unit 5 management accounting assignment sample

Unit 5 Management Accounting- Assignment

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Unit 5 Management Accounting Assignment Sample – BTEC-HND-LEVEL 4

Management accounting systems use financial and non-financial statements to provide insightful information. So that management can take an effective decision for the organizations.

It plays an important role in providing information to the managerial people. The scope of management accounting is wide as it includes all sorts of information related to a specific organization.

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Understanding of management accounting systems

The accounting management system studies cost and business operation. It aids the management to prepare financial reports and records. It eases the managerial decision-making process to achieve the organizational goal.

The accounting management system is the act of transforming the financial, and accounting data into meaningful information. It helps management to make an important decision on behalf of the organization.

The costing system or cost accounting system is the Framework used by the management to approximate the cost of the product for profitability analysis, inventory management, and evaluation.

Communication provides information that influences the productivity of the organization. The role of accounting management initiates and ends with communication. The effectiveness of the accounting management system depends on how well information got conveyed. The influence of management relies on communication, and well-organized communication leads to effective decision-making. The organization needs to focus on the communication of accounting information so that it can influence the management.

Accounting management can result in better decision-making. To do so, it needs to provide relevant information to the management. Accounting management incorporates all information, regardless of whether it’s related to cultural or social issues. Whether they’re financial or not, the accounting system offers valuable information to the management.

It helps the management to analyze the information, and take effective decisions for the organization. As such, proper analysis of information is important, as analysis reflects the decision-making of the organization. Management needs to analyze the information so that they can assess the financial condition of the enterprise, and take better decisions.

This principle focuses on how the Management accountants perform their activities. They should follow basic work ethics and be accountable to the organization. Management accountants should be trustworthy and analyze the information appropriately so that they can make effective decisions for the company. They ought to consider the company stockholders, and are credible for the betterment of the organization through effective decision making.

Important functions of management accounting

It includes the formation of the long and short-term plans and proper measures taken. Financial planning incorporates resources that get acquired and used over a specific period. Management accounting helps in planning activities as it offers insightful information for the decision-making process.

It helps to plan a list of alternative actions taken by management to meet the goals of the organization.

It is the process of allocating tasks to the staff members and establishing the organizational framework. It helps to achieve the goals and objectives of the organization. The

The accounting management system aids the managerial people to furnish necessary information by providing records and reports.

Controlling

It is the act of monitoring, measuring, correcting, and evaluating the business plan. An accounting management system helps to plan performance reports, control reports. To highlight the difference between expected performance and actual performance.

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Decision Taking

The main aim of the accounting management system is to help the organization make effective decisions.

Cost accounting is an act of Omit cost related to operating a business. In general, cost accounting gets used by the manager to determine the type and Amount of expense incurred while following the current model.

Performance reports get analyzed by the management after every 4 to 6 months. Managerial Accountants use budgetary plans to examine the actual budgeted amounts. The difference between the real and actual budgets gets analyzed and calculated when determining new budgets, And all information about accounts gets reflected in the performance reports.

Throughput Accounting

It is a new concept related to the accounting management system. An Israeli business management guru Proposed the throughput accounting concept.

Accrual Accounting:

If the management follows accrual accounting principles, it records revenue when a transaction gets completed, not receiving the cash in hand. It implies that the company records when it earns it, even if the consumer hasn’t paid it yet. For instance, a carpentry contractor that uses accrual accounting Records the revenue when the task gets completed, Even if the customer hasn’t cleared the final bill.

Range of management accounting techniques

Accounting management tools.

Accounting management tools are tools and systems that help the management in their daily accounting activities. They help in maintaining the records, preparing financial statements, and controlling them to get a good performance out of them. Or,

Accounting management tools are used to help an organization manage its financial records. They are used to help with the accounting process, such as recording sales transactions, preparation of budgets, and preparing reports for various stakeholders. There are different accounting management tools that can be used by the management.

The most common accounting management tools are budgeting, financial planning, and cash flow management.

Budgeting is the process of creating a plan that will allow your business to maintain its current operating deficit only once it has exhausted all possible ways to generate revenue.
Financial planning is your business’s attempt to figure out how much money you can bring in each month, and then manage your expenses accordingly.
Cash flow management is the process of controlling your money flow by making sure that you have enough cash and credit to meet all your obligations.

Cash flow analysis

Cash flow analysis is the process of determining how much money you have and how much money you spend. It will help you to manage your business and to maintain its balance sheet. The cash flow statement is a part of the financial statement that gives you a snapshot of your business’s cash inflows and outflows over a period of time.

The components of the cash flow statement are:

Cash inflows are those that are received from customers, such as payments for products or services, or payments for goods sold.
Cash outflows are those that go out to pay for expenses, such as salaries, taxes, interest on loans, and insurance.
Cash balance is your total amount of cash.

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Finance forecasting

Finance forecasting is an important accounting management tool. According to the survey, about 85% of the participants admitted that they used the technique. Forecasting is the process of predicting the year-end result while the year is still ongoing. The management to take corrective measures if needed.

For the Management Accountants, forecasting is a follow-up task of Budgeting. The budget of a financial year gets calculated, even before the year starts.

Management uses Financial forecasting to incorporate an Insight after planning a budget. The method and amount of forecasting vary from one organization to the other.

Cash Forecasting

Cash forecasting is one of the crucial tools used in the account management system. According to the CIMA survey reports, about 80% of the participants indicated that they followed the technique.

Cash forecasting predicts the liquidity condition of the organization. It is important, as unpredicted cash outflow can ruin the financial health of the business organization.

Even if the company has revenues and assets, the unavailability of Cash can cause the bankruptcy of the company.

Variance analysis

After cash forecasting, variance analysis is a crucial account management tool. The CIM survey report says that about 75% of the organizations use this tool.

Variance analysis aims to compare two related values. The comparison takes place between an actual and expected value. In general, it relies on the closing schedule of the organization. If the business has a monthly closing, management conducts variance analysis after every alternate month.

Tools used by the performance management system

Balance sheet: It is a management tool that is used to evaluate the financial position of an organization. It is also used to measure the assets and liabilities of an organization. It is a tool that helps in evaluating the financial health of an organization.
Business process reengineering: It is the process of changing the way a business is run. It involves a change in strategy, organizational structure, and information technology.
Performance-based management: It is the process of managing the organization, which is based on the performance criteria. The performance management system must be able to monitor and control all employees so that they can achieve their objectives and meet the organizational goals.

Use of planning tools used in management accounting

Strategic decision-making is an important task of account management. Important strategic management tools used in the organization are as follows:

SWOT analysis: It is a tool used to identify and examine the strengths, weaknesses, opportunities and threats of an organization.
Risk management: It is a process of identifying, measuring, controlling and communicating the risks of an organization.
Mission statement: It is a statement of the goals, objectives and strategies of an organization.
Future planning: It is a tool used to identify, estimate and plan the future needs of an organization.
Competitor analysis: It is a tool used to identify and measure the performance of competitors.

Advantages of budgetary planning

Budgetary planning is the process of planning the resources (money) that an organization needs to operate. The main purpose of budgeting is to allocate the resources among various categories, such as sales, wages, research and development, and administrative expenses.

Budgetary planning is a useful tool for managers to understand the financial resources that are required to run an organization. Budgeting is helpful in allocating resources among various categories, such as sales, wages, research and development, and administrative expenses.

Maximizes profit: The goal of budgeting is to maximize the profit of the organization. To do so, coordination and planning of different organizational functions are essential. Budgeting helps to control revenue, cost, and capital expenses while optimizing the use of resources.
Uniform Plans and policies: Budget planning centralizes the control over all divisions and departments. It helps the management in carrying out a uniform policy without getting affected by the authoritarian nature of the Enterprise.
Delegation of authority: Budgeting facilitates delegation of authority. It fixes the limit within which the authority can exercise its power. Executives and subordinates can make decisions and judgments staying within the budgetary limits.
It helps an organization in managing the quality, quantity and timing of resources to achieve organizational goals.
It helps in ensuring that the resources are used efficiently.
It helps an organization in planning and managing its financial resources.
It aids an organization in developing a corporate budget.

While budgeting has several advantages that are essential for an organization, it has disadvantages that Management should consider.

Budgeting, forecasting, and planning need not include the exact application of science. budgeting utilizes judgments and approximations that might not be 100% accurate. At its peak, Budgeting is an apprehension, no one knows exactly when it will happen.
Success and utilization of budgeting rely on cooperation and understanding from all the members of management. members are needed to take actions based on the Plan. It requires the top-level management to adhere to the plans and Offer Corporation. Oftentimes, budgeting fails As the top-level executive officer offers lip service to the budgeting.
Budgeting is merely a tool, it is neither a replacement nor it takes over the management.
Budget planning takes time. Management imposes too much expectation from budgeting. When the expectations don’t get fulfilled, Blame is food on a budget.
As the year-end period of the company approaches, employees realize the gap between the actual expense and the budget. Employees might get tempted to spend excessive amounts to get the allowance exhausted. Such activities might lead to less than optimal profit for the organization.

Ways in which organizations could use management accounting to respond to financial problems.

To meet the objectives, accounting management system depends on a variety of techniques including the following:

Margin analysis

Margin analysis is mainly concerned with the added benefits of product Optimisation. Margin analysis is one of the important functions of accounting management. It includes the evaluation of break-even analysis, which finds its application in listing the optimal product mix for an organization.

Constraint analysis

Product line analysis of an organization helps in identifying the bottleneck, and Problems created by this bottleneck, and its effect on the Company’s capacity to generate revenues.

