Management and financial accounting Essay Example | Topics and Well Written Essays - 500 words

Management and financial accounting - Essay Example The real estate business has experienced a sharp down trend in the recent times. As such, people are on the job of improving their own homes rather than buying or selling of houses. Lofty Heights which is a firm into improving of homes, as such, is expanding vastly taking the advantage of this downturn. Its headquarters are in South Wales but, it is growing nationally with Jeff (owner) as the sales and marketing personnel and Evans (employee) as the financial manager. The company is expanding further to form newer departments in the organizational structure like HR, Customer Service etc. It follows absorption costing for ascertaining its unit costs and is a sole proprietorship business entity as on date. Task – F2 – Management Accounting: Solution – a: Amount of profit budgeted to be made for each of the loft conversions: Particulars 23 31 36 Sales 28,500 39,500 55,500 Less: Direct Costs 7,800 14,500 18,500 Gross Profit 20,700 25,000 37,000 Less: Allocated Fixed O/h's 12,000 12,000 12,000 Net Profit budgeted 8,700 13,000 25,000 Solution – b: Allocated fixed o/h's HR Finance CS Building Planning 2,000 3,000 3,000 20,000 8,000 The fixed overheads are being allocated to the three loft conversion units according to their labor hour utility. But, this type of costing is more suitable only when:†¢There is only one conversion†¢Production is calculated on the basis of normal capacity and †¢There is no inventory.