Management Accounting Practices and Success

The assignment examines the relationship between management accounting practices and an organization's success. It explores various management accounting tools such as cost control, budgeting, pricing decisions, and variance analysis, demonstrating how they contribute to performance improvement and efficiency. The report emphasizes the significance of these practices for informed decision-making and achieving organizational goals.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Different types of cost classification......................................................................................4
1.2 Calculating of job cost for 200 units using job costing method............................................5
1.3 Determination of Exquisite cost using Absorption Costing Technique.................................6
1.4 Analyzing cost data using appropriate techniques.................................................................8
TASK 2............................................................................................................................................9
2.1 Preparation and analysis of routine cost reports....................................................................9
2.2 Application of performance indicators in order to identify potential improvements in
business......................................................................................................................................11
2.3 Recommendation for cost reduction and value enhancement for business.........................12
TASK 3..........................................................................................................................................13
3.1 Explaining of purpose and nature of the budgeting process................................................13
3.2 Selection of appropriate budgeting methods in accordance with the needs of organization
....................................................................................................................................................13
3.3 Preparation of production and material purchase budget....................................................14
3.4 Preparation of cash budget...................................................................................................15
TASK 4..........................................................................................................................................16
4.1 Computation of variances along with the identification of possible causes and
recommendation for corrective actions......................................................................................16
4.2 Preparation of reconciliation operating statement...............................................................17
4.3 Management report in accordance with the identified responsibility centers......................17
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INDEX OF TABLES
Table 1: Calculating of job cost for 200 units..................................................................................6
Table 2: Allocation and apportion of overheads..............................................................................7
Table 3: Reapportion of service departments..................................................................................7
Table 4: Calculation of overhead absorption rates..........................................................................8
Table 5: Routine cost report of September......................................................................................9
Table 6: Computation of standard budget at 1900 units..................................................................9
Table 7: Production budget of Jeffrey and Son's .........................................................................14
Table 8: Material purchase budget of Jeffrey and Son's ...............................................................14
Table 9: Cash budget of Jeffrey and Son's ....................................................................................15
Table 10: Computation of amount receivable from debtors..........................................................15
Table 11: Computation of amount of overhead payment..............................................................15
Table 12: Computation of production cost ...................................................................................15
Table 13: Sales budget...................................................................................................................16
Table 14: Computation of variances of Jeffrey and Son's ............................................................16
Table 15: Reconciliation operating statement of Jeffrey and Son's ..............................................17

INTRODUCTION
Management accounting is identified as the important part of business accounting. It
provides significant assistance to management of an organization while handling various tasks
and business operations associated with costing and budgeting. These tools play vital role in
evaluation of wide range of data which is related with cost of production. The rationale behind
the same is to apply cost control and production management strategies that are having
significant impact on the profitability and growth of business entity. By applying different
budgeting approaches, management is able to forecast profitability of company and expenditures
on several business operations (Drury, 2013). By using different type of management accounting
tools such as costing, overhead management, etc., an organization can take appropriate decisions
related to pricing and quality management. It also supports management for developing
appropriate business practices through which effectiveness of different business operations can
be enhanced. Present study carried out is a detail evaluation of wide range of costing techniques
by considering the case of Jeffrey and Son's Ltd. This report is going to evaluate different aspects
of management accounting that are associated with cost and budgets as well as their
implementation as per the given case scenario. This report also determines the role of different
elements of management accounting in decision making process.
TASK 1
1.1 Different types of cost classification
Basis of
classification
Type of cost Meaning
Elements Material, Labour
and overhead
Material cost is determined as expenditure made by
company for purchasing the raw material. In addition
to that payment of salary, wages and other benefits
are considered as labour cost for organization
(Bennouna, Meredith and Marchant, 201). Apart from
the material and labour cost, all the other expenses
such as factory rent insurance, utilities expenditure
etc. are considered as overhead for company.
Functions Production, All the production expenses which are managed by
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administration,
selling and
distribution.
business entity during the production process for
converting all kind of inputs into finished goods have
been addressed as production expenditure. However,
all the office expenses which are mainly associated
with office rent, utilities, equipment and stationery are
the part of administrative expenditure (Method of
Costing, 2012). Selling and distribution contains all
the expenditures that are occurred while handling of
different promotional and marketing expenditure for
attainment of business goals.
Nature Direct and indirect
cost.
Direct cost includes all the expenses such as material
and labour cost that are directly associated with the
production process of different goods and services.