Capital budgeting

Capital budgeting is the act of analyzing information Required to Make important decisions related to capital expenditure. Capital budgeting analysis helps the management to evaluate the net present value and rate of return to make budgeting decisions.

Inventory valuation

Inventory valuation includes assessing and identifying the actual cost of the company’s inventory and products. It helps to allocate and calculate the overhead cost, and the direct costs related to COGS ( Cost of product sold).

Integration of accounting management To the organization and its benefits

Accounting management is an important role in Controlling costs, supporting, Decision making of the organization. Management accounting Is the act of evaluating information, so that management can make effective decisions for the organization.

The advantages of accounting Management are as follows:

accounting management helps to increase organizational efficiency
Accounting management helps to fix the target, and product pricing
accounting management helps to forecast and prepare the budget, making it easy for the management to estimate expenses and income.
Accounting management helps to evolve better decision-making for the .organization
Accounting management helps to find ways by which companies can minimize production costs and maximize profitability.

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Unit 5 Management Accounting

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Level: Undergraduate/College
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Introduction

Management accounting field lays on analyzing business costs and operations on a periodical basis. It focuses on recording as well as evaluating data set and thereby prepares report which in turn contributes in the managerial decision making. Tools and techniques of management accounting provide high level of assistance in planning, controlling, monitoring and enhancing performance. In the current times, management accounting tools are widely used by the business unit for gaining competitive edge over others. The present report is based on the case scenario of Tech Ltd which manufacturers special chargers for mobile phones and other electronic gadgets. In this, report will describe requirements of management accounting system in the organizational context. Further, it will also shed light on the level to which managerial reports serve valuable information to the managers for decision making. Further, report also entails how absorption and marginal costing system helps in assessing cost and profit. In this, manner in which accounting techniques aid in planning and sustainable success will also be presented.

Task 1

A. defining management accounting and its essential requirement.

Management accounting is the process which includes wide range of activities such as identification, measurement, analysis, interpretation and communication of information. In the context of business unit, MA is highly significant as it provides accurate and timely information to the managers for short-term decision making. Management accounting systems may be served as a confidential reports related to the internal operations which in turn aid in business decisions and thereby overall growth. Tech Ltd can attain success by taking into account different types of management accounting systems.

1. Difference between management and financial accounting

Both management and financial accounting is the main parts of finance but significant difference takes place between such two in the following manner:

2. Significance of management accounting information for the managers as a decision making tool

Management accounting implies for the process in relation to preparing accounts and reports which furnish statistical & timely information for decision making purpose. MA assists managers in taking both long as well as short term business decisions and thereby helps in meeting goals. MA contributes significantly in the organizational growth and assists in building competitive edge over other. In the context of Tech Ltd, significance of MA can be presented as a decision making tool in the following manner:

Assists in future forecasting : MA helps company in making evaluation whether it should invest money in equipments or not. Further, it also provides deeper insight to the management team that strategy regarding diversification of operations will prove to be beneficial or not. Hence, MA field assists in making forecast about future trends and thereby decision making.
Helps in taking make or buy decisions : Manufacturing companies also face issue in deciding whether they should produce product inside or make focus on outsourcing. Hence, using MA manager of Tech Ltd can take suitable decision regarding make or buy aspects.
Facilitates cash flow forecasting : It enables manager to make proper forecast about future expenses and revenue streams. Hence, by undertaking MA business unit can make appropriate prediction about future cash position and thereby becomes able to develop strategic plan.
Assists in understanding performance variances : Using MA, Tech ltd’s manager can assess and analyze causes take place behind deviations ( Management accounting and its importance , 2018). Hence, by understanding performance variances suitable strategies can be formulated for future improvements.
Evaluation of rate of return : Manager of the company can analyze rate of return which in turn associated with the future investment opportunities. Further, using MA firm can determine when it will attain the position of no profit no loss.

3. Cost accounting system

This accounting system is usually used by the manufacturing firms for recording information about production related activities. Hence, Tech Ltd also comes under the category of manufacturing unit so it should focus on undertaking the system of cost accounting. By using such system, manager of Tech Ltd becomes able to track the flow of stock continually through the various stages of production. Further, using the system of cost accounting firm can make proper estimation about cost and do profit planning (Messner, 2016). Thus, from the perspective of cost assessment, profitability planning and stock valuation such system is highly significant.

4. Inventory or stock management system

In relation to Tech ltd, stock management system is vital for better management and functioning. Such system clearly entails the level of stock which business unit must have at any point of time. By undertaking inventory control methods such as just in time, economic order quantity etc firm can ensure uninterrupted functioning and thereby becomes able to exert control on cost such as holding & ordering (Fullerton, Kennedy and Widener, 2014). Along with this, inventory management system helps in tracking orders, sales level and deliveries. Thus, by employing inventory management system firm can achieve goals to a great extent.

5. Job costing system

Tech Ltd, a manufacturing business unit, can use job costing system for the purpose of effective management. Job costing system of MA focuses on collecting information about cost which is related to the specific production or service. In other words, by employing job costing system business unit can ascertain cost associated with specific production in terms of material, labour and overhead ( Job costing , 2018). Hence, considering such system manager of Tech Ltd can take pricing decisions and track or monitor the level of expenses.

b. Presenting financial information

1. different types of managerial accounting reports.

Managerial accounting reports include budget, job costing, accounts receivable aging and manufacturing framework. Such reports are prepared by the business owners for monitoring company’s performance and developing framework for future success. As per the requirements manager of Tech Ltd can prepare managerial reports for decision making purpose.

Budget report : It contains information about departmental performance and helps in ascertaining whether goals are met or not. Hence, budget or performance report provides assistance to the manager in assessing the causes due to which deviations are occurred within the specified time frame. Referring the causes of deviations manager of Tech Ltd becomes able to take remedial measure for improvement. Further, using such report manager can set suitable goals for the near future or upcoming time period (Otley, 2016). However, on the critical note, it can be depicted that if firm fails to set suitable budgeted figures then it may result into high deviations and thereby leads inappropriate framework.
Job costing report : This report communicates information regarding expenses related to specific projects. Job costing report helps in determining profitability by making comparison of expenses with estimated revenue. Such report is highly prominent in the context of Tech Ltd as it gives clear indication about profit earning areas and helps in improving areas before cost escalation.
Accounts receivable aging report : By using such report Tech Ltd can manage its cash flows in the best possible way. Through undertaking accounts receivable report manager can assess or identify customers who are unable to pay their due balances. Accounts receivable reports provide deeper insight about the timeframe within which debtors are making payment. Thus, considering such report manager can take decision whether there is a need to tighten credit policies or not. In this way, such report helps in managing both cash flow and working capital.
Inventory and manufacturing report : Tech Ltd can make its inventory process more efficient by using such report. Stock report provides information about inventory waste, hourly labour and per unit overhead cost (Perin and et.al., 2016). This in turn offers opportunity to the manager in doing comparison of different assembly lines and thereby helps in ascertaining best performing departments.

All the above depicted aspects show that managerial accounting reports help in tracking the performance of departments and taking actions for improvement.

2. Stating reasons why information must be presented in a understandable manner

Managerial reports can said to be significant when it contains characteristics of reliability, accuracy, comparability and understand-ability. There are several reasons due to which Tech Ltd should prepare report in an understandable manner such as:

Considering managerial reports manager formulates strategies and policies
Helps in taking decision about cost reduction and profit planning
Future planning is also based on managerial reports (Reome and Sinclair, 2017)

Hence, all the above depicted decisions are the based on managerial accounting reports. Thus, for the achievement of goals emphasis should be placed on preparing reports in an understandable manner.

Preparing income statement on the basis of absorption and marginal costing method

Absorption costing : This method implies for the one where all the manufacturing costs are absorbed by the number of units produced. On the basis of absorption costing method, cost of finished stock include both fixed and variable expenses including material, labour as well as overhead. Accounting standards also lay focus on using such full costing method while valuating inventory (Suomala, Lyly-Yrjänäinen and Lukka, 2014). Moreover, such method treats both fixed and variable expenses as product cost which can be recovered through selling prices.

Marginal costing : Under such method, variable cost is charged to the unit cost, whereas fixed cost completely written off in against to the contribution. Marginal costing method helps in assessing additional cost which is associated with the production of an extra unit of output. Such costing method classifies expenses in terms of fixed and variable. Further, by using this method manager of Tech Ltd can do stock valuation, determine price and ascertain profitability aspect.

Absorption costing

Computation of manufacturing cost per unit

Marginal costing

Computation of variable cost per unit

Variable cost per unit: 5 + 8 + 2

= £15

Reconciliation statement

The above depicted table shows that on the basis of absorption costing method Tech Ltd will incur the loss of £375. In accordance with the full costing method manufacturing cost implies for £20 respectively. On the other side, marginal costing method presents the loss of £2875 significantly. Hence, for the attainment of profit margin company is required to exert control on cost level. Further, it is recommended to Tech Ltd to make focus on undertaking absorption costing method because it presents suitable view of cost and profit margin by taking into account both fixed and variable expenses.

a. Presenting different kinds of budgets along with their benefits and drawbacks

Budget may be served as a quantitative tool which contains information regarding income and expenses pertaining to the near future. By preparing budget manager can persuade personnel about the manner in which they need to spend money. Hence, there are several types of budget and budgeting tools which can be employed by Tech Ltd such as:

Fixed or static budgets : This implies for the financial framework which does not change as per the sales and other business activities. Hence, fixed budgets are not changed throughout the budget period (Tucker and Lowe, 2014).

