Management Accounting Systems and Reports: A Case Study of Dyson

Management
Accounting

Table of Contents

INTRODUCTION
Management accounting is defined as an application of skill, knowledge and expertise in
the preparation of financial and non-financial data (Arena and Arnaboldi, 2014). It is a practice
of identifying, measuring, analysing, interpreting and communicating the information which will
be used by managers in the decision-making process. It includes the cost savings of the
organization in keeping cash flow, enforcement ability, financial strength of the company and
more. Based on such inner data, an organization may choose suitable alternatives and take
choices aimed at the future development of the company. This acts as a tool for the management
in forming plan of actions and achieving better control over the various activities performed in
an organisation. For the following report, a British engineering company has been selected i.e.
Dyson which is established in UK. It was founded on 8th July, 1991, 28 years ago by James
Dyson. The company designs and manufactures household appliances like vacuum cleaners, air
purifiers, heaters, dryers etc. This report highlights on the need of management accounting
systems and reports by businesses as these help in decision-making. Also, different types of
budget, planning tools and other indicators are used to resolve the financial issues faced by
Dyson are also covered under this document.
TASK 1
Management accounting systems:
Management accounting: It refers to a tool which helps in preparation of financial and
non-financial information that is used by management of a company. This also analysis business
costs and operations in order to prepare internal reports and records which can aid the managers
in the process of decision-making. The major aim & purpose of management accounting is to
evaluate an organisation's performance, efficiently utilize the resources, plan for future course of
actions etc. With the help of this technique, Dyson prepares its financial statements and take
important decisions about the non-financial items or other aspects required on a day-today basis.
Management accounting system: Management accounting systems are internal part of
company and apply into different types of departments (Armstrong, 2014). It complies by
various systems which help companies in taking effective decisions related to setting price for
products or services offered to the user, manage stock levels by keeping an eye on the inventory
at warehouse etc. There is a requirement of management accounting systems within an enterprise
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as it helps in estimating value of various products & services by maintaining a balance between
them. Dyson uses management accounting systems to make products as per the need &
requirement of the user.
Inventory management system: This is a system which ensures that stock levels are
maintained at the warehouse which includes raw materials, finished products, labour etc. It
involves recording of inventory in a unique software like barcode reader which helps the firm to
track down inventory. This system ensures that inventory is ordered from the supplier before the
lead time in order to avoid stock-out. For the purpose of valuation, different types of techniques
are used i.e. LIFO, FIFO, Weighted average method which are defined as follows:
LIFO: Last in, first out is a method which states that the product which is last produced
should be sell first (Azudin and Mansor, 2018).
FIFO: First in, first out is a method which states that the goods which are produced at the
beginning should be sold first.
Weighted average method: It is a method which divides the cost of goods sold available
for sale by the units produced.
Dyson values its stock on the basis of FIFO which states that the products which are
produced at the beginning should be sold first as every new appliance is updated with every
production. In order for the company to get an idea about when the products are consumed by the
customer, this system makes sure that proper tracking is done straight away when the product is
dispatched from the warehouse till it is delivered to the client.
Cost managerial system: It is a technique that is used by companies in order to estimate
the value associated with different products and services offered to the user. This involves two
concepts namely job order that accumulates and assigns cost separately for a job or task whereas
process costing is a method that collects and allocated value for each process. The purpose of
cost accounting system is to carry out the outlay and value it on the basis of different costing
techniques like ABC, Marginal, Absorption etc. The essential requirement of this system in the
Dyson uses cost managerial accounting to assign price for the dryers, heaters, air purifiers etc.
(Bierstaker, Janvrin and Lowe, 2014).
Job order costing system: It is a system which ensures that the goods & services are
produced as per the need and requirement of the client. Since, customer satisfaction plays a
major role in forming business operations so it is essential that the orders placed by the
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