However, all the other business expenses that do not
direct link with production process and cannot be
charged in production cost are termed as indirect cost
(Altman, 2012). It includes expenditures related to
supervision, rent and rates, insurances etc.
Behaviour Fixed, semi variable
and variable
Fixed expenditures which include all expenses that
are not influenced by the production volume are
termed as fixed cost such as cost of equipment, rent of
building etc. Semi variable cost can be changed after
certain level of production volume for example,
electricity and telephone bill (Lasher, 2010).
However, variable cost is directly correlated with the
production quantity. For example: rise in cost of
material due to increase in production quantity.
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1.2 Calculating of job cost for 200 units using job costing method
Job costing method: It is an important costing approach in which cost of each and every
job is assigned. It is a combination of all kind of expenditures that are associated with the
material, labour as well as manufacturing overhead (Porter and Norton, 2009). In the given case,
the cost data have been provided for job no. 444 that is related to production of 200 units. Below
mentioned job sheet determine all kind of expenditures that has been made on particular job:
Table 1: Calculating of job cost for 200 units
Name of Item Amount
Direct material cost £40000
Direct Labor cost £54000
Production overhead:
Variable exp. £36000
Fixed exp. £24000
Total cost of 200 units £154000
Cost per unit £770
Necessary working note:
Particular Qty per
unit
Rate Calculation Cost
Direct material
exp.
50 kg. 4£ per kg 50kg*4£*200 40000£
Direct labour
exp.
30 hours 9£ per hour 30hours*9£*200 54000£
Variable
production
overhead
30 hours 6£ per hour 30 hours*6£*200 36000£
Fixed production
overhead
(80000£)/(20000 hours)*(30*200) 24000£
Cost per unit (154000£)/(200 Units) 770£
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1.3 Determination of Exquisite cost using Absorption Costing Technique
Absorption costing: It is termed as the most important costing method in which different
manufacturing overheads are allocated to the production and service departments with reference
to different measures (Dugdale and Lyne, 2010). As per given case, Jeffrey & Son's Company is
having three production departments with a combination of two machines and are namely
machine X, machine Y and assembly. On the other hand, stores and maintenance departments
have been considered as the part of company's service departments.
(a) Allocation and apportion of overheads to the production departments
Table 2: Allocation and apportion of overheads
Basis of
allocation
Machine
shop X
Machine
shop Y Assembly Stores Maintenance
Indirect wages
and supervision Allocated £100,000.00
£99,500.0
0 £92,500.00
£10,000.
00 £60,000.00
Indirect
materials Allocated £100,000.00
£100,000.
00 £40,000.00
£4,000.0
0 £9,000.00
Light and
heating Area occupied £10,000.00 £5,000.00 £15,000.00
£15,000.
00 £5,000.00
Rent Area Occupied £20,000.00
£10,000.0
0 £30,000.00
£30,000.
00 £10,000.00
Insurance and
machinery
Machinery book
value £7,947.02 £4,966.89 £993.38 £496.69 £596.03
Depreciation of
machinery
Machinery book
value £79,470.20
£49,668.8
7 £9,933.77
£4,966.8
9 £5,960.26
Insurance of
building Area occupied £5,000.00 £2,500.00 £7,500.00
£7,500.0
0 £2,500.00
Salaries of
works
management
Number of
employees £24,000.00
£16,000.0
0 £24,000.00
£8,000.0
0 £8,000.00
Total cost of
overhead £346,417.02
£287,636.
00
£219,927.0
0
£79,964.
00 £101,056.00
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(b) Reapportion of service departments to production departments
Table 3: Reapportion of service departments
Particular Basis Machine X Machine Y Assembly
Primary
Distribution
As Stated Earlier 346417.02£ 287636£ 219927£
Stores
Department
Direct material
(4:3:1)
39982£ 29987£ 9995£
Maintenance
Department
Maintenance
machine hours
(12:8:5)
48506.88£ 32337.92£ 20211.2£
Total cost 434905.9£ 349960.92£ 250133.2£
(C) Overhead Absorption Rates (OAR) for production departments using machine hour basis
OAR = Total cost/Actual machine hours
Particular Machine X Machine Y Assembly
Total cost 434905.9£ 349960.92£ 250133.2£
Actual machine hours 80000 60000 10000
OAR 5.44£ 5.83£ 25.01£
(D) Calculation of cost
Items Calculation Per unit cost
Material 8£
Labour 2 hours*7.50£ 15£
Production Dept. Overheads
Machine X 0.8 hours*5.44£ 4.35£
Machine Y 0.6 hours*5.83£ 3.5£
Assembly 0.1 hours*25.01£ 2.5£
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Total cost 33.35£
1.4 Analyzing cost data using appropriate techniques
As per the given detail evaluation of present case has been provided. It has been found
that the Finance Director of Jeffrey & Son's is not satisfied with the current allocation basis or
absorption rates which are considered to calculate the overhead absorption. As per the scenario,
it has been found that overheads must be absorbed on the basis of direct labour hours.