Advantages:

Helps in assessing business activities which are highly important.
Provides high level of assistance in reducing cost and increasing profit margin
Time saving exercise

Disadvantages:

Fixed budgets do not help in tracking and monitoring expenses
It avoids future pattern and fluctuations

Flexible budget : In the modern business environment, flexible budgeting framework is considered as high prominent over others. Moreover, in this, manager makes changes in the variable cost according to actual revenue. Hence, in this, budget varied according to sales revenue so it is considered as highly realistic.

Gives input for budgetary control
Facilitates change management and adaptation
Enables manager to monitor expenses and thereby take measures for improvement
Includes more complications
Inappropriate information affects the accuracy and suitability of flexible budgeting framework

Zero based budgeting : ZBB is considered as highly effectual technique which in turn provides high level of assistance in setting appropriate financial framework. In this, manager starts with zero bases and evaluates every line of item related to revenue and expenses. Hence, as per ZBB, manager makes effort in relation to finding alternative ways of performing activities (Ward, 2012). Thus, it helps in preparing competent plan for the upcoming time period in monetary terms.

Assists in avoiding redundant activities
Facilitates efficient allocation of financial resources
In this, employees are involved in decision making aspects which in turn ensures high level of co-ordination and communication among the personnel
Time intensive exercise
In ZBB, it is highly difficult for the manager to explain every line of item. Thus, for enhancing the ability of employees in such field manager needs to conduct training session.
For preparing budget as per ZBB high manpower is required because it needs involvement of personnel work at every level.

b. Budget preparation process and pricing methods

Tech ltd can set suitable budget by taking into consideration following steps:

In the first stage, manager makes assessment of cash inflow and outflow by taking into account activities which need to be performed in the concerned time frame.
At this stage, higher management team reviews financial plan or budget. Hence, by evaluating activities, resource availability and priority budget committee makes some modifications in the existing plan as per requirement.
In the third stage, final budget or financial plan approved by higher management team is communicated to each respective department (Bogsnes, 2016).
Once budget has provided at each level thereafter the same is executed by the personnel. In other words, personnel implement budget at this stage while carry out activities.
Under the last stage, manager makes comparison of actual performance with the budgeted figures. Hence, considering deviations and taking feedback from personnel manager makes changes in the existing plan.

Pricing methods : There are several methods which can be used for setting prices such as marginal & absorption costing, competitive, cost-plus pricing etc. In the context of Tech Ltd, marginal costing method proves to be highly suitable. Hence, considering such method firm can assess variations which will take in the cost on the production of one extra unit of output. Thus, using such cost related information firm would become able to set appropriate prices. Along with this, business unit should also consider demand and supply factor while taking decision about pricing aspects.

c. Significance of budget tool from the perspective of planning and control

Budgeting tool is highly significant which in ensures effectual planning and control. Moreover, budget offers input to the manager for making comparison of actual output and expenses with planned figures. By using budget manager of Tech Ltd would become able to assess reasons due to which specific department pertaining to sales and expense failed to perform according to the budget. Hence, by taking into account the causes of deviations firm can take corrective action within the suitable time frame (Granlund and Lukka, 2017). Further, assessed deviations also help in setting realistic and achievable financial plan for the near future. Thus, referring all such aspects, it can be depicted that budgeting tools aid in planning and control to a great extent.

Task 4

Comparing the manner in which different business units adapt management accounting tools for dealing with problems.

Management accounting tools provide high level of assistance to the business unit in responding monetary issues. On the basis of given case situation, problem of loss is suffered by Tech Ltd. Thus, using balance scorecard strategy business organization can make evaluation of performance from four perspectives such as financial, customers & stakeholders, internal process, learning and growth. (Dekker, 2016) Hence, using such approach management team of such manufacturing business unit would become able to understand customer’s expectation and deficiencies take place in the financial, internal proves as well as learning & growth aspects. By keeping all such aspects in mind it can be depicted that balance scorecard approach helps in developing suitable strategies and policy framework. However, on the critical note, it can be depicted that for executing balance scorecard approach prominently business unit requires skilled personnel.

From assessment, it has found that to cope with the financial issues other manufacturing companies undertakes following techniques:

Benchmarking : By setting benchmarks in relation to the income and expenses manufacturing firms evaluate potential as well as performance of each departmental personnel (Menifield, 2017). Hence, through periodical assessment manager becomes able to identify training need of personnel and other changes which need to be made in the existing framework for getting the desired level of outcome or success.
Key performance indicators : As per such technique, by setting key indicators regarding sales, expenses, market share etc firm can respond monetary problems. Comparing current performance in against to such indicators business unit would become able to take suitable measure for further growth.

In conclusion to this report, it can be presented that management accounting systems are highly prominent as it helps in monitoring internal operations. Tech Ltd can do effectual planning by using MA systems namely job costing, inventory management etc. It can be seen in the report that managerial accounting reports offer opportunity in relation to making evaluation of departmental performance. Hence, by getting deeper insight about the performance of each department manager of Tech Ltd would become able to develop competent strategic and policy framework. Further, it has been articulated that absorption costing method is highly effectual over marginal because it considers both fixed and variable expenses while determining cost. It can be stated from the evaluation that budgeting tools makes vital contribution in financial planning and helps in making optimum use of resources. It can be depicted from evaluation that balance scorecard technique helps in making appropriate decisions as it focuses on considering both monetary and non-monetary aspects.

Bogsnes, B., 2016. Implementing beyond budgeting: unlocking the performance potential. John Wiley & Sons.
Dekker, H. C., 2016. On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research . 31. pp.86-99.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management . 32(7). pp.414-428.
Granlund, M. and Lukka, K., 2017. Investigating highly established research paradigms: Reviving contextuality in contingency theory based management accounting research. Critical Perspectives on Accounting. 45. pp.63-80.
Menifield, C. E., 2017. The basics of public budgeting and financial management: A handbook for academics and practitioners. Rowman & Littlefield.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting practice. Management Accounting Research . 31. pp.103-111.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research. 31. pp.45-62.
Perin, M. G. and et.al., 2016. Network Effects on Radical Innovation and Financial Performance: An Open-mindedness Approach. Brazilian Administration Review. 13(4). p.1.
Reome, C. and Sinclair, T. A., 2017. Better Budgeting Is Good Governance. Shared Governance in Higher Education, Volume 2: New Paradigms, Evolving Perspectives. p.121.
Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A reflective analysis of conducting interventionist research in management accounting. Management Accounting Research . 25(4). pp.304-314.
Tucker, D. and Lowe, R., 2014. Practitioners are from Mars; academics are from Venus? An investigation of the research-practice gap in management accounting. Accounting, Auditing & Accountability Journal . 27(3). pp.394-425.
Ward, K., 2012. Strategic management accounting . Routledge.

Related Samples You May Find Useful:

Types and Scope of Management Accounting
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INTRODUCTION Operations can be defined as business activities in which an organization engages itself so that it can convert its raw materials into finished services or products in order to sell them to its targeted customers in order to increase its revenue and profit margin (Grant, Trautrims and

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Unit 5 Management Accounting

P1. explain management accounting and give the essential requirements of different types of management accounting systems, p2. explain different methods used for management accounting reporting, p3 preparation of income statement by using marginal and absorption costing.

Management accounting is the process by which financial statistical information are put together. Management accounting is used to produce reports annually which are used by managers on a day to day basis to make decisions for the company.

Cost analysis in a company day to day decisions need to be made. For example a company is unsure where to focus and how to sell their products etc then they need to see the financial side of their business. This is where management accounting assignment helps in financial decision making.
Management accounting provides a data-driven look at how to grow a small business budgeting. Management accounting is very beneficial to a company in providing the financial side of the business which helps the company to always improve their business by making decisions and changes.
Inventory accounting systems are used to plan and track inventory levels and inventory related activities. One of the most common inventory system is bad code tracking this is where each of the item is tagged with a bar code. As the inventory items are brought into a warehouse the bar codes are scanned to add or subtract from inventory. Bar code systems can be also used to track for and account for items as they are moved around the warehouse.
Industry-specific accounting- Accounting systems also include industry-specific applications. A retail accounting system, for example, has different requirements than in other industries. Sales are captured at the point of sale using computerized point-of-sale cash registers. When items go on sale, the retail accounting system must track and properly report on merchandise markdowns. Legal accounting software has other specific requirements as well, including the tracking of time spent by attorneys, dollar amount of time billed out based on an hourly rate and the utilization rate of each attorney.

The benefits of management accounting systems

Management accounting is very beneficial to every business JJD gets many benefits from management accounting. Management accounting helps JJD carry out planning for its future. Management accounting reports contain detailed reports of specific products, market research and regional information therefore JJD knows which area of their business they were to invest in.
Management accounting is also beneficial because it gives JJD greater control over their business. Due to the analyzed report, JJD knows which area to focus on and which areas they need to improve in.
Management accounting helps JJD lower their operational expenses. JJD uses management accounting information to review the cost of economic resources. In the past JJD has used valuable information from JJD accounting and changed the way of shipping in order to cut down on shipping costs. In the past JJD had only one warehouse from which it had to ship all over the u but now it has 5 warehouses which cuts down on their petrol usage and saves their shipping costs.
JJD has also used management accounting in order to improve cash flow. Their management accounting reports created have given them a superb budget for their entire company. This has helped JJD to save some of those extra unnecessary expenses that are not really needed in the company.
Cost accounting is an approach to evaluate the overall costs that are associated with conducting business. Cost accounting is used in general by managers in order to utilize to determine what type and how many expenses with maintaining the current business model.
Performance reports are calculated every year however some companies create it monthly and quarterly as well. Managerial accountants use budgets to compare actual budgeted amounts. The differences calculated are analyzed calculated when determining new budgets and all information regarding these amounts is listed in a performance report.
Throughput accounting is a new concept relating to the basic principles of management accounting. Throughput accounting concept was developed by Eli goldrath an Israeli business management guru and originator of theory of constraint.

