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P4 Advantages and disadvantages of planning tools using budgetary control

   

Added on  2021-02-20

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Management Accounting

Table of ContentsINTRODUCTION...........................................................................................................................1ACTIVITY 1....................................................................................................................................1P 1. Types of management Acc. Systems...................................................................................1P 2. Defining methods for management accounting reporting...................................................4P 3. Calculation of cost using various MA techniques...............................................................5ANNEXURE A ...............................................................................................................................6ANNEXURE B..............................................................................................................................13LO3 ...............................................................................................................................................14P4 Advantages and disadvantages of planning tools using budgetary control.........................14M3 The use of planning tools and their applications for forecasting and preparing the budget....................................................................................................................................................18D3 Planning tools for accounting and solving the financial problems to lead the organizationfor sustainable success..............................................................................................................18ACTIVITY 2..................................................................................................................................18P5. Using management accounting system for resolving financial problems being faced.......18ANNEXURE C..............................................................................................................................20M4. Analysing aspects which assist management accounting in achieving sustainable success....................................................................................................................................................21CONCLUSION..............................................................................................................................23REFERENCES..............................................................................................................................24

INTRODUCTIONManagement accounting is an effective framework which helps in preparing timelyfinancial reports and mathematical data to internal stakeholders of the organization which helpsin taking day to day strategic decision for higher operational efficiency and growth of thebusiness. Managerial accounting helps in effective planning, controlling and organising theactivities of the organization in order to reach greater heights. The study will highlight, systemsof MA and the various methods of MA reporting. Present study will also examine costs byappropriately using various cost analysis techniques. This study will also evaluate the benefitsand limitations of different budgetary tools in order to respond to various financial problems.This study will also compare different organization to solve various financial problems and leadbusiness to higher sustainable growth. Hilti GB is a multinational manufacturing and engineeringcompany in UK which was established in the year 1941 and mainly deals in power tools,diamond drills, laser products fire stops and anchors. ACTIVITY 1Part AP 1. Types of management Acc. SystemsManagement AccountingManagement accounting (MA) is a crucial process of analysing, identifying, measuring,interpreting, evaluating and communicating the same with the internal managerial of theorganization. This study helps management of the organization in taking strategic decision inorder to provide higher operational efficiency for smooth functioning of the business. This studyhelps in controlling cost of the Hilti Gb company by critically evaluating the cost attached witheach activities (Hoitash and Hoitash, 2017). MA helps in analysing profit and forecasting thefuture in order to analyse the future to predict the cost for long term sustainable growth. MAhelps in valuation of stock, capital budgeting analysis and variance analysis for smoothfunctioning of the business. Management Accounting SystemManagement accounting system helps in measuring and evaluating the various financialresults and reports which leads to effective decision making and operational efficiency. Thisstudy helps management in forecasting the future needs of the customers. It helps in predictingthe future needs and determining the operational efficiency of the business. It also helps in1

controlling the performance the company and also interpreting the financial data andcommunicating the same to the internal stakeholders of the Hilti Gb company. This helps inmotivating employees and making strategic plan to solve various financial problems and reachgreater heights with utmost accuracy and efficiency. Cost accounting system: This system is also referred to as product cost system. This is aneffective framework which helps in determining the cost of various different activities and alsoevaluate the cost of the products manufactured and services rendered by the Hilti Gb company. This helps in analysing the profits from the particular manufacturing process(Schalteggerand Burritt,2017). It also effectively evaluates the inventory cost which are verycrucial for the profitable operations of the business. It also helps in assessment of cost, correctrecording, determination of selling price, reduction of cost and break even analysis which leadsto higher operational standards and efficiency. Inventory management system: This system determines the level of inventory and alsohelps in tracking various orders, sale and delivery. This tool helps in forecasting and planning thefuture needs of the company by determining the resources necessary for the production andmanufacturing process. This system of MA helps in improvising quality and increase productivity and profitability. Italso helps in avoiding excess inventory and stocks out by optimally utilizing the resources andbalancing demand and supply. This can be estimated through LIFO method, FIFO method andweighted average method.Job costing system: This system is an effective process of accumulating informationrelated with the cost associated with specific job of the Hilti Gb company. This system helps intracking the cost of the particular job which mainly includes raw material, labour and overheadcost (Maas, Schaltegger and Crutzen, 2016). This tool is useful in determining the most profitable units of job in the company. Thissystem is useful in estimating the cost of the each job and determine the most profitable job forhigher operational standards and efficiency. Price optimization system: It is an effective tool in determining the reaction andbehaviour of the customers with the change in the price of the company. This system helps inaccurately determining the price of the various products and services rendered by the companyfor higher operational growth and productivity. 2

