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Managerial Accounting Assignment Sample

INTRODUCTION

HOW MANAGEMENT ACCOUNTING SYSTEMS AND MANAGERIAL ACCOUNTING REPORTING ARE INTEGRATED WITHIN THE ORGANISATIONAL PROCESS OF THE ENTERPRISE

Managerial accounting gives qualitative as well as quantitative information to the company in respect to its financial and operational performance. The focus of financial accounting is on the external utilization of data by their creditors along with other stakeholders for the enolization of the company's performance to take an appropriate decision (Vladychyn 2017). The use of managerial accounting is done internally by their employee's managers and the owner. The managerial accounting system in a company and compass the procedure of installing the plant operations and their support and controlling measures to take decisions effectively. Amazon's method regarding the managerial accounting system leads to a perpetual improvement of the organization by the integration as well as the development of the system associated with cost management. The cost of various inputs is measured by the company for eliminating or reducing those costs which are found to add very little or no value to the company (Vladychyn 2017).

BENEFITS OF MANAGEMENT ACCOUNTING SYSTEM

There are several benefits of the management accounting system which are discussed as below are- 

  • It helps in saving time and the cost of the organization as book-keeping is a time-consuming task and therefore it is management accounting that helps in saving the costs and also saving the time of the company (Beard 2017). 

  • The managerial accounting system increases the financial visibility of the company by monitoring the financial position of the company. one can also generate forecasts based on the cash flows with the help of managerial accounting (Beard 2017). 

  • Several calculations have high possibilities of errors and therefore it helps in minimizing errors, and hence it will ensure accuracy. Therefore, the accountant does not need to spend a lot of time in finding and minimizing errors with the help of management accounting. 

  • The management accounting system helps in improving assets and also helps in the management of the inventory because it allows the management accountant to perform more efficiently and more effectively. 

  • Management accounting gives its users the convenience of tracking the information which is financial as well as non-financial and performing the tasks from anywhere. 

PRINCIPLES OF MANAGEMENT ACCOUNTING

Various Management accounting principles are as follows -

  • Compiling and designing – it is designed to present the required information to solve any particular problem.

  • Exceptional management- this principle is followed to present data for managing the standard costing techniques and budgetary control system (de Souza Bonfim et al., 2021).

  • Source accounting controlling - this principle helps in controlling the cost at those points which are incurred during the source accounting control.

  • Inflation accounting - it is important to evaluate the capitals which are contributed by the company owner in the form of a real money value by the means of revaluation accounting (de Souza Bonfim et al., 2021). 

  • Utilizing the investment return - the investment return or the return on capital employed exhibits the efficiency of the organization in the form of a real value of money.

  • Utility - this principle suggests that the system of Management accounting should be utilized only if they are supposed to serve the utility

  • Integration - this principle suggests that all of the importance that is regarding management are to be integrated so that efficiency could be maximized.

  • Absorbing the overhead cost - the overhead cost consisting of the indirect expenses, indirect labour, and indirect materials auto be absorbed to get the desired output.

  • Resource utilization - this principle suggests that the system of Management accounting is to appropriately use the resources of the company (Weygandt et al., 2018).

  • Uncontrollable and controllable costs - according to this principle the system of Management accounting code gives tools for controlling both the uncontrollable and controllable costs.

  • Forward-looking approach - this system is required to protect the upcoming problems with the help of techniques associated with standard costing to fix the standards (Weygandt et al., 2018).

  • Appropriate means - the appropriate means for presenting recording and accumulating accounting data as required to be selected for proper mechanization of the accounting in the organization.

  • Personalized contacts - the personal contact associated with reform and managers and others are not supposed to be completely replaced by the statement or reports for avoiding the misunderstanding between the employees and the management (Weygandt et al., 2018). 

IMPORTANCE OF PRINCIPLES OF MANAGEMENT ACCOUNTING

These Accounting Principles help the individual to take an appropriate decision as and when required in respect to the relevant data. These principles work as a guide to identifying the present past as well as future data consisting of the various nonfinancial and financial information from various sources, whether internal or external. This further consists of economic, environmental, and social information. The Management Accounting Principles serve in the form of a doctrine for the accountant procedure and theories to perform their systems of accounting as it has been mentioned by the accounting principle insurance the following of particular standards by the company in respect to the method of recording various economic events which are to be presented, recorded and recognized (Baldarelli, et al., 2017). 

LO2

DIFFERENT TECHNIQUES AND METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING

  • Distinct techniques and methods used for reporting of Management accountants are as follows- 

  • Analyzing the margin - margin analysis related to the incremental advantage for optimization of production consists of the measurement of the break-even point to determine the optimal selling Mix regarding the products of the company (Predeus et al., 2020). 

  • Analyzing the constraint - it consists of the identification of major bottlenecks as well as inefficiencies along with their influence on the ability of the company to generate profit and revenues.

  • Capital budgeting - it is related to the analysing of data so that essential decisions could be taken in association with the capital expenditure which consists of the calculation of the internal rate of return and net present value

  • Product costing and inventory valuation - it consists of analyzing and identifying the real cost related to the inventory as well as the product of the company. It consists of the calculation of overhead charges along with the enolization of the direct cost associated with the cost of goods sold (Golova et al., 2020). 

  • Forecasting and trend analysis - it is majorly related to the identification of trends as well as the pattern of the cost of various products along with the identification of unusual variations from the predicted values.

Absorption costing

 

Product A

Product B

Particulars

units

Price

Product A

units

price

Product B

Sales

4600

£        180 

£                                         8,28,000 

3200

£        150 

£        4,80,000 

Production Cost:

 

 

 

 

 

 

Direct material

5000

£          30 

£                                         1,50,000 

3500

£          24 

£            84,000 

Direct labor

5000

£          36 

£                                         1,80,000 

3500

£          24 

£            84,000 

Production Variableoverheads

5000

£          24 

£                                         1,20,000 

3500

£          16 

£            56,000 

Fixed overhead for  prouction

5000

£          42 

£                                         2,10,000 

3500

£          60 

£        2,10,000 

Cost of Production 

 

 

£                                         6,60,000 

 

 

£        4,34,000 

Add-  Opening Stock

 

 

Nil 

 

 

Nil 

less: Closing stock

 

 

Nil 

 

 

Nil 

Total COGS

 

 

£                                         6,60,000 

 

 

£        4,34,000 

Gross profits

 

 

£                                         1,68,000 

 

 

£            46,000 

Add:- Variable Selling Cost

4600

£             2 

£                                               9,200 

£        3,200 

£             2 

£              6,400 

Fixed administration cost

5000

£          11 

£                                             54,000 

£        3,500 

£    15.48 

£            54,180 

Total non production cost

 

 

£                                             63,200 

 

 

£            60,580 

Net profits

 

 

£                                         1,04,800 

 

 

-£           14,580 

 

Marginal costing statement 

 

Product A

Product B

Particulars

units

Price

Product A

units

price

Product B

Sales

4600

£        180 

£                                         8,28,000 

3200

£        150 

£        4,80,000 

Variable costs

 

 

 

 

 

 

Opening stock

 

 

£                                                      -   

 

 

£                     -   

Direct labor

5000

£          36 

£                                         1,80,000 

80

£          24 

£              1,920 

Direct material

5000

£          30 

£                                         1,50,000 

80

£          24 

£              1,920 

Variable overheads (Production)

5000

£          24 

£                                         1,20,000 

80

£          16 

£              1,280 

 

 

 

 

 

 

 

Total cost

 

 

£                                         2,70,000 

 

 

£              5,120 

Add:- Variable  Cost (Sales)

4600

£             2 

£                                               9,200 

£        3,200 

£             2 

£              6,400 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution

 

 

£                                         5,48,800 

 

 

£        4,68,480 

Fixed  cost (administration)

5000

£    10.80 

£                                             54,000 

£        3,200 

£    15.48 

£            49,536 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-production cost

 

 

£                                             54,000 

 

 

£            49,536 

 

 

 

 

 

 

 

Net profits

 

 

£                                         4,94,800 

 

 

£        4,18,944 

 

Working Notes

Fixed manufacturing overhead

210000.00

Product A

42.00

Product B

60.00

 

Fixed administration overhead

54000.00

Product A

10.80

Product B

15.43










LO3 & LO3

Introduction 

The section of the article addresses the various budgetary planning tools and control that can assist the authorities of the organization in ensuring suitable planning layouts. Apart from that various techniques associated with the management system are also evaluated to enable the key parties to make a value judgment. 

Explanation and analysis of the advantages and disadvantages of budgetary planning tools and control and how they are applied for preparing and forecasting budgets 

A budgetary planning tool is an important tool that enables the leaders and managers to make a suitable plan for future activities. However, there are various types of budgetary control planning tools that are required to be effectively analyzed to gain the advantages and disadvantages leading to better decision making (Paisey and Paisey, 2017). Different tools of budgetary control include:

Capital budgeting 

A capital budgeting tool is an important type of budgetary planning element that a business organization uses to make a suitable decision regarding the purchase of a fixed asset or not. Also, this tool assists in the creation of the quantitative view over the proposed fixed asset investment. It also assists in the creation of accountability and measurability (Clark, et. al., 2013). 

Advantages 

Disadvantages 

  • The concerned tool assists in the understanding of the various factors of risk and its effects.

  • It also plays a major role in investing wisely.

  • Apart from that, it also plays a major role in making an informed decision considering all the necessary factors. 

  • It sometimes leads to the wrong applicability of the decisions. 

  • Wrong decisions affect the long-term applicability of the work operations. 

  • Techniques of the concerned tool are assumed and not real.  

For instance: If the investment in the project is 200000 and the saving from the project is 5000 with the repayment of 5 years. However, in project 2, investment is 500000 and the saving from the project is 7000 with the repayment of 7 years. As such as per the payback period project 2 is selected. 

Variance analysis 

Variance analysis addresses and focuses on the analysis and evaluation of the differences between the planned budget and the actual budget. The variance analysis is used to assess the price and quantity of materials, labour, and overhead costs (Clark, et. al., 2013). 