Accrual accounting- If a company uses accrual accounting, it records revenue when the actual transaction is completed (such as the completion of work specified in a contract agreement between the company and its customer), not when it receives the cash. That is, the company records revenue when it earns it, even if the customer hasn’t paid yet. For example, a carpentry contractor who uses accrual accounting records the revenue earned when he completes the job, even if the customer hasn’t paid the final bill yet.

Expenses are handled in the same way. The company records any expenses when they’re incurred, even if it hasn’t paid for the supplies yet. For example, when a carpenter buys lumber for a job, he may very likely do so on account and not actually lay out the cash for the lumber until a month or so later when he gets the bill.

Marginal and absorption costing system both are important for the company. By using both of these approaches, profit calculation can be done by the business firm. Income statement refers to the statement where cash inflow amount which is revenue and outflow elements like varied sort of expenses are included. From revenue expenses values are subtracted to identify whether company earn profit or loss in its business. Usually, from sales revenue direct expenses are subtracted and in this way, gross profit value is computed. Thereafter, from gross profit amount, indirect expenses are subtracted and by doing so, net profit amount is calculated (Zimmerman and Yahya-Zadeh, 2011). Thus, it is assumed that income statement have significance for the firms. In management accounting, income statement can be prepared in two ways which are marginal and absorption costing method. There is large difference between both approaches because calculation method vary in case of these methods. It MC method,out of FC and VC exclusively expenses that are not stable in nature are taken in to account. Apart from this, in absorption costing,all sort of expenses are considered for costing purpose and profit calculation. Due to this reason, profit amount revealed by both these approaches are also different from each other. Marginal costing method reflects higher amount of net profit then absorption costing method. However, this does not mean that specific calculation approach is more effective than other approach.This is because fixed expenses are not incurred directly in production of goods (Macintosh and Quattrone, 2010). Hence, manager is always interested in knowing whether variable expenses have high, low or moderate impact on the firm profitability. On other hand, manager would like to use absorption costing method. One of the main reason behind such kind of belief is thatall sort of expenditures are included in the calculation process. Fixed expenses are directly not related to production of goods and services but fixed assets are used by the business firms for production of goods. Hence, it can be said that it is very important to take in to account fixed expenses in profit calculation. So, there is significance of both marginal and absorption costing methods for the business firms (Baldvinsdottir, Mitchell and Nørreklit, 2010). It depends on the manager requirements and discretion that which approach of profit calculation it think is more appropriate for the company. It means that there are advantages of using both approaches to managers in respect to making business decisions. However, most of times managers prefer to use marginal costing method in the business. This is because they give much importance to the expenses that are directly related to the production of goods and services at workplace.

Table 1: Profit by absorption costing method

It can be observed that in case of absorption costing method, net profit amount to 900. Under this, first of all sales revenue amount is recorded which is 100000 and thereafter, from cost of production closing stock amount is deducted. From sales cost of goods sold value is subtracted and in this way gross profit amount is calculated. Variable expenses are listed in the calculation table and it can be observed that variable sales indirect expense amount to 6000 followed by fixed cost production overhead value which is 8000 and administration expenses whose value is 7000 followed by selling cost whose value is 100. On this basis, it can be said that systematic approach is followed for calculation purpose. From gross profit amount, all expenses are subtracted and by doing so, net profit is computed whose value is 900.

Table 2: Profit by marginal costing method

In case of marginal cost method, sales value again is 100000 and like absorption costing method from cost of production closing stock amount is subtracted in marginal costing method. Fixed overhead expenses are subtracted from newly computed value. In this way, overall production cost of sales is calculated. From sales revenue amount 85900 value is subtracted and in this way gross profit amount is calculated. Finally, from gross profit variable expenses are subtracted and in respect to fixed cost only, fixed cost administration cost is subtracted. Here major, difference comes between fixed and marginal costing method at a point where fixed production expenses were subtracted along with variable expenses in absorption cost but in marginal costing, fixed production overhead are directly deducted from sales (Lukka and Modell, 2010). Hence, profit amount vary for MC and AC method as it may be observed that in MC method, profit amount is 1000 and same in case of AC method is 900. Thus, it is clear that there is difference in the profit amount that is computed by using marginal and absorption costing methods. Managers must use both these methods for profit calculation and must use both of them to make business decisions. Like financial models, calculation models in respect to marginal and absorption costing can be developed and by changing values of fixed and variable expenses, it can be identified that with change in these expenses, what sort of variation comes in profit amount. Such kind of models can assist firm in making business decisions in respect to setting of target for fixed and variable expenses which assist firm in earning determined amount of profit in the business. It may be assumed that MC and AC method have significance for the firms and managers because by using these approaches in different manner profit calculation can be done and performance can be accessed. Hence, managers must use both these approaches to make business decisions.

What are common concepts and techniques of managerial accounting?

http://www.investopedia.com/ask/answers/062915/what-are-common-concepts-and-techniques-managerial-accounting.asp

In-text: (Tarver, 2017)

Your References: Tarver, E. (2017). What are common concepts and techniques of managerial accounting? . [online] Investopedia. Available at: http://www.investopedia.com/ask/answers/062915/what-are-common-concepts-and-techniques-managerial-accounting.asp [Accessed 30 Oct. 2017].

HE IMPORTANCE OF MANAGEMENT ACCOUNTING FOR PROFESSIONAL ACCOUNTANTS IN BUSINESS – GAA ACCOUNTING

Drilling data Much of management accounting focuses on the analysis of data, experts say, and how that data is acquired and analysed differentiates the management accountant from the auditor. As K.M. Wong, Group Manager, Finance and Accounting, at Power Assets Holdings and an Institute Council member, points out, “one of an accountant’s essential functions is providing useful information to company management.”

In-text: (Gaaaccounting.com, 2017)

Your Bibliography: Gaaaccounting.com. (2017). The Importance of Management Accounting for Professional Accountants in Business – GAA Accounting . [online] Available at: http://www.gaaaccounting.com/the-

Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory and practice in management accounting. Management Accounting Research . 21(2). pp.79-82.

Lukka, K. and Modell, S., 2010. Validation in interpretive management accounting research. Accounting, organizations and society . 35(4). pp.462-477.

Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An organizational and sociological approach . John Wiley & Sons.

Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control. Issues in Accounting Education . 26(1). pp.258-259.

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Module 4: Allocating Manufacturing Overhead — Assignment: Canoe, Co.
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Unit 5 Management Accounting Assignment

INTRODUCTION - Management Accounting Assignment

Lo1: understanding management accounting systems, lo3: use of planning tools in management accounting, lo4: ways in which organizations could use management accounting to respond to financial problems, lo2- a range of management accounting techniques.

Words: 5210

Unit 5 Management Accounting Assignment

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The Process of analysing, interpreting and then processing is called Management Accounting. This report comprises of various different criteria and terms related to management accounting. It contains the different methods and types of Management accounting systems. The various methods which are used in the reporting process are also discussed in the report. It also includes the various methods of Management Accounting which helps the management to grow and sustain in the business for the long term. The report also emphasis on the various cost that is being incurred on the activities and which are of utmost importance. Management Accounting affecting the financial performance is discussed later in this report containing the various measures which the company can take to increase its efficiency. The Absorption costing and marginal costing both are also being analysed in this report and both of them are compared and the best option is then taken into consideration afterwards. The report highlights how management reporting is integrated with management accounting and how it is beneficial for the management or the organisation as a whole. Various advantages of budgetary control and disadvantages of budgetary control are studied here.

Management Accounting:

It is a term that is combined of two terms which are in the word itself that are “Management and Accounting”. It is a way through the top management does its work efficiently and effectively. In other words it can be said that it is the study of managerial aspect of accounting. It mainly concentrates on the techniques to redesign the policies which are effective for the top management to run the business( Busco and Scapens,2011). It includes various things such as formation of policies, control of executed methods and appreciation of this effectiveness.

The essential requirements of different types of management accounting systems are:

The style of Management which could be democratic or an Autocratic style.
The Organisation Structure also gives managers a fair idea how the activities will be carried by using the various forms of reports.
Another factor which is also very much responsible is the information required by the organisation and depends upon the internal and external use also
Apart from this it should also concentrate on the relevant information and not on the inaccurate one
The most important requirement for MAS are the cost which are involved here
The inventory management also plays a major and important role in the Management Accounting Systems
The Management Accounting Systems should take complex tasks and then it can help in making decisions(Li et al, 2012).

Different methods used for management accounting reporting are:

Budget Reports: It facilitates the management in attaining the company’s performance and usually shows all future expenses with having a reserve too for each one. This also helps in indentifying the areas where the company can trim its costs in future ahead.
Account Receivable Aging Report: This is very useful for the managers in identifying the defaulters in the overdue payment. In other words it is a critical tool in measuring the cash flow in the organization. All the organization needs less time period to convert the account receivables into the cash itself and by that only the firm is able to earn more profit in the future ahead.
Variance Analysis: It is a process of comparing various budgeted statements and analyzing the gaps between the costs and actual data. The variance is other way called the Marginal analysis because they keep on changing from time to time.
Performance Reports: It states the differences in the actual budget and the projected budget and help management take decisions accordingly. These reports also show what the areas in which improvement are and changes are needed and then corrective measures can be taken for that.
Cost Reports: This report contains various information relating to the cost of labor, materials etc and also tell managers in ascertaining the cost of manufactured process and also provide internal report systems.
Inventory and manufacturing Reports: It is also helpful in the manufacturing process which includes materials, labor etc. Various things like these affect the manufacturing costs which affect the Gross Profit are taken into consideration here.
Job Cost Reports: These costs evaluate the costs involved when the project is in the progress till its final end. There are various costs which are either incurred in between the projects because every cost is useful in this area(Maas et al, 2016).

