Strategic Management Accounting & Business Strategy Analysis

This assignment delves into the critical relationship between strategic management accounting and business strategy, drawing upon seminal works by Tenucci (2010), Scapens & Bromwich (2010), Vaivio & Sirén (2010), and Macintosh & Quattrone (2010). It explores how management accounting systems influence companies' performance in uncertain environments (Ajibolade et al., 2010) and the role of professional accountants in SMEs (Nandan, 2010). Additionally, it examines environmental management accounting's impact on supply chain management (Burritt et al., 2011) and its interplay with environmental reporting (Bouten & Hoozée, 2013). The assignment encourages a comprehensive analysis of marginal cost concepts using the Business Dictionary definition.

MANAGEMENT
ACCOUNITNG

Table of Contents
INTRODUCTION...........................................................................................................................1
Section 1. .........................................................................................................................................1
1. ............................................................................................................................................1
2. ............................................................................................................................................2
3..............................................................................................................................................2
4........................................................................................................................................................3
a).............................................................................................................................................3
b).............................................................................................................................................7
c) ............................................................................................................................................7
Section 2...........................................................................................................................................8
Part A......................................................................................................................................8
Part B....................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is the most crucial aspects which is used in the business in order
to attain pre-set objectives of the organisation. Firms are trying to attain their objectives by
utilising firms' resources (Lavia López and Hiebl,, 2014). The management accountant is the key
person in the organisation which used management accounting practices in order to get
competitive advantages over the firm. With the help of such practices, company could lower the
price of the products by eliminating the waste price. There are so many MA tools which can be
used in the company for achieving the firm objectives. MA practices helps the company to make
an effective strategy for viability of the firm.
Section 1.
1.
Management accounting is the tool by which an accurate information can be made which
can be useful throughout the firm in order to attain the firm's objectives and goals. MA reports
are made by the management accountants which is specially framed for the firm internally. Such
kinds of MA reports is used for making trend analysis, variance analysis and much more which
can be used for achieving the objectives (Macintosh. and Quattrone, , 2010). Management
accounting practices are crucial for attaining the firm's objectives. MA reports helps the key
players in the firm in the following areas:
Strategic management: Effective strategies are made so that the sound decisions could be
frame, and company is able to get its pre-set objectives.
Performance management: MA assist the firm to know the performance of the company and
also helps to design their policies accordingly.
Risk management: MA assists the firm to make the strategies in a way where it could eliminate
and manage the risk. The management accountant are the key person who could eliminate the
risk effectively.
However, the key task of MA is for making plans and renders decisions supports for
administration of the firm for sound running and also crucial for decision making processes to
making procedures towards achieving the performance of the firm.
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2.
There are various management accounting system which helps the firm for getting competitive
advantages over the firm. Some of them are as follows:
Cost accounting system: This is the framework which is used by the management
accountants for lowering the cost of the production which could lead to get the optimum benefits
over the periods. This system also helps the top level executives for making the strategies that
could lead to get the pre-set objectives (Banerjee,, 2010.). This technique is used in the firm in
order to forecast the price of the product which will help out to frame the pricing policies for the
firm. Prediction of the cost of the product is the most crucial task for management accountant as
this requires so much attention.
Inventory management system: Inventory management framework is the process by
which stock of the company can be tracked, ordered and delivers. This is mainly done in the
manufacturing sector which is implemented in order to make a work order and various
production related documents.
Job costing system: This is the main system which is used for assigning production
related costs for a batches of products. Normally, this system is implemented only when goods
produced are entirely different from each other. As, there is a crucial variation within the product
produced, this system frame job cost records for each job. The job cost record will display the
direct materials, direct labour and overheads costs related to the production.
3.
Cost accounting system's benefits: Cost accounting system is useful for making the
business sustainable and also aides the firm for making the decisions. As, this will also reflects
the accuracy in the financial reports of the firm so that various stakeholders are able to take their
independent decisions in a most effective manner (Nandan, 2010). Now, this is observed that the
a sound cost accounting system helps the firm to make their business a sound command over its
spendings and also assists to secure economy under the production of the goods.
Inventory management system's benefits: In every business, inventory control is the
most crucial task which is used for attaining the company's objectives. As, this will help out the
firm to attain the sustainability. With the help of good inventory management skills, company is
able to utilise it resources effectively, as this will also assists the firm enhance the accuracy of
the firm. This will also able to stop product deficiencies and enables the firm to keep enough
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stocks. Along with this, a good inventory related strategy help out to enhance the efficiency and
productivity.
