Pranjal answered on
Jun 02 2021
ACCT204: MANAGEMENT ACCOUNTING
Table of Contents
1.0 Part One: Question One 3
2.0 Part Two: Question Two 5
2.1 PART 1: Revenues budget 5
2.2 PART 2: Direct materials budget 5
2.3 PART 3: Direct labour budget 6
2.4 PART 4: Overhead budget 7
2.5 PART 5: Budgeted statement of profit or loss 7
1.0 Part One: Question One
Costing system most likely to be used
The business is of construction of infrastructure etc and hence one standalone project may yield considerable revenue for the firm. Moreover, the criticality of the project is severe and hence, the project costing may be used in the given scenario (Entire, 2020).
The company is an oil and natural gas organisation that is involved in the process of exploration and extraction of oil and gas across the world. The company seems to be using the traditional costing method where the indirect costs are apportioned based on the labour hours etc (Mobil, 2020).
The business is an educational organisation and hence belongs to the service industry. Therefore, the service costing may be used in the given University to set the fees, identify the costs and prepare the budgets and projections (Monash, 2020).
As stated earlier, since the construction projects are standalone and involve a separate set of resources, teams, deliverables, strategies and time frame, every project is undertaken accordingly. Hence, the costing has also been tweaked to suit the need of the project. In other words, project costing is best suited for constructions and engineering projects.
It seems that the oils and natural gas companies are involved in extraction and transportation of oil etc. Since the activities are manifold ranging from extraction to final distribution, the huge supply chain deals with different activities. Traditional costing helps the business to allocate different related overheads costs to the products in the most reasonable manner.
Since the organisation is an education institution (i.e. a University), the cost components will be different from that of the goods and products-oriented costing method. Service costing enables the management to devise cost structure and fix the price in service sector scenario efficiently. Hence, service costing seems to appropriate here,
Project costing helps the management to appropriately identify cost components, allocate the overheads and assign the price of each project.
Traditional costing method helps the business to allocate cots to the products in the most simplistic manner. Moreover, the method is accepted as per Generally Accepted Accounting Principles (GAAP).
Service costing helps the business to identify various cost factors that may affect the overall operations and allocate the same to the service and fix the price accordingly (Dütting, Feldman, Kesselheim and Lucier, 2017, October).
Since the project costing assumes completion percentage based on the certain parameter, reality may differ and hence completion-based costing may not be tenable at times.
Traditional costing assumes single overhead absorption rate which may not be able to portray the accurate costing structure of the business.
Service costing assumes all cost components to be related to the service delivery and hence assign the cost of them to the services which may not be true at times. There may be certain redundant service cost.
Table 1: Summary of Findings
(Source: Created by the author)
2.0 Part Two: Question Two
2.1 PART 1: Revenues budget
The revenue budget has been prepared based on the given information pertaining to selling price per unit of three different products namely Noodle Bowls, Egg...