University Report: Management Accounting for Pieter Knol - ACCT5000

This report addresses the board of directors of Pieter Knol, emphasizing the importance of understanding costs in product creation and service delivery. It highlights the benefits of management accounting, particularly in providing timely information for decision-making, and explains how management accounting can better meet business needs through relevant cost analysis, budgeting, and controlling. The report delves into cost behavior, explaining its significance for managerial decisions, and outlines two common approaches for obtaining cost formulas: account analysis and the high-low method. It identifies common problems in collecting information for analysis, such as a lack of financial performance data and the overuse of spreadsheets, and recommends enhanced cooperation between departments and pertinent cost analysis. The report concludes by stressing the importance of data accuracy for business success and provides references to support its findings.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Issue 1:...................................................................................................................................2
Understanding difference between cost and value:................................................................2
Reasons why management accounting information can better meet the management neet:. 3
Issue 2:.......................................................................................................................................4
Benefits of cost behaviour:.....................................................................................................4
Two often-used approaches of obtaining cost formula:.........................................................5
Common problems faced in the process of collecting information for analysis:...................6
Recommendations:.....................................................................................................................7
Conclusion:................................................................................................................................7
References:.................................................................................................................................8

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Introduction:
The present report will be addressing the board of directors of Pieter Knol regarding
the importance of understanding the cost involved in making product and providing a service
in a systematic manner. The report aims at addressing the benefits of management to Pieter
Knol regarding the timely portray of information to management (Collis, Jill, and Roger
2017). A convincing reason will be provided to the board of directors and Pieter Knol
regarding the reasons of using management accounting information to meet the specific
business needs. The report will also demonstrate the benefit of understanding cost behaviour
and would explain two most regularly used approach of obtaining cost formula.
Discussion:
Issue 1:
The prices that Pieter Knol charge for its products should be viewed as a highly
notable business decisions the board of director makes. The board should understand that
setting price very high or very low will either yield best result or would limit the business
growth. At worst it may contribute to serious business problems for their sales and cash flow
(Datar and Madhav 2018). Below stated are the explanation which is critical to understand
for the board and Pieter Knol on what it clearly costs to product a product in a systematic
manner and recording the same in a proper manner.
Understanding difference between cost and value:
The board of director and Pieter Knol should understand the difference amid cost
value as it increases profitability. The board should understand the cost of product or services
as the sum it spends to make a product. Price should be viewed as financial reward for
offering product or service and the value should be viewed as something which its customers
believe the product or service is worthy to them (Kaplan, Robert and Anthony 2015). The

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pricing must be in accordance with value of benefits which the business provides to its
customers, while simultaneously bearing in mind the price of their competitors charge.
The board should also understand that each business is required to cover its costs to
generate profit. Hence, working out the costs accurately is regarded as important part of
working out the price (Kokubu, Katsuhiko and Hirotsugu 2015). When the business sets
price, it must set price higher than the variable costs of generating their product or service.
Each of the sale will then make a contribution in covering the fixed cost and would make
profit.
On the other the cost accounting offers cost information to management. The
management should understand that the cost department should cooperate with the other
departments of business in providing a timely information and useful suggestion as this will
help the board of directors and Pieter Knol to improve their performance. Having timely and
right information relating to costs will help in fostering cooperation among the department
and would promote coordination of their efforts.
Reasons why management accounting information can better meet the management
neet:
The managerial accounting information is considered useful in making managerial
decisions. It mainly emphasizes on the internal decision making (Maas et al. 2016). The
board of directors and Pieter Knol should understand that management accounting can
improve the efficiency of accounting department and generates result effortlessly, timely and
accurately.
1: Relevant analysis of cost: Management accounting helps in performing a “relevant cost
analysis” to know the current expenditure and offer proposals for future activities. The

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management accountant can assess variety of sales and product channels to locate a highly
profitable business model.
2: Defining budgets: The budget linked decisions should adhere with the sales history and
advertising database (Nelson, Thomas and Paul 2014). This is where the management
accountant steps up to assess the former activities and define the investment for forthcoming
course of actions.
3: Controlling: Controlling is regarded as vital aspects of management accounting.
Management accounting information helps in assessing the work of the entire business units
and makes assumptions associated financial performance. As a result it becomes easy for
senior executives to lower operational costs.
Issue 2:
Benefits of cost behaviour:
The cost behaviour is considered important for the business in determining the effect
of changes in the organizational activities on the cost related with them. In other words, the
cost behaviour is normally ascertained by managers in assessing the changes in costs because
of changes in output level inside the organization (Otley 2014). For the board of directors and
Pieter Knol understanding the cost behaviour is viewed important for making managerial
decisions because of following reasons;
a. Managers will be able to lower the overall cost occurred on activities
b. The cost behaviour would help the manager in making decisions to improve the
profitability
c. The cost behaviour would help the manager in obtaining economies of scale by
raising the production volume.

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Two often-used approaches of obtaining cost formula:
Account Analysis:
This approach is considered important and a common starting point for estimating the
fixed and variable costs. By totalling all the recognized costs as fixed helps in offering
estimation of total fixed costs. In order to ascertain the overall variable costs per unit all the
costs are recognized as variable are summed and it is divided to assess the activity.
High-low method:
Another important importantly used method is the high low method where fixed and
variable costs are recognized for the purpose of cost estimation (Nelson, Thomas and Paul
2014). The accountants use this approach for quick and easy way of estimating the costs.
Common problems faced in the process of collecting information for analysis:
Financial reporting and performance management must be considered as business
empowering procedure not simply laborious or ongoing tasks. So if a business is able to
relate any these, then it must change how their business handles and uses financial data.
There are some common problems that are faced in the procedure of collecting the info for
analysis are as follows;
a. Lack of financial performance information: The business may face the recurring
challenge of core financial system agnostic, obtaining an expressive intelligence from
the data which is held inside the core financial banking system (Kokubu, Katsuhiko
and Hirotsugu 2015). The term intelligence implies ability of monitor the trends of
individual product lines.

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b. Too many spreadsheets: Having too many spreadsheets can be challenging in
processing and collecting information for analysis purpose. It is important to build a
self-service analytics.
Recommendations:
a. It is recommended that the cost department should cooperate with other departments
to offer the board of directors and Pieter Knol with timely information.
b. The board of directors are also recommended to perform a pertinent cost analysis to
ascertain the current expenditures and provide suggestion on improving it.
Conclusion:
Conclusively, data accuracy and truthful is critical in the success of the company.
Without the expressive and actionable visions, a business cannot assess the present state of
businesses or plan for upcoming business moves.

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References:
Collis, Jill, and Roger Hussey. Cost and management accounting. Macmillan International
Higher Education, 2017.
Datar, Srikant M., and Madhav Rajan. "Horngren's Cost Accounting: A Managerial
Emphasis." (2018).
Kaplan, Robert S., and Anthony A. Atkinson. Advanced management accounting. PHI
Learning, 2015.
Kokubu, Katsuhiko, and Hirotsugu Kitada. "Material flow cost accounting and existing
management perspectives." Journal of Cleaner Production 108 (2015): 1279-1288.
Maas, Karen, Stefan Schaltegger, and Nathalie Crutzen. "Integrating corporate sustainability
assessment, management accounting, control, and reporting." Journal of Cleaner
Production 136 (2016): 237-248.
Nelson, A. Thomas, and Paul BW Miller. "Modern management accounting." Australasian.
Accounting, Business and Finance Journal 8 (2014): 2.
Otley, David. "The contingency theory of management accounting and control: 1980–
2014." Management accounting research 31 (2016): 45-62.