The benefits of management accounting systems are very crucial to understand which certainly includes these:

The company’s operations are usually reflected by the money in hand at the last day of the financial year
It also helps in planning the management processes and taking corrective measures if needed.
It helps in communication of various important details across various departments.
It generally helps in motivating the morale of the employees as by that they will be working more efficiently
It provides the perfect coordination among the various departments such as sales, purchases, finance, personnel etc
Through the help of Management accounting systems the company can prepare the plans and drive the workforce towards the achievement of the goals
The most important aspect here which is considered here is the profit earned towards which all the activities through these systems take place.
The management accounting systems help to eliminate the amount of wastes through which efficiency is increased.
The major thing which these systems give from the organization side is the best customer service and satisfaction
The management systems also help in organizing various things in the organization such as the most importantly the work which is carried out.
The regulation of activities is also there with the help of the management systems in the way of planning, organizing etc.
It will also help in the price optimizing system as there will be no duplication of efforts and wastage of money in the organization.
Various activities and drives are in accordance to this only
The management works in accordance to the systems which leads to the optimization of the resources and achievement of goals.
All the departments are interlinked so there are no communication gaps too.
All the departments of work are depended on each other for the workings and any mismatch of the information or the gaps can lead to the disturbance of the whole company (Bernardo et al, 2015).

Management accounting systems and management accounting reporting is integrated within organizational processes:

Budgeting Reports- It is the combination of the enterprise activities and the budget reports also makes the business to think and move towards the targeted objectivities and targets in a far better and good way.
Account Receivable Aging Report- It is another union of the enterprise activities and the ARAR report help in the proper collection of the funds from all the receivable and generating revenue for the business and it also help in the maintaining the accuracy and the flexible nature which help in collection of amount too.
Job Cost Report-The activities should be meant towards the reduction of the costs and all the strategies related to the cost of the products are also taken care of by this report only aiming to the best reduction as far as possible.
Inventory and Manufacturing Reports: The merger among the all reports and process helps in maintaining a appropriate report which helps in the management of inventory which includes the number of inventory stock that needs to placed and cleared.
Performance Reports: The merger between the reports and management organizational activities will help managers to plan for future productions and cost increases leading to cost reduction and high profitability. It helps to keep track of all the performance across the departments in the organization(Bernardo et al,2015).
Other Information Report: The reports which are not a part of the above reports they usually contain the information related to the analysis of these reports above and usually contain the information about the revenue generated through various means and keep a track on them on achieving the targets and sustainability. . Information should be communicated individually as well in groups time to time so that the workings could be smooth.
Business situation or opportunity reports:The merger between the organization processes and these type of reports will allow management to critically analyze and then actions could be made accordingly to the situations. These are the reports through which various actions are defined in the organization which are accordance to these reports only.

Budgetarycontrol is the process of identifying the differences or the variances among the actual budget and the expected budget which helps the management to take the corrective decisions. The planning tools also help in keeping an eye on the organizational achievements of goals and activities which all are inclined towards it. ( Bobryshev et al, 2015).

Various advantages of different types of planning tools used for budgetarycontrol are:

These tools act as an essential one for the management to plan and make sure that the company goes in accordance to the future goals and objectives.
These will help the business to go far from the view of short term to the view of long term
The standard costing also helps in the evaluation of inventory and preparation of budget
These tools will help the enterprise to see its competitive advantage when compared with others through these
These also help in standard bookkeeping
With the help of these the internal audit can also be done conveniently.
They also ensure the deadlines which the employees follow for the effectiveness in the company.
The capital budgeting tools helps in the long term strategic investments.
Proper financial analysis is done with the help of these tools while drafting the budget.

Various disadvantages of types of planning tools used for budgetarycontrol are:

The employees know that these planning tools are implemented by the organization which can or maybe have the negative impact on them
By the help of this there may be some chances to overestimate the costs which can have a bad impact on the future growth
They are not always correct when the prices go high in the future
These tools generally ignore the external environment which is the macro importance of due importance.
They are made out of assumptions for the future and are generally irreversible in nature.
It generally takes a lot of time of the managerial level.
These tools are sometimes not acceptable by all the employees in the organization
This can sometimes lead to difficulty in motivating the employees.

There are different planning tools which help in application for preparing budgets and forecasts.

Standard Costing: It involves an estimation of the costs and what all expense will be bearded by an enterprise in the future and to plan a budget for the same. This is also helpful in the organisation controlling which is a need nowadays. It also simplifies the cost in the bookkeeping process and helps in the preparation of the budget in the organisation. It is an internal measure planning tool which helps the organisation in maintaining the inventory control. The standards are set according to the previous data and forecast of the future understanding the macro environment so that correct projections could be made.
Capital Budgeting: It is the process of identifying, analysing and selecting the most appropriate investment projects whose flow of cash are to be assumed for more years and apart from this it shows the future projections too.It helps the company to make long-term strategic investments and choose the strategic investments wisely through this. This will directly help the management not to under invest and over invest. These are irreversible in nature so the management needs to take care of these decisions wisely.
Operating Budget: It is prepared to show all the income and expenses over a specific period of time and which is generally of month, week, and quarterly base. Operating Budget is sales as income is lifeblood for the firm. It is the most common type of budget which includes the sales which is the lifeline of the organization.
Sales Budget: It is one of the planning tools for preparing the budgets and is of utmost importance because it states that it is directly concerned with the efficiency of sales efficiency and reducing costs.A sales budget cannot effectively forecast the future trends of events. Various other budgets also depend upon Sales Budget such as Production Budget, Direct Labour Cost, Direct Material Budget etc.This is clearly important in forecasting and generating revenue in the firm. It is also called the lifeline of the management because through this only all the activities are formulated within and then are executed after wards(Shim et al, 2011).

Planning tools for accounting respond appropriately to solving financial problems to lead organizations to sustainable success

Financial analysis is the most important tool when it comes to solving problems and investment purpose. These include various things such as different types of ratios which help in identifying and making plans accordingly in the future ahead. These tools help the business in the decision making process and can improve the financial performance. Planning tools also help the organization in providing solutions to the financial problems of the business unit in different functions of the business and making these functions of the business more future oriented.(Moynihan et al, 2010) . Some of them are being discussed here:

Planning - The planning tools help the organization in various ways in the business as all the activities are aligned towards the achievement of the goal by the formulation of different strategies and activities. Planning also makes the work life balanced and also helps in directing the activities. Without a good plan no enterprise can grow when compared to the competitors also. All these planned activities are future oriented and gives direction to sustainability.
Controlling and monitoring - The controlling and monitoring of the business become more easy and good as these activities are controlled by the planning tools which helps the business to keep an eye on the activities.
Competitive advantages - The business also seeks the competitive advantage over the competitors as it is efficiently using all the resources to make best use out of it and try to monitor all the activities so that the business can grow in the future.
Strategic Planning- It includes various activities such as applying PEST, SWOT,Porter’s Five Forces of balance scorecard analysis which help in the business financial position and persists the management to understand what is needed by an enterprise to grow in the future aspect.
Using Budgets- It states the operating and the costing one and this helps in solving the financial problems because the budgets help in comparing and taking decisions accordingly. It also helps in defining the various type of budget and then compares the actual budget with the original one.

Management accounting systems to respond to financial problems in different Organizations

Today in this dynamic era all the companies face dynamic changes and face difficulties in formulating various plans, strategies etc.There are so many challenges related to the macro economic factors such as economical, political, social etc and different organizations work differently interpreting these. It includes modifying the business outlay for analyzing and sustainability, and then giving feedback on the effect of social and environmental aspects on organization performance.

There are various Financial Problems which affect the functioning and the organizations take various meas25ures to resolve these problems(Soudani,2012).

Like in the organization Called HSBC the main problem was to tackle the amount of cash inflows and the cash outflows, so they use various different reporting system for all the daily activities like its subsidiaries, units, centers of responsibility, KPIs, management information blocks , contractors and IT support systems. There with the help of this they manage the amount of cash in the organization. Here the company has a separate accounting department which tries to formulate various different activities in accordance with the reports also. This organization is known for its smooth functioning and no glitches so to ensure the same these systems are used.

Just like the above company another company which is Unilever also makes use of the Management Accounting Systems because here also it face a lot of difficulty such as here the inventory is also managed by the systems. The company also uses activity based accounting to respond to financial problems because it is the easiest form of the system. It makes use of the strategic planning and price optimization principle to ensure smooth functioning in the financial department leading to the organization as the whole. It makes use of the budget reports so that it can easily target the profit for the next quarter or the financial year. Apart from all these it has also focus on the cost accounting system because the cost will ultimately define the profit afterwards. These systems help the organizations to identify the various problems related to planning, organizing, etc and then taking corrective measures in the future and strengthen its performance. All these help the company in strategic planning and making corrective decisions for all the projects and upcoming needs( Alawattage and Wickramasinghe, 2012).

