1.3 NA FIFO and AVCO tables are incomplete. i only need the mentioned to be done i need the tables to be completed rest is all done i have uploaded the question and the assignmenti only need task 1.3 to be done which is to complete the tablesTask: 1
Cost Accounting: Cost Accounting is the branch of accounting which works on the cost activities
of the organizations to find out what is the actual cost of an activity, what should be the cost of
an activity, how to improve performance so that cost can be minimized and overall cost
management of the organization. (Hansen, Mowen, and Guan, 2007)
Managerial Accounting: Management accounting is the branch of accounting which identifies,
analyzes and communicates information with the management to take decisions that help to
achieve organization’s goal. (Hansen, Mowen, and Guan, 2007) Cost accounting is a part of
managerial accounting. Sometimes cost accounting is named as managerial accounting.
Financial Accounting: Financial Accounting works on past transactions of an organization to
find out the impact of these transactions on the organization’s overall condition at the end of
certain time period. Financial accounting calculates the profit or loss from the financial activities
of the organization and shows the overall asset, liability and ownership condition of an
organization. (Hansen, Mowen, and Guan, 2007)
There are subtle differences among these three types of the accounting process. Financial
accounting is the necessary part of the accounting process that each and every organization has
to follow. Using financial accounting process organizations communicates its overall financial
position and the result of economic activities of a financial year to its stakeholders. (Weetman
and IVONNE, 2013) On the other hand, cost accounting and managerial accounting are not
mandatory to be followed by the organizations. Organizations usually use these accounting
procedures for management purpose, and they don’t usually dispose of these accounts. Besides,
the financial accounting procedures are based on past transactions, but management accounting
and cost accounting are generally futuristic analysis. Organizations use cost and managerial
accounting processes to develop the operating performance of the organization.
Cost accounting and managerial accounting are vastly related to one another. Cost accounting
usually works on identifying, analyzing, and communicating cost related information to the
management whereas managerial accounting works on all types of accounts to provide insights
into the overall condition and development aspects to the management.
Costs can be classified in many ways. Different classification of costs shows various aspects of
costs. (Lanen, Anderson, and Maher, 2013) Product cost and period cost are two major
Product costs are those expenses that are directly related to the production of product or services.
These costs can be directly attributed to each product produced. Direct material, Direct labor,
Manufacturing overhead etc. are the product costs.
Period costs are costs that are not directly attributable to the products produced. These are the
costs that cannot be traced to a particular product or service. Period costs include marketing cost
and administrative cost.
Other classification of costs includes – variable cost, fixed cost and semi-variable cost.
Variable costs include those costs that change due to changes in overall output level. As the
production increases, the cost also increases and vice versa. Example: Direct material, direct
Fixed costs are the costs that do not change due to changes in the output quantity. Whether the
output level increases or decreases the cost level doesn’t change. Example: Marketing costs and
Semi-variable costs include those costs which remain fixed for a given level of output. After the
level of output is crossed the cost increases at a particular rate for per unit of additional output.
Example: utility bill. (Lanen, Anderson, and Maher, 2013)
Ending Inventory Calculation – FIFO method
Total inventory available for sales = (450+150+150+250) = 1000 units
Total sales = ( 75+115+175+200+200 ) = 865 units
Ending inventory = (1000-865) units = 135 units
As FIFO method is to be used to determine the value of the ending inventory the remaining
inventory units are from the last purchase 250 units which have a per value of 5.4 and was
purchased on 25th June.
So the value of ending inventory is –
Ending Inventory Calculation FIFO
Per unit price
Ending Inventory Calculation – AVCO method
Average cost per unit = Total cost of available goods for sales / Total goods available for sales
Ending Inventory Calculation AVCO
Quantity Per unit price Value
Total available goods
According to the previous calculation the ending inventory is 135 units.
