Comparison and Contrast of Planning Tools in Management Accounting

This document discusses the various planning tools used in management accounting, including budgetary planning, strategic planning, and pricing strategies. It compares and contrasts these tools, highlighting their advantages and disadvantages. The document also explores the use of management accounting tools to solve financial problems, such as break-even analysis, key performance indicators, benchmarking, and financial governance.

Management accounting
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TASK 3
P4 Comparison and contrast three planning tools used in management accounting
Planning tool: Business cooperation’s only get success when they maintain long term
sustainability for this purpose they plan policies, tools and techniques used for planning, these tool s
knows as planning tools of management accounting. Following are the types of planning tool
1. Budgetary planning tool: Theses tools are used for formulation of budget. There will be
various types of budgetary techniques has been used which are describe below
Activity based budgeting: In this type of budgeting method mangers prepared budget by
allocation of resources in systematic way.
Advantage
Excite Entertainment Ltd uses this method through which resource utilized in proper way.
It provides accurate information for future.
Disadvantage
It requires high cost.
It is time consuming procedure.
Zero based budgeting: In that type of budgeting, business organization formulate budget on
the basis of deep research and start from zero level (Huang, Yu, Peng, Z. and Zhao, 2015).
Advantage
It is beneficial for small business organizations.
It used for getting reliable information.
Disadvantage
It required time for starting fro initial level
It is complex method of budgeting.
Rolling budget: In these types of planning tool, budget is prepared on the basis of short time
period and for continuous business purpose.
Advantage
It useful for Excite Entertainment Ltd to reduce of errors.
Help in increasing productivity level and reduce standard and actual deviation of actions.
2. Strategic planning tool: Theses types of budgeting tools are apply in organization to plan for
future business policies on the basis of scanning the environment. For this purpose, SWOT,
Pestle, balance score card technique is used. With the use of SWOT analysis, mangers identify the
strength, weakness opportunities of the business environment. And Pestle, balance scorecard
technique use to recognized effect of external environment.
Advantage
Strategic planning tools help in finding best opportunities and provide guideline for Excite
Entertainment Ltd to make future policies.
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With the use of these technique, organization able to make plans for those department which
are the rest of weakness of high risky zone department for the Excite Entertainment Ltd.
3. Pricing strategies: Business entities gain profits by selling their product and service at effective
price. They use price skimming, discounting and penetrating pricing policies .All these strategies
useful in gaining profit for business organization.
Advantage
With the use of pricings strategies of Excite Entertainment Ltd able to decide best pricing policy
for their business operations.
They provide competitive business advantage in market (Agugiaro, 2016).
Disadvantage
Price of products is flexible and they depend on the factors of demand and supply thus it is
very hard to make
those policies which remains contact for long time period
It requires skilled personals for build pricing policies.
Excite Entertainment Ltd use activity based budgeting for plan budget it will help in proved
information for future polices make on the basis of activity based budget data , they use pricing
skimming policies to earn profit
TASK 4
P5 Uses of management accounting tools to solve financial problem
Financial problem: Every business cooperating need some factors to start and run their business
cycle, these included, raw material, human and financial resource. Financial resource are part of
the business life and though financial resource organization not able to pay their financial
liabilities this situation known as financial cries and problem of financial. In financial problem
organization not able to fulfil current and long term liabilities due to lack of monetary resource.
At the present time Excite Entertainment Ltd also facing financial problem, which is started due
to decaling rate of sales and Excite Entertainment Ltd not able to control their cost? With the use
of effete managements accounting tools they can control cost of fiancé ad solve their problem.
Following are the tools can be apply to cut throat financial problem (Personal Guerrero, , Garcia,
Pena, M. and Leon, 2014).
Calculation of Break Even Analysis
Particular Rate per unit Amount
Sales 40
variable cost 10
Contribution 30
Fixed cost 120000
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Profit
P/V ratio = Contribution / Sales price per unit
= 75%
Break even point = Fixed Cost / PV ratio =
120000/75 % 160000
Break even sales = 1600000
Revenue = Fixed cost + Target profit / P/V
ratio
120000+90000/75
% 280000
Revenue units= Fixed cost + Target Income /
Contribution per unit
120000+900000
= 7000 units
Managers need to sold 7000 units in order to attain the profit 90000
Key performance indicator: Key performance indicator: This tool is used in order to solve the
financial problem. In this technique , indicator has been decided and on the basis others indicator
organization measure the performance of various department’s Excite Entertainment Ltd sales rate
get down with the use of performance indicator they can increase their sales rate by setting target of
sales.
Benchmarking: Benchmarking: This technique of managing accounting, benchmarked are set and
on the basis of these benchmark. Mangers decide polices of given incentives. Excite Entertainment
Ltd faces problem because their cash inflow activities not getting high due to cost incurred in various
activities. Manger set benchmark and on the basis of these benchmark thy can control cost.
Financial governance: This Financial governance policy track the record of the business organization
and provided help in order to not incurred any politic and issue related with corruption and business
conflict arise with the business organization.
Basis Excite Entertainment Ltd Harvey Flims
Issue face by
corporation
The business organization
bear from financial
difficulty due to require of
administrative policy apply
during collection of debtors
This organization is face
financial involvedness
since the takings of the
organization is decrease
unpaid to refuse fee of
sales.
managing
accounting
The organization use effect
clerical receivable
Harvey food cafe apply
fee optimization cost
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System explanation and be relevant
cost organization scheme.
from side to side which they
can with no trouble
recognize the debtor which
not pay their amount
overdue liability
secretarial scheme with
the use of this design
they can take decision
about price plan and able
to make revenue by
selling provide and serve
up with satisfactory
price level.
Technique They use KPI skill in order
to make effective policy
from side to side which they
can increase their money
sales and take cash from
debtor within small time
period.
Manager of Harvey food
cafe use benchmarking
they set aim and raise
sales rate and able to
make cash inflow (Zhu,
2014).
REFRENCES
Books and journals
Huang, Z., Yu, H., Peng, Z. and Zhao, M., 2015. Methods and tools for community energy planning:
A review. Renewable and sustainable energy reviews, 42, pp.1335-1348.
Agugiaro, G., 2016. Energy planning tools and CityGML-based 3D virtual city models: experiences
from Trento (Italy). Applied Geomatics, 8(1), pp.41-56.
Personal, E., Guerrero, J .I., Garcia, A., Pena, M. and Leon, C., 2014. Key performance indicators: A
useful tool to assess Smart Grid goals. Energy, 76, pp.976-988.
Zhu, J., 2014. Quantitative models for performance evaluation and benchmarking: data envelopment
analysis with spreadsheets (Vol. 213). Springer.
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