Calculation of overhead absorption rates using labour hours as a basis
Overhead Absorption Rate = Total cost/direct labour hours
Table 4: Calculation of overhead absorption rates
Particular Machine X Machine Y Assembly
Total cost 434905.9£ 349960.92£ 250133.2£
Labour hours 200000 150000 200000
OAR 2.17£ 2.33£ 1.25£
Calculation of cost
Items Calculation Per unit cost
Material 8£
Labour 2 hours*7.50£ 15£
Machine X 2*2.17£ 4.34£
Machine Y 1.5*2.33£ 3.5£
Assembly 1*1.25£ 1.25£
Total cost 32.09£
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As per the above assessment, it has been found that labor hour is identified as a good
basis of allocation of overheads. As a result of such decision, the cost per unit gets declined to
32.09£. This is beneficial for the company to reduce its product cost.
TASK 2
2.1 Preparation and analysis of routine cost reports
Table 5: Routine cost report of September
Budgeted cost Actual cost Variances
Particulars
Units 2000 units 1900 units
Material cost £24000 £22800 £-1200
Labour cost £18000 £19000 £1000
Fixed overhead £15000 £15000 -
Prime cost £57000 £56800 -
Electricity
 Fixed portion £500 £500 -
 Variable portion £7500 £7125 £375
Maintenance £5000 £5000 -
Total production cost £70000 £69425
Working notes
Table 6: Computation of standard budget at 1900 units
Budgeted cost Budgeted cost
Particulars
Units 2000 units 1900 units
Material cost £24000 £22800
Labour cost £18000 £17100
Fixed overhead £15000 £15000
Prime cost £57000 £54900
Electricity
Fixed portion £500 £500
Variable portion £7500 £7125
Maintenance £5000 £5000
Total production cost £70000 £67525
Computation of variable cost - Electricity
=Change in total cost / Change in no. of units to be produced
= (8000-5000)/ (2000-1200)
=£3.75
Computation of stepped cost
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Maintenance cost can be altered due to it is indentified in the slot of 500. As per the
aspect, it can be stated that there is not significant reduction in cost addressed if company
reduces 100 units.
Comment on variance
 Material cost- By considering the outcomes of above calculation, it has been found
favourable variance in amount of material. This reason behind this is that there has not
been any significant alteration addressed in the per unit cost along as well as the nature of
material is also variable so as reduction in production unit is going to create significant
impact on the cost of production (Variance Analysis, 2010).
 Labour cost- The above evaluation has found the negative variance in labour cost of 1000
with reference to actual variance which is 1900. Therefore, it can be stated that estimated
per unit cost of labour is 9 that is lower than actual labour cost of 10. As per the variation,
the management of Jeffrey and Son's Ltd should have to manage some extra expenditure
of 1 on each unit. Therefore, the Amount of 900 has to manage in the variance because
computation of budget for 20000 units is carried out with a rate of 9 and actual
computation of 18000 units has been addressed on 10.
 Fixed overhead- There is not any kind of variation addressed in the value of fixed
overhead due to fixed overhead are never change as per the production quantity.
 Electricity- It is considered as semi variable cost as per the nature. Therefore, this amount
of electricity bills has been evaluated in the form of fixed and variable expense. As per
the above computation, it has been addressed that there is not any kind of change in fixed
portion (Berger, 2011). In the contrary, the value of variable cost is also reduced with
reference to production volume.
 Maintenance- Maintenance charges are being applied as a stepped cost that has enhanced
due to increase in slot of 500. Therefore, reduction in production unit by 100 has not
created any huge impact on the maintenance cost.
2.2 Application of performance indicators in order to identify potential improvements in business
There is wide range of performance indicators available for the management of Jeffrey
and Son's through which business entity is able to assess different scope in which advancement
can be made.
