COLLEGE OF BANKING AND FINANCIAL STUDIES DEPARTMENT OF PROFESSIONAL STUDIES Assignment front sheet Assignment - 1 Qualification Unit number and title Pearson BTEC Level 5 HND Diploma Business Unit 9- Management Accounting Costing and Budgeting Semester Batch III Spring -2016-2017 Student name Assessor name Mr. Feroskhan/Mr.Mohamed Ali Student No. Internal Verifier (IV) name Mr.Farzan Date issued Completion date Submitted on 21/3/2017 25/5/2017 Assignment title Cost Classifications, techniques ,Information, Forecasting And budgeting Learning Outcome Learning outcome Assessment Criteria In this assessment you will have the opportunity to present evidence that shows you are able to: Task no. Evidence (Page no) LO1 Be able to analyse cost information within a business 1.1 Classify different types of cost 1 1.2 Use different costing methods 2 1.3 Calculate costs using appropriate techniques 3 1.4 Analyse cost data using appropriate techniques 4 LO3 Be able to prepare forecasts and budgets for a business 3.1 Explain the purpose and nature of the budgeting process. 5 3.2 Select appropriate budgeting methods for the organization and its needs. 6 3.3 Prepare budgets according to the chosen budgeting methods 7 3.4 Prepare a Cash Budget 8 Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Student signature: Date: 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 Grade Descriptor Indicative characteristic/s Contextualisation M1 Identify and apply strategies to find appropriate solutions Effective judgements have been made.2. An effective approach to study and research has been applied. 3. complex problems with more than one variable have been explored To achieve M1, you should make effective judgements in classifying the cost based on cost behavior, nature and this should be reflected in the preparation of cost sheet (task 1) And you should solve the given complex problem and more than one variable should have been explored. (task 2) Discussion of different type of techniques used in presenting cost data (task 4).Use journal articles and literatures to explain the nature and purpose of budgeting (task 5). You should make effective judgements in selecting the appropriate budgeting method and you should explore problems with more than one variable (Task 7). you should demonstrate understanding on how to budget for cash and credit sales ( task 8) M2 Select / design and apply appropriate methods / techniques 1. relevant theories and techniques have been applied 2.a range of methods and techniques have been applied 3.a range of sources of information has been used To achieve M2, you should use relevant theories and techniques in different costing methods to substantiate your answer. (task 2)and you should use range of methods and techniques to present the cost data.(Use Bar chart, pie chart and trend analysis) task 4. For both task you will have to use journal articles and text book as references. M3 Present and communicate appropriate findings 1 .the appropriate structure and approach has been used coherent, logical development of principles/ concepts for the intended audience 2.a range of methods of presentation have been used and technical language has been accurately used To achieve M3, you should have used the appropriate structure and approach coherently in preparing the cost sheet and consider the intended audience who will use the cost sheet. (task1).You should have used an appropriate structure and approach coherently in preparing the profit statement. (task3). You should have used an appropriate structure and approach showing ranges of methods of presentation of cost data. (Task 4). For both task you will have to use journal articles and text book as references. D1 Use critical reflection to evaluate own work and justify valid conclusions Conclusions have been arrived at through synthesis of ideas and have been justified. To achieve D1, you should validate the inventory level calculated in FIFO and AVCO method. (Task 3) Conclusions should have been arrived (areas need cost control), through synthesis of ideas and it should be justified based on the given cost data. (task 4) D2 Take responsibility for managing and organising activities 1.Autonomy/independence has been demonstrated To achieve D2, you should demonstrate autonomy independence in calculating cost and selling price (task 2), you should have planned and used substantial activities or investigations in explaining the purpose of a budget. You could explain beyond budgeting. (task 5) You should have planned and managed substantial activities, projects or investigations in different budgeting method used in organizations (task 6). You should demonstrate more autonomy and independence in preparing cash budget (Task 8). D3 Demonstrate convergent /lateral / creative thinking 1. ideas have been generated and decisions taken 