So, the value of ending inventory is –
Ending Inventory Calculation AVCO method
Quantity Per unit price (average)
According to the two methods used to calculate the value of ending inventory, the value is
different from each method. The reason behind is that the per unit price is different in each
method. Though the quantity available in the inventory after the month of June is same in each
method, the value of ending inventory is different due to the per unit price attributed to the
product under each method. Under FIFO method per unit price of 5.4 is used as the inventory is
assumed to be available from the last purchase units which were 5.4 per unit and all previous
inventory from beginning inventory and from other previous purchases are sold out. Under
AVCO method an average price of all the quantity available to be sold is calculated and used to
find out the cost of ending inventory. (Weetman and IVONNE, 2013)
The above sample also shows that when the price is rising the FIFO method gives more value to
the ending inventory than the average method. This means that the firm is allocating less value or
cost to the cost of goods sold. As the cost of goods sold is lower in the FIFO method, the net
income will be higher. This process violates the conservatism principle of the method. So to
determine which method of inventory valuation to use organizations usually follow industry
practice. Besides, in the case of rising prices FIFO method is not appropriate to use.
Responsibility accounting: Responsibility accounting provides information to the different
responsibility centers that help to take a decision regarding each responsibility centers and
contributes to develop the performance of the responsibility centers. Here responsibility centers
are those for which a manager has authority and responsibility. Usually responsibility centers are
defined as the departments of an organization.
The management of cost center has authority over costs. They don’t have control over revenue or
investment activities. Departments such as accounting, finance, legal, and personnel are common
cost centers. (Brewer et al., 2009)
The management of cost center has authority over both costs and revenues but doesn’t have any
control over investment fund. For example: the manager of an amusement park.
From the given scenario the employment of an assistant is related to activities of the cost center.
The decision to purchase new dryers and washing equipment is the activity of investment center.
The decision to take a loan for this purpose is related to the business of both cost center and
The performance of cost center can be evaluated comparing the actual cost with the standard cost
for a particular level of output. All the variances analysis of the previous task can be mentioned
here. The performance of profit center can be evaluated comparing actual benefit with budgeted
profit and performance of investment center can be evaluated comparing the ROI of the
organization. (Brewer et al., 2009)
Variable cost is the cost that changes due to changes of product produced. Per unit variable cost
is usually fixed at a specific level. On the other hand, fixed cost doesn’t change due to changes in
the level of output. Fixed cost is not usually calculated per unit basis. (Horngren, Datar, and
Rajan, 2014) We can use high-low method to find out variable cost and fixed cost from the total
Variable cost per unit:
At first find out the highest activity and the lowest activity.
Variable cost per unit =
Fixed cost = Total cost – Total variable cost
= 55660 – (4.19*9400)
= 55660 – 39383.60
In this method we assumed a linear relationship between variable cost and total cost. We also
assumed that in these activity levels (5500-9400) the total fixed cost has not changed. The
variable cost per unit is fixed at 4.19 per unit. It means that to increase one unit of output the
total cost will increase by 4.19 and there will be no change in the level of fixed cost. This method
is also developed by assuming a linear regression equation between total cost with variable cost
per unit and total fixed cost. (Horngren, Datar, and Rajan, 2014)
Total cost = Variable cost per unit * no of output + total fixed cost
Standard cost card (Absorption Costing)
Standard Cost Card (Absorption costing)
Standard cost card (Marginal Costing)
Standard Cost Card (Marginal costing)
The above two table shows standard cost card under absorption costing method and marginal
costing method. Under absorption costing method per unit standard cost is 99 but under marginal
costing method per unit standard cost is 84. The difference of 15 is due to the allocation of fixed
overhead under absorption costing method. Under marginal costing method fixed overhead is not
allocated to the per unit cost. As the fixed overhead doesn’t change with accordance to the
increase or decrease in the level or output, it is not included in the cost card under marginal
costing method. Marginal cost card includes those costs that change due to one unit change in the
level of output. As fixed overhead doesn’t follow these criteria, fixed overhead per unit is not
included under marginal costing method.
Variances for material:
Difference in Price
Total price variance
According to the given data material price variance is not favorable. Per unit price is higher than
the standard price. The reason behind is that the management is not capable of bargaining a good
price for the materials from the suppliers.
