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Management Control & Accounting - Essay Example

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You have been asked to suggest a method of deducting the full cost of various production orders of Patel Ltd. This method will be used as a basis for setting prices. The production orders vary greatly in size and nature form on to the next.
In choosing between the two bases…
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Management Control & Accounting
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Download file to see previous pages The costing can be improved by taking a different approach such as activity-based costing. In activity based costing, activities regarding the factory overhead costs will be classified, and the costs will be broken down according to the level of activities. In this way, the cause and effect between the overhead items in the factory overhead schedule and the activities will be more established, resulting in a more accurate costing.
2. Athena Ltd is an engineering business doing work for its customers to their particular requirements and specifications. It determines the full cost of each job taking a job costing approach, accounting for overheads on a departmental basis. It bases its prices to customers on this full cost figure. The business has two departments: a machining department, where each job starts, and a fitting department, which completes all of the jobs. Machining department overheads are charged to jobs on a machine hour’s basis and those of the fitting department on a direct labour hour basis. The budgeted information for next year is as follows:
a) Prepare a statement showing the budgeted overheads for next year, analysed between the two departments. This should be in the form of three columns: one for the total figure for each type of overhead and one column each for the two departments, where each type of overhead is analysed between the two departments. Each column should also show the total overhead for the year. Please use the template below.
c) Athena Ltd has been asked by a customer to specify the price that it will charge for a particular job that will, if the job goes ahead, be undertaken early next year. The job is expected to use direct material costing Athena Ltd £ 1200, to need 50 hours of machining time, 10 hours of Machine Department direct labour and 40 hours of Fitting Department direct labour. Athena Ltd charges a profit loading of 20% to the full cost of jobs to determine the selling ...Download file to see next pagesRead More
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