Management Accounting for Sustainable Success

The assignment examines the role of management accounting in Dell's pursuit of sustainable success. It explores how Dell leverages management accounting practices to reduce its environmental footprint, meet customer expectations through cost-effective solutions, and foster employee satisfaction for enhanced product quality. The analysis emphasizes the importance of coordinating organizational efforts from employees to top management for achieving long-term sustainability.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Explain management accounting and give essential requirement of different types of
management accounting systems.................................................................................................3
P2 Explain the different methods used for management accounting reporting...........................4
M1 Evaluate the benefits of various management accounting systems and their application
within Dell...................................................................................................................................4
D1 Critically evaluate how management accounting systems and management accounting
reporting is integrated withing organizational process in context of Dell...................................5
TASK 2............................................................................................................................................5
P3 Calculate costs per unit under both absorption costing and marginal costing and explain
why do they differ........................................................................................................................5
M2 Accurately apply the results obtained in P3 above to produce an Income Statement using
the management accounting technique of Marginal Costing......................................................6
D2 Produce a Financial Report that accurately applies and interprets data for a range of
business activities carried out at Dell..........................................................................................7
TASK 3............................................................................................................................................8
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary controL........................................................................................................................8
A. Compute the standard cost of PVC sheets required to manufacture 4,000 keyboards. Also
compute the difference between actual cost incurred and standard cost....................................8
B. Compute materials price and quantity variance. Table 4 calculation of material price
variance........................................................................................................................................8
M3 Analyze the use of different planning tools and their application for preparing and
forecasting budgets in the context of Dell. The different planning tools for forecasting budgets
are as follows -.............................................................................................................................9

D3 Evaluate how planning tools respond appropriately to solving problems in the context of
Dell , leading to sustainable business development...................................................................10
Task 4.............................................................................................................................................10
P5 Compare Dell with one of the two Lenovo or HP................................................................10
M4 Analyze how, in responding to financial problems, management accounting can lead an
organization such as Dell to sustainable success.......................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
To function properly in the organization there are various management accounting
systems which help in the proper functioning of the organization. A management accounting
system collects the financial data and draws conclusion out of it. The below report deals with the
different accounting systems and their benefits and the integration of the same within the
organization. Further it deals with the calculation of the different variances and the financial
report and towards the end it deals with the planning tools which are used by Dell in their
sustainable success.
TASK 1
P1 Explain management accounting and give essential requirement of different types of
management accounting systems.
Management accounting aims at deriving the information which is available to a business
for making decisions and this information is required by the managers so that no decisions in the
organization is delayed because it will in turn affect the productivity of the organization.
Management accounting is not done to meet the needs of outsiders, rather it focuses on the
internal functioning of the organization aiming the managers.
The essential requirement of different types of management accounting systems are- Job Costing- under this type of costing, the entire job is not considered as a single output.
Here the costs are segregated based on the work done by each department and the
workers. Here the job has different specifications and hence the work is evaluated
differently. Here the work comes is basically customized hence different systems are
required to accomplish different jobs hence the costing is also done separately. Batch Costing- in this type, the entire batch is valued and cost is calculated separately.
This is suitable for the batch which is uniform and the design is similar (Otley, 2013). For
the entire batch the same costing is done. Process Costing- For the products which require a series of activities to come to the last
product is evaluated under process costing. It is used to determine the cost of each
process in a unified manner. This is basically done for the mass production where there
are no changes in the production chain.

 Service Costing- Other than this type of costing, as this is focused over the product. But
Service costing is aimed at operating of a particular service such as Railway service etc.
here no products are to be dealt only the services rendered are apportioned.
P2 Explain the different methods used for management accounting reporting.
The different methods used for management accounting reporting are as follows-
1. Income statement- It is a statement depicting the various incomes and expenses that a
company has incurred over a period of time. For management to take decisions they
require information to base their decisions on. That purpose of providing the information
is served by income statement. It contains the incomes and expenses for the year ending
and also shows the net profit or net loss of the firm. Managers use income statement and
study the areas which are creating more expenditures so as to reduce the same.
2. Ratio Analysis- for making decisions, if one is able to compare the data for the two years
it becomes very easy to compare and take decisions accordingly. For doing this, ratio
analysis serves our purpose as it provides the comparison between the financial data for
the years (McLaren, 2016). It expresses itself in form of profitability, liquidity, solvency
etc. to give a broad preview of information.
3. Cost Variance Analysis- For doing any calculations, first a standard is set and keeping
that in mind the actual performances are carried out. If the actual performances does not
match the standards performance there are deviations and then further these deviations
are checked and reasons for the same is given.
M1 Evaluate the benefits of various management accounting systems and their application within
Dell.
There are various accounting system that exists for different organizations depending of
the work they perform. The benefits of using Job Costing method is it is mostly used when the
work is of customized nature. Hence in that case job costing serves the purpose as for every
different work the cost is evaluated separately and gives the idea of the performance of various
departments in performing the work.
In case of Batch costing, the main benefit is that for the entire batch the same production
system and resources is used. It helps in effective utilization of the resources and one does not
have to look forward to the different resources for the same batch. It is mostly suited in the
pharmaceuticals industry.

