
variable cost |
286000 |
247000 |
|
Contribution |
29000 |
155500 |
|
less: |
||
|
fixed manufacturing overheads |
20000 |
20000 |
|
Fixed Admin & selling cost |
2000 |
2000 |
|
total fixed costs |
22000 |
22000 |
|
NET INCOME AS PER MARGINAL COST |
7000 |
133500 |
1.2: Wide range of management accounting techniques
In every business, whether related with small business or large organisation they need to make use of appropriate techniques which is effective enough to increase overall growth and stability in coming time. This has been determine that without using right kind of accounting techniques a company would not be able to reach at their set destination in allotted period of time. In accordance with this, there are certain other specific aspects those are essential for measuring the performance of UCK group plc by the use of appropriate accounting techniques (JOSHI and et. al., 2011). This will analyse more effective in relation to evaluate total profitability with the use proper allocation of resources. On the basis of collected information for financial reporting auditor need to analyse performance of the company. There are various techniques from which accounting information can be collected. Such as:
Financial planning: It is consider as one of the primary tools of deciding in advance regarding the financial events for the concern to attain primary aims of an organisation. It consists of both short and long term objectives for the company.
Historical cost: As per this cost accounting need to provide previous data to an organisation which is associate with each job, procedure and department so that to make comparison of present position during the time.
1.3: Interpretation of draw results from incomes statements
In order to analyse the performance of the company, it is necessary to make use of data in specific manner so that better outcomes can be attain effectively. It has been determine that two of the primary costing techniques to calculate annual net profit and loss of the company. The results are found fluctuating by using either of the methods. Those techniques will be taken into account which would provide more effective outcomes for the company in terms of net gains. It has been seen that net profit incur by company from January and February sales they are able to earn maximum profit from using absorption costing. The marginal costing is not that much effective in respect to absorption costing. The major outcomes are analyse by the help of increase overall growth and efficiency during the period of time. The main impacts are seen because of the use of fixed cost treatment. With the use of these two methods the chances of getting more reliable and accurate results can be more (Amoako, 2013).
TASK 2
2.1: Merits and demerits of using planning tools
Planning is happens to be an essential aspect for an organisation to attain their aims and objective in more specific manner. This will assist in control various types of budgets in evaluating performance during the time. It is necessary to calculate on regular basis to make use of standard to increase overall stability and growth for the company. This seems to be effectively related with internal tools and techniques those are useful in respect to manage and control total risk factors that are exist in an organisation. Budget is said to be prediction of future cost and expenses those are going to incur by the company. There are various types of planning tools that are effective for an organisation. Some of them are:
Forecasting tools: As per this tools and techniques, manager can easily be able to examine future activities on regular basis. It would be implemented by using past and previous information for the purpose of evaluating performance during the time.
Advantage: The main objective of using these particular techniques is to analyse future costs and expenses a company is going to incurred (Hilton and Platt, 2013).
Disadvantage: It is total based one estimation which wills leads to bring less chance of growth for the company.
Contingency tools: It is an important planning tools that can be used to measure overall risks that are present in an organisation. This seems to be effective enough to deal with any kind of situations that are difficult to handle.
Advantage: As per this specific techniques which a company can use to determine their total drawbacks before making any important decision related with production.
Disadvantage: This seems to be more difficult to evaluated condition without having suitable plans. It has been seen so because of qualitative nature.
2.2: Assessment of expenses for July and August
In accordance with analysing expenses that UCK group plc has incurred during the period of July and August are discussed underneath:
(Total expenditure of high activity – Expenditure from low activity)
Total cost=
(Highest activity per hour spend – Lower hour spend)
Total expenditure (Per units): (9820-7410) / 795-505)=8.31
Total expenses for July:
= 650*8.31= 5401.5
For August:
= 750*8.31= 6232.5
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2.3: Purpose of using cash budget
It is necessary to make use of budgets to analyse total cash flows incur during the period of time. It is necessary for manager to make use of data in reliable and accurate manner so that maximum chances of generating positive outcomes can be attained in more easily. This seems to be associated with forecasting of income and expenditure as primary motive for the company (Parker, 2012). The primary motive for the company to increase efficiency as well as productivity through controlling extra costs those are affecting routine of an organisation. It is the total sum of amount which is uses through proper allocation of main aims that are being set for the coming year. Cash budgets are valuable budgets that is related with analyse total inflows and outflows that are incurred during an specific perio
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