Case Study on Management Accounting : Zylla Organisation

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Management accounting and essential requirements of its different types .....................3
P2. Different methods used for management accounting reporting.......................................5
TASK 2 ...........................................................................................................................................6
P3 – Marginal and Absorption costing ..................................................................................6
TASK 3 ...........................................................................................................................................8
P4 Advantages and disadvantages of planning tools which are used in budgetary control...8
TASK 4 .........................................................................................................................................9
P5 - Ways in which organisations use management accounting to respond to......................9
financial problems.................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting means a system of finance that supports administration of a
business. It is formed with two words i.e. management and accounting. Thus, it helps
management in taking important decisions (Macintosh and Quattrone, 2010). Management
accounting is a preparation of administrative reports and accounts that deliver accurate and
timely data to make day-to-day and short term decisions. The administrative decisions in an
organisation on the basis of financial information are provided by management accounting. In
the case study, Zylla, a multinational organisation has undergone with number of changes over
time due to expansion, acquisition and restructuring of firm. The management accounting system
needs to be revamped due to such results. This report consists of different management
accounting techniques for determining the cost and planning tools used in a system. Management
accounting plays a key role in important decisions and strategies framed by an organisation. It
uses information of all types, not just financial to lead business towards success.
TASK 1
P1. Management accounting and essential requirements of its different types
Management accounting is one of the wide areas of financial system. It refers to
accounting for management. Management accounting is done for the administration of business
firm to make strategies and take necessary decisions (DRURY, 2013). Thus, it is system of
accounting that is carried out to assist management in important planning and strategies of
business organisation. It is basically concerned for information that supports management. It
produces the report that helps company's internal stakeholders as opposed to external. It provides
periodic reports to managers of an organisation. Usually management accounting reports consist
of cash availability, sales revenue generation, accounts payable and receivables status. It is a
deep study of managerial features of accounting. The main aim of management accounting is to
reframe whole system so that it will serve business organisation in strategies and decisions. It
creates monthly and weekly reports as and when required like budget report is for three months.
Needs of management accounting
It is required to properly evaluate and recognise present status of financial position of a
firm. It helps in different managerial functions such as planning, organising, directing and
controlling (Baldvinsdottir, Mitchell, and Nørreklit, 2010). It overall helps in the performance

evaluation of an organisation. The reports are made to take appropriate decisions and plan future
oriented activities. It helps in handling the future contingencies of business (Lukka and Modell,
2010). A system of information is required to assist management to investigate, evaluate and
verify smooth functioning of each division and take necessary steps as and when required. The
different types of management accounting systems and their benefits are as follows-
Inventory management system- Inventory management system is the planning, recording
and analysing stocks of a firm. It is used to plan and track inventory levels and those related
activities. Management accounting is an ongoing process of movement of products in and out
from the warehouse of company (Ward, 2012). Management of stocks is done on daily basis.
Inventory management is an important part of business organisation. Any mistake in such system
will lead to failure of business organisation . It covers every movement of part or product of a
firm. One of the best systems followed to recognise the same is use of bar codes. Even malls and
stores are using such system as when stock is sold, it will automatically be deducted from
inventory. One of the innovative technologies used now a days is Radio frequency identification
(RFID). It is the use of signals to record inventory addition and subtraction. Zylla is also using
one of such system of inventory management.
Job costing- This costing is basically used by a construction company like Zylla, to ssign
cost to incur for a particular job. It means allocating cost to individual job projects. This system
determine materials, labour and direct expenses and also overheads to find out cost of production
(Parker, 2012.). If an organisation's products is not identical such system of costing is effective.
It is accounting of direct and indirect costs.
Price optimisation- Price optimisation is the numerical way of finding out how customers
respond to different prices adopted by an organisation. It also determine the pricing policy that a
firm like Zylla should adopt to gain more customers by satisfying their needs. Companies like
Zylla spend massive amount of time to determine the prices so that firm will gain more
customers and maximise their profits . Various components used in such system is management
analysis, customer elasticity model, etc. It is basically collection of cost history and fixing
different prices by a firm to improve profitability.
Cost accounting system- Cost accounting system is used by management accountants to
estimate the cost incurred by company. Profitability analysis is done based on the same. It is the
determination of cost, inventory valuation and control. Any company that is selling different