Planning Tools Used by Budgetary Control in Management Accounting

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management Accounting System:....................................................................................1
Management Accounting:..................................................................................................1
Management accounting system:.......................................................................................2
M1 Benefits of management accounting system....................................................................3
P2 Management Accounting Reporting:................................................................................3
Management accounting reporting:...................................................................................3
Different types of reports...................................................................................................4
TASK 2............................................................................................................................................5
P3 Appropriate costing techniques:........................................................................................5
Appropriate application of Marginal Costing.........................................................................6
Appropriate application of Marginal Costing.........................................................................8
Interpretation of marginal and absorption costing..................................................................9
TASK 3..........................................................................................................................................10
P4 Planning tools used by budgetary control:......................................................................10
Budget:.............................................................................................................................10
Behavioural implications of budget:................................................................................11
Common Costing Systems:.............................................................................................12
External and Internal Analysis of Aston Martin:.............................................................12
M3 Analysis of different planning tools for preparing and forecasting budgets:.................14
TASK 4..........................................................................................................................................14
P5 Adaptation of management accounting in response to financial problems.....................14
Financial Problems:.........................................................................................................14
Comparison of different organizations in context with financial problems:...................15
Characteristics of management accountant:....................................................................16
M4 Analysis of management accounting techniques in leading sustainable success:........16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18

APPENDIX....................................................................................................................................20

INTRODUCTION
Management accounting which is also known as managerial accounting is a framework
that is basically used by the managers to maintain and control the internal affairs of an
organization. This is utilized for filtering the internal informations of the establishment and make
it valuable for the administration so that they can make effective decisions and control over the
functions of the firm.
This report covers a detailed description about management accounting in context with
the Aston Martin Lagonda Global Holding Plc which is an independent manufacturer company
of Britain established by Lionel Martin and Robert Bamford in 1913 and manufactures luxury
sport cars. It includes management accounting system and reporting, their benefits, cost
accounting system and techniques, planning tools for accounting and financial governance.
TASK 1
P1 Management Accounting System:
Management Accounting:
Management accounting is a set of so many activities such as collection, classification,
recording and presentation of financial and non-financial data in such a manner that internal
stakeholder such as managers can utilize this information in planning, operating, managing and
controlling the internal process of functioning in an efficient and effective manner.
Origin, role and principle of management accounting:
Managerial accounting was developed at the beginning of nineteenth century by the
business persons of large organizations who find it necessary to manage and control internal
operations in order to survive in the market. Management accounting plays a significant role in
cost reduction and control, profit maximization, price fixing, stock management, planning and
decision making for future operations (Jamil and others, 2015). It basically follows two major
principles that are principle if causality and principle of analogy.
Difference between management and financial accounting:
Management Accounting Financial Accounting
Management accounting provides sufficient
reports and informations to the internal
Financial accounting renders reports and
informations related to the funds which can be
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stakeholders such as managers and owners. utilized by external stakeholders.
This methods has no specific format or
standards to be followed (Theriou and
Aggelidis, 2014).
Financial accountant has to follow some
standards and reporting formats to prepare the
reports and documents.
Management accounting system:
Managerial accounting system is a framework used by the internal managers to provide
sufficient data and information that is required for management reporting system. Management
accounting system is created to identify, analyse and communicated the data within the
establishment. The management accountants of Aston Martin developed various management
accounting systems to assess the actual performance of the company that are described below:
Cost Accounting System: Costing system or cost accounting system is a framework that
is developed by the establishments to evaluate the cost of production, cost reduction, profitability
analysis and cost control. This system is followed by the selected organization in order to
evaluate detailed information of cost of production of their cars and other services. It also help in
measuring the financial performance of the company.
Inventory management system: Inventory management system is evolved within the
organizations to monitor and control the purchase, usage and storage of the items or components
which are required for the production. The administration of Aston Martin follow this system to
oversee the production from purchase of raw material to availability of finished goods. The
management is also ensures the quality of the cars and effective shipping to the customers.
Job order costing system: Job order costing refers to the structure for assigning
manufacturing cost to specific batch of the products or item. This system involves the practise of
data accumulation on the costs that are related to a particular job or product. The respective firm
uses this system to evaluate the cost of direct labour, direct material and overheads. It also
provide help in calculating the cost of customised cars (Tappura and others, 2015).
Price optimization system: Price optimization system is a mathematical analysis that is
used to determine the reaction or behaviour of the customers in relation to the different prices for
the business offerings. The management of Aston Martin applies this techniques to calculate the
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optimum price for its cars and other products and generate the desired profit with maximum
customer satisfaction.
M1 Benefits of management accounting system
Accounting Systems Benefits
Cost Accounting
System
 This accounting system helps in cost control, inventory analysis
and profitability analysis.
 The selected firm can utilise this system for appropriate
allocation of cost centres.
Inventory
Management System
 This system helps in reducing the order and carrying cost, saves
time and space (Adams and others, 2016).
 Aston Martin Plc can create a satisfied customer base with
utilization of inventory management system.
Job Order Costing
System
 Cost of the specific or customised products can be calculated
easily with the help of this system.
 The company can evaluate the performance of the workers
involved within an specific job.
Price Optimisation
System
 Desired profit can be generated for the company with the help of
this system.
 The establishment can provide better customer satisfaction to its
customers as it provides prices according to the customers'
reactions.
P2 Management Accounting Reporting:
Management accounting reporting:
Managerial accounting reporting is a process of collecting data and information and
analysing it for assessing the productivity and efficiency of the entire organization. Performance
of the various departments and employees of the company can be evaluated with the help of
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