NGUYENTRAI UNIVERSITY BTEC HND INBUSINESS (MANAGEMENT)

ASSIGNMENTCOVERSHEET
NAME OF STUDENT REGISTRATION NO. UNITTITLE ASSIGNMENTTITLE ASSIGNMENTNO NAME OFASSESSOR SUBMISSION DEADLINE

Unit9: Management Accounting:Costing and Budgeting Cost Information Analysis 1 of2

I, Here by confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.

Signature

Date

----------------------------------------------------------------------------------------------------------------

FOR OFFICIAL USE

Assignment Received By: Date:

MACBA1QCFJan2013NTU

UnitOutcomes
Outcome Evidence for the criteria Feedback Assessors decision
First Attempt Rework

Internal Verification

Classify different types of cost

1.1

Beableto analyse cost information withina business LO1

Use different costing methods

1.2

Calculate costs using appropriate techniques

1.3

Analyse cost data using appropriate techniques

1.4

Prepare and analyse routine costre ports

2.1

Beableto propose methods toreduce costsand enhance valuewithin abusiness LO2

Use performance indicatorsto identifypotential improvements

2.2

Suggest improvementsto reducecosts, enhancevalue andquality

2.3

Merit gradesawarded Distinctiongradesawarded

M1 D1

M2 D2

M3 D3

MACBA1QCFJan2013NTU

Outcome

Evidencefor thecriteria

Feedback

Assessors decision

Internal Verification

Assignment
( )Well-structured;Reference isdoneproperly/ should bedone(ifany) Overall,youve

Areas for improvement:

ASSESSORSIGNATURE

DATE

NAME:..........................................................................................

(Oral feedback was also provided) STUDENTSIGNATURE DATE / /

NAME :.............................................................................
FORINTERNALUSEONLY VERIFIED YES NO DATE :........................................................................... VERIFIEDBY:........................................................................... NAME :...........................................................................

MACBA1QCFJan2013NTU

1.4 On the basis of your cost classification in the above, analyze cost data using appropriate techniques Advantages of absorption and marginal costing. Marginal costing. - Contribution per unit is constant unlike profit per unit which varies with changes in sales volumes - There is no under or over absorption of overheads ( and hence no adjustment is required in the income statement - Fixed cost are period cost and charge in full to period under consideration. - Marginal costing is useful in the decision making process. - it is simple to operate -Practical cost control is greatly facilitated. By avoiding arbitrary allocation of fixed overhead, efforts can be concentrated on maintaining a uniform and consistent marginal cost useful to the various levels of management. -Marginal Costing is simple to understand and operate; it can be combined with other forms of costing, such as, budgetary costing, standard costing without much difficulty. -In marginal Costing fixed overheads are not charged to the cost of production due to this the effect of varying charges per unit is avoided. -It helps in short-term profit planning by breakeven charts and profit graphs. Comparative profitability can be easily assessed and brought to the notice of the management for decisionmaking. Absorption costing - Absorpting costing includes an element of fixed overheads in inventory values - Analysing underover absorption of overheads is a useful exercise in controlling cost of an organisezation. - In small organizations, absorpting overheads into the cost of products is the best way of estimating job costs and profits on jobs -Absorption costing recognizes fixed costs in product cost. As it is suitable for determining price of the product. The pricing based on absorption costing ensures that all costs are covered. - Absorption costing will show correct profit calculation than variable costing in a situation where production is done to have sales in future ( eg. seasonal production and seasonal sales). - Absorption costing conforms with accrual and matching accounting concepts which requires matching costs with revenue for a particular accounting period. - Absorption costing has been recognized for the purpose of preparing external reports and for stock valuation purposes. - Absorption costing avoids the separating of costs into fixed and variable elements. - The allocation and apportionment of fixed factory overheads to cost centers makes manager more aware and responsible for the cost and services provided to others.

Difference absorption costing and marginal costing. Marginal costing method Product cost Direct material Direct labor Direct expense Variable production overheads Absorption costing Product cost Product cost as per marginal costing Fixed production overheads

Assuming only produce one product is Zigbee A. Retain the value. However, the fixed overhead will be changed. Specifically, I will show in details in the table below. Zigbee A 150 20 900 8 2 120000 Zigbee A 20 16 133,3 169,3 -19,3 -17400 Zigbee A 20 16 36 114 102600 -17400

Selling price per unit Material Sales / week Per hour/week Labour Fixed overhead a) Absorption costing Material Labor cost Fixed overhead Unit cost Profit/loss Total profit per week b) Marginal costing Material Labor cost Unit variale cost Unit contribution Profit/loss Total profit per week

According to the calculated results, we see that if QMI only produce Zigbee A, the company will lose even by marginal costing or absorption costing. According to the calculated results, we see that if A Zigbee production, the company will lose even by marginal Costing or absorption costing. Therefore, the company should not be separated to produce two products.

