P 4 Benefits and limitation of various planning tools

   

Added on  2021-02-20

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Management accounting
P 4 Benefits and limitation of various planning tools_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1LO 1.................................................................................................................................................1P 1 Need of MA system in the company....................................................................................1P 2 different methods of MA reporting system...........................................................................2LO 2.................................................................................................................................................3P 3 Presentations of income statement by using the different costing method...........................3LO 3.................................................................................................................................................6P 4 Benefits and limitation of various planning tools.................................................................6LO 4 ................................................................................................................................................8P 5 Ways to resolve or respond the financial problems of the firm............................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................11
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INTRODUCTIONManagement accounting is used to improve the understanding of the financial and nonfinancial information to take the efficient decision and improve the organisational culture andenvironment. It helps to provide the useful information to the stakeholders. JOJO fruit juice is amanufacturing unit which manufacture juice for all age group. The report highlights themanagement accounting role and decision making and various management accounting systemto improve the organisation functioning. It explains the various methods used by MA inreporting the transaction. It also explains the use of marginal cost and absorption cost inpreparation of income statement. Planning tools such as sales budget, cash budget have variousadvantages and disadvantages for budgetary control and the different financial problems and wayto solve these problems. LO 1P 1 Need of MA system in the companyManagement accounting : It is the process of recording, analysing and maintaining theaccounting information to improve the operation work and prepare the financial reports to informthe organisation condition to the management and management leaders like Owner, shareholders,creditors etc. (Kaplan and Atkinson, 2015).Requirement of Management accounting systemCost accounting system : It is also known as product costing or costing system. It helpsthe JOJO juice manufacturing company to estimate the cost of the product and its ingredients toanalyses the profit, inventory and control the cost of the unit. The firm has to evaluate the eachaspect of the production activity to estimate the accurate cost and profit of the organization. Italso helps them to evaluate the work in process, finished and raw material inventory level in thecompany (Schaltegger and Burritt, 2017). There are two main types of cost accounting system :process costing and job order costing.Job order costing : It helps the organization to estimate the cost of each job and controlthe activity to get the accurate result and find the area of improvement. It mainly used by thecompany which produce the unique and special products and services. Process costing : It helps the company to accumulate the cost of each process separately.It is widely used in the organization where the production of goods and services can be done by1
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department to department or the flow of production is from one department to anotherdepartment (Maskell, Baggaley and Grasso, 2017). ABC costing : Activity based costing is used to estimate the cost of each activity andassign the related expenses. It describes the relation between cost, overhead and manufacturingactivity. But some cost are unable to estimate by using the ABC costing system such as indirectcost : office staff and workers salary. Price optimization system : The system helps the company to determine the responseand behavior towards the price of the product and services. Customer is the end users of thegoods. They play major role in setting in the price to influencing manufacturers by theiractivities. Organization uses various methods or tools to estimate the behavior of customer. Italso helps the JOJO juice manufacturing company to decide that whether the price set by them isable to achieve the organization objective or not and the customer are able to reach the productor not.Inventory management system : It is a software system which provided the informationand support the company to record and measure the inventory lever, order quantity and sales ofthe company in particular time period. Inventory management system is used to maintain theinventory level and reduces the waste of inventory (Chenhall and Moers, 2015). It also helps thecompany to minimize the over and under production of goods. JOJO manufacturing companyuse the system to manage the demand and supply level and deliver the juice to the customer ontime. It is tool which record all the data related to the inventory in computer based system whichwas prior done manually. It helps them to get the required stock on time by recording all thesales and arrival of the products. P 2 different methods of MA reporting systemThe aim of MA reporting is to collect the data form the financial accounting a use themto prepare the report by recording the transaction in different accounts to inform the stakeholdersabout the financial position of the company. There are different management accounting reportsuch as : Budget report : one of the role of management accounting is to plan the requirement offinance by preparing budget for the different activities and ascertain the requirement of resourceto accomplish the goal and objectives (Maas, Schaltegger, and Crutzen, 2016). Budget areprepared by the manager by using the past year data and add the inflation rate and estimate2
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