In this organization Dell, it is using Process costing systems as the work is being carried
out is of homogeneous nature and require the same type of production to carry out the entire
process (Fullerton, 2013). And dell is using the system effectively with very minute changes in
the laptops process costing is serving the purpose. As Dell in not focusing on the customized
products hence job costing is not an appropriate measure of evaluating the cost.
D1 Critically evaluate how management accounting systems and management accounting
reporting is integrated withing organizational process in context of Dell.
The purpose of management accounting systems are aimed at
TASK 2
P3 Calculate costs per unit under both absorption costing and marginal costing and explain why
do they differ
Table 1Calculation of Unit Costs
MARGINAL
COSTING
ABSORBTION
COSTING
Direct material 20 20
Direct labour 8 8
Fixed manufacturing overhead - 10
Variable manufacturing
overhead 4 4
TOTAL 32 42
In absorption costing and marginal costing, the calculation of the per unit costs differs a lot in
terms of fixed manufacturing overheads. In absorption costing the per unit cost is found to be 42
per unit and in marginal costing, the per unit cost is 32 per unit. This difference exists because of
the fact that in marginal costing the fixed manufacturing is not considered but the same is
considered in the absorption costing. As in marginal costing only the variable costs are
considered for the calculation as the fixed manufacturing overhead is allocated to the finished

product and that is included in the cost of inventory. So this reduces the per unit costs. This per
unit cost are used to determine the entire cost for the product and this has reduced the income in
the income statement in case of marginal costing.
But in case of Absorption costing, all the fixed manufacturing overheads are allocated to
the units which becomes the part of the finished product and is carried on to the next period. As
the per unit cost is higher in absorption costing from the marginal costing the profit in the
income statement will also be higher.
In marginal costing, the variable cost of the product becomes the product cost while the
fixed cost remains the period cost as it is allocated over the period and not to the individual
product.
M2 Accurately apply the results obtained in P3 above to produce an Income Statement using the
management accounting technique of Marginal Costing.
Table 2Income statement
MARGINAL
COSTING
Sales (40,000 units @ 67.50) 2700000
Less variable expenses:
Add: Opening inventory 0
COGM (50,000 × 32) 1600000
Goods available for use 2100000
Direct materials(40000 × 20) 800000
Direct labor (40000 × 8) 320000
Variable manufacturing overhead
(40000 × 4)
160000 4980000

Less: Closing inventory 4200000
Selling and administrative
expenses (50,000 × 6)
300000 -4500000
Contribution Margin 3180000
Less: Fixed expenses
Manufacturing overhead 500000
Selling and administrative
expenses
600000 -1100000
Net operating income 2080000
In case of marginal costing, the per unit cost is taken to be 32 as calculated above and the
entire calculations are based on these calculation. As the per unit cost in marginal costing is less
than the absorption costing as marginal costing ignore the fixed manufacturing overhead while
calculation the per unit costs.
D2 Produce a Financial Report that accurately applies and interprets data for a range of business
activities carried out at Dell
To
Board of Directors of Dell
The financial statements basically depicts the position of the business and when this is
presented in the formal way is termed as financial report. From the above calculation of the
income statement of the marginal costing of Dell it is found that as the closing stock is more
than the opening stock the profit so arrived is lower than the absorption costing and the net
operating income is just GBP 2080000. While doing the calculations of the selling price and
closing stock, the fixed cost is not considered for the calculation as we ignore this in marginal
costing. In the above case opening cost is zero for the period so only the closing stock will be
used for calculation. Hence the financial report depicts the data of financial statements in a
more refined and advanced manner.

TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary controL
The various planning tools used in Budgetary Control are the fixed budget and variable
budget. In the fixed budget, the budget for the next year is fixed in advance and there is no scope
for modifications. But in the flexible budget, the budget can be molded as per the current
situation in the prevailing year.
A. Compute the standard cost of PVC sheets required to
manufacture 4,000 keyboards. Also compute the difference
between actual cost incurred and standard cost.
Table 3 Calculation of standard cost
Standard cost= Total cost / feet of pvsheets
37,400 / 11000
GBP 3.4 per unit
Total standard cost = 4000 × 3.4 =GBP 13600
Actual cost = GBP 3.60
Total actual cost = 4000 × 3.60 = GBP 14,400
As per the calculation of standard cost one can infer that there is difference in the actual
and standard cost and the difference is of GBP 0.2 here the condition is adverse as the actual cost
has been incurred more than the standard cost. The reason being that the proper bargaining has
not been done.
B. Compute materials price and quantity variance.
Table 4 calculation of material price variance
Direct materials price variance = (Standard Price – Actual Price) × Actual
Quantity
= ( 3.4 – 3.6 ) × 4,000
= - 800 (Adverse)