The material quantity variable is favorable to some extent. The total material required to produce
42800 output is lower than the standard level of materials required. That is why the material
quantity variance is favorable.
But the total variable is unfavorable as material price variance is much higher than material
quantity variance. The reason behind that may be the quality of material has improved and so
suppliers are charging a higher price for the materials. This logic seems appropriate as the
material required per unit output has reduced from the previous standard level and it is possible if
the quality of material is improved. (Brewer et al., 2009)
Direct labor variance:
Actual rate Standard rate
Difference in rate Total rate variance
According to the given data the direct labor rate variance is unfavorable. The per hour direct
labor rate is higher than the standard labor rate. This may result in due to overtime work for this
output level. Overtime hour rate is higher than normal hour rate.
The direct labor efficiency variance is also unfavorable as actual hour used is higher than
standard hour for this level of output. The reason behind unfavorable efficiency variance can be
attributed to poorly trained workers, demotivated workers, poor quality materials, faulty
Variable overhead variance:
Actual rate Standard rate
Difference in rate Total rate variance
Variable overhead is related to direct labor hour. We used direct labor hour as a base to allocate
overhead cost per unit. The actual rate for variable overhead per hour is lower than the standard
rate. So the variable overhead rate variance is favorable for the firm. On the other hand the direct
labor hour is higher than the standard level of labor hour for 42800 unit of output. That is why
the variable overhead efficiency variance is unfavorable. But the total variance of variable
overhead is favorable for the firm.
Fixed overhead variances:
Actual rate Standard rate
Difference in rate Total rate variance Condition
We used direct labor hour as a base to allocate fixed overhead cost per unit. The fixed overhead
spending variance is favorable as the actual rate is much lower than the standard rate. On the
other hand, fixed overhead volume variance is unfavorable. This is related to direct labor hour.
As the actual direct labor hour is higher than the standard direct labor hour the variance is
unfavorable. The total fixed overhead variance is favorable as the spending variance is higher
than volume variance. (Brewer et al., 2009)
Sales volume variance = (Actual unit sold – budgeted unit sold) * Standard contribution per unit
= (40000-30000) * 49
= 490000 F
Sales price variance = (Actual price – Budgeted price) x Actual unit sales
= (70-70) * 40000
Total sales variance = 490000+0
The sales volume variance is favorable as the actual unit sold is higher than the budgeted sales
unit. But the sales price variance is zero as the budgeted sales price and actual sales price was
equal at $70.
Actual Profit Statement (Absorption costing):
Actual profit statement
Less: Direct Material
Less: Direct Labor
Less: Variable production overhead
Less: Fixed production overhead
Budgeted Profit Statement (Absorption costing):
Budgeted profit statement
Less: Direct Material (6*30000)
Less: Direct Labor (8*30000)
Less: Variable production overhead (4*30000)
Less: Fixed production overhead (3*30000)
Reconciliation of Actual profit and Budgeted profit:
Profit as per actual statement
Less: Additional sales revenue
Profit as per budgeted statement
Add: direct material overapplied
Add: direct labor overapplied
Add: variable overhead overapplied
Add: fixed overhead overapplied
Hansen, D.R., Mowen, M.M. and Guan, L. (2007) Cost management: Accounting and control.
6th edn. Cincinnati, OH, United States: South-Western College Pub.
Lanen, W.N., Anderson, S.W. and Maher, M.W. (2013) Fundamentals of cost accounting. 4th
edn. New York: McGraw-Hill Higher Education.
Brewer, P.C., Garrison, R.H., Noreen, E.W. and Garrison.., R.H. (2009) Introduction to
managerial accounting. 5th edn. Boston: McGraw Hill Higher Education.
Weetman, P. and IVONNE, P. (2013) Financial and management accounting: An introduction.
6th edn. Harlow, United Kingdom: Pearson Education.
Horngren, C.T., Datar, S.M. and Rajan, M.V. (2014) Cost accounting: A managerial emphasis.