2. convergent and lateral thinking have been applied To achieve D3, you should have arrived at conclusions through synthesis of ideas and justified your conclusion pertaining to prepared cost card. (Task 1) you should demonstrate effective thinking and self-evaluation in preparation of budgets. Self-evaluation based on appropriateness of the budget and its practicability need to be assessed. (task 7) Assignment brief Purpose of this assignment The aim of this assignment is to assess the learner’s ability to demonstrate understanding on the importance of management accounting to all businesses. It looks at costing and budgeting, and how to use current or historical financial data to plan for the effective finances and costs of the business for the future. Scenario 1 Synergy Limited produces Digital satellite receivers (DSR), installing dish system in apartments, villas and business establishments. DSR comes with a one year warranty offering free repairs if any faults arise in this period. Each Digital satellite receiver includes two main components – metal cover and the circuit. At present, Synergy Limited manufacture these components. However, the company is currently considering outsourcing the production of Digital satellite receivers and concentrate in marketing and installation of the system. A newly established company has offered to supply circuit at the price of O.R.15. Synergy Limited estimates to produce 2000 units of Digital satellite receivers (DSR) during the second quarter of 2017. Now the Management of Synergy Limited wants a detailed analysis of the total cost of making the product. Estimated data for the forthcoming period is as follows:- 1.Each unit of digital satellite receiver requires materials as follows-:  circuit costing R.O 8.5 each  metal covering costing R.O 2.5 each 2. Each unit of digital satellite receivers requires 3 hours of skilled labour at R.O 4 per hour and 2 hours of unskilled labour at R.O. 3 per hour. 3. Other direct expenses to be incurred per Digital satellite receivers are R.O. 1. 4. Synergy Limited. Decided to absorb the fixed production overhead based on direct labour hours (skilled and unskilled). Firm estimated fixed production cost of R.O 5000 and budgeted direct labour hours (skilled and unskilled) of 2500 hours. Task 1 – LO1 - Assessment Criteria 1.1 (M1, M3, D3): Classify different types of cost To achieve Pass you must • Identify the different types of cost (material, labour and overhead) incurred in making Digital satellite receivers and record this information in the unit cost card showing prime cost and production cost of Digital satellite receivers. In addition to the above Having identified the different types of cost, classify them on the basis of - Nature and Behaviour To achieve M1, you should make effective judgements in classifying the cost based on cost behavior, nature and this should be reflected in the preparation of cost sheet. To achieve M3, you should have used the appropriate structure and approach coherently in preparing the cost sheet and consider the intended audience who will use the cost sheet. To achieve D3, you should have arrived at conclusions through synthesis of ideas and justified your conclusion pertaining to prepared cost card. Scenario 2 ABC limited manufacture Bluetooth adopter for vehicles. ABC limited has two production departments and the overhead absorption rates for each department is as below;- Modification Department is involved in making the plastic mould for Bluetooth adopter and Fixing Department performs the fixing of imported circuits in to the plastic mould. Department Overhead absorption rate per direct labour hour Modification Department R.O. 2 Fixing Department R.O. 3 Rent a car company requested a quotation for 200 Bluetooth adopters during the next quarter. The following cost estimation for batch of 200 units were provided by the production department. Material Circuit boards ( 200 units) R.O.550 Plastic (200 units) R.O.350 Labour (Batch) Modification Department 10 hrs R.O.3.per Hour Fixing Department 5 hrs R.O.4.per Hour Firm has the policy of keeping a profit mark up of 50% on production cost. You are required to calculate cost and selling price per unit of a Bluetooth adopter. Task 2 – LO1 - Assessment Criteria 1.2 (M1, M2, D2): Use different costing methods To achieve Pass you must • Identify the need for different costing methods at ABC limited. • Use appropriate costing method to calculate the cost and the selling price of Bluetooth adopter To achieve M1, you should solve the given complex problem and more than one variable should have been explored. (Explore the use of Overhead absorption rate) To achieve M2, you should use relevant theories and techniques in different costing methods to substantiate your answer. To achieve D2, you should demonstrate autonomy independence in calculating cost and selling price. Scenario 3 Store keeper of ABC limited recorded the following inventory receipts and issues in his record. He requested your help to find out the value of closing stock under FIFO and AVCO methods. Transactions during January 2016:- Date Item Units Unit cost(O.R) 1st Jan Opening stock 200 10.00 3rd Jan Receipt 600 11.00 4th Jan Issue 400 ? 