Benefits of Management Accounting for Favelle Favco Berhad

The assignment discusses how Favelle Favco Berhad can benefit from using management accounting information to make informed decisions, control expenses, and maximize production. It highlights the importance of management accounting in helping companies achieve efficiency and productivity, and provides references to relevant studies and articles on the topic.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Point 1- Characteristics of management accounting information..........................................1
Point 2 – Discussing relevance and comparable characteristics beneficial for management
accountant...............................................................................................................................3
Point 3- Implication of usefulness of characteristics to management accountants in taking
decisions.................................................................................................................................5
SUMMARY.....................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting information plays crucial role in the organisation to take
enhanced decisions. This information is useful in carrying out relevant data so that internal
operations may be strengthened by company. It is essentially required because without referring
to such piece of content, well-structured decisions cannot be taken. Furthermore, costs are
controlled in a better way and unnecessary ones are alleviated up to a high extent. Present report
deals with Favelle Favco Berhad which is engaged in manufacturing sector. The organisation is
listed on Malaysian Stock Exchange named as Bursa Malaysia Berhad which is the largest
exchange holding company replaced with Kuala Lumpur Exchange. It is formed under Section
15 of CMS (Capital Market and Services) Act, 2007 operating and offering complete range of
trading, clearing and related depository services in effective manner.
Favelle Favco Berhad is in manufacturing of cranes which are used in the construction of
houses, roads and related construction elements. The brand is operated under names of Favelle
Favco and Kroll. The firm is located and headquartered in the Selangor, Malaysia. The address
of organisation is Lot 586, Jalan Batu Tiga Lama, 41300 Klang in Selangor. Main plant is
located in this region, however, production sites and offices are in Sydney, Australia, China,
Texas, USA and Denmark. The organisation provides full range of cranes under two brands and
has cemented its position in short time span. Cranes includes Offshore, Tower, Crawler and
Wharf. The tailored solutions and services are provided by company in meeting out demands and
expectations of customers.
High advancement in technology is provided by firm. Services imparted by organisation
are lifting support for job site demand. Well-maintained equipments are provided that are low
cost and heavy investment is made on it. Personnels are well-trained giving productive services
to clients by effectively catering their needs. Reliable services are given by company. It is
enlarging its product portfolio by adding cranes in offshore category which are build in
accordance to API standards and delivering quality services. Management accounting
characteristics and concepts are explained in the report. It will be useful for Favelle Favco
Berhad in maintaining costs and alleviating it so that revenue may be maximised.
Point 1- Characteristics of management accounting information
There are various characteristics of such accounting information are discussed below-
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1. Emphasising on future-
The financial accounting provides historical data in the form of financials and then it is
provided to management accountant. Attempt is made in order to use such information for the
purpose of future by using standard costing, budgetary control. Furthermore, cost variances are
analysed to find out whether more cost is incurred in accordance to the budgeted or not. If more
is attained, then measures are taken to alleviate and it is reduced quite effectually. These
elements are helpful in highlighting future cause of management accounting.
2. Imparting information for making decisions-
The information is imparted by financial accounting and then managerial reports are
prepared in the best possible manner. For instance, final accounts are prepared of Favelle Favco
Berhad and from this, managerial reports are formulated in taking decisions with reference to the
financials imparted. This means that only information is provided and as such, management
accounting helps to take information from financial accounting and thus, enhanced decisions are
taken. It is needed so that company's management can take better decisions (Liechtung, 2018).
3. Cause and effect of relationship-
The profit and loss account is prepared for assessing whether company has earned good
quantum of income or not and whether loss is suffered or not. The main reason is that it does not
clarify what is the implied reason for such loss or income earned as it is not disclosed in the
account. On the other hand, management accounting information studies reasons or it can be
called as cause and effect relationship between various variables affecting profitability of
organisation up too much extent. Hence, such accounting information helps in assessing reasons
behind costs incurred and income earned as per cited example.
4. Elements of cost-
The costs are incurred in carrying out manufacturing activities by Favelle Favco Berhad
in order to meet demand with ease. Total costs consists of fixed, variable and semi-variable in
the management accounting (Characteristics of Good Management Accounting Information,
2018). These expenses are required to be incurred to meet production levels and thus,
organisation has to minimise the same for increased production. The fixed costs are to be
incurred irrespective of the production. On the other hand, variable expenses varies with
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production level and increases or decreases in same ratio in relation to manufacturing process.