Job costing system's framework: There are various advantages occurred by applying
job order costing methods. With the help of this, company could determine the profits of each
job. This also render the detailed analysis of cost of material, labour and overheads for each job
as and when need. Plant efficiency could be maintained by limiting attention to costs connecting
to each job.
M1: Benefits of management accounting
In accordance with the information gathered from above accounting system that are more
facilitative for the company. It is done in order to manage and control their business operations.
Company need to enhance its performance in more effective ways. So that profitability would be
increased. The position in the market is depend upon financial stability of the company. Mangers
taken decision regarding the performance of the company after making proper evaluation of the
accounting records and statements (Van Helden and et. al., 2010.). The major benefit of the
accounting system is that it provide balance among financial aspects of the company in terms of
controlling cost and extra expenses.
D1: Critical analysis of accounting systems
Accounting system are the most effective aspects of any business concern which are
required to be evaluated on regular basis. So that financial transaction are recorded and
summarised in most effective manners. It is most effective process to enter all those records into
financial statements of the company which are performed during the accounting year (Marginal
cost. 2017.). The resource are scares with the company so they must be utilises in effective
manner in order to get more positive outcomes. An contingency plan should be always ready
with the managers, if any thing goes beyond the imagination of the strategies made by the
company.
4.
a).
Statement of profit and loss using absorption costing:
Quarter 1
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No. Of units £/unit £ £
Sales value 66.000 1 66.000
less Cost of sales
Opening inventory 0 0.85 0
+Production 78.000 0.85 66.300
-closing inventory (12.000) 0.85 (10.200) (56.100)
Gross profit 9.900
less Expenses
Selling &Administration costs (5.200)
Profit 4.700
-Under absorption (2.800)
Profit reconciled 1.900
Quarter2
No. Of units £/unit £ £
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Sales value 74.000 1 74.000
less Cost of sales
Opening inventory 12.000 0.85 10.200
+Production 66.000 0.85 56.100
66.300
-closing inventory (4.000) 0.85 (3.400) (62.900)
Gross profit 11.100
less Expenses
Selling &Administration costs (5.200)
Profit 5.900
Statement of profit and loss using marginal costing
Quarter 1
No. Of units £/unit £ £
Sales value 66.000 1 66.000
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less Cost of sales
Opening inventory 0 0.65 0
+Production 78.000 0.65 50.700
50.700
-closing inventory 12.000 0.65 (7.800) (42.900)
Contribution 23.100
-fixed costs (16.000)
-selling &administration (5.200)
Profit 1900
Quarter 2
No. Of units £/unit £ £
Sales 74.000 1 74.000
less Cost of sales
Opening inventory 12.000 0.65 7.800
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+Production 66.000 0.65 42.900
50.700
-closing inventory 4.000 0.65 2.600 (48.100)
Contribution 25.900
-Fixed costs (1.600)
-selling &administration (5.200)
Profit 4.700
b).
Under marginal costing method, the variable cost is to be considered while calculating
the contribution and after that the fixed is considered (Vaivio and Sirén, 2010). Absorption
costing is the technique under which the company considers entire manufacturing costs are
absorbed by units manufactured. On the other way, the cost of final product in stock will cover
direct material, direct labour and entire overheads which are related to the manufacturing
products. That is why, the net income under marginal and absorptions varied. The main
difference which is present among them is provided below:
For quarter 1
Overheads absorbed =(66.000×£0.20)=13,200
Total fixed cost= 16,000
Under absorption = (2,800)
For quarter 2
Absorbed Expenses =(74000×£0.20)=14,800
Total fixed cost=16.000
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Under absorption(1.200)
c) .
This statement is made so that the difference which is present among both the methods
can be matched and the profits can be reconciled.
Particulars Q1 Q2
Profit under absorption 4700 5900
Under absorption (2.800) -1200
Profits under marginal 1.900 4700
Working notes
Fix=16.000
66.000×0.20=13.200
Under absorption (2.800)
74.000×0.20=14.800
Fix=16.000
Under absorption=1.200
M2: Financial reporting methods
Through analysing financial data of a company with using effective techniques which are
use as an important aspect for the cited company. Most of the decision are based on the internal
factors or external which are directly or indirectly affect the productivity of the company. some
of them are Auditing, inventory control system and cash attainment record. Auditing is the
techniques which are most common to any company. It provide more effective results through
analysing all accounting transaction. It depend upon the department which option they are going
to adopt under financial reporting.