9th Jan Receipt 300 12.00 11th Jan Issue 400 ? 18th Jan Receipt 200 13.00 20th Jan Issue 100 ? 31st Jan Closing Balance 400 ? Task 3 – LO1 - Assessment Criteria 1.3 (M3, D1): Calculate costs using appropriate techniques To achieve Pass you must • Calculate cost of closing stock using FIFO and AVCO method. To achieve M3, you should have used an appropriate structure and approach coherently in preparing the profit statement. To achieve D1, you should validate the inventory value calculated under FIFO and AVCO. Scenario 4 A) TNT limited manufacture and sells gardening equipment to retail customers. Following forecasted data has been given to you. The managing director of the company is very much concerned about the company’s future performance. You are working as the cost accountant and requested to Analyse cost data using appropriate techniques in order to present in the next board meeting. Company sells six product which are X1, X2, X3, X4, X5 and X6. Sales Forecast Items Month X1 X2 X3 X4 X5 X6 Total January 2500 3500 1500 3600 2500 2300 15900 February 3500 2500 2400 2300 2200 2100 15000 March 4500 4500 4500 4500 4500 2300 24800 April 4600 3500 3500 3500 3500 3500 22100 May 5500 3500 3400 3300 3200 3100 22000 June 5500 4500 3500 2500 1500 2300 19800 Variable cost Month X1 X2 X3 X4 X5 X6 January 1550 2170 930 2232 1550 1426 February 2450 1750 1680 1610 1540 1470 March 2700 2700 2700 2700 2700 1380 April 2300 1750 1750 1750 1750 1750 May 3025 1925 1870 1815 1760 1705 June 3080 2520 1960 1400 840 1288 Month Forecasted sales Variable Cost of production January 15,900 9,858 February 15,000 10,500 March 24,800 14,880 April 22,100 11,050 May 22,000 12,100 June 19,800 11,088 Variable cost Materials Labor Variable OH 9858 5915 2957 986 10500 6300 3150 1050 14880 8928 4464 1488 11050 6630 3315 1105 12100 7260 3630 1210 11088 6653 3326 1109 Task 4 – LO1 - Assessment Criteria 1.4 (M1, M2, M3, D1): Analyse cost data using appropriate techniques To achieve Pass you should present the data provided in scenario 4, using an appropriate technique. To achieve M1, you should have adopted an effective approach to study and research has been applied in the Discussion of different type of techniques used in presenting cost data. To achieve M2, you should use range of methods and techniques to present the cost data.(Use Bar chart, pie chart and trend analysis) To achieve M3, you should have used an appropriate structure and approach showing ranges of methods of presentation of cost data. To achieve D1, conclusions should have been arrived (areas need cost control), through synthesis of ideas and it should be justified based on the given cost data. Scenario 5 (Tasks 5, 6 and 7) ZIZ Ltd manufactures three types of industrial equipment. (A, B and C) and is preparing its budget for forthcoming six month. The budget for the forthcoming six months from 1st July 2017 to 31st December 2017 is to be prepared. Forecasted information for the next six months is as follows. A B C 1. Demand for the company’s product Sales Demand in units for six months 1200 units 1600 units 1400 units Selling price per unit R.O 23 R.O 34 R.O 32 2. Opening inventory of finished product at 1st January 2017 in units. 50 units 20 units 20 units 2. Closing inventory of finished product at 30 June 2017 in units. 40 units 30 units 60 units 4. Direct labour hours required per unit of each product 5 hours 6 hours 4 hours 5. Raw material content (quantity) per unit of each product. Plastic Aluminium Steel 3 kilos 2 kilos 2 kilos 3 kilos 2 kilos 2 kilos 4 kilos 2 kilos 4 kilos 6. Direct labour –the standard wage rate of direct labour is R.O 4 per hour. The following information is available regarding raw materials: Plastic Aluminium Steel a) Closing inventory requirement in Kilos at 30tht June 2017 in units. 1450 Kilos 1850 Kilos 1350 Kilos b) Opening inventory at 1st January 2017 in units. 