Responding to financial problems, management accounting can lead organizations to sustainable success as

It is rightly said that all organizations do not succeed in the long run and gain sustainability unless they adapt their different strategies, business outlay, and organizational practices according to the environment. There are several ways through which the organization can do so:

Identifying the various social and environmental trends which will in future create the differentiation of the company over time.
To produce reports that will include different aspects related to the budget formulation strategies, different decisions on pricing techniques and other activities related to decision making.
It should also think to develop the KPIs for strategic and sustainable goals in the future
The organization must also look into the performance outlook which will show all the financial problems the company has faced beforehand
Apply all the accounting tools and techniques related to the management, which shall include the availability of the mother earth’sresources, and also the decision making process which helps in achieving sustainability.(Laszlo et al, 2010).
Trying to get in compliance with the reports for effective and efficient functioning of the origination.
They should also try to look for future and consistent managers and financial analyst who know in and out of the organization.
The decision makes should be experienced using the management accounting so that they can lead the organization in the future.
It should look into all the risk factors keeping in mind the financial problems which could be caused due to this.
The management accounting focuses on the business models decreasing the financial problems and increasing the performance and sustainability of it
The enterprise risk management is also a part of management accounting to increase long term
It also includes the external reporting decreasing the financial performance(Hoque et al, 2011).

Cost Calculation using Two Different Methods:

Marginal Costing is a process where all the variable costs are taken into consideration and is determined as the product cost. Absorption Costing is a type where not only the variable costs are taken into account but also fixed costs also are. Here, it has been clearly seen that costs has been determined to figure out which method will suit the organization more. In absorption costing it has been clearly observed that the cost incurred is somewhat high than the marginal costing but it gives a fair and true idea about the business or the enterprise.

With the help of these it is easy to know which method the company will use in maintain the books of accounts. The case here also the variable cost which is the marginal one is less reliable as it keeps on changing( Nawaz, 2013).

There are many management accounting techniques which help the business to grow and prosper in the future. The income statement has been prepared below using absorption and marginal costing. Margin Analysis, Trend Analysis, Inventory Valuation, Capital Budgeting al comes under this. These are the techniques which are used by the management in every aspect and then all of them are critically evaluated. The financial documents such as Income Statement, Balance Sheet, Cash Flow Statement and all the reports are prepared with the data and studied to run efficiently. The two types of costing are studied by which we can see that which method to use for the business.

The income Statement comprises of the most importantly Revenue which is the foremost thing in any organization and then deducting all the variable and fixed costs giving the value of contribution It has been clearly seen while analyzing the gross profit when using Absorption Costing Methods is more than the profit when using the Marginal Costing Method. The difference among the profit is somewhat around 10000. The main difference in both the methods of calculation of profit is the amount of Closing Stock.

The fixed overhead plays a vital role here because that will tell the exact contribution which will tell the Gross Profit and the net profit. The profit will determine the effectiveness and the company will obviously choose that method which will yield higher profitability(Drury, 2018).

Other financial reports need to be critically analyzed after determining the cost so that the planned activities are in the direction of the achievement of the goals. The planning tools also help in analyzing various aspects such as these reports tell the financial performance and growth in this. The techniques which are used in the management accounting are blended in the books of accounts to give a fair picture of the business. The variable costs which keep on fluctuating in the business and which is taken into account in marginal costing more importantly keeps the costs changing. A cost which changes the profit has been in both the methods of accounting but in Marginal Costing it changes the Gross Profit Value. The particular format has been taken and then calculated both the costs and Gross Profit. These facilitate the decision making process in the organization because the financial analyst now have valid points to approve or reject a method. Here, in this scenario also it has been clearly observed that this only help in taking the effective decisions for the company. In today’s era there are many complex activities which needs the planning tools need to be taken care(Collis et al, 2017).

The critical Evaluation of the report tells us first that what management accounting is. The various methods which are involved in the Management Accounting are studied in the report thereafter. All this is included in the first phase of the report above. Later both the costs are discussed and the best alternative is taken in the second phase. The costs are analyzed and then the best decision has been taken by analyzing the costs and which is the most suitable one. The Management accounting planning tools has also been studied above and the financial problems which have direct impact by these are also studied. Different Organizations have different financial problems which need to be solved. This report has also put the various tools to lead the organizations for sustainable development in the future. It also has shown the various methods and benefits of management accounting thereafter. The management techniques which help in decision making process are also studied above. All this gives a fair idea what all essentials are there for an organization to run smoothly and efficiently with these methods and tools. The report has also shown budgetary control and how these budgets help in the management process.

Busco, C. and Scapens, R.W., 2011. Management accounting systems and organisational culture. Qualitative Research in Accounting & Management .

Li, X., Sawhney, R., Arendt, E.J. and Ramasamy, K., 2012. A comparative analysis of management accounting systems’ impact on lean implementation. International Journal of Technology Management , 57 (1/2/3), pp.33-48.

Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment, management accounting, control, and reporting. Journal of Cleaner Production , 136 , pp.237-248.

Bernardo, M., Simon, A., Tarí, J.J. and Molina-Azorín, J.F., 2015. Benefits of management systems integration: a literature review. Journal of Cleaner Production , 94 , pp.260-267.

Bobryshev, A.N., Yakovenko, V.S., Tunin, S.A., Germanova, V.S. and Glushko, A.Y., 2015. The concept of management accounting in crisis conditions. J. Advanced Res. L. & Econ. , 6 , p.520.

Nawaz, M., 2013. An Insight Into the Two Costing Technique: Absorption Costing and Marginal Costing. BRAND. Broad Research in Accounting, Negotiation, and Distribution , 4 (1), pp.48-61.

Soudani, S.N., 2012. The usefulness of an accounting information system for effective organizational performance. International Journal of Economics and Finance , 4 (5), pp.136-145.

Alawattage, C. and Wickramasinghe, D., 2012. Management accounting change: approaches and perspectives . Routledge.

Drury, C., 2018. Cost and management accounting . Cengage Learning.

Collis, J., Hussey, J. and Hussey, R., 2017. Cost and management accounting . Macmillan International Higher Education.

Hoque, F., Walsh, L., Mirakaj, D. and Bruckner, J., 2011. The power of convergence: linking business strategies and technology decisions to create sustainable success . Amacom.

Laszlo, A., Laszlo, K.C. and Dunsky, H., 2010. Redefining success: Designing systemic sustainable strategies. Systems Research and Behavioral Science , 27 (1), pp.3-21.

Moynihan, D.P. and Andrews, M., 2010. Budgets and financial management. Public management and performance: Research directions , pp.60-88.

Bragg, S.M., 2012. Financial analysis: a controller's guide . John Wiley & Sons.

Shim, J.K., Siegel, J.G. and Shim, A.I., 2011. Budgeting basics and beyond (Vol. 574). John Wiley & Sons.

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Unit 5 Management Accounting Assignment

1. Principles of management accounting

Management accounting is a profession that includes integration of financial and non-financial statements to provide useful information to the management so that the management can take effective decision for the organization. Management accounting plays a very major role in providing information to the people of management. The scope of management accounting is very wide as it contains all types of accounting information that are related to the particular organization. The principles of management accounting are as follows.

a) Influence:

Communication provides insight that is influential. The role of management accounting begins as well as ends with communication. The utilization of management accounting is depending upon how well the information has been communicated so the major principle of management accounting is communication as the influence of management is depending upon the communication and better communication leads to good decision making so it is very necessary for every organization to focus on communication of management accounting information in proper way so that it can influence the management.

b) Relevance:

Information is relevant. Management accounting can lead to better decision making when the information provided to the management is relevant. Management accounting includes all type of information that is related to the organization whether they are financial or not, whether they are relating to the social and cultural issues of the organization. In other words all the information that are related to the organization and can affect the decision making must be included in the management accounting as all these information are relevant for the organization (Zaman & Akbar, 2013).

c) Analysis:

This principle is also known as value. Impact on value is analyzed. Management accounting helps the management to analysis the provided information properly so that management can evolve better decision making for the organization so right analysis is very necessary for every organization as analysis of the management accounting information reflects the decision making of the organization. Management should analysis the information properly so that they can understand the environment of the organization and can take better decisions.

Stewardship build trust. This principle focuses on the working of management accountants that these persons must be ethical and accountable to the organization. Management accountants must be trust worthy person that they should analysis the management accounting information in right ways so that they can take effective decisions for the organization. Management accountants must consider the trust of stakeholders and also they should be responsible for betterment of the organization through better decision making. They should fulfill all their responsibilities so that this could have a positive impact on the growth of the organization.

2. Role of management accounting and management accounting systems

Management accounting refers to the effective use of all those information which is related to management and which evolves the efficient decision making of the organization and management accounting systems refers to the process of collection of relevant data from the business operation and then converting them into management accounting information. Role of management accounting and management accounting system is as follows.

a) Planning:

Planning is preparation for the achievement of the objectives in advance. Planning is done with a view to achieve short term as well as long term goals of the organization so management accounting helps in forecasting the budgets so that estimations for the expenses and incomes can be done in advances and through this management accounting systems helps in analyzing the relevant information so that goals of the organization can be achieved.

b) Organizing:

organizing refers to the proper organization of people in the organization so that a proper framework can be established and roles and responsibilities of each department can be assigned. Management accounting helps in taking those decisions in regard to assignment of roles and responsibilities so that a proper hierarchy of the work can be maintained in the organization and in this management accounting systems also plays a very major role in measuring the performance of the people of management so that operations of the organization can be adjusted in proper ways.

c) Controlling:

Control is the process of measuring the actual performance and then comparing it with estimated performance so that control can be established in the organizations so that the overall performance of the organization can be improved and this could be done through management accounting and management accounting systems as management accounting helps in providing relevant information to the organization so that measurement of performance can be done properly and management accounting systemhelps in defining the information which is relevant for this purpose (Yakshibaev, 2011).

d) Decision making:

The main role of management accounting and management accounting system is providing effective decision making to the organization so management accounting helps the management to take better decisions for the organization.

