Management Accounting Assignment: Agmet Company

Added on - 06 Jun 2020

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Management Accounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Section 1...........................................................................................................................................11. Significance of management accounting in decision-making............................................12. Explaining types of management accounting reporting.....................................................33. Critical analysis of benefits of management accounting system........................................44. A, B) Calculation of absorption and marginal costing and Explaining difference in bothcosting with regards to profit..................................................................................................5C) Reconciled statement of Profit and Loss.........................................................................11Section 2.........................................................................................................................................11Part A.............................................................................................................................................11Explaining advantages and disadvantages of planning tools...............................................11Part B.............................................................................................................................................13Management accounting system used to respond to financial problems.............................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................16
INTRODUCTIONManagement accounting reports are very crucial as well as necessary for the firm in orderto manage and control different operational activities within organisation that will help toincrease profitability and production. The report will cover importance of managementaccounting to Agmet Company engaged in manufacturing of chemical products and its essentialrequirements associated with different management accounting reports.An income statement is also provided in this report which helps to identify net income offirm by using absorption and marginal costing methods. Management accounting as a marketingtool for business and various types of planning tools that help to control the cost under thebudget will be discussed in this report. Budget making, budgetary control and different aspects ofbudget will be explained and balance score card approach to respond financial problems withinfirm will be covered in this report. The key difference between financial and managementaccounting associated with solving the financial problems is also considered in this report.Section 11. Significance of management accounting in decision-makingManagement accounting is quite useful branch of accounting help to make certainimprovements internally and as such, strengthening organisation in the best possible manner.This type of accounting draws financial reports from another type of accounting that is financialaccounting and as such, management is able to take better and enhanced decision in effectiveway. Management accounting information is provided to managers in order to analyse internaloperations of the company so that customers may be imparted with quality products quiteeffectually. In contrast to this, such information is not available to external users of financialinformation as it is presented to management only.Management accounting has several benefits to organisation which help to achieve goalsin effective manner (Freedman). Cost accounting is one such type which deals with controllingcosts in the best possible way. Furthermore, it is quite relevant in manufacturing firm as variousexpenditures such as fixed, variable and semi-variable are incurred in order to achieveproduction in desired manner. Moreover, when these costs are controlled adequately, then moreproductivity may be accomplished that is always desired by the business. Agmet Companywhich is engaged in manufacturing of chemical products is also benefited by applyingmanagement accounting in practice and as such, production can be achieved quite effectually.1
Management accounting is highly significant to Agmet Company as it help to takeeffective decisions with regards to various costs and tools of accounting and eventually, firm ishighly benefited by such information and as a result, expenses are controlled in effectual way.Moreover, techniques like marginal and absorption costing are quite relevant to organisation andas a result, enhanced decisions are made strengthening firm internally (Renz and Herman, 2016).Preparation and formulation of policies are done so that desired targets may be attained. Inrelation to this, some management accounting systems are listed below-1. Inventory management systemThe inventory management system is quite relevant in maintaining desired level of stockin the best possible way. This is done in order to achieve production in that way so that nowastage is occurred. It is essential for Agmet Company to minimise spoilage of scarce resourcesquite effectually. Stock is required to be ordered by first assessing needs and demand ofproduction department may be achieved. This help management to analyse required quantum ofinventory so that desired production can be accomplished in a better way. Thus, it is needed thatAgmet Company should analyse demand first and then raw materials should be ordered. It isrequired because if stock is ordered in excess quantum, then cost of handling will have to beincurred by organisation and as such, this will add-on to the expenditures.2. Price optimisationPrice optimisation technique is another useful for one which help to assess how pricesaffect demand of particular product. This is a mathematical analysis that clarifies business inorder to set price with regards to preferences of consumers (Otley, 2016). In relation to this, it isrequired that Agmet Company should quote prices in that way by which customers are ready topurchase the same. In simple words, price optimisation technique is used to assess consumerbehaviour and as such, prices are set in accordance to their preference so that they not be drivenaway by rivals.3. Cost accountingCosts are required to be controlled in that way so that revenue may be achieved in thebest possible manner. For overcoming the same, cost accounting is used by organisation for thepurpose of initiating control over expenses so that they may not exceed revenue of the firm.2
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