Advantages 

Disadvantages 

  • It plays a major and effective role in making efficient, detailed, and forward-looking decisions. 

  • The concerned tool acts as a forward-looking mechanism

  • Supports in making suitable command on the assigning of the authority and responsibility. 

  • The concerned tool is based on the results that lead to delay in the decision-making process. 

  • Inappropriate command on the deviation of the results (Afolabi, et, al., 2017).

For instance: The budgeted amount of the project is £50000. However, the actual budget is estimated to be £60000. The variance analysis is £10000. 

The following tools can be applied and used by Tesco Plc for various purposes that majorly include:

SWOT Analysis: With the application of the concerned tool, Tesco Plc can address and determine the strengths, weaknesses, opportunities, and threats (Clark, et. al., 2013). This will assist in the analysis of the various factors that assist the authorities in making suitable decisions for the future period. 

PEST Analysis: With the capital budgeting tools, the authorities of Tesco Plc can also assist in the analysis of the external environments that assist in better alignment of the internal and external factors. 

Balance Scorecard: With the application of the concerned tool, Tesco Plc can manage the work operation with the application of suitable policies and procedures. This will assist in the enhancing of productivity and profitability (Clark, et. al., 2013). 

How managers respond to financial problems

There are various parameters that a manager or the leader considers to respond to a financial problem. These parameters support overcoming the issues leading to better operation. Various parameters that are considered by Tesco Plc in this respect majorly and primarily include:

Financial reporting: Financial reporting includes all the external financial statements (income statement, balance sheet, statement of cash flows, etc.) These reports assist in meeting and addressing the various aspects and meeting the obligations. These reports also assist in the analysis of the various issues and aspects that thereby supports in the authorities of Tesco Plc in making them effective and appropriate decision regarding the future activities. 

Benchmarking: Benchmarking is an aspect that sets the parameters with which the actual performance or result is required to be compared. With this tool, Tesco Plc can measure its financial parameters that thereby assist the authorities in making suitable conclusions (Lavia López and Hiebl, 2015). This will also assist in gaining a suitable direction for the conduct of future operations. Also, Tesco Plc with suitable benchmarking can make quick decisions that can thereby assist in gaining suitable opportunities leading to suitable growth. 

Budget goals: The Company to address the specific objectives must set and formulate the master budget for its key objectives. For the purposes, Tesco Plc must ensure to prepare suitable budgets following the work priorities and the resources available. This will play a major role for the organization in planning future activities. 

KPI: The concerned tool provides a base for routine and clerical operations. It ensures that all the activities are performed as per the key performance indicator. However, the organization must ensure to consider both the financial and non-financial parameters t obtain reliable and effective outcomes (Hu and Li, 2013). 

How good management accounting can help the organization to achieve sustainable success. 

Management accounting techniques is an important element that supports the organization in gaining various and series of advantages that thereby assist them in the attainment of success and growth (Jinga and Dumitru, 2015). Good management accounting involves the application of good management accounting tools that include: 

Total Quality Management: The concerned management accounting tool is an important tool that assists in managing the quality prospects at different levels so that to attain sustainable success. Maintaining quality prospects will also assist the company concern in attracting customers and retaining them for the long prospects of time.

Business process Re-engineering: The concerned tool enables the authorities of Tesco Plc to re-developing their current operating structure following the needs and requirements of the internal as well as external environment (Jinga and Dumitru, 2015). This will play a major role in managing the long-term needs that will further assist in the addressing of sustainable success. However, for the purpose, of re-engineering suitable measures and factors are required to be considered appropriately. 

Bookkeeping: Another management accounting aspect that can be addressed to attain sustainable success is book-keeping. Book-keeping enables to have a complete overview of the monetary aspects that thereby enables the company to have a suitable alignment over the standard and actual parameters. This leads to better decision making and in the attainment of sustainable success (Lavia López and Hiebl, 2015). 

Reference to more than one organization for comparison of how they adapt management systems to respond to financial problems 

To respond to the financial problem management system is effectively crucial to attaining a good position in the market. There are various tools of the management system that can be used by the authorities of the organization to enhance its work operation in an effective manner (Hu and Li, 2013). 

For instance: The authorities of Tesla Plc ensure the application of the business process re-engineering. The main focus of the organization with the use of the tool is to re-develop the structure of the organization such that it can address the needs of both the internal and external work operations. With the application of the concerned management tool, the authorities of Tesla Plc effectively manage its work parameters with the involvement of all the aspects and factors that are necessary for the attainment of sustainable success leading to better future command. However, on the other hand, Tennis England Plc ensures the application of total quality management. The main focus of this concept is to make an appropriate focus on the aspects of the quality so that it can effectively address the needs of the customers retaining them for the long prospects of time.  With the application of the concerned method, the appropriate command can be attained on all the facts leading to better success (Afolabi, et, al., 2017). 

Conclusion 

The section concludes on the various management tools that are necessary and crucial for the management of the organization in the attainment of sustainable success. In addition, the pros and cons associated with each tool are also concluded for better and effective decision making. 

 

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