Project Management Accounting Carlton Speciality PLC

Question: Discuss about theProject Management Accounting for Carlton Speciality PLC. Answer: Introduction: The assignment concentrates on detailed preparation of the significant financial and manufacturing statements in the context of Carlton Speciality PLC. The first segment deals with the formation of combined schedule of cost of goods manufactured and cost of goods sold for the above-mentioned organisation. In addition, the missing values of the provided accounts have been computed based on the given adjustments. Furthermore, based on the above statements and accounts, the income statement for Carlton Speciality PLC has been developed for July 2016. The latter segment of the assignment sheds light on highlighting the dissimilarities between job costing and process costing along with categorising monthly production reports into the appropriate inventory system. Cost of Goods Sold, Cost of Goods Manufactured and Missing Values for Raw Materials and WIP Control Accounts of Carlton Speciality PLC: Calculation of finished goods labour hour Direct labour hours worked for July (A) 270000 Work in progress labour hours (B) 31250 Finished goods labour hours [(A) (B)] 238750 Calculation of labour absorption rate Direct labour cost (A) 100000 Direct labour hours worked (B) 31250 Labour rate per hour [(A)/(B)] 3.2 Calculation of manufacturing overhead absorption rate Manufacturing budgeted overhead cost (A) 1000000 Budgeted hours for labour (B) 200000 Overhead absorption rate [(A)/(B)] 5 Calculation of cost of goods manufactured Cost of goods sold (A) 4000000 Add: Closing finished goods (B) 1200000 Less: Opening finished goods (C) -320000 Cost of goods manufactured [(A) + (B) (C)] 4880000 Calculation of closing work in progress Direct labour cost (A) 100000 Direct material (B) 140000 Manufacturing overhead (C) 156250 Total work in progress at the end of June [(A) + (B) + (C)] 396250 Calculation of issue of cost of goods manufactured Closing Work in progress (A) 396250 Less: opening Work in progress (B) 240000 Issue of cost of goods manufactured [(A) (B)] 156250 Calculation of raw materials purchased Closing accounts payable (A) 65000 Payments to creditors (B) 430000 Less: Opening accounts payable (C) -70000 Materials purchased [(A) + (B) + (C)] 425000 Calculation of raw materials consumed in goods manufactured Cost of goods manufactured (A) 4880000 Less: Work in progress consumed (B) -156250 Less: Direct labour in finished goods [(C) = Finished goods labour hours x labour rate per hour] -764000 Less: Overhead in manufacturing [(D) = Finished goods labour hours x overhead absorption rate] -1193750 Raw materials consumed in goods [(A) + (B) + (C)] 2766000 Calculation of opening stock of raw materials Closing stock of raw materials (A) 850000 Add. Issue to manufacture (B) 2766000 Less: purchase (C) -425000 Opening stock of raw material [(A) + (B) + (C)] 3191000 Income Statement Carlton Speciality PLC for July 2016: Income statement for the month of July Cost of goods sold (A) 4000000 Add. Profit (B) 2000000 Sales [(A) + (B)] 6000000 Dissimilarities Between Job Costing and Process Costing: Points of Dissimilarities Job Costing Process costing Concept It is the process of computing the cost pertaining to a special contract or work order. Under this method, work is completed in accordance with the client instructions (Drury 2013). It is the process of charging costs to different processes for determining the operations. Nature The production technique in job costing is mainly customised. In process costing, the production is standardised in nature (Kaplan and Atkinson 2015). Cost assignment The cost related to each job is computed in job costing (Needles, Powers and Crosson 2013). In process costing, the cost is ascertained for the process itself and then, it is distributed afterwards over the manufactured units. Centre of cost The centre of cost is the job itself. The centre of cost is the whole process. Possibility of cost minimisation The scope of reducing cost is meagre in job costing. The scope of eliminating cost is higher in process costing in contrast to job costing (Weygandt, Kimmel and Kieso 2015). Distinctiveness All the jobs could be distinguished from each other (Mellor, Hao and Zhang 2014). Since, the manufacturing process is consecutive; the products could not be distinguished after production. Type of industry Job costing is deemed most appropriate for those industries, which produce goods in accordance with the placed orders of the customers. Process costing, on the other hand, is suitable for those industries, which are engaged in mass production (Frazier 2014). Identification of Monthly Production Reports Regarding Whether they are Periodic or Perpetual Inventory Systems: Monthly production reports could be categorised into perpetual inventory system, since this system records the records the balances continually in both the accounts of inventory and cost of goods sold. In addition, the monthly production reports are generated by debiting the cost of goods sold and crediting the inventory (Verma 2015). Periodic inventory system, on the other hand, is generated at the end of each accounting period, which is mostly a year (Gordon, Raedy and Sannella 2015). In order to generate monthly production report, a distinguishable entity is needed for adjusting the inventory account. This feature is observed in the perpetual inventory system. Moreover, periodic inventory system does not keep the regular record of purchases, which is a vital element in generating the monthly production reports (Ross 2015). For instance, in case of Carlton Speciality PLC, the closing stock of one period is used in the following month. Therefore, the inventory system of the company is to be considered as perpetual inventory system. Hence, monthly production reports are classified as the perpetual inventory system. Conclusion: The above discussion deals with preparation of the different manufacturing statements and missing account values in the context of Carlton Speciality PLC. In addition, job costing and process costing have been distinguished from each other, in which it has been found job costing is followed in accordance with the client demand. However, process costing is followed in case of mass production. Finally, it has been identified that monthly production reports are categorised as perpetual inventory system. References: Drury, C.M., 2013.Management and cost accounting. Springer. Frazier, W.E., 2014. Metal additive manufacturing: a review.Journal of Materials Engineering and Performance,23(6), pp.1917-1928. Gordon, E.A., Raedy, J.S. and Sannella, A.J., 2015.Intermediate Accounting. Pearson Education, Incorporated. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning. Mellor, S., Hao, L. and Zhang, D., 2014. Additive manufacturing: A framework for implementation.International Journal of Production Economics,149, pp.194-201. Needles, B.E., Powers, M. and Crosson, S.V., 2013.Principles of accounting. Cengage Learning. Ross, D.F., 2015. Managing Supply Chain Inventories. InDistribution Planning and Control(pp. 309-356). Springer US. Verma, M., 2015. Inventory Management Accounting for Obsolete Inventory. IUP Journal of Accounting Research Audit Practices,14(1), p.55. Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015.Financial Managerial Accounting. John Wiley Sons.