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The Role of Management Accounting Function

Added on -2019-09-13

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Management Accounting for ControlGroup Assignment 2016 / 2017FAOF Year 3MANAGEMENT ACCOUNTINGFOR CONTROL (MAC)CRN 26269Assessed Coursework 2016/17(Overall Component Weighting = 25%)Management Accounting for ControlMAC Assignment 2016 / 2017 – Page1
Management Accounting for ControlGroup Assignment 2016 / 2017Introduction:The Management Accountant (role):The role of the management accounting function is the provision of decision-supportinformation to the business executive management for financial planning and control.Short-term financial planning (budgeting):Management accounting financial planning is the reporting of expected futureincomes and expenditures, profits and assets required to meet executivemanagement overall business objective requirements.Co-ordination:The management accountant will require input from all other businessfunctions for the raw data required for budget production i.e.:Sales:The sales function will forecast expected customer demand, product-mix and selling prices. These factors will form the expected revenues(trading incomes) for the budget period.Production:Expected sales quantities will inform the production and productionresources requirement (i.e. materials, labour and productionoverheads). The production quantity is the sales quantity adjusted foropening and closing inventories. Business support resources:Business support refers to product distribution and businessadministration (including the finance office). As non-productionoverheads. Business support resource costs are often fixed (period-based). Traditional or activity-based systems may be applied foroverhead recovery through the production process. Budget constraints:The initial reported budget preparation may, or may not meet the originalexecutive management objectives. Where the initial plan may fall short ofrequirements:Feed-back:The original data is returned to source for adjustment (improvement)Feed-forwards:The budget constraints cannot be overcome (for the budget period)and the objectives will need to be adjusted to meet current capability Acceptance and responsibility:When all budget requirements are accepted, the agreed plans are reported ina master budget. This is then translated into targets for each individualfunction manager (as budget holder) in terms:Required outputs (sales, production and business support)Constrained inputs (resources suppled / applied by the business)Deadlines (the budget period and control measuring)MAC Assignment 2016 / 2017 – Page2
Management Accounting for ControlGroup Assignment 2016 / 2017Motivation (behavioural aspects):Budget targets provide functional managers with clear expectation that canadvise and inform day-to-day operations. Further motivations may includefinancial rewards for budget achievement (and / or penalties for failure). Long-term financial planning:Long-term business financial planning is the capital investment appraisal. This isused to evaluate a long-term (strategic) project before the commitment of resources.A capital investment appraisal requires relevant cash flow data in the form of:Initial investment amountPeriodic receipts and payments (amounts and timings) The management accountant will establish the cost of investment finance (equityand / or debt) and use this value as the discount factor to establish the project netpresent value (NPV) using discounted cash flow (DCF) techniques. Other appraisaltechniques include payback period and accounting rate of return.The financial appraisal report will be an important factor in determining whether theproject is accepted. An important aspect of capital investment appraisal is that, where the project isaccepted and the financial resources are applied, the original pre-investment positionis no longer available. Management commitment to project outcome is an importantfactor in project success.The capital investment appraisal will feed into, and management commitment will besupported by short-term planning.The short-term (annual) budget should be in-line with the long-term plan and the roleof the management accountant, in addition to planning decision-support, is controldecision-support information.Management control decision-support information:The planning process defines expectation and allocates responsibility for theachievement of for planned outcomes in advance of the production period.During the production period, the management accounting system will input andprocess actual trading data. This is then compared to expectation (the budget plan).Any differences (variances) are evaluated and the variance analysis reported toexecutive management.Variance reports are often a trigger for management short-term control activity thatmay including e.g.:Sales price / volume adjustmentMaterials supplier contract discussions / change of supplierOperational staff support (training) / discipline / pay rate adjustmentActivity-based analysis / change for production and non-production overheadsThe purposes of control reporting and activity is to ensure (as far as is controllable)the planned management objective.MAC Assignment 2016 / 2017 – Page3
Management Accounting for ControlGroup Assignment 2016 / 2017Assignment (overview):For the Management Accounting for Control (MAC) assignment, you are required (aspart of a group) to investigate and assess an area of current (or otherwise relevant)academic research on a subject area relevant to management accounting and toproduce an evaluation on that academic research.You (and your group members) should assume the role of expert managementaccounting practitioners with an interest in a specific area of managementaccounting research (see appendix B for subject areas).An outline of the individual requirements of this assignment are summarised below:Access academic research material relevant to your subject areaDiscuss the academic material for your expert viewpoint i.e.Examine the aims, tests and findings of the research material chosenCritically evaluate the research material chosenCompare and contrast the research material evaluatedSpecific task requirements and guidance are provided in the main body of thisdocument.All work submitted must be your own words (i.e. clearly displaying your ownreading, learning and knowledge) as academic referencing is both inappropriate andspecifically disallowed.MAC Assignment 2016 / 2017 – Page4

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