15th edn. United States: Prentice Hall.
COLLEGE OF BANKING AND FINANCIAL STUDIES
DEPARTMENT OF PROFESSIONAL STUDIES
Assignment Front Sheet (Assignment – 1)
Unit number and title
Pearson BTEC Level 5 HND Diploma in
Cost Accounting and Performance Management
Batch – Fall 2016-2017
Internal Verifier (IV) name
Understand The Nature Source And Purpose Of Management
Information And Cost Accounting Concepts And Be Able To Compare
Actual Costs With Standard Costs And Analyse Variances.
Understand the Nature
source and purpose of
information and cost
Compare and contrast various Cost
Estimate inventory values using different
Differentiate between cost, profit,
investment and revenue centres.
Separate the fixed and variable elements
of total costs using a suitable method in
a given situation
Explain and illustrate the difference
between standard cost card under
marginal and absorption costing
Compute and interpret price and usage
variances for material, labour, and
Reconcile budgeted profit with actual
profit under standard absorption costing.
Understand and be
able to compare
actual costs with
standard costs and
In this assessment you will have
the opportunity to present
evidence that shows you are able
to: of cost
Explain the relationship
accounting to financial and managerial
LO – 3
no. (Page no)
I certify that the work submitted for this assignment is my own and research sources are fully
pg. 1- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
In addition to the above PASS criteria, this assignment gives you the opportunity to submit evidence in order to achieve the
following MERIT and DISTINCTION grades
M1 Identify and apply
strategies to find appropriate
To achieve M1, explore the relationship between Cost, Financial and Managerial
Effective judgements have Accounting. (Task 1). To get M1 you should make the effective judgement between
M2 Select / design and apply
appropriate methods /
A range of methods and
techniques have been
standard cost and standard costing. (Task 6)
A range of sources of
information has been used
M3 Present and communicate
D1 Use critical reflection to
evaluate own work and
justify valid conclusions
D2 Take responsibility for
managing and organising
D3 Demonstrate convergent
/lateral / creative thinking
To get M2 you should be able to select suitable method to separate the fixed and
variable elements of total costs and explain it. You should explain the concept of cost
behaviour used in the identified method. (Task 5)
To get M2 Use appropriate method to calculate sales variances accurately.(Task 7)
To achieve M3 To achieve M3 you will need to differentiate Inventory values and
present the reasons of difference between the stock values. (Task -3). To get M3. You
The appropriate structure should be able to make judgement, of the responsibility centre and explain how
and approach has been
managers of responsibility centres are responsible for the performance of their part of
the organization and its activities and how the performance is measured.
(Task 4).To get M3 Present and communicate appropriate findings to explain the
concept of reconciliation statement using different methods.( Task 8)
To achieve D1 you should evaluate the process of inventory control system.(Task -3)To
have been proposed
get D1 evaluate the reasons for the occurrence of adverse and favourable variances.(
characteristics for success Task -7)
has been demonstrated
Innovation and creative
thought have been applied
A range of sources of
information has been used
pg. 2- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
To achieve D2- Recognize the interrelationship between variances.( Task 7)
Purpose of this Assignment: Involvement with costs is fundamental to the role of management
accountants. Any Business, whether it manufactures goods or provides a service, needs to know how
much its product or services cost and how these costs might change in response to decisions made. This
assignment will help you understand the nature source and purpose of management information and
cost accounting concepts and to compare actual costs with standard costs and analyse variances. It also
helps to understand performance measurement models: Balanced scorecard, benchmarking, types of
Task 1 (LO-1 AC -1.1) P,M1
1.1 Explain the relationship of cost accounting to financial and managerial accounting.
Context- Relevant to L.O.1.1 (P, M1)
Financial accounting Systems ensure that the assets and liabilities of a business are properly accounted
for, and provide information about profits to shareholders and to other interested parties.
Management accounting system provides information specifically for the use of managers within an
Cost and management accounting are the terms which are often used interchangeably.
In relation to the above explain the relation of cost accounting to Financial and Management
Accounting and how it helps management in decision making.