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 Evaluation of the product quality- The quality of product and services is termed as most
important element of organizational success that is having direct impact on the growth
and profitability of firm. By carrying out detail evaluation of the product quality and
production process, business entity is able to monitor different operational activities in
which improvements are required as per the current market trends (Hooks and et. al.
2012). This evaluation plays important role in assessment of negative elements of
production process which are hampering overall quality of different kinds of goods and
services. Accounting statements- A systematic evaluation of a variety of accounting statements
such as income statements, balance sheet etc., provides significant assistance to
management of Jeffrey and Son's in assessment of alternation in the financial position of
business entity. If management finds some reduction in the amount of sales as well as
profitability then business entity has to select appropriate strategies in order to increase
profitability (Menifield, 2010). In the contrary, increment in business expenditure is
influenced managers for implementation of changes in business operations. In the process
of change management, accounting statements have played important role for increasing
effectiveness of business decision and monitoring organization performance.
 Customer satisfaction- It is one the most essential element for ensuring long term
sustainability of business. By assessing views and suggestion of buyers, business entity
will be able to make appropriate improvements in the product quality as well as service
rendering process. It also supports the management of Jeffrey and Son's for developing
appropriate strategies through which management is able to adapt to appropriate
strategies to increase efficiency of the production process as per the distinct needs of
consumers.
2.3 Recommendation for cost reduction and value enhancement for business
The below mentioned approaches will help management of Jeffrey and Son's in
attainment of the business objectives associated with the cost reduction and profit
enhancement for business-
Techniques Details
Total quality
management
By applying these tools, management will be able to improve all aspects
of business operations that are having direct impact on the quality of
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final product and services (Salem‐Mhamdia and Ghadhab, 2012).
Therefore, the Total quality management approach is playing important
role in order to implement improvement in overall production process
by conducting detail evaluation of different deviations and issues that
are occurred in production process and creating negative impact on the
overall quality of final product.
Kaizen costing Kaizen costing is also playing important role the process quality
management and cost reduction. This system is paying extra attention
on continuous betterment through which management of Jeffrey and
Son's will be able to implement systematic changes within whole
business functioning along with appropriate support of employees for
accomplishment of different operational tasks (Needles, Powers and
Crosson, 2010). This system provides significant assistance for
controlling the wastage of resources during business operations:
▪ High waiting time
▪ Improper allocation of human resources
▪ Production quantity is higher than requirement
▪ Increase in number of damaged unit
Just in time system
and economic order
quantity
In the context of present business environment, Just it time system of
inventory management has been found very effective in order to
decrease the storage and carrying cost of different inventories. As per
this approach, top manager of Jeffrey and Son's and other department of
company will be able to manage purchasing process as per the demand
of final product and services in the market.
TASK 3
3.1 Explaining of purpose and nature of the budgeting process
Purpose of budgeting process
Budget is considered as most important document of business decision making process
through which business entity will be able to made appropriate strategies for handling future
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operational activities as per the goals of company. The primary objective of budgeting process is
to organize detail evaluation of the future expenses along with the revenue (Needles, Powers and
Crosson, 2010). This information will assist management of Jeffrey and Son's limited in
allocation of wide range financial resources in an optimum manner as per the distinct needs of
business. These statements provides significant assistance to Jeffrey and Son's limited for
estimations of the future profit of business that helps manage in development of wide range of
supportive business strategies and organizational plan as per the distinct need of business. This
tool provides significant assistance to management in order to carry out detail comparison
organization's performance with reference to predetermined standards.
Nature of budgeting process
An organization develops wide range of budget as per the last year accounting data or
financial performance of company. It supports manager of Jeffrey and Son's in computation of
the possible amount of cash inflow that would be generated as result of future sales activities
(Drury, 2013). While developing different budgets, whole budgeting process along with different
budgets are reviewed by senior manager before submission to board of directors of business
entity.
3.2 Selection of appropriate budgeting methods in accordance with the needs of organization
A systematic evaluation of different budgets is carried out below: Operational budgets- In the case of Jeffrey and Son's, this type of budget is developed by
considering separate operational activities and business operations that are mainly
associated with the production, selling as well as marketing practices. These budgets are
mainly formulated periodically that could be annually, monthly or quarterly as per the
distinct business requirement as well as attainment of long and short term sales goals of
Jeffrey and Son's (Altman, 2012). These kinds of budget supports manager in
implementation of various business strategies in meet short and long term objectives with
reference to long term vision. Incremental budgeting- This method is used by Jeffrey and Son's in development of such
budgets that can easily manage with small up and downs of business environment. It is
considered as a traditional approach for budgeting process because these kinds of budgets
are developed as per the previous financial information.