1550 Kilos 2150 Kilos 1250 Kilos c) Budgeted cost of raw material per kilo R.O. 4 R.O. 5 R.O. 6 Task 5 – LO3 - Assessment Criteria 3.1 (M1, D2): Explain the purpose and nature of the budgeting process. To achieve Pass you must, • Explain the purpose and nature of the budgeting process of ZIZ Ltd. To achieve M1, you should have used an effective approach to study and research the purpose of budgeting. Use journal articles and literatures to explain the nature and purpose of budgeting. To achieve D2, you should have planned and used substantial activities or investigations in explaining the purpose of a budget. You could explain beyond budgeting. Task 6 – LO3 - Assessment Criteria 3.2 (M2,D2): Select appropriate budgeting methods for the organization and its needs. To achieve Pass you must, • Select the most appropriate budgeting methods in preparing the budget for ZIZ Ltd. To achieve M2 you must, you should use range of methods and techniques to present the cost data To achieve D2, you should have planned and managed substantial activities, projects or investigations in different budgeting method used in organizations. Task 7 – LO3 - Assessment Criteria 3.3 (M1, D3): Prepare budgets according to the chosen budgeting methods To achieve Pass you should prepare (Using data presented in scenario 5) • sales budget, • production budget in quantities, • direct material usage budget, • direct material purchase budget • direct labour budget To achieve M1, you should make effective judgements in selecting the appropriate budgeting method and you should explore problems with more than one variable. To achieve D3, you should demonstrate effective thinking and self-evaluation in preparation of budgets. Self-evaluation based on appropriateness of the budget and its practicability need to be assessed. Scenario 6 TOY Ltd is planning to start its business operation in January 2018. AXN Ltd has the following information for the first six months of trading. Capital introduced to the business 80,000 Monthly rent 2,500 Cash payment for an equipment payable in April 25,000 Cash sales per month 8,300 Credit sales per month (credit sales are made on two month’s credit; no bad debts are expected) 19,000 Credit Purchase per month (credit purchase are made on One month’s credit) 6,000 Cash purchase per month 4,000 The monthly cash expenditure on salaries 4,000 Task 8 – LO3 - Assessment Criteria 3.4 (M1, D1, D2): Prepare a Cash Budget To achieve Pass, you should, • Prepare a cash budget for the six months from January 2017 To achieve M1, complex problems with more than one variable have been explored in preparing the cash budget. ( demonstrate understanding on how to budget for cash and credit sales) To achieve D1, you should propose Realistic improvement to be made in cash budget of TOY Ltd. To achieve D2, you should Demonstrate autonomy and independence in preparing the cash budget. Evidence checklist Summary of evidence required by student Evidence presented Task 1 Drafting the cost card for the given scenario and explain the cost classification Task 2 Essay on explaining different costing method and drafting statement which shows the cost and selling price of product A and product B Task 3 Drafting statement based on Absorption Costing, Marginal Costing And Reconciliation statement. Task 4 Essay illustrating different sampling methods and appropriate presentation of data in the case scenario. Task 5 Essay explaining the purpose of the budgeting process Task 6 Critically evaluation of various budgeting methods used by organizations. Task 7 Drafting statement which comprise important functional budgets Task 8 Drafting and commenting on cash budget for six month and explaining the importance of cash budgets Resources: List of Websites www.accaglobal.com www.cimagloabl.com http://www.ICAEW.co.uk Guidance notes: 1. Use standard document formats and structures. 2. Word process the documents.(Word count should not exceed 2500 words excluding the tables, calculations and references ) 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. CLASS ID AND PASSWORD FOR TURNITIN: 1) Class Id: ; Password: Achievement Summary Qualification QCF Level: 5 Assessor name Mr. Feroskhan Unit Number and title Unit 9- Management Accounting Costing and Budgeting Student name Criteria Reference To achieve the criteria the evidence must show that the student is able to: Achieved? (tick) 1.1 Classify different types of cost 1.2 Use different costing methods 1.3 Calculate costs using appropriate techniques 1.4 Analyse cost data using appropriate techniques 3.1 Explain the purpose and nature of the budgeting process. 3.2 Select appropriate budgeting methods for the organization and its needs. 3.3 Prepare budgets according to the chosen budgeting methods 3.4 Prepare a Cash Budget Higher Grade achievements (where applicable) Grade descriptor Achieved? (tick) Grade descriptor M1: Identify and apply strategies to find appropriate solutions D1: Use critical reflection to evaluate own work and justify valid conclusions M2: Select / design and apply appropriate methods / techniques D2: Take responsibility for managing and organising activities M3: Present and communicate appropriate findings D3: Demonstrate convergent/lateral/creative thinking Assignment Feedback Formative Feedback: Assessor to Student Action Plan Summative feedback Feedback: Student to Assessor Assessor Signature Date IV Signature Date Student Signature Date