Pass: To get the Pass Grade explain briefly Cost accounting, Management Accounting and Financial
Accounting and explore the relationship between them.
M1- To achieve M1, make an effective judgement by differentiating Cost, Financial and Managerial
Task 2. (LO-1 AC 1.2 )
Compare and contrast various Cost classification methods.
Tested in semester – 3 Management Accounting Costing and Budgeting. (Learning Outcome 1.1)
Classify different types of cost.
Task 3 (LO -1 AC 1.3) P, M3, D1
1.3 Estimate inventory values using different methods.
The Reeda is a Trading Company. It buys goods from Dubai and sell it in Oman. The company discloses
the following information about the stock for the month of June 2016:
pg. 3- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
Cost per unit ($)
Pass – To achieve Pass grade you should be able to estimate inventory values of Reeda Company on 30th
June 2016 using FIFO and AVCO methods.
M3 – To achieve M3 you need to present appropriate findings by differentiating Inventory values
calculated above and present the reasons of difference between the stock values.
D1- To achieve D1 you should evaluate the process of inventory control system and justify it.
Task 4 (LO-1 AC- 1.4) P,M3
1.4 Differentiate between cost, profit, investment and revenue centres.
Sara Lee has been operating a small hairdressing business for several months. She is managing the
business individually and is responsible for deciding the cost of all the hair styles and handling the
marketing for the customers. She has started the business by using her savings.
Business is growing slowly. She would like to expand by employing an assistant (Leena) to look after the
day to day activities of the business and to decide the cost to be charged for different services they
provide. She is also planning to purchase new dryers and washing equipment. She is thinking to take a
loan for the same. She will need to monitor the success of that investment by making the judgement of
the profitability and the capital she has invested.
Pass- To get the Pass grade explain responsibility accounting and differentiate between cost, profit,
investment and revenue centres.
M3- To get M3 grade present appropriate findings of the above scenario and link them with the
appropriate responsibility centres and communicate how managers are responsible for their centre’s
performance and how the performance is measured.
Task 5 (LO-1 AC- 1.5) P,M2
– Separate the fixed and variable elements of total costs using a suitable method in a given
The CG Kitchenware Limited sells kitchen appliances (Dishwashers, Fridges and Ovens) to departmental
pg. 4- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
stores. The following table shows the number of Ovens sold and total costs for each of the past five
Total Cost ($)
Variable cost per unit and total fixed cost is constant within this range of activity.
Pass- To get the pass grade you should be able to separate the fixed and variable elements of total
costs using a suitable method in a given scenario.
M2 – To get M2 you should be able to select suitable method to separate the fixed and variable
elements of total costs and explain it. You should explain the concept of cost behaviour used in the
Task 6 (LO-3 AC- 3.1) P,M1
3.1 – Explain and illustrate the difference between standard cost card under marginal and absorption
Nu Line Ltd. Manufactures machine tools for conversion to specialist use. The tools are sold to the
textile industry. Company is not automated and is based on simple labour intensive process. Company
plans to produce 5,000 units in a year. Based on historical data the Company calculated the following
standards concerning direct Inputs:
5 Kg at $3.00 per Kg
4 Kg at $10.00 per Kg.
3 hours at $6.00 per hour.
2 hours at $2.50 per hour
2 hours at $3.00 per hour
Fixed production overhead cost is $75,000 and is absorbed on the basis of skilled labour hours.
Pass-To get pass grade use the above date to draw the standard cost card under marginal and
absorption costing and explain the difference between them.
M1-To get M1 you should make the effective judgement between standard cost and standard costing,
pg. 5- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
Task 7 (LO-3 AC- 3.2) P,M2,D1,D2
3.2 – Compute and interpret price and usage variances for material, labour, and overhead inputs
Task 7 (LO-3 AC- 3.2) P,M2,D1,D2
Plastics Ltd. Manufactures different plastic products
Standard costs relating to one of its product have been calculated as follows:
Direct material 5 Kg at $1.2per kg
Direct labour, 2 Hours at $4 per hour
Variable production Overhead, 2 Hours at $2 per hour
Fixed production Overhead 2 hour at $1.5 per hour
The budgeted selling price of one bag is $70 and Carrypack budgeted to produce and sell 30,000 units a
During December 42,800 units were actually produced and 40,000 units were sold, actual selling price
was $70 per unit.