D2: Analysis of company performance
According to given situation in above case it has been concluded that company has both
costing options. Such as absorption and marginal costing to calculated net profit from it income
statements. Through using these two methods results would be different for the company
(Scapens and Bromwich, 2010.). It will be more easy to choose either of the option which is
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more reliable and accurate in results. If they company is going with absorption costing method
they need to consider fixed cost also which make certain difference in net profit. Because, under
marginal costing fixed costs are not considers. The one which gives more effective results would
be selected by the company.
Section 2.
Part A
Budget is the estimation of the revenues and expenditure for a specified period of time.
This is the perfect tool which is used by the management accountant in order to assess the actual
expenditures and revenues with the budgeted figure. As this will help out to make the business
reliable. This is helpful for predicting the future financial goals and targets. This is one of the
major imperative tools,plan of actions for attaining quantified objectives, standard for evaluating
performance, and tool for coping with forecasting adverse situations. Budget is implemented
within the firm in order to monitor and control costs for the company and operations for any
specified accounting year (Ajibolade, Arowomole, and Ojikutu, 2010). This is used by the firm
to identify accounting their pre-set goals and objectives and then different types of plans and
strategies are framed in order to improve the performance and then compare the actual results to
the budgeted ones. Various functions are performed by the firm so that the final outcomes can be
attained. As, this is used by the management of the company so that the company could attain the
pre-set targets and after that the budgeted results can be compared. After that the firm takes
healthy steps to remove such variances by using skills. There are few aims and objectives which
are used for budgetary control. It's key objectives is to make co-ordination between resources
and implementation in order to implement them in a most effective manner (Cinquini and
Tenucci, 2010). However, there are some advantages are mentioned which are as follows:
Enhanced efficiency: Budgets are useful for enhancing the performance of the company. This is
possible as this gives the directions to the employees about what work they need to do or what is
not. If the firm's performance enhanced then in that case, company will produce tremendous
revenues for the firm.
Communication: While framing budgeting in any firm, there is a cooperation between entire
department after that forecasting could be framed distinctly and accurately. After that this can be
observed that budgetary control is beneficial better communicative atmosphere.
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There are various budgetary tools which are helpful for forecasting for a specified period of time.
Cash Budgets: This is the most important tool which assess the cash inflows and cash outflows
in a specified period. With the help of this budget, company would able to know from where
company is getting cash and where it is implementing its cash. The company also identify about
the entity whether it has enough cash to operate or not. Now this has be
Zero base budgeting: Under this budgeting method, budgeting process starts from zero. This
tries to attain maximum allocation of resources to the parts of the firm where they are much
needed.
M3: Evaluation of plan and related application
For the cited company it is vital to have effective performance and that would be
achieved through well constructed plan and strategies. The strategies are used to achieve the goal
and objectives which are set by the company (Renz, 2016). The most watchable level for
accounting purpose is operational as well as tactical which are operated through coordination
with each other. In order to get more accurate results company need to control its costs and extra
expense which are affecting performance of the company. It will be more helpful in order to
gain competitive advantages over other competitors.
D3; Evaluate techniques to overcome financial issues
There are various techniques which are used by the company to overcome financial
problems. Some of them key performance standard which is said to be most effective techniques
use by the company to manage its financial performance. Benchmarking is another tools of
reducing financial problems by setting a range so that it would identified before it reached to that
particular range. Financial governance is another component of solving financial problems which
are arises in an organisation.
Part B.
By using different tools and techniques which are discussed above management get to know
about its distinct problems and issues which effect the final results and performance of the
company (Parker,, 2012). Through using the financial tools it is identified that what is the
difference in companies performance if compared it with the previous years results. In order to
overcome such issues some techniques are used by management which help them in achieving
the desired results and identifying the issues behind deviation in expected outcome. Some of
them are given below in detail :
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Benchmarking – It is a process through which standards are set against a particular project
which helps in making the comparison task more easy. Through this concept a desired standard
is set which is being expected as an end result. It can be set against a product, programme,
strategies etc. The main goal of this plan of action is to determine the areas which needs extra
care and development. The other objective of same is to study how companies is same field are
successful in achieving their set performance standards and also to increase the present
efficiency level of employees. It is a continuous process which continues till the results are
achieved.
