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Management Accounting - Hewland Engineering Limited
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Added on 2021-02-21
Management Accounting - Hewland Engineering Limited
Added on 2021-02-21
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Management Accounting
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INTRODUCTIONIn past (around 150-200 years back), private organisations experience the need of aninternal accounting system to supervises and control the internal environment of a businessorganisation in order to ensure their existence in the market. For this, a practice which is evolvedcommonly known as managerial accounting. Such accounting technique provides information tothe managers so that they can be assisted in making decisions and planning for achievement oforganizational goals.For better understanding of management accounting, a famous engineering companyHewland Engineering Limited has been selected in this report. The company is founded in1957 by Mike Hewland in Maidenhead, England and conducts its business in automotive sectorspecialises in racing-car gearboxes.This report covers definition and various aspects of MAS, knowledge of MA reporting,budgetary tools as well as such system helps the company in solving various financial problemswithin its working environment and assist in answering to such issues. This report provides thevarious methods that may help in estimating and analysing future business conditions inorganizational context.ACTIVITY 1P1. Management Accounting System and its various kind:Management Accounting:It may be defined as collection, documentation, abstracting,evaluating and supervising the data to assist the management (for maintain sustainability infunctioning of the entity to attain its target. Management accounting may be defined as techniquewhich is utilised by the management of an entity to be able to take effect of its internaloperations and functions. The essential task that a management accountant of an entity has toaccomplish are planning, organizing and supervising activities of the firm (Serena Chiucchi,2013).Management Accounting System:MAS may be defined as approach that includescreation of several documents and estimations of company's future requirements for assisting themanagers. With help of MAS, Hewland Engineering limited can prepare its income statements ateach year end. An entity may utilise distinct kinds of MAS that are as follows:
Price Optimisation System: It is a technique that assist in understanding that how thepotential consumer will behave on several quotations for a specific commodity. Priceoptimisation system helps in choosing best price which is satisfactory on both behalf (i.e.company and customers). Respective organization utilises such technique to fix amounts ofseveral products in market as per several circumstances for its potential consumers. Inventory Management System: This type is evolved to maintain and manage the mostessential source of organizational income viz. the inventory or stock of products. It keeps recordof raw material, WIP, finished goods dispatched for delivery, sales return and goods onconsignment, etc. The management of respective enterprise may be capable in selectingappropriate method for inventory valuation, these are as below:LIFO: In such valuation method, closing stock are valued based on price of last inventorypurchased. FIFO: In technique, inventory is valued on the basis rate of first inventory purchased. Weighted average method: In this method, company divides the total cost of goodsavailable for sale with number of quantity available. Job Costing System:Such type of MAS is used by an enterprise for a specific job incalculating the cost of such particular job by adding all the costs such as materials, labour andoverheads (Lindholm, Laine and Suomala, 2017). In other words, it may be said that Job costingsystem act as a tool in an organisation for tracing costs related to individual’s jobs and evaluatethe performance of such job to reduce the costs of all future jobs. For example, an enterprise mayproduce custom made machines as job A and It may construct custom-designed buildings as jobB. Cost Accounting System: It is a type of MAS that helps a manufacturer to find andmeasure several costs in manufacturing process. Cost accounting system helps the company inestimating the correct cost of its products because it is very essential to control the cost for betterprofitability. The management of Hewland Engineering Limited utilises such type of MAS forestimating the expenses of its products and calculate the profit of the organization. A companyby implementing such can reduce its costs related to manufacturing process that may be used forimproving its several business operations (Stechemesser and Guenther, 2012).
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