Relevant actual details of production are as follows:
Materials 213,776 Kgs costing
Labour 86,970 hours were worked and total wages were
Variable production overhead was
Fixed production overhead was
Compute and Interpret price and usage variances for material, labour, overhead (fixed and variable)
Pass- Compute and interpret price and usage variances for material, labour, overhead (fixed and
M2 – To get M2 Use appropriate method to calculate sales variances accurately.
D1 – To get D1 evaluate the reasons for the occurrence of adverse and favourable variances.
D2- Variances should not be looked at in isolation. One variance might be inter-related with another,
take a responsibility for managing and organising your activity and recognize the interrelationship
between variances calculated above.
Task 8 (LO-3 AC- 3.3) P, M3
1.3 – Reconcile budgeted profit with actual profit under standard absorption costing.
Pass: To get the pass grade prepare the reconciliation statement (using task 7 above) and actual profit
statement and match the profits under absorption costing using appropriate format.
M3- To get M3 Present and communicate appropriate findings to explain the concept of reconciliation
statement using different methods.
pg. 6- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
Summary of evidence required by student
Essay identifying and explaining the relationship of cost accounting to financial
and managerial accounting.
Calculation showing stock valuation using different methods.
Based on the case evidence identify responsibility centres.
Calculation showing the segregation of fixed and variable part of the total cost.
Drafting standard cost card under marginal and absorption Costing.
Calculation and interpretation of Variances.
Drafting statement to reconcile actual and budgeted profits.
1. Use standard document formats and structures.
2. Word process the documents.
3. Use 12 point Arial or Times New Roman script.
4. Provide a list of references and use the Harvard referencing system.
5. Complete the title page and sign the statement of authenticity.
6. Upload the entire assignment in MS word format only on Turnitin.
7. Staple only once to keep the pages of your work together.
8. Late submission, late work will only be marked on the next occasion the unit is taught.
9. Submit the work along with the Turnitin report to the respective assessors in their offices.
10. Collect the assignment submission form duly signed by the assessor and the learner.
11. Grades are subject to External Verification.
Resources: List of Websites
List of Books:
1. FIA, FMA, Management Accounting, ACCA Paper F2 (2012, 2014), BPP Learning Media.
2. William Lanen, Shannon Anderson, Michael Maher: Fundamentals of Cost Accounting, McGrawHill/Irwin; 3 edition (January 7, 2010), ISBN-10: 0073527114, ISBN-13: 978-0073527116 | Edition: 3
1. James Jiambalvo : Managerial Accounting, 2nd Edition, Wiley, June 2012, ©2004, ISBN: 978-0-47013718-5.
Word limit – 2500 words.
pg. 7- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
Pearson BTEC Level 5 HND
Diploma in Accounting
Unit Number and
Cost Accounting and
To achieve the criteria the evidence must show that the
student is able to:
Explain the relationship of cost accounting to financial and managerial
Compare and contrast various Cost classification methods
Estimate inventory values using different methods
Differentiate between cost, profit, investment and revenue centres.
Separate the fixed and variable elements of total costs using a suitable
method in a given situation
Explain and illustrate the difference between standard cost card under
marginal and absorption costing
Compute and interpret price and usage variances for material, labour,
and overhead inputs
Reconcile budgeted profit with actual profit under standard absorption
Higher Grade achievements (where applicable)
M1: Identify and apply strategies to
find appropriate solutions
D1: Use critical reflection to
evaluate own work and justify
pg. 8- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
Summative Feedback: Assessor to Student
Feedback: Student to Assessor
pg. 9- HND- SEM-IV- ASSIGNMENT – CAPM – FALL 2016-2017
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