3. Use of techniques and methods used in management accounting

There is various type of management accounting systems such as cost accounting systems, inventory management systems, job costing systems, price-optimizing systems etc.

4 Calculation of income statements

A) comparative absorption income statement.

b) The differences in the profits is due the method that is used for the costing as both the profits are calculated with different methods of costing as in absorption costing method all the expenses are segregated and then are deducted from sales so this leads to increase of expenses and thus it lowers the profits where in marginal costing method expenses are deducted into two categories which is into fixed and variable expenses. In this method first of all fixed costs are deducted from the sales which gives the contribution and then variable costs are divided from the contribution which provides the profit and through this the expenses are segregated into two heads (Schmidlin, 2014).

c) FIFO refers to first in first out system of inventory valuation where the inventory is valued in such way that the first come inventory must be sold first and the records of inventory are made in such a way that inventory first come are recorded first and they are recorded for the sale first. The main focus of FIFO system is that the oldest inventory must be sol first without considering any other inventory. This method is the most used method of inventory valuation s it provides a clear picture of inventory. AVCO refers to Average cost or weighted cost method where inventory valuation is done by dividing the total cost of good that are available with sum of total purchases and inventory. This method is also applied in periodic inventory system and perpetual inventory system. Both the methods FIFO and AVCO are used for inventory valuation.

5. Integration of management accounting to the organization and its benefits.

Management accounting plays a very major role in an organization management accounting helps in supporting controlling, planning, organizing, decision making of the organization. Management accounting is a process of evaluating the information relating to the organization so that they can use that information in effective decision making of the business. Management accounting integrates in each and every level of the organization as all the information which are related to the organization whether they are financial or not, they are related to internal environment of the organization or external environment of the organization, whether the information are related to the social and cultural issues of the organization. In short all the information that is related to the organization and can affect the decision making is included in management accounting (Robnson. et al, 2012).

Management accounting is very useful for the organization as it impacts the decision making and decision making of the organization leads to the success of the organization so there is a direct link between management accounting and growth of the organization so the benefits of management accounting in an organization are as follows.

Management accounting helps in increasing the efficiency of the functions of management.
Management accounting helps in fixing the target, fixing the prices of the products.
Management accounting helps in forecasting and preparing the budgets so organization can estimate its income and expenses.
Management accounting helps in providing tools and techniques that increases the reliability of functions of business.
Management accounting helps in establishing the planning and control in all the levels of organization.
Management accounting helps in evolving better decision making for the business.
Management accounting helps in finding ways to reduce the cost of production so that higher profits can be generated.
Management accounting helps in establishing proper communication among all the levels of the organization.
Management accounting helps in identifying the overall performance of the organization.
Management accounting helps in cutting the extra costs of the organization so that the benefits could be earned by the organization.
Management accounting helps in integrating the individual efforts of the people of the organization towards the achievement of organizational goals and objectives.
Management accounting helps in implementing the expansion plans in the organization.
Management accounting helps in defining the process for achieving the goals of the business.

There are several abovementioned benefits of management accounting in an organization so an organization needs to utilize its management information in right ways in order to achieve its long term as well as short term goals.

A) A budget is a forecast of what is expected to happen in a business during the next year.’

Budget is a statement which is prepared with a view to estimate the income and expenses of future year on the basis of present financial performance of any organization. One of the director of Nero Limited has raised a query with regard to this statement so this statement of director is partially right as the budget is prepared to estimate the income and expenses of Nero Limited for upcoming years but it cannot be determined what is expected to happen in next year as the budget only considers the financial values so the cash flows of Nero Limited can be forecasted so that the company can estimate its incomes and expenses but except financial terms what is doing to happen in next year cannot be forecasted through budget. The main purpose of preparing is the budget is to estimate the cash inflows and cash outflows of Nero Limited for next year.

b) ‘Activity-based budgeting is an approach that takes account of the planned volume of activity to .deduce the figures to go into the budget.’

Activity based budgeting is a type of budgeting where budgets are prepared on the basis of each activity. As the comment raised by the director of Nero Limited Activity-based budgeting is an approach that takes account of the planned volume of activity to deduce the figures to go into the budget is right as the main aim of activity based costing is to prepare budgets on the basis of the activities as well as the overall cost is also deducted from each activity. The approach which is used for activity based budgeting is that the planned volume of activity is deducted from the particular activity and through this the budget is prepared. In activity based budgeting overhead costs plays a significant role in total costs. In activity based budgeting activities and their costs are identified and then the cost from that particular activity is deducted (Morana, 2014).

Scenario 2 (i)

A. cash budget is a plan that shows the inflows and outflows during the period for which it is calculated. it helps in evaluating if the business has sufficient cash to operate its day to day activities or not. it includes revenues and expenses paid by the business and reflects the position as surplus or deficit..

Cash budget is significant for a business.

Opportunities – By evaluating the business’s liquidity position opportunities of expansion, acquisition or merger can be known.
Strategy – If the business is planning launch of a new product or expansion but it has insufficient funds then it can make plans or strategies for borrowing money and the source as well.
Decision making – It helps the management make decisions.
Tax planning – It helps in estimating the profit that will be earned by the business for the period for which it is calculated thus making it easier to plan for taxes and penalties, fines and additional payment of tax can be stopped (Hall & Westerman, 2013).

b. The cash budget is as follows:

C .information required by the banker for granting overdraft for further expansion:-.

The amount to be granted – The banker will consider the amount that is to be granted. In case a huge sum is involved it will affect the standing of the bank.
Purpose – The banker will analyses the purpose for which the loan is to be granted and will further analyses if the expansion program to be carried out by the organization is profitable or not as that will affect the repayment of the loan amount.
Security and mortgage – The banker will consider if the security that is offered or mortgaged is easily saleable or not and its worth is more than the loan amount or not.
Repayment tenure – The banker will also consider the tenure of repayment as the bank would want the repayment in easy and quick installments.

Scenario 2 (ii)

If the quantity of other two services cannot be expanded to use the spare capacity, the fixed costs allocated on the standards services will be a sunk cost and thus it is not relevant for decision making since even of the standard services are not offered, the fixed costs will be incurred. Hus the report prepared by accountant includes fixed cost which cannot be used for identifying the profit from standard service for decision making. There is a contribution of £15 (90 -75) from standard services and therefore it is advisable to offer these services next year also.
If the spare capacity can be used to render a new service Nova, then standards services shall not be rendered net year since the contribution from Nova services will be £25 (85 – 60) which is higher than the contribution from standard services.
In such case the opportunity cost of not offering the standard service will also be added to the variable cost. Thus, the minimum price acceptable will be £35 + £15 = £50.
If a resource is scarce ad restricting sales then in such case profit can be maximized by utilizing the resource for selling only those products or services which results in maximum contribution. The ranking shall be given to each category on the basis of contribution per unit from each category since fixed cost is a sunk cost and therefore in this case highest contribution will result in maximum profits.

i) ‘Afavorable direct labor rate variance can only be caused by staff working more efficiently than budgeted.’

Direct laborrate variance includes elements of rate of labor wages and time consumed by labor. Thus a favorablelabor rate variance occurs when either he staff works more efficiently than planned or the staff is replaced with cheaper labor force with low wage rates. Thu the above statement is partially correct.

ii) ‘When calculating variances, we ignore differences of volume of output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated.’

While calculating variances, the differences of volume of output are ignored between actual and budget by flexing the budget. The variances in the volume or output are calculated separately. Thus, this helps in the estimation of effect on the level of activity and is not the water under the bridge by the time variances are calculated.

iii)‘ Most businesses do not have feedforward controls of any type, just feedback controls through budgets.’

Feedback controls refer to as the implementation of controls after performance whereas feed forward controls are those which are implemented before the performance of business operations. Budgets are not the feedback controls but are feed forward controls since they help in controlling the business operations before their performance. However variance analysis is conducted afterwards to monitor the deviations.

a) Cash flows are used in the IRR, NPV and payback back period as all these theories includes the present value of cash. In all those theories cash is included and also during consideration of the expansion plans all these theories are to be considered as this provides a fair view of choosing any project as well as it calculates the present value for a future cash so through this the present value of the project is also considered.

These theories helps in selecting the project as the project with positive NPV is beneficial for the business and the project having negative NPV is not beneficial for the business so if a project has to choose any project on the basis of NPV then it should go with the project which is having higher NPV. IRR refers to the internal rate of return which helps in choosing the suitable project for the business on the basis of IRR so if a project is to be chosen on the basis of IRR then the project having higher IRR must be choose.Payback period refers to the present value of future cash. Profit flows of the business are circulated within the profit and loss statement of thee business and cash flows are used in these theories because these theories includes the value of cash.

(I) Calculation of NPV, IRR and payback period

Payback period: There is no payback period in the projects as the payback period defines the time period in which the investment of the whole project will be recovered or can be said as the time period in which the amount that is invested in the project is equal to the inflows that are achieved from the project so in both these projects the cash inflows of the year 2 are negative that represents that both the projects have earned loss in this year and also both the projects have not earned much profits in the year so that the initial investment of the projects can be covered. So there is no payback period of both the projects.

ii) Selection of a project

If Nero limited want to choose one project on the basis of calculation of NPV and IRR then if Nero limited chooses a project on the basis of NPV then none of the project is profitable for the company as both the projects are having negative NPV but if Nero limited has to choose one project between both projects then Nero limited should go for the project 2 has it is having higher NPV in comparison to project 2 and if Nero limited has to choose a project between both the projects on the basis of IRR then Nero limited can choose both the projects as the IRR of both the projects are same so overall Nero limited should go for the project 2 on the basis of NPV and IRR.

