Management Accounting and Financial Planning AAF0436

Management
Accounting and
Financial Planning

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Describe standard costing in addition to its types. Also specify its limitations.....................3
Discuss about Target costing and how it differs with Standard costing.................................4
Describe the role of contribution technique for making decisions.........................................6
Interpret the manner in which transfer pricing approach helps in improving the gains of
business...................................................................................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting refers to the process of identifying, analysing and interpreting
the financial data of organisation for the purpose of taking various monetary as well as non-
monetary decisions. It prepares various types of statements and tries to find out the weaknesses
of firm so that its profitability could be increased (Tsai and Jhong, 2019). The report is based on
BETA IT company. It is a Dubai based business dealing in developing apps, software
consultancy, support and maintenance of application, IOT services ans many more. The report
discusses about various types and limitations of standard costing along with its compression with
target costing. It further provides the role of contribution technique in decision making, in
addition to analyse the approaches of transfer of price to improve the profitability of firm.
MAIN BODY
Describe standard costing in addition to its types. Also specify its limitations.
It is a process of estimating the amount of expenses that can be incurred during
production. The cost estimated in this system is then compared with the actual results to know
the difference about them and collect information about the reason behind this variation. Its
objective is to implement estimated budget correctly and examine the performance of that
operation, so that BETA can control the extra cost incurred on it. They are generally prepared
periodically and work on the previous experience of the firm. It takes advance search and finding
for determining the base for coming year.
Kinds
Normally, it has four types
 Ideal standard- These are measures which are very easy to obtained in normal
conditions. It requires BETA to adopt the most favourable cost for its labour and
material along with maximum attainable output that can be produced amid of showing
highest level of efficiency. There is no space for any sort of spoilage or inefficiency in
these types of measures (Bradley and et. al., 2018).
 Normal standards- They are the estimated level which are anticipated to be achieved in
future, generally for the duration of single business cycle. BETA frame these standards
while looking at its average capacity that can help it in boom and regression. The cost
recognised in this method is not revised ans remains same for the whole cycle.