2.2 Use performance indicators to identify potential improvements

unit 110 3.6 tonne 9 9400

Selling price per tonne Product per hour Direct materials per input material tonne Process wages per week

Rework per week 140 Repair machinary per week 1900 Normal working time 37 hour ( 10% of materials input are lost, some has to be reworked ) Lost time 6 hours Productive hours 31 hours

Note: Productive hours = normal working time lost time

Night shift Saturday working Unit

Maintanance team: Incremental cost per week 1200 600 Machine breakdown time saving (%) 75% 40% Machine breakdown time 1.5 3.6 hours Machine repair costs reduced to 350 40% ( Expect that Output tonne can be increased from 90% of materials input to 92% )

Note: Machine breakdown time = lost time machine breakdown time saving (%) * lost time The Profit/Loss

Production Value Production Cost: Process wages Rework Repairs to machine Material Value of materials Total Cost Profit/ loss

Current Unit 111.6 Tonne 12276 9400 140 1900 124 1116 12556 -280 Tonne

Note: - Production = Productive hours * product per hour - Value = selling price * production - Material = 100/90*production - Value of material = Direct materials per input material * material - Total cost = process wages + rework + repairs to machine + value of materials - Profit/ loss = value total cost

Night shift Production Value Production Cost Process wages Rework Repairs to machine Materials Value of materials Incremental cost per week Total Cost Profit/ loss 127,8 14058 9400 0 350 138,91 1250,22 1200 12200,22 1857,78

Saturday working

Unit

120,24 tonne 13226,4 9400 0 1140 130,70 1176,26 600 12316,26 910,14 tonne

Note: production = (normal working time machine break down time) *product per hours Value = production * selling price per tone Repair to machine = repair mahinery per week repair cost reduce Materials = 100/92* production Value of materials = direct materials per input material * material Total cost = rework + repairs to machine +value of material + incremental cost per week Profit/loss = value total cost
Current Profit Margin Cost/Sale Ratio 102,28% Night shift 13,22% 86,78% Saturday working 6,88% 93,12%

Sale ratio = total cost / value Profit margin = Profit/Loss / Value 2.3 Suggest improvements to reduce costs, enhance value and quality From the above calculation, we can see part of the business of the subsidiary company and then make the appropriate improvements. If Quanta want to improve the performance of company, they should focus on the following characteristics: quality, reduce cost and enhance production values. First, Quanta reduce the production costs to increase profits or reduce losses in a certain number of items or processes. For reducing the production cost. Quanta need to implement these requirements. They need to improve the ability to make use of resources, effective use, not waste. Subsequently, Quanta need to improve labor productivity, concentrate on the job to be effective. They must also make use of the equipment. Do not dispose of these products can still

be used. Reduce the cost of raw materials is also an important factor; it must be assured of the balance. Additionally, Quanta should make use of machinery and labor, reduce labor costs. Finally, they need to know to save resources spent. Other way: Sell or donate excess office furniture and equipment. Storage space is expensive. You can sell it to employees, the public, or the vendor (on consignment). Donate it to local charities or schools. When leasing equipment, get an option to cancel due to closure or consolidation. Don't get an "evergreen clause", where the contract always continues unless you give 30 days notice. They are difficult to cancel, as the expiration date is hard to monitor. When you reduce production costs, increase value, Quanta should focus on product quality and management system that works. They should pay attention on the quality of the product. Since the product was put on the market, Quanta should focus on quality rather than quantity of products to create the image on the product market. They should use Standard Costing in a total quality environment (TQM).In TQM; it is the link between manufacturers, employees or related materials. Quanta have to ensure that the interests of workers. From there they can set out the requirements for the best quality products. It must be agreed upon by contract. In addition, Quanta need to ensure the quality and price of raw materials. In summary, TQM is a management chain product quality. It will help companies create valuable products Enhance value and quality : Track mistakes for manufacturers, this process involves statistical quality control, the process of setting a product's specifications and then sampling a small number of units from the production line to see how closely they measure up to those specs. Standards are set and, if too much deviation occurs. Find out what quality your customers expect and if they would like your business to have a quality award.Regularly check progress by sampling products, services and processes and asking for the views of all those involved. Identify new opportunities and threats and change quality plans as necessary