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Produce a report divided into seven main sections based on a case-study BB Ltd investigating the following aspects of management accounting techniques.

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Introduction

UNIT 13 MANAGEMENT ACCOUNTING Produced By A.Akil INTRODUCTION My name is Akil, I am required to produce a report divided into seven main sections based on a case-study BB Ltd investigating the following aspects of management accounting techniques. Part 1: Types of Cost Part 2: Breakeven analysis and Marginal Cost Part 3: Absorption costing Part 4: Investment appraisal Part 5: Budgets and budgetary control Part 6: Standard cost and various analysis Part 7: An effective summary of my results and a critical evaluation of each method or technique used. (A grade) Background information Bianca Butcher is the managing director of BB Ltd a famous wooden toys manufacturer in Bromley. She supplies shops throughout the UK as well as retailing its products from a shop. I have been employed as the management accountant and as part of my assignment. I am required to analyse various management accounting issues in making both short term and long term decisions. The business address is as follows BB Ltd Broadfield Industrial Estate Bromley Kent BR6 6TT Tel : 020-8286-2222 Fax : 020-8286-7700 PART 1: CLASSIFICATION OF COSTS A) I have had various discussions with Bianca Butcher and she would like me to carry out a brief investigation into the activities of any wooden toy manufacturer demonstrating my understanding of the following cost and how they behave 1) Fixed Costs 2) Variable Costs 3) Direct Cost 4) Indirect Costs 5) Semi Variable Costs 6) Standard Costs Fixed Costs Any costs that do not vary with the level of output because they are linked to a time base rather than to a level of activity. Sometimes called period costs, they include rents and rates and depreciation. The graph represents total payments made for the use of buildings, plant and equipment, etc, which must be met irrespective of whether outputs is high or low. Variable costs Any costs that tend to vary directly with the level of output. ...read more.

Middle

BB Ltd can send some of their employees to work in Czech as part of the manufacturing of the toys thus will be able to implement UK's health and safety policies along with the quality assurance. There will also be better communication between the two countries and the admin can be dealt with more efficiently. D CLOSURE OF A DEPARTMENT Management expects all segments of the business to make a profit. However, the latest profit statement from the shop shows the following: � Sales �80,000.00 Cost of Goods Sold �50,000.00 Wages �16,000.00 Share of fixed overheads 18,000 Net Loss -�4,000 � SALES 80,000 VARIABLE COSTS 66,000 CONTRIBUTION COST 14,000 FIXED COST 18,000 NET LOSS -4,000 I don't think the shop should close because although there is a net loss the contribution is positive. The business contribution shows that there is potential and BB Ltd can survive the loss. Assuming Fred China Ltd is willing to rent the premises for �17,000, I would advise not to because to me �17,000 in overheads wont make much differences because you will still make a net loss. E TO CONTINUE OR DISCONTINUE BB Ltd makes four patterns of a particular toy- Lala, Po, Cece, and Zizi , data shown below in the following statement Lala Po Cece Zizi Total Sales Revenue 460,000 400,000 420,000 300,000 1,580,000 Total Cost 480,000 540,000 350,000 200,000 1,570,000 Profit/loss -20,000 -140,000 70,000 100,000 10,000 Total Cost can be broken down as 25% fixed overhead costs and 75% variable costs. LALA PO Sales 460000 400000 Variable Costs (75%) 360000 405000 Contribution 100000 -5000 Fixed Costs (25%) 120000 135000 Profit/Loss -20000 -140000 By looking at this table above Lala and Po are both negative figures so this is making BB Ltd a loss. Toy Lala has a high contribution of �100000 which is much greater than its net loss of �20000. The high contribution proves that the loss made on Lala has the ability to be improved in terms of changing from a loss into a profit. ...read more.

Conclusion

If you have a short term cash flow problem you could ask a bank for an overdraft. Also it will give the wrong impression to other investors who would want to invest in the business because all their financial statement is wrong. Cash flow forecast for Bianca butcher from 1 January 2002 to 31st December 2002 January February March April May June July August September October November December Quantity of units sold 250 400 450 500 1,000 600 750 500 550 625 750 900 Receipts Sales �250 �400 �450 �500 �1,000 �600 �750 �500 �550 �625 �750 �900 Credit sales �750 �1,200 �1,350 �1,500 �3,000 �1,800 �2,250 �1,500 �1,650 �1,875 �2,250 Owners Savings �3,500 Family Loan �2,000 Consultancy fees �600 �600 �600 �600 �600 �600 �600 �600 Total receipts �3,750 �1,150 �3,650 �2,450 �3,100 �4,200 �3,150 �3,350 �2,650 �2,275 �3,225 �3,750 Payments Purchases of stock �500 �800 �900 �1,000 �2,000 �1,200 �1,500 �1,000 �1,100 �1,250 �1,500 Stock payment buffer �2,000 Advertising �500 �500 �500 �800 �500 �500 �500 �500 �500 �500 �500 �800 Temp wages for office manager �100 �100 �100 �100 �100 �100 �100 �100 �100 Postage �100 �100 �100 �150 �150 �150 �150 �150 �150 �150 �150 �150 Packing materials �50 �50 �50 �75 �75 �75 �75 �75 �75 �75 �75 �75 Telephone * �250 �250 �250 Sundry expense �15 �15 �15 �40 �15 �15 �15 �15 �15 �15 �15 �40 Rent �200 �200 �200 �200 �200 �200 �200 �200 �200 �200 �200 �200 Office equipment �2,300 Computer and printer �2,750 Van �4,600 Owner drawings �180 �180 �180 �180 �180 �180 �180 �180 �180 �180 �180 �180 Total payments �5,345 �1,545 �1,945 �5,445 �2,220 �3,220 �2,670 �2,720 �2,220 �2,570 �2,470 �7,545 Net cashflow -�1,595 -�395 �1,705 -�2,995 �880 �980 �480 �630 �430 -�295 �755 -�3,795 Opening balance �0 -�1,595 -�1,990 -�285 -�3,280 -�2,400 -�1,420 -�940 -�310 �120 -�175 �580 Closing balance -�1,595 -�1,990 -�285 -�3,280 -�2,400 -�1,420 -�940 -�310 �120 -�175 �580 -�3,215 2 A.Akil ...read more.

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