Benefits of Management Accounting
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Added on 2020-10-22
Benefits of Management Accounting
Added on 2020-10-22
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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Management accounting and its types of management accounting systems........................1P2. Management accounting reporting and its types..................................................................3M1. Evaluate the benefits of management accounting system and its applications...................4D1. Management accounting system and its reporting within organisation process..................5TASK 2............................................................................................................................................5P3. Calculation of cost using an appropriate technique..............................................................5D2: Data interpretation................................................................................................................7TASK 3............................................................................................................................................7P4: Budgetary control and planning tools used in budgetary control with its advantages anddisadvantages..............................................................................................................................7M3: Uses and applications of planning tools for preparing and forecasting budgets.................9TASK 4..........................................................................................................................................10P5: Responses of management accounting system to deal with financial problems................10M4: Management accounting lead organisation to sustainable success in responding tofinancial problems.....................................................................................................................12D3: Planning tools respond appropriately to resolve financial problems.................................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONManagement accounting is an approach of analysing accounting information and setguidelines that are useful in recording financial transaction of the company. The main objectiveof management accounting is assistance in planning and future policies formulation. Sollatek is amanufacturer of valves and tubes situated in Slough, United Kingdom. Company manufacture alarge range of voltage protection, solar products and LED lights.In this report, company follows various management accounting systems and methodsused for reporting. Cost and profit of product is determine using costing techniques which helpsin preparing income statement. Company evaluate various planning tools used for budgetarycontrol. It also adopt management accounting systems to respond to financial problems (rabner,and Moers, 2013). TASK 1P1. Management accounting and its types of management accounting systemsManagement accounting plays a vital role in managerial functions like planning,organising, controlling and decision making that are performed by managers. It is a core processwhere employers manage with their subordinates by introducing a set of specific objectives.These goals are important for both the company and employee strive to achieve in coming future.Management accounting systems are confidential internal statements that assist managersin decision making and identifying ways to run the company more efficiently. Sollatek usemanagement accounting system such as cost accounting, inventory management, priceoptimisation and job costing for evaluating its process of working. The information of thesesystems used in all departments of a company such as finance, information technology, HR,marketing, operations and sales. Various management accounting systems are explained below:Cost Accounting System: It is a framework used by company in estimating their productcost for profitability analysis, cost control and product valuation (Padovani, Orelli and Young,2014). Cost of raw material, work in progress and finished goods are estimated under this systemfor the purpose of preparing income statement. Sollatek use this method for calculating theaccurate cost of synthetic rubber which is necessary for profitability operations. Company mustknow that their products are profitable or not. This is only possible when it estimate correct costof it's product in manufacturing process.1
Price Optimisation System: It is a system used to tailor product pricing for customers ofdifferent segments that evaluate how targeted customers will respond to variation in price. Thissystem assist in accumulating the demand of product at various level of prices. Sollatek use priceoptimisation system to identify the best price of its product that customers are willingness to pay.Company set a price of its product which it supply to clients. These price strategies are reviewedfrom time to time to make an improvement in pricing policies which helps in achievingmaximum efficiency and decision making.Inventory Management System: This system is designed for manufacturers that trackthe flows of inventory at different stages of production and distribution. This system includes adetailed information about inventory in opening stock, work in process and finished goods or instorage warehouse. The features of this system are asset tracking, service management, productidentification, inventory optimization etc. Sollatek use this system for tracking the inflow oroutflow of raw material that management wants to supply their product as per the demand ofsuppliers and customers. Inventory management system also reduces the improper managementof inventory by controlling and managing product future demand. It increases product efficiencyand helps in inventory optimisation and demand forecasting (Ball, 2013). Job cost System: This system is used to determine costs at a small unit level wherecompany record the costs of manufacturing instead of process. Cost of direct raw material,labour, applied overhead combines to find a total job cost. Sollatek is valves & tubesmanufacturer and distributor to clients. It follows job cost system to accumulate the cost of eachjob, maintaining information that is much related to its operations. Company identify the costsand revenues of its products at different levels of manufacturing and distributing. Each job isdifferent and company wants to perform its job as per the requirement of customers andsuppliers. This system also assist in evaluating the actual cost and performance of each jobs.2
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