This system helps management in determining the accurate prices which helps Hilti Gbcompany in generating higher profitability. This tool helps in determining the change in thevariation of demand and supply due to change in different price levels (Otley, 2016). This toolhelps management in determining the price to enhance revenue and improve profit. Benefits of Management accounting systemsCost accounting system: This tool helps in recording, classifying and allocation anddetermination of current and future cost for controlling cost that eventually leads to higheroperational standards and efficiency (Chenhall and Moers, 2015). This is very crucial for theestimation of manufacturing and selling process for smooth functioning of the business. It is aneffective process which helps in controlling and reducing cost and also optimum utilization ofthe resources for higher operational standards and accuracy. Inventory management system: This tool helps in simplifying the inventory managementprocess by giving proper details about the level of inventory which leads to higher operationalefficiency and performance in an accurate and viable manner (Haldand Thrane, 2016) . It helpsmanagement in keeping detailed reports of the inventory and avoids over and under stocking ofthe inventory. This system helps in managing the inventory effectively and reducing variouscomplexities in the process by streamlining the entire manufacturing and selling process. Job costing system: This system helps in comparing actual cost with estimated budgetedplan in order to evaluate the variance and take necessary action to resolve the issue on time. Thismethod is useful in facilitating price of each job (Hiebl, 2018). This system is beneficial indetermining the defective and spoilage area in each job for higher operational standards andaccuracy. It also helps management in trend analysis to evaluate the performance of the job overthe historical periods. Price optimization system: This tool helps in evaluating the accurate price for theparticular product and services on a real time basis. This helps in effectively determining theprices in order to continuously improve the productivity and operational efficacy of the Hilti Gbcompany (WHAT IS PRICE OPTIMISATION?, 2017). This system coordinates the decision andpreference of manufacturer consumer and supplier for higher operational standards. This systemis beneficial in minimizing the risk and optimal utilization of the resources and also helps inmaximizing the value of business. Critical evaluation of MA systems and MA reporting3

Systems of MA helps Hilti Gb company in evaluating the most profitable unit of theorganization. It also helps in determining the cost attached with each manufacturing unit whichleads to higher sustainable growth and development. This system helps in evaluating andmeasuring the cost of the units and also eliminate unnecessary cost for higher operationalstandards. Integration of MA system helps in tracking internal cost of the business in relation tooperation, production and investment in the market. On the contrary, (Fleischman and Parker,2017) argued that, MA system may lead to manipulation of data and personal biasses whicheventually result in ineffective decision making and also looses accuracy, objectivity andvalidity. MA reporting is very beneficial to Hilti Gb company to analyse the performance of thecompany and compare it with other competitors to analyse and evaluate the competitive positionof the company in the market. This tool is useful in evaluating the performance and functioningof each particular department. (Haldand Thrane, 2016) argued that, MA reporting takes intoconsideration only financial data which leads to intuitive decision making. This does not alwaysgive accurate results because it does not take into consideration qualitative data. This is a costlyaffair and it takes time to prepare reports.P 2. Defining methods for management accounting reporting.Management accounting reporting has been defined as a process of preparing internalmanagerial report related to all the statistical as well as financial information of the company.This report assist in the effective decision making process of the management of Hilti Gb.Following are the types of report that can benefit Hilti Gb:1.Budget Report – With the help of budget report, Hilti Gb can make comparison of actualresult with the estimation made for a particular accounting period, for determiningvariance if any. By preparing a budget target, it helps in forecasting cost expenses amountassociated with carrying on future business production and revenue income to be receivedfrom it (Boiral, 2016). Also, it soothes the management in making proper and effectiveallocation of the available and limited business as well as financial resources of thecompany maong different business department as per their requirements.2.Performance Report – A report which provides a deep insight about the performanceand success journey of both the company as well as its employees. By monitoring or4

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