Semi-variable are blend of fixed and variable to be incurred by firm. The fixed costs are rent,
salaries etc, variable costs are raw materials, labour etc. Whereas, semi-variable expenditures
include depreciation and licensing which are of mixed nature.
5. Non-monetary variables-
The financial accounting deals specifically with monetary transactions and accounts for
the same. However, management accounting utilises such information in relation to various non-
monetary variables such as efficiency level of workers, employee turnover which are crucial for
business. Moreover, management policy, company culture, conditions prevailing in the market
and customer behaviour are some of the points taken into account for decision-making purpose.
Hence, monetary data supplied by financial accounting is used to take constructive decision.
6. Enhancing efficiency-
Targets are set by company which are to be attained by employees. Budgetary control
system is implemented in each of the departments in order to compare actual performance with
planned so that deviations can be extracted in a better way. Basically, there are two types of
deviations such as positive and negative one. If positive deviation prevails, then management of
Favelle Favco Berhad need not to worry as efficiency is increased. However, in case of negative
one, corrective actions are required for improvement. Hence, overall efficiency is maximized
with the help of management accounting (Malmi, 2016).
Point 2 – Discussing relevance and comparable characteristics beneficial for management
accountant
The concepts of relevance and comparable are quite useful to management accountant in
order to provide better and impressive information to managerial personnels so that they may be
able to take enhanced decisions. These are discussed below-
Relevance-
The relevance characteristic is essentially required so that firm may be strengthened
internally in the best possible manner. Basic concept of relevance is that information must be
appropriate and useful to decision-makers in enhancing overall efficiency of organisation. It is
important in various parts of Favelle Favco Berhad be it planning or initiating control in firm's
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operations in internal basis. This means that information must be relevant to the management so
that personnels may be able to carry out better economic decisions and has quality to relevancy
in evaluating past, current and future events and thus, corrective actions can be taken in
removing deviations that existed in the past. In relation to this, decisions are not the same and as
such, different data need to be collected for taking such sort of informed decisions.
One of the main objective is to analyse and decide which information is appropriate to
common issues in making decisions. Favelle Favco Berhad needs to analyse as it operates in
manufacturing of construction cranes that what would be relevant information to management.
For instance, analysis of new project is not required to include information pertaining to indirect
costs as it is of no use. Instead, prime cost should be accounted for as it is much relevant in
taking better decisions by the management. By taking into consideration characteristic of
management accounting, accountant is benefited as he is able to include relevant information
only which assists to managerial personnels. This helps to strengthened Favelle Favco Berhad on
internal basis and thus, higher productivity can be achieved for carrying out external operations
in the best possible way.
Comparable-
It is another useful characteristic of management accounting as it helps to compare one
information with that of other relevant assisting in decision-making purpose. The financial
statements such as balance sheet, income statement and cash flow statement are pillars of
analysing financial health of company. These help in clarifying whether firm is performing well
or not. The main essence of comparable is that management accountant can easily assess and
compare differences which are required to serve information to management for decision-making
in effective manner. Financial health and performance can be analysed and as such, differences
can be accounted for on internal ground. On the other hand, financial statements can be
compared with that of peer company so as to find any deviations in firm's own performance. It
means that Favelle Favco Berhad can compare its financials with its competitor to assess overal
financial position in the best possible manner. Hence, it will be fruitful for accountant to take
such comparison and then provide relevant reports to management for enhanced decision-
making.
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The measurement and effect of financial transaction can be carried out with much ease of
company with that of rivals in consistent manner. This helps management accountant to formulat
information in relation to financial planning, cost issues on yearly or quarterly basis making it
easier to compare with that of past information or peer companies in effective manner. Hence, it
can be said that management accountant is benefited by such characteristics and thus,
constructive, relevant and reliable information is presented to Favelle Favco Berhad's
management for taking appropriate decisions within timely manner.
Point 3- Implication of usefulness of characteristics to management accountants in taking
decisions
The detailed implication of usefulness of characteristics to accountants in taking
enhanced decisions are listed below-
1. Able to compare-
The main usefulness of both relevance and comparable concept is that financial
information can be compared and as such, Favelle Favco Berhad may be able to attain useful
insight about the same. The implication can be made by maintaining proper business transactions
so that organisation can easily provide relevant information to the users. In context of this,
management accountant is benefited in classifying data which is easily comparable with past
information in effective way.