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 Zero based budgeting- As per the case, It is one of the most appropriate budgeting
processes that helps Jeffrey and Son's during development of different budget in
particular situation in which there is not any previous base available for preparation of
budget (Lasher, 2010). This situation has been occurred within business operations when
drastic changes are identified in market situations. In these types of budgets, there is high
possibility of variances and deviations.
By considering able evaluation, operational budgeting is being identified as a most
suitable method for preparation of different budget as per distinct business requirement of Jeffrey
and Son's.
3.3 Preparation of production and material purchase budget
Production budget
Table 7: Production budget of Jeffrey and Son's
Particulars July August September
Units to be sold in different
months 105000 90000 105000
Desired ending inventory 13500 15750 15000
Total need 118500 105750 120000
Less: opening inventory -11000 -13500 -15750
Units to be produced 107500 92250 104250
Material purchase budget
Table 8: Material purchase budget of Jeffrey and Son's
Particulars July(£) August(£) September(£)
Units to be produced 107500 92250 104250
Material cost £3.50 £3.50 £3.50
Material to be purchased £376,250.00
£322,875.0
0 £364,875.00
Add: cost of material in ending inventory £80,718.75 £91,218.75 £91,218.75
Total cost of material needed £456,968.75
£414,093.7
5 £456,093.75
Less: Cost of material in beginning
inventory -£166,400.00
-
£80,718.75 -£166,400.00
Cost of material to be purchased £290,568.75
£333,375.0
0 £289,693.75
3.4 Preparation of cash budget
Cash budget of Jeffrey and Son's is mentioned below:
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Particulars July August September
Cash balance 16000 44031 67993
Cash Receipts
Cash sales 900000 821250 864000
Total cash Income 916000 865281 931993
Cash Expenditures
Material Purchase 365969 334688 372531
Direct wages 322500 276750 317250
Variable overhead 108500 98350 100350
Fixed Overhead 75000 87500 87500
Total cash expenses 871969 797288 877631
Cash balance 44031 67993 54362
Working note: sales
May June July August September
Sales units 95000 110000 105000 90000 105000
Sales prices 9 9 9 9 9
Total sales 855000 990000 945000 810000 945000
60% in the
same month 513000 594000 567000 486000 567000
25% in the
following
month 213750 247500 236250 202500 236250
10% after two
months 85500 99000 94500 81000 94500
5% bad debs 42750 49500 47250 40500 47250
Sales for the months of July, August and September
July August September
60% of the monthly sales 567000 486000 567000
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25% of previous sales 247500 236250 202500
10% of Sales before two months 85500 99000 94500
Total 900000 821250 864000
Purchase of raw material
July = 209125 kg * 1.75 = 365969
August = 191250 kg * 1.75 = 334688
September = 212875 kg * 1.75 = 372531
Labor expenditure
July = 107500 * 3 = 322500
August = 92250 * 3 = 276750
September = 105750 * 3 = 317250
Variable overhead
June July August September
Units 110000 107500 92250 105750
Variable cost per
unit 1 1 1 1
Total variable
overhead 110000 107500 92250 105750
60% in the same
month 66000 64500 55350 63450
40% in the next
month 44000 43000 36900 42300
Variable overhead
July August September
60% of the monthly
overhead 64500 55350 63450
40% of the previous
year overhead 44000 43000 36900
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Total variable
overhead 108500 98350 100350
The present cash budget concluded that in all the subsequent months, Jeffrey &
Son's posses positive cash balance at the end of the period.