Key performance indicator – it is a measurable tool which shows how an organisation is
achieving its goals and objectives. These indicators can be utilised at different levels which
further helps in evaluating that weather targets are achieved or not. There are two types of these
indicators which are upper and lower one (Baldvinsdottir, Mitchell. and Nørreklit, 2010Bodie,
Z., 2013). The upper indicates show the performance standards of overall organisation whereas
the lower one gives the idea of different departments performances. It also facilitates effective
communication in an organisation as sufficient data is communicated to all those who are
affected by it so that accordingly the employees can act upon it. This process starts with an
initiative of realising what are the goals of given organisation as this way it is evaluated that
which all actions of an organisations needs to be measure against the KPIs. There are various
indicators of the companies performance in which some of them are discussed below:
Profit – it is one the most crucial indicator of an organisations execution. By analysing the net
and gross profit of a particular time period it can be analysed that weather the company was
effective or not in receiving the desired returns on its capital.
Cost of goods sold – Through this management can get the idea of how much return a company
is receiving after its total sales as it gives a clear vision of a products markup and actual
margins estimated.
Financial governance – it is another tool which is concern with the management of companies
present finance. Through this system management can strengthen the external as well as internal
audit system. Auditing helps in keeping continuous check on the day to day operations which
further helps in eliminating wastage and using the provided resources to their maximum
capacity. Thereafter, the advise and suggestions of different auditors can be utilised to make
improvements in the present working techniques.
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M4: Analysis of the problems
In an organisation there are so many financial problems which are arise in during
recording of financial transactions (Macintosh and Quattrone, 2010). As explained in above
mentioned financial issues which are arises in an organisation. Balance scorecard is use by the
company to rectify all those errors. The performance of the company are affected because of
such issues. The company can overcome all those issues through applying effective techniques
into it. As most of the financial problems are affecting profitability of the businesses.
CONCLUSION
From the above project report it has been articulated that management accounting is an
effective aspect which need to be consider by the company to manage their business operations.
As most of the important financial decisions are rely on accounting system used by the company.
Under this project assignment, importance of management accounting systems are explained
under this. Use of absorption and marginal costing methods are presented to know net profit for
the company in order to make effective decision making. How budget are helpful in management
accounting and tools which are used by the company in order to solve financial problems.
REFERENCES
Books and Journals:
Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
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.
Bodie, Z., 2013. Investments. McGraw-Hill.
Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1). pp.54-70.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Cinquini, L. and Tenucci, A., 2010. Strategic management accounting and business strategy: a
loose coupling?. Journal of Accounting & organizational change. 6(2). pp.228-259.
Scapens, R.W. and Bromwich, M., 2010. Management accounting research: 20 years on.
Vaivio, J. and Sirén, A., 2010. Insights into method triangulation and “paradigms” in interpretive
management accounting research. Management Accounting Research. 21(2). pp.130-
141.
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Van Helden, G.J and et. al., 2010. Knowledge creation for practice in public sector management
accounting by consultants and academics: Preliminary findings and directions for future
research. Management Accounting Research. 21(2). pp.83-94.
Nandan, R., 2010. Management accounting needs of SMEs and the role of professional
accountants: A renewed research agenda. Journal of applied management accounting
research. 8(1). p.65.
Banerjee, B., 2010. Financial policy and management accounting. PHI Learning Pvt. Ltd..
Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Lavia López, O. and Hiebl, M.R., 2014. Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of
Management Accounting Research. 27(1). pp.81-119.
Schaltegger, S., Gibassier, D. and Zvezdov, D., 2013. Is environmental management accounting
a discipline? A bibliometric literature review. Meditari Accountancy Research. 21(1).
pp.4-31.
Ajibolade, S.O., Arowomole, S.S.A. and Ojikutu, R.K., 2010. MANAGEMENT
ACCOUNTING SYSTEMS, PERCEIVED ENVIRONMENTAL UNCERTAINTY
AND COMPANIES'PERFORMANCE IN NIGERIA. International Journal of
Academic Research. 2(1).
Bouten, L. and Hoozée, S., 2013. On the interplay between environmental reporting and
management accounting change. Management Accounting Research. 24(4). pp.333-
348.
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(Vol. 27). Springer Science & Business Media.
Online
Marginal cost. 2017. [Online]. Available
through :<http://www.businessdictionary.com/definition/marginal-cost.html>.
[Accessed on 12th September 2017]
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