Management accounting is a type of accounting system which is used by companies for the aim of budgeting and costing. This project is based on Smart Looks which makes clothes for different retailers. A worker is being appointed to identify the cost of the company so that cost planning can be done.
- Analysis of cost information.
- Different methods to reduce cost and to enhance the value in business.
- Preparation of budget and forecast for business.
- Monitoring performance against the budget.
Management accounting is a process of preparing managerial accounts and reports in order to better management of the organisation. The aim objective of this project report is to discuss and explain various budgetary methods along with several costing methods in order to have a better understanding about organisational elements such as inventory, production, budgetary control and financial statements. In this project report several inventory management methods are explained along with various other questions which includes preparation of budgets, cost reduction technique and others.
1.1 Fixed, variable and semi-variable cost along with other ways of cost classification
a. Columnar table of fixed, variable and semi-variable cost
Fixed cost – These are the costs which are static in nature and does not change with changing activity. This cost is does not depended on the volume of goods and services produced by an organisation. These expenses are time related and referred as overhead costs. Some of the examples of these costs are salaries, insurance, depreciation, rent etc (Bennett, 2013).
Variable cost – These costs are flexible in nature and change according to the level of production and business operations. Variable or marginal costs increase and decrease according to the business activities of an organisation. Some of the examples of these costs are direct material, direct labour, production supplies, shipping costs etc.
Semi variable cost – Semi variable costs are the combination of both fixed and variable costs. Part of these expenses are fixed which does not change and some part of these expenses are variable which may change according to the level of business operations. Some of the examples of these these expenses are commission charges and semi variable labour costs (Bovens, 2014).