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Cost and Management Accounting

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Cost & Management Accounting (MGT-402)
VU
Division
Mar
Jan
Feb
Product
Qty.
Price
Value
Qty.
Pr
Value
Qty.
Pric
Value
(Units)
(Rs.
(Rs.)
(Units)
ice
(Rs.)
(Units)
e
(Rs.)
)
(Rs.)
(Rs.
)
Town A
54,000
16
8,64,000
50,000
16
8,00,000
62,500
16
10,00,00
X
0
37,500
16
3,75,000
35,000
10
3,50,000
37,500
10
3,75,000
Y
Total
91,500
----
12,2,9000
85,000
----
11,50,000
----
13,75,00
0
Banglore
12,500
10
2,00,000
----
-----
16
X Town B
61,500
10
6,15,000
55,000
10
5,50,000
62,500
10
6,25,000
Y
Total
74,500
---
8,15,000
55,000
5,50,000
62,500
----
6,25,000
Hyderabad
80,000
16
12,80,000
75,000
16
12,00,000
77,500
16
12,40,00
IX
0
II Y
9,000
10
90,000
----
----
10
Total
89,000
----
13,80,000
75,000
12,00,000
----
12,40,00
0
Product
1,46,500
16
23,44,000 1,25,000
16
20,00,000
1,40,00
16
22,40,00
X
1,08,500
10
10,80,000  90,000
10
9,00,000
0
10
0
Product II
1,00,00
10,00,00
Y
0
0
Total
2,54,500
----
34,24,000 2,15,000
29,00,000
2,40,00
----
32,40,00
0
0
Production budget
This budget provides an estimate of the total volume of production distributed product-wise with
the scheduling of operations by days, weeks and months and a forecast of the inventory of finished
products. Generally, the production budget is based on the sales -budget. The responsibility for the
overall production budget lies with Works Manager and that of departmental production budgets
with departmental works management Production budget may be expressed in physical or financial
terms or both in relation to production. The production budgets attempt to answer questions like:
(i)
What is to be produced?
(ii)
When it is to be produced?
(iii)
How it is to be produced?
(iv)
Where it is to be produced?
The production budget envisages the production program for achieving the sales target it serves as
a basis Job preparation of related cost- budgets, e.g., materials cost budget, labor cost budget, etc.
It easily facilities the preparation of a cash budget. The production budget is prepared after taking
into consideration several factors like: (i) Inventory policies. (II) Sales requirements, (iii)
Production stability, (iv) Plant capacity, (v) Availability of materials and labor, (vi) Time taken in
production process, etc.
207
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Cost & Management Accounting (MGT-402)
VU
Activity 2
From the following details of Mysore Cement Works Limited, complete the production budget for
the three-month period ending March 31, 19x6 (Production budget for product P has already been
worked out.
Estimated stock
Estimated sale during
Desired closing stock
Type of product
on Jan 1, 19x6
Jan-March 1986
on March 31, 19x6
(Units)
(Units)
(Units)
1,000
5,000
1,500
P
Q
1,500
7,500
2,500
R
2,000
6,500
1,500
S
1,500
6,000
1,000
208
Table of Contents:
  1. COST CLASSIFICATION AND COST BEHAVIOR INTRODUCTION:COST CLASSIFICATION,
  2. IMPORTANT TERMINOLOGIES:Cost Center, Profit Centre, Differential Cost or Incremental cost
  3. FINANCIAL STATEMENTS:Inventory, Direct Material Consumed, Total Factory Cost
  4. FINANCIAL STATEMENTS:Adjustment in the Entire Production, Adjustment in the Income Statement
  5. PROBLEMS IN PREPARATION OF FINANCIAL STATEMENTS:Gross Profit Margin Rate, Net Profit Ratio
  6. MORE ABOUT PREPARATION OF FINANCIAL STATEMENTS:Conversion Cost
  7. MATERIAL:Inventory, Perpetual Inventory System, Weighted Average Method (W.Avg)
  8. CONTROL OVER MATERIAL:Order Level, Maximum Stock Level, Danger Level
  9. ECONOMIC ORDERING QUANTITY:EOQ Graph, PROBLEMS
  10. ACCOUNTING FOR LOSSES:Spoiled output, Accounting treatment, Inventory Turnover Ratio
  11. LABOR:Direct Labor Cost, Mechanical Methods, MAKING PAYMENTS TO EMPLOYEES
  12. PAYROLL AND INCENTIVES:Systems of Wages, Premium Plans
  13. PIECE RATE BASE PREMIUM PLANS:Suitability of Piece Rate System, GROUP BONUS SYSTEMS
  14. LABOR TURNOVER AND LABOR EFFICIENCY RATIOS & FACTORY OVERHEAD COST
  15. ALLOCATION AND APPORTIONMENT OF FOH COST
  16. FACTORY OVERHEAD COST:Marketing, Research and development
  17. FACTORY OVERHEAD COST:Spending Variance, Capacity/Volume Variance
  18. JOB ORDER COSTING SYSTEM:Direct Materials, Direct Labor, Factory Overhead
  19. PROCESS COSTING SYSTEM:Data Collection, Cost of Completed Output
  20. PROCESS COSTING SYSTEM:Cost of Production Report, Quantity Schedule
  21. PROCESS COSTING SYSTEM:Normal Loss at the End of Process
  22. PROCESS COSTING SYSTEM:PRACTICE QUESTION
  23. PROCESS COSTING SYSTEM:Partially-processed units, Equivalent units
  24. PROCESS COSTING SYSTEM:Weighted average method, Cost of Production Report
  25. COSTING/VALUATION OF JOINT AND BY PRODUCTS:Accounting for joint products
  26. COSTING/VALUATION OF JOINT AND BY PRODUCTS:Problems of common costs
  27. MARGINAL AND ABSORPTION COSTING:Contribution Margin, Marginal cost per unit
  28. MARGINAL AND ABSORPTION COSTING:Contribution and profit
  29. COST VOLUME PROFIT ANALYSIS:Contribution Margin Approach & CVP Analysis
  30. COST VOLUME PROFIT ANALYSIS:Target Contribution Margin
  31. BREAK EVEN ANALYSIS MARGIN OF SAFETY:Margin of Safety (MOS), Using Budget profit
  32. BREAKEVEN ANALYSIS CHARTS AND GRAPHS:Usefulness of charts
  33. WHAT IS A BUDGET?:Budgetary control, Making a Forecast, Preparing budgets
  34. Production & Sales Budget:Rolling budget, Sales budget
  35. Production & Sales Budget:Illustration 1, Production budget
  36. FLEXIBLE BUDGET:Capacity and volume, Theoretical Capacity
  37. FLEXIBLE BUDGET:ANALYSIS OF COST BEHAVIOR, Fixed Expenses
  38. TYPES OF BUDGET:Format of Cash Budget,
  39. Complex Cash Budget & Flexible Budget:Comparing actual with original budget
  40. FLEXIBLE & ZERO BASE BUDGETING:Efficiency Ratio, Performance budgeting
  41. DECISION MAKING IN MANAGEMENT ACCOUNTING:Spare capacity costs, Sunk cost
  42. DECISION MAKING:Size of fund, Income statement
  43. DECISION MAKING:Avoidable Costs, Non-Relevant Variable Costs, Absorbed Overhead
  44. DECISION MAKING CHOICE OF PRODUCT (PRODUCT MIX) DECISIONS
  45. DECISION MAKING CHOICE OF PRODUCT (PRODUCT MIX) DECISIONS:MAKE OR BUY DECISIONS