TASK 4
4.1 Computation of variances along with the identification of possible causes and
recommendation for corrective actions
Calculation of Budgeted cost for 4000 Units are as follows:
Table 9: Computation of variances of Jeffrey and Son's
Particular Per unit cost Budgeted
Sales (A) 4 16000
Material 0.96 3840
Labour 0.8 3200
Fixed Overhead 4800
Total Cost (B) 2.96 11840
Profit (A - B) 1.04 4160
Working Note:
Sales = 4000 * 4£ = 16000£
Material cost = 0.4kg*2.40£*4000 = 3840£
Labor cost = 8£*6/60*4000 = 3200£
Fixed overhead = 4800£
Calculation of variance
Particular Budgeted Fixed Actual
Sales 16000 14000 13820
Material 3840 3360 3420
Labor 3200 2800 2690
Fixed overhead 4800 4800 4900
Profit 4160 3040 2810
Sales variance
Particulars Variance
Sales volume variance ( 4160 - 3040) 1120 (A)
Sales price variance ( 14000 - 13820) 180 (A)
Particulars Formula Calculation Net variance
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Material price
variance
AQ*(SP-AP) 1425(2.4£ - 2.4£) Zero
Material usage
variance
(SQ-AQ)*SP [( 3500 *0.4)-(1425)*
(2.40)]
60(Adverse)
Total 60 (Adverse)
The labor variance
Particulars Formula Variance Net variance
Labor rate variance (SR-AR)*SH [(8£-7.8£)*350] 70 (f)
Labor efficiency
variance
(SH-AH)*SR [(3500*0.1)-(345)]*8£ 40(f)
Fixed overhead variance
Particulars Variance Net variance
Budgeted fixed
production overhead
4800
Actual fixed overhead 4900
Fixed overhead
expenditure variance
Budgeted -Actual 4800 - 4900 100 (A)
By conducting detail evaluation of above mentioned variance, it can be stated that actual
financial performance of Jeffrey and Son's is not good because negative variance is occurred in
the profit of the organization as a result of low price of the final products. It results reduction in
overall revenue of firm. Further, it has been found that the consumption of inventories with in
production department is very high that has enhanced production cost (Porter and Norton, 2009).
On the other hand, favourable labour variance has been maintained by manager that determines
employees have managed different job operations with full efficiency.
The prevention of occurrence of similar variances requires appropriate forecasting that
must be carried out by the management of Jeffrey and Son's. In this process, management has to
carry out the detail evaluation of several factors of external environment. This approach provides
significant support for controlling the consumption of raw material with the help of high
technologies.
4.2 Preparation of reconciliation operating statement
Reconciliation operating statements is created by the business entity for identification of
the different causes of variances that have been addressed between actual and budgeted profits
(Dugdale and Lyne, 2010). On the basis of this information, several corrective measures are
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taken by managers for controlling the reoccurrence of variation. Reconciliation operating
statement of Jeffrey and Son's with reference to computed variances is developed below:
Table 10: Reconciliation operating statement of Jeffrey and Son's
Particular Per unit Budgeted(4000 Units) Per unit Actual(3500) Variance
Sales 4 16000 3.94 13820 -2180
Material 0.96 3840 0.97 3420 420
labour 0.8 3200 0.77 2690 510
Fixed
Overhead 4800 4900 -100
Total 2.96 11840 3.14 11010 830
Operating
profit 1.04 4160 0.8 2810 1350
With reference to above calculation of reconciliation operating statement, it has been
found that actual profit of company of organization is lower than budget profit which is £1350.
The reason of variance is reduction in per unit sales price. Apart from that increase in
consumption of material has been identified as an important element or cause of variation. Apart
from that, labour variance is influencing profit by £510 in a positive manner as a result in
decrease in per unit labour cost.
4.3 Management report in accordance with the identified responsibility centres
As per the reconciliation operating statement, some important modification is discussed
below to improve efficiency of business:
To: Management of Jeffrey and Son's
From: Accounts manager
Subject: Evaluation of variances in business performance
Date: 18th January, 2016
Production department- In the process production, business entity has to adopt latest
production process, equipment etc. through which company will be able to minimize the
material consumption and wastage of resources. For the negative variance in the consumption
of material, production manager is responsible for improper planning of inventory management
or excessive consumption of raw material.
Sales department- Sales department of Jeffrey and Son's need to adopt reliable pricing
approach for determination of sales price in order to control re-occurrence of variances. In this
process, a systematic market research has found very effective in evaluation of market demand
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and supply for taking appropriate pricing decisions (Hooks and et. al. 2012). But, sales manager
is also responsible for identification of adverse variance in sales of performance of company.
Human resource department- However, company has maintained favourable labour variance
that has increased profit of organization but organization needs to develop wide range of HR
strategies in order to monitor and outcomes of staff.
CONCLUSION
As per the above study, it can be concluded that the success of an organization is high
depending on its management accounting practices. This report has found that the different tools
of management accounting helps managers during cost control, development of budget and
pricing decisions. It has found that variance analysis provides significant support to managers in
order to take appropriate decision for increasing performance and efficiency of company.
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