2. Recognising relevant information-
Management accountant is benefited by taking enhanced information available through
financial statements. The information is easily recognised with the help of relevancy in it. Thus,
it helps accountant in taking appropriate decision regarding internal health and as such, it is
improved by taking corrective actions, thereby, helping accountants in carrying out useful
information in the best possible manner (Cotter, 2018). Hence, it can be said by taking into
account such characteristics of management accounting, firm's accountant is able to make
structured judgements quite effectually.
3. Satisfying users in decision-making process-
The users of management accounting information are the personnels which uses the same
in taking enhanced decisions in the best possible way. Furthermore, it helps managerial
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personnels in carrying out better decisions which satisfies them as complete health of company is
analysed and as such, process may be ease off quite effectually. The relevance and comparable
characteristic is implicated in an organisation in that way which guides accountants in taking
enhanced piece of judgements and is beneficial for entire firm as operations are handled in a
better way. Hence, satisfaction level is accomplished as it assists in decision-making process.
4. Synchronising qualitative and quantitative information-
The quantitative information is effectively supplied by the financial accounting in that
way which highlights overall performance of organisation with ease. This information is then
supplied to management accountants so that they may be able to do financial planning and
consider cost issues in effective manner (Suomala, Lyly-Yrjänäinen & Lukka, 2014). In relation
to this, qualitative and quantitative information is synchronised in appropriate way helping to
management accountant to take desired decision. The implication of relevance and comparable
concept, firm can achieve desired heights as firm is internally strengthened. Hence, accountant of
company is benefited as required information is made available quite effectually.
5. Emphasising on cost reduction-
It is essentially required so that business may be able to take into account all costs
incurred on attaining desired production. Furthermore, Favelle Favco Berhad can effectively
initiate control on costs of manufacturing of cranes for construction purpose. It means that firm
may be able to gain useful insight about the cost reduction on manufacturing. Management
accountant of organisation can achieve cost reduction mechanism so that expenses may be
reduced and maximum production can be accomplished. Hence, by initiating alleviation in costs,
firm may produce more and attain higher profits, thereby, providing customer satisfaction at least
possible manufacturing cost. Thus, it can be said that management accountant is benefited to take
enhanced decisions and furnish report to top management to apply those in practice.
SUMMARY
Hereby it can be summarised that company is benefited by relying on management
accounting information in the best possible manner. It is required that firm should use such
information to effectively strengthened in a better way. Hence, company is highly benefited on
using desired information supplied by management accountants. Favelle Favco Berhad engaged
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in construction of cranes has to use management accounting information so that firm may be able
to gain useful insight with much ease. Furthermore, manufacturing sector incurs various costs
such as fixed, semi-variable and variable which are needed to be incurred in accomplishing
desired level of production. These costs vary with production, however, fixed costs are incurred
constantly as its nature is fixed and even that company has no production, then also it has to pay
for fixed expenses. The characteristics of management accounting information are analysed
which are used in conjunction to the stated targets of company so that deviations if exists can be
eradicated up to a high extent. Hence, it is required to eradicate variances in order to attain
efficiency and productivity at the same time. Furthermore, costs can be controlled and
production may be maximized. The comparable and relevance concept or characteristic of
management accounting information helps accountant in making well-structured decisions and as
a result,Favelle Favco Berhad can be strengthened in a better way. Furthermore, maximum
production can be achieved by controlling expenses and financial planning may be done with the
help of such information. Thus, it can be said that firm is benefited with management accounting
as it assists in making appropriate decisions for injecting internal operations.
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REFERENCES
Books and Journals
Cotter, T. F., (2018). On Unknown Opportunities and Perils: Reflections on Carrier and
Minniti's' Biologics: The New Antitrust Frontier'.
Liechtung, J., (2018). THE RACE IS ON! REGULATING SELF-DRIVING VEHICLES
BEFORE THEY HIT THE STREETS.Brooklyn Journal of Corporate, Financial &
Commercial Law.12(2). p.6.
Malmi, T., (2016). Managerialist studies in management accounting: 1990–2014. Management
Accounting Research. 31. pp .31-44.
Suomala, P., Lyly-Yrjänäinen, J. & Lukka, K., (2014). Battlefield around interventions: A
reflective analysis of conducting interventionist research in management
accounting. Management Accounting Research. 25(4). pp .304-314.
Online
Characteristics of Good Management Accounting Information, 2018 [Online] Available
Through: <https://www.mbaknol.com/financial-management/characteristics-of-good-
management-accounting-information/>
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