Cost plus pricing is a strategic tool for determining the price of a product by adding fixed costs, variable costs and a markup percentage to arrive at a final cost of the product.

The drawbacks of using cost plus pricing approach are:-

Limits innovation – This approach limits creativity or distinctive features that can be added to the product as keeping a low price is difficult.
Low satisfaction to value for money – This pricing technique is quite unrealistic and the target group might not find the price of the product satisfactory or they may find it to be overpriced.
Loss of revenue – By adopting cost plus pricing method, competitive aspect is lost.
Decrease in gross profit – Suppose if the cost of a product is coming down to 40 per unit and after markup it comes to 50 per unit, gross profit of 10 per unit is earned, but if the material cost increases causing the product to cost 42 per unit then the gross margin will be significantly reduced.
Overpricing - This method takes into consideration sunk cost and historical cost also which increases the price of the product thus makes it overpriced (Grimm, 2016).

B. It is important to hold inventories.

To meet unexpected demand – The business is considered to be successful when the demand is easily met by the supply. In times of crises when the demand suddenly increases the supply can be made smoother if sufficient stock of inventory is held.
Seasons – Holding inventory based on seasonal changes is generally followed in businesses which are on boom seasonally. For instance, holding inventory of woolens in winters, raincoats and umbrellas in rainy season.
Discounts – When inventory is purchased in larger quantity more discounts is offered which is lucrative as it will have a direct impact on reduction of cost and rise in profit margin.
Hedging – If rise in price is expected then more quantity of inventory is held for deriving benefits from increased price and in case taxes are to be levied in future those could be saved and hedging can also be done.
Saving of freight and transportation expenses – If large quantities of inventories areordered at once, transportation cost can be saved.

c. (i) Calculation of ratios to measure efficiency of working capital management for two years

Current Ratio = Current assets/ current liabilities 2015 = 579/195 = 2.97 2014 = 732/225 = 3.25 Acid test ratio = Current assets – Prepaid expenses – inventory/ current liabilities 2015 = 579 - 200/195 = 1.94 2014 = 732 – 250/225 = 2.14

(ii) The method which can be used by the management of this company to exercise control over its inventories and receivables includes inventory management tools such as ABC method of Inventory Valuation, factoring of receivables, controlling bad debts etc.

(iii) Operating cycle provides the information to the management accountants about the period in which the funds invested in the business operations will be recovered from passing through all the stages of operating cycle. The operating cycle of the company for two years can be calculated as follows:

Operating cycle = Days Inventory outstanding + Days Sales Outstanding + Days Payable Outstanding 2015 = (200+160/2)/ (1,080/365) + (375/1,800)*365 – (195/1,120)*365 = 60.83 + 76.04 – 63.55 = 73.32 2014 = (200+250/2)/ (1,125/365) + (480/1,920)*365 – (225/1,175)*365 = 73 + 91.25 – 69.89 = 94.36

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Unit 5: Management Accounting

Basic actitivies (computer-graded).

Students should be familiar with the following vocabulary before continuing on to the activities and exercises.

This unit discusses management accounting. Accountancy is more than just calculating profit and loss. Management accountants help larger and more mature companies make tough financial decisions that shape their future.

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Written Assignment Unit 5. University of the People. BUS 5110 - Managerial Accounting. Dr. Jamal Boubetana July 20, 2021. Introduction Papaya Partners' management detected variances from the budget and requested an analysis.Methodology and Results I will first calculate the quantity of units sold.Sales revenues / Sales price = Units sold $500,000 / $25 = 20,000 cartons 1.
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BTEC HND Unit 5 Management Accounting Assignment 2 - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. BTEC HND Unit 5 Management Accounting Assignment 2. Covering LO3 & LO4. Assignment titled "Financial and non-financial position of the organization"
Unit 5 Management Accounting Assignment Sample
INTRODUCTION In business term management accounting contains functions and tasks directly or indirectly connected with collecting and transferring financial information within entity to provide assistance in decision making processes. It is adopted by business entities to manage their functions in structured way to attain predetermined targets or objectives.
UNIT 5 Management Accounting Systems Sample Assignment
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Unit 5 - Assignment brief.pdf - Free download as PDF File (.pdf), Text File (.txt) or read online for free. The document provides guidance and scenarios for a management accounting assignment. Scenario 1 outlines that the student has been hired as a management accounter for a medium-sized organization. Scenario 2 provides financial data for a company that manufactures a single product and ...
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Unit 5 Management Accounting- Assignment
This assignment on Unit 5 management accounting. LO1:Management accounting systems 4 Brief description of organization P2] 6 Benefits of management accounting
Unit 5 Management Accounting Assignment Sample
The accounting management system aids the managerial people to furnish necessary information by providing records and reports. Controlling. It is the act of monitoring, measuring, correcting, and evaluating the business plan. An accounting management system helps to plan performance reports, control reports.
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Unit 5 Management Accounting
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Unit 5 Management Accounting Assignment Sample
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Managerial Accounting written assignment on the case study written assignment: unit business administration department, university of the people bus 5110: Skip to document Ask an Expert
PDF Introduction to management accounting
In 2006 Merchant Equity Partners (MEP), , a priv MEP on in. private equity group, bought the retail arm of MFI (the furniture business) for just £1. planned to revive the loss-making furniture chain and sell it on for up to £500 million around 2011. MFI management felt at the time that having it taken over.
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Unit 5 - Management Accounting. Learn key concepts in financial analysis, budgeting, and decision-making. Master the art of financial management. +44 203 318 3300 +61 2 7908 3995 [email protected] My Account. ... Unit 5 - Management Accounting Assignment Sample. Part A: Introduction: Management Accounting Assignment ...
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Unit 5 Management Accounting
Unit 5 Management Accounting (1) - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. The document discusses various concepts in management accounting including the comparison between management accounting and cost accounting, the global management accounting principles, and the differences between management accounting and financial accounting.
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Management Accounting: It is a term that is combined of two terms which are in the word itself that are "Management and Accounting". It is a way through the top management does its work efficiently and effectively. In other words it can be said that it is the study of managerial aspect of accounting.
Unit 5 Management Accounting Assignment
Management accounting helps in integrating the individual efforts of the people of the organization towards the achievement of organizational goals and objectives. Management accounting helps in implementing the expansion plans in the organization. Management accounting helps in defining the process for achieving the goals of the business.
Unit 5: Management Accounting
Advanced activities (teacher-graded) Record yourself speaking English. Pick a question and write about it. This unit discusses management accounting. Accountancy is more than just calculating profit and loss. Management accountants help larger and more mature companies make tough financial decisions that shape their future.
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BUS 5110 Managerial Accounting -Written Assignment Unit 5 - Free download as PDF File (.pdf), Text File (.txt) or read online for free. Papaya Partners is a distributor that sells papaya cartons to supermarkets. They budgeted to sell $500,000 worth of cartons at $25 per carton. Actual sales met the budget. Management needs variance analysis to understand cost drivers.
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Unit 5 Management Accounting- Assignment

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Management Accounting Systems: Importance, Types, and Application lg ...

Unit 5 Management Accounting Assignment Sample – BTEC-HND-LEVEL 4

Understanding of management accounting systems

Important functions of management accounting

Range of management accounting techniques

Cash flow analysis

Finance forecasting

Cash Forecasting

Variance analysis

Tools used by the performance management system

Use of planning tools used in management accounting

Advantages of budgetary planning

Ways in which organizations could use management accounting to respond to financial problems.

Margin analysis

Constraint analysis

Capital budgeting

Integration of accounting management To the organization and its benefits

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Unit 5 Management Accounting

Introduction

Task 1

1. Difference between management and financial accounting

2. Significance of management accounting information for the managers as a decision making tool

3. Cost accounting system

4. Inventory or stock management system

5. Job costing system

b. Presenting financial information

2. Stating reasons why information must be presented in a understandable manner

Preparing income statement on the basis of absorption and marginal costing method

a. Presenting different kinds of budgets along with their benefits and drawbacks

b. Budget preparation process and pricing methods

c. Significance of budget tool from the perspective of planning and control

Task 4

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Unit 5 Management Accounting

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INTRODUCTION - Management Accounting Assignment

Unit 5 Management Accounting Assignment

Unit 5 Management Accounting Assignment

1. Principles of management accounting

a) Influence:

b) Relevance:

c) Analysis:

2. Role of management accounting and management accounting systems

a) Planning:

b) Organizing:

c) Controlling:

d) Decision making:

3. Use of techniques and methods used in management accounting

4 Calculation of income statements

5. Integration of management accounting to the organization and its benefits.

A) A budget is a forecast of what is expected to happen in a business during the next year.’

b) ‘Activity-based budgeting is an approach that takes account of the planned volume of activity to .deduce the figures to go into the budget.’

Scenario 2 (i)

b. The cash budget is as follows:

Scenario 2 (ii)

i) ‘Afavorable direct labor rate variance can only be caused by staff working more efficiently than budgeted.’

ii) ‘When calculating variances, we ignore differences of volume of output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated.’

iii)‘ Most businesses do not have feedforward controls of any type, just feedback controls through budgets.’

(I) Calculation of NPV, IRR and payback period

ii) Selection of a project

B. It is important to hold inventories.

c. (i) Calculation of ratios to measure efficiency of working capital management for two years

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