Management Accounting Tools for Boosting Business Performance
Added on 2019-12-18
23 Pages4722 Words275 Views
|
|
|
MANAGEMENTACCOUNTING1
2
INTRODUCTIONManaging finance require intellectual ability by a manager who need to applied their skills on right track of the business. This report is based on defining the nature o management accounting tools to be adopted by Small scale entity in improving their financial crisis. This is all about absorption and marginal costing majorly in the whole report.PART 1P1 Justify Management accounting and necessary requirements of various types of management accounting system in the given case scenarioBackgroundIn the given case scenario, where there is highly requirement of management accountingtools and techniques to facilitate its variety of users. The owner currently deals in offering variety ofservices in order to deliver good quality products or services to attract its existing employee’s alongwith their clients (Schulze and Heidenreich, 2017). Employees are the true representators of thebusiness who reflect the transparent conditions of the business in front of its various competitors.The focus of this report is on explaining the needs and the objectives of small based industries dealin hospitality organisation which is regarded service industry. This service industry is mostimportant firms in the overall business environment who takes cares about the tastes andpreferences of all of the customers in the external environment.The current management structure of this organisation states that there are only fiftyemployees in this corporation in order to operate several business functions in order to attain all theobjectives of the business. Management accounting plays a significant role in uplifting the existingconditions as they helps in passing important information from one end to another in to achieve thedesired gaols and the objectives of the business (Said, 2016). The primary concern of an entity is onreduction of cost as optimally utilisation of all the resources is important in order to minimise allkinds of costs to gain the higher amount of profit in the business enterprise. The overall turnover ofthis is not exceeding 500000 GBP which showcases the enthusiasm of the current firm who aresmall scale enterprise who intends to enhance its current market share by eliminating itsdeficiencies by transforming them into their strengths. These strengths can be sued against themanagement in improving the skills and the capabilities in achieving its goals.. Main aim oforganization is to reduction op fist existing cost which can be done by increasing the overall salesvolume of the business as positivity will eliminate all the negativity incurred in the business. Higherexpenditure will be regulated by making expenditures budgets which eaves the role of the business3
entity along its competitors who tries to pull down the status of the business by constantly amendingthe overall pricing structures of several products deal by an enterprise. There are variousmanagement accounting systems needs to be adopt by an entity in order to improve their skills andcapabilities in front of its competitors which is given as below:According to the CIMA, the definition of management accounting states that it is that branchof accounting which helps in reporting information related to qualitative and quantitativeinformation related to the business. It is that kind of communication medium under which importantinformation are supplied to the top management in order to maintain the current business value infront of its various competitors who intends to suppress the market status of an entity.Management accounting system is that terminology which used to define the data collectedby an enterprise which is of financial nature in order to regulate the business operations of the firm.The data can be collected in order to ensure the business activities such as sales; inventory used inthe business, changes takes places in the usage of raw materials. All these activities are analysed inorder to generate final reports which will be supplied to the management in order to make finalaction in the business.OriginThe management accounting concepts came into origin in the 19th century with theintroduction of industrial revolution which gives birth to the unique concept in order to removeweaknesses lies in the management.RoleThe role of thee management accounting is to regulate the business performance as theresources are fully utilised in order to generate higher results. The assets are controlled in order toretain in the business for the longer time period. The financial efficiency of the business will beimproved in order to achieve various targets.Principle The basic principle of the management that helps in achieving the desired aims of anenterprise includes causality and Analogy principle. All these principles help in meeting higherdemands of the customers which in turn created image of the firm in the external market.Difference among financial and management accountingObjective wise these two concepts are total different as management accounting focuses ondelivering information related to the business to the management in order to make correctiveactions. On the other hand, financial accounting related to the recording of financial transactions inthe business entity in order to determine the financial performance of an enterprise.Cost accounting system4
The primary concern of the management is to determine the cost incurred by an enterprise ina particular year. The cost will be recorded in the cost sheets prepared by an entity using absorptionand marginal by considering fixed or variable costing.Inventory management systemInventories are kept by an entity owner in order to accomplish their sales order by meetinghigher expectations of various customers. The inventory can be managed by setting re-orderquantity point in which inventory will automatically gets filled when the certain level reaches in thefirm. Just in time will be used in order to manage inventory in which inventories are purchased justto cater the sales order.Job costing systemThe different transactions in the business entity are classified into various batches and theselling price o all the batches are determined separately. These separate batches units are regardedas job orders whose costing and selling price will be ascertained separately.Price optimising systemIt is regarded as that important tool used by an enterprise in improving all the skills and thecapabilities of an enterprise owner. It uses mathematical analysis in which current costs incurred byan entity are assessed in relation with the inventory level in order to improve the overall businessprofit of the business.Benefits of different types of systemCost accounting systemThe financial resources held in an enterprise will be properly analysed in order to remove existingweaknesses.Cost can be predicted by an entityInventory management systemEfficiency of the current inventory will be increasesWarehousing cost will be eliminated by using just in time method of using inventoriesPrice optimising systemMeeting higher demands of the customers in catering all the sales ordersWeaknesses lies in the existing inventory level will be reducesCost Volume profit analysis- The major concern of an entity is to track its current costs incurred intheir business which require proper application system in order to ensure completion of all tasks andduties (Tucker and Parker, 2014). The costs of each and every activities of the business areseparately associated as this will help in determining the efficiency of singular activities. Thisfurther helps in continue or discontinue the least effective market segment which is not generating5
any kind of profit or just generating loss for the business. This trilogy emphasises on threecomponents such as cost, sales and the final outcome every business wants to generate that is theprofit earned by an individual. Costs and sales has inverse or indirect proportion among each otheras one factor increases which leads to the decrease in another element. Increases in amount ofexpenditure in the business will in turn reduce all the profit earned by an individual in a particularyear. On the other hand, increases in the sales volume of an entity will directly reduce all theexpenditure spends by the owner in their business. Expenditures can be regulated in order toachieve the target of higher sales which showcases the higher ability of an organisation. Thepositive or negative different among these two components will directly affected on the overallprofit of an entity. The final outcome generated by an individual will depends on the total salesincurred by the firm. Higher amount of sales is essential in order to bear the heavy pressure ofexisting or uncertain expenditure pressure. Uncertain expenses incurred in the firm will deterioratethe performance of an entity which will be monitored by keeping track on the expenditures incurredregularly in the business which helps in predicting the uncertain expenses in the near future.Particularscost per unitYear1Year2Year3Year4Year5Year6Year7Year8Units produced800010000120001400016000180002000022000Sales1080000100000120000140000160000180000200000220000Variable cost5400005000060000700008000090000100000110000Contribution5400005000060000700008000090000100000110000Fixed cost1000010000100001000010000100001000010000Profit30000400005000060000700008000090000100000ParticularsYear1Year2Year3Year4Year5Year6Year7Year8Year9Year10Fixed cost10000100001000010000100001000010000100001000010000Contribution per unit5555555555BEP2000200020002000200020002000200020002000Particularscost per unitYear1Year2Year3Year4Year5Year6Year7Units produced8000100001200014000160001800020000Sales1080000100000120000140000160000180000200000Profit30000400005000060000700008000090000Relationship percentage change among sales and profit63%60%58%57%56%56%55%Budgeting- Another important technique used by an individual in the management accounting isbudgets. These budgets will be regarded as comparison tool through which an entity can reconciletheir past performance with their current performance and the differences will be rectified by themanager taking best appropriate actions (Brandau, Endenich, Trapp and Hoffjan, 2013). The future6
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents