Management Accounting Techniques and Planning Tools for Business Success

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 2............................................................................................................................................1
P3 Application for range of management accounting techniques..............................................1
M2. Application of management accounting technique for appropriate financial reporting
document......................................................................................................................................5
TASK 3............................................................................................................................................6
P4. Various uses of planning tools for managerial accounting..................................................6
M3 Analysing different uses of planning tools and their implication in predicting budget.......8
TASK 4............................................................................................................................................8
P5 Various methods which organisation can use in managerial accounting to respond business
difficulties....................................................................................................................................8
M4 Analysing solutions to financial difficulties which can lead organisation in its stability. .11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is also known as managerial accounting or cost accounting. It is
referred as the process of analysing and recording financial and non-financial decisions by
managers. It is the systematic presentation of accounting data to transform its policies which are
to be adopted by managers in their daily activities. According to this project Airdri organisation
has been selected for its management accounting. This organisation was introduced by
Oxfordshire in 1974. It is the first manufacturer of hand dryer. There are various types of range
for management accounting techniques applied in the organisation. It also implement some
planning tools used for the controlling and direction of business(Alyousef and Alnasser, 2015).
Additionally, it can respond financial problems by using benchmarking, key performance
indicators and budgetary targets which helps organisation to achieve success.
TASK 2
P3 Application for range of management accounting techniques
Management accounting is the analysis for business decision-making. There are various
range of these techniques which are described as under:-
Cost:- A cost is an expense done on production of products which is to be recovered on
sale by earning profits.
Types of cost:- The cost is further classified in various categories which are:-
 Fixed Cost:- It is the cost which remains constant and stable, which don't fluctuate on
change in mass of production.
 Variable cost:- It vary with change in volume of production.
 Semi- Variable cost:- It is the cost which are partially fixed and partially variable.
Cost Analysis:- It is considered as the measurement of expense incurred in
manufacturing as compared to output generated.
Cost Volume profit:- This analysis is used to determine the changes taking place in cost
and volume affects the operating profit of an organisation.
Flexible Budgeting:- It is a flexible budget which predicts production with changing
level of business activity (Elmassri, Harris and Carter, 2016).
Cost Variances:- It is the variation between expected expenses and actual expense done
by an organisation.
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Absorption Costing:- It is also known as inventory valuation method. It involves direct
cost which consists of material, labour, overhead, etc., are the manufacturing expense assigned to
produce a product.
Marginal Costing:- It is the change in total production cost which increases on every
additional unit of variable cost whereas fixed cost remains constant.
Cost Allocation:- It is considered as the cost allocation on every department, production
process in forming a product.
Activity-based Costing:- This is implied by organisation to improve cost accuracy on
every business activity.
Inventory Cost:- It's the cost originated by business on its procurement, storage, and
management of inventory in business (Fallan and Opstad, 2014).
Types of Inventory cost:- There are three types of inventory cost,which are as follows:-
 Ordering cost:- These are those expense incurred on storing inventory until it is sold
which are placing an order, handling paper work, etc.
 Carrying Cost:- This is the cost implied on storage of finished product, insurance,
obsolete, loss by theft, etc. which leads to increase the price of product.
 Shortage Cost:- This is the cost which are generated on out of stock product by
disrupted production, emergency shipments, customer loyalty.
Benefits of reducing inventory cost:- The owner of organisation are benefited with the
inventory cost control by earning more profit on least expense incurred. This also leads in
reduction of obsolescence of products, cost shortage as it produce more to meet the demand of
consumers.
Valuation method:- This method determines current worth and identifying monetary
terms to quantify its benefits. It involves three types of valuation method such as asset based,
market value and earning value approach.
Overhead Cost:- It is referred as an ongoing expense of operating business. This
expense is done by entities for its stability and to achieve success in future (Holm, Kumar and
Plenborg, 2016)
Absorption costing technique
Quarter 1
Particulars Amount
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