3 MANAGEMENT ACCOUNTING Executive Summary Management accounting is one of the processes used for preparation of management reports as well as accounts that render accurate and timely financial information in front of managers so that they can undertake both short-term and long-term decisions.On the other hand, Financial Accounting provides information to the financial users that help managers inside the business enterprise with decision-making. The role of management accounting in business enterprise helps in forecasting the future and make or buy decisions. Furthermore, management accountingemploysdifferenttoolsforforecastingbusinesstrendsthatincludefinancial modeling,simulations,ratioanalysis,ManagementInformationSystem,Key Performance Indicators, Game theory as well as balance scorecards and skills to analyze financial statements. The tools as well as techniques used in the management accounting can be categorized under certain heads. The current segment or study explains two methods of management accounting and these methods are cost accounting as well as cash flow analysis. Cost accounting help in calculating cost of goods sold, produced by using various tools as well as techniques or methods. In the first assignment, the main purpose of the report is to compute the overhead costs for calculating the production cost. In addition, there are different techniques used in the assignment that help in allocating the overhead expenses to specific product. After evaluating several techniques, it is found that Activity based costing help in allocating overheads as well as determining the product cost in an accurate way. It is even mentioned in the first assignment that there are different overheads that are allocated to the
4 MANAGEMENT ACCOUNTING product based on its benefits consumed from various related activities as shown in the Activity based costing method. As far as second assignment is concerned, it deals with explaining cash flow analysis as it is treated as one of the significant tool used by the managers to understand the cash flows of any business in an effective way. Cash flow analysis techniques had been used in the second assignment for measuring the potentiality of a new plan. Assessment Task Part A Requirement a: Activity Activity CostActivity Driver Annual Quantit y Costper Unitof Activity Process Receivables$15,000No. of Invoices5000$3.00 Process Payables$25,000 Nos. of Purchase Orders2500$10.00 Program Production$28,000 Nos.of Production Schedule1000$28.00 Process Sales Order$40,000 Nos.ofSales Order4000$10.00 Dispatch Sales Order$30,000Nos.of2500$12.00
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