As the material price variance comes out to be adverse so we can infer that the purchase
department is inefficient in purchase of materials as they have given more price to obtain the
materials.
Table 5 calculation of Direct Material Quantity Variance
Direct Material Quantity Variance = Standard price × (Standard quantity –
Actual Quantity)
= 3.4 × (10,000 – 11,000)
= -3400 (Adverse)
[Working Note] : Standard quantity= 4000 keyboards × 2.5 per unit =
10,00]
As the material quantity variance is 3400 adverse means that the company is inefficient in
converting the raw materials into finished goods. This has occurred because of more wastage of
raw materials in the production process.
M3 Analyze the use of different planning tools and their application for preparing and
forecasting budgets in the context of Dell.
The different planning tools for forecasting budgets are as follows -
 Sales volume contribution and sales price variances
- Sales volume variance is basically the change in the profit occurred due the differences of
budgeted and actual unit of sales. If the resultant figure is negative means that less units were
sold as compared to the budget and if the variance is favorable means that more units were sold.
Whereas sales price variance shows the difference between the standard price and the actual
price of the sales (Otley, 2013). A favorable condition is preferred because if shows more sales
than the standard.
 Labor Rate and Efficiency Variance- Labor rate variance shows the wages paid to the
labor if the variance comes out to be adverse than more wages are paid than the standard
and more labors are hired to do the same work.

Whereas labor efficiency variance means how effective a labor is in doing the given piece of
work. If adverse meaning that labor takes more time in doing the work than the standard time.
He is less effective.
 Linear Programming- Linear programming is a mathematical model which provides the
best possible way to allocate the resources which are scarce. It uses mathematical
technique to come out to a given solution (Kaplan, 2015). It aims at increasing the profit
for the organization and minimizing the cost.
 Simulation- Simulation model works on a real life situation. In this a model is built and
examined as per the real world situation and is evaluated accordingly. It gives the exact
analysis of the situation.
D3 Evaluate how planning tools respond appropriately to solving problems
in the context of Dell , leading to sustainable business development.
In case of Dell, the sustainable development is the main objective as it aims at utilizing
the resources in the best possible manner. Dell's activities are aimed at proper utilization of
resources with the minimal cost. The planning tools such as linear programming, is used to
allocate the cost to the products in order to avoid the wastage of resources. The main objective of
the organization is to achieve maximum profits in a given time but an organization is sustainable
when n they minimizing the waste as well. The waste affect the use of raw materials and in turn
affects the environment as well. Hence the wastage is to be minimized as this increases the cost
of production. Hence linear programming aims at allocation the costs in such a way that the costs
are minimized and profits are maximized (McLaren, 2016). Simulation is the real world
depiction hence giving the view of how the organization will be performing in a given situation
and gives us the idea of the resources which will be required to achieve the tasks. It gives a broad
and clear understanding of the facts and figures which will be required at that particular situation.
Task 4
P5 Compare Dell with one of the two Lenovo or HP
In case of Dell, as we know the laptops which Dell is producing is of similar nature with
a few variations in the product. So due to this Dell is using the process costing accounting system
to identify the costs. As in this the entire process is evaluated in one go as per the process which
are involved in making the product and similarly the budget is allocated accordingly. But on the

other hand, in Lenovo the laptops are customized as per the needs of the customers. Hence they
does not use the process costing as every product demands different process to to further. So this
purpose is sorted by the use of Job costing accounting system. In that the cost is evaluated on the
basis of different departments as every product has different features. Hence the budgets are
prepared on that basis and resources are allocated accordingly.
M4 Analyze how, in responding to financial problems, management accounting can lead an
organization such as Dell to sustainable success.
For Dell's sustainable success, Management Accounting has a big role to play. In
producing the laptops Dell’s main focus is towards the reduction of carbon credit to the
environment. With the production of laptops, they are motivating the people to plant a tree while
they purchase a laptop. As that damage to the environment in producing one laptop is
compensated by planting a tree. As Dell is the biggest example of the concern towards the
environment. It is meeting the customer expectations in the cost effective ways and not
damaging the environment. Sustainable success is not just a one day task. It involves the
coordination between the entire organizations from the employees to the top management. Only
when employees are satisfied in the organization this will have a direct impression on the goods
which are manufactured by the company and this thing in Dell is excellent as its achieving
sustainable success and giving an edge over the competitors.
CONCLUSION
The different accounting systems helps them to cater to the varied needs and serves to the
purpose of the organization. It aims at the decision making by analyzing the information
available and aiding to the decision making. It also helps in the planning as this helps in the
preparation of budgets and on that basis the future planning can be done accordingly. Hence
Dell is using the best ways in the production and aiming at the optimum utilization of resources.

REFERENCES
Books and Journals
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 47. pp.1-13.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society.
38(1). pp.50-71.
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.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
McLaren, J., Appleyard, T. and Mitchell, F., 2016. The rise and fall of management accounting
systems: A case study investigation of EVA™. The British Accounting Review. 48(3).
pp.341-358.
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.