Management Accounting Assignment - Standard Costing

Added on - 04 Oct 2020

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MANAGEMENT ACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1A. Management accounting topic...........................................................................................1B. Explaining the purpose studies research question.............................................................5C. Analysing the differences and similarities in findings of two studies...............................7(d)Four specific outcomes that are learned from these two studies.......................................7CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................11
INTRODUCTIONManagerial accounting can also be said as cost accounting as it is process to identify,measure, analyse, interpret and communicate information required by managers for pursuingorganization goals (Yandell, 2017). The difference between financial and managerial accountingis that financial accounting has an aim to provide information to parties that are outsiders toorganization whereas managerial accounting helps managers in taking decisions in any company.This report will present different forms of managerial accounting with their explanation andunderstanding. The management tool which had been taken in this project report is StandardCosting. This study is based on accounting and management accounting journals. The twojournals that are taken are Standard Costing and Variance Analysis, Standard Costing atechnique at variance with modern management. The report will be analysis of management tooltaken and different techniques to calculate variances are also explained.A. Management accounting topicStandard costingIt is a method of costing thorough which standard cost are employed as its calculation,comparison with actual cost and analysis of variances along with their causes and to point outincidences.Standard costing can be understood as an accounting technique that is used by businessorganisations to identify difference between actual cost of production and the cost that shouldhave occurred for those goods (Bargerstock and Shi, 2016). Expense that should have incurredfor actual production is called standard cost. In simple words, it means to find out the variancebetween actual and standard cost. The standard cost is generally related with budgeted plans of amanufacturer for a financial year and it includes production cost consisting of direct material,labour and manufacturing overheads.This is a method of ascertaining the cost, where statistics are used to prepare:1.Standard cost2.determination of actual cost3.finding out difference between above two and evaluating reason behind the variance.Objective of standard costing:Aids in implementation of budgetary controls system operations.This helps in ascertaining evaluation of performance.1
Provides various methods for proper utilisation of material, labour and overheads.With setting up of standard, employees are motivated to improve their performances.With proper valuation of the inventory it also helps the management of firm.It acts as control devise for the management.Aids in taking correct decisions related with price fixation, inventory purchase decisionetc.supply relevant and important information for deciding and fixing the sale price ofproduct.Advantages of Standard costing1.Budgeting:a budget is always prepared with on the basis of standard cost. Whenpreparing budgets it is not possible to determine the actual cost so standard cost is takeninto account and through technique of standard-costing difference between budgeted costand actual expenses can be found out (Bedford and Sandelin, 2015). This cost on basisof which budgets are prepared appearers in financial report for whole year, so it can besaid that this coast is also reliable.2.Inventory costing:standard cost is always multiplied by the closing units of inventory,though it does not always match with actual amount but it is close to it. With regularupdation of standard cost estimate of actual cost can be done before its occurrence whichis very useful for determination of profitability of the business.3.Application of overhead:allocation of cost after its actual occurrence can be quitecumbersome and can create delay in profit estimation. So with standard costing expensesrelated with production is estimated before time and same are allocated to variousbusiness activities.4.Determination of sales price:with estimating of cost of production with standard costand adding margin of profits sales prices can be determined which can be accepted bythe consumer easily and they are ready to pay the same. This system also considerschanges in cost of production at different level of volume levels.Disadvantages of Standard costing1.Cost plus contract:for contracts with consumer where he/she pay actual price for theproduction, done by manufacturer. Here, standard cost can not be considered actual cost2
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