Management Accounting Techniques and Tools

The assignment delves into the core concepts of management accounting systems, examining key techniques such as activity-based costing (ABC), job costing, and zero-based budgeting. It analyzes the advantages and disadvantages of each technique, providing practical insights into their applications within organizations. The document also discusses responsibility accounting and cash budgeting, further enriching the understanding of diverse management accounting tools.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Analysing the essential requirements of the management accounting system..................1
P2 Determining and evaluating the various reporting techniques of the management
accounting...............................................................................................................................4
TASK 2............................................................................................................................................6
P3 Calculations or measurements for Marginal and Absorption costing income statements 6
TASK 3............................................................................................................................................8
P4 Evaluating the kinds of Budgetary tools and their pros and cons as well.........................8
TASK 4..........................................................................................................................................11
P5 Adoption of the management accounting system to overcome the financial obstacles. .11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
To develop the operational strength of the business as well as communicating the various
financial problems within premises there is need to adopt the management accounting systems.
In the present assessment there will be discussion based on the various accounting tools and
techniques which in turn helpful for the professionals of Berry-house Hotel to make most
appropriate decision. Thus, such decision making will be helpful for the managers in terms of
making budgets, planning costs ad techniques to produce the income statement which will be
based on Marginal and Absorption costs. The report will also shed some lights over the various
methods to over come any financial obstacles in the organisation as well as improve the
operational ability of business.
TASK 1
To: General Manager
(Berry-House Hotel)
From: Management accounting officer
Subject: Require writing a report to General Manager in Berry House Hotel
Introduction:
In accordance with improving the internal efficiency of the organisation to meet the
financial stability there is need to implement various management accounting techniques. These
techniques will be beneficial for Berry house hotel in terms with analysing internal efficiency
and ability to met the expenses and to improve the areas of weaknesses. Therefore, with the
help of such tools and techniques the business become efficient to meet all the financial
requirements.
P1 Analysing the essential requirements of the management accounting system
There will be essential requirements of implementing the various management
accounting techniques in the daily operations of business. Thus, the need to include such
methods will be beneficial for the managers in terms of making the adequate decision in relation
with evaluating the operational aspect of firm (Goddard and Simm, 2017). This tools will be
helpful for manager in terms of planning, budgets, estimating the costs as well as developing the
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strategic plans for enhancing industrial performance. However, here are some management
accounting tools which are need to implement by professionals in Berry House hotel such as:
Drawing 1: Management
accounting system
Cost accounting:
This management accounting technique will be helpful in terms of making the adequate
assumptions as well as presenting the favourable funds for al the departments in the organisation.
There will be various costs such as Fixed Costs, Variable costs, Direct or Indirect costs which in
turn required for business to analyse the various expenses incurred during the assessments period
(Hopper and Bui, 2016).
Fixed Cost: These are the expenses which remain constants and fixed for the long period.
However, such costs does not change as according to the variable costs (Aouni, McGillis and
Abdulkarim, 2017). These costs do not depend over the level of operations Berry House Hotel
have but it will be fruitful for the business in ciphertext with making the adequate payments for
fix expenses such as salary, rent, telephone bills etc.
Variable Cost: These are the costs which frequently changes as per the variations in the
level of outputs produced by business. However, such costs can be relevant with the
manufacturing costs, purchase and sales costs which varies as per the requirements in the
organisation (Bathurst and Schwartz, 2017). In the festive season or time of any national events
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Cost Accounting Batch Costing Price optimisation Inventory
management
Job costing

the demands in the market will tend to rise so managers at Berry House Hotel need to make
estimation over requirements of various goods and services.
Direct Cost: the expenses which are directly implicated over the products and which are
made during producing the units for the business. There can be need of various techniques which
in turn helpful for Berry House Hotel in having the favourable returns form such expenses. Thus,
this mainly includes Direct material, labour, equipments and machinery expenses (Kabinlapat
and Sutthachai, 2017). These are the costs which are relevant with the business operations' ans
well as played the main role in producing the goods and services of the entity. These are directly
charged over the products and thus the firm will become able to attain the adequate amount of
profit.
Indirect Cost: Costs which are indirectly levied in the books of accounts such as
depreciation, selling and administration expense. These are basically overheads which are
indirectly included in the financial data set of business. However, Berry House Hotel need to
analyse such costs as well as make the adequate solutions which will be beneficial in lowering
down the costs of production (Martinelli and Milosevic, 2016).
Job Costing:
To analyse the costs over the duties and the piece of work which are being produced by
the business there is need to analyse the expense incurred in such operational tasks. Therefore,
Berry House Hotel will be beneficial if they make the adequate measurement of such costs
incurred while producing the units. It will be fruitful in terms of making the favourable decisions
or innovative strategies which in turn helpful for reducing the expenses of business (Job Costing,
2013). These are basically direct labour, material and the overhead expenses which are need to
be less as well as adequately utilised by the firm which in turn helpful for attaining the
favourable returns from such operations.
Batch Costing:
Apart from Job costing technique the batch costing will be more fruitful for the business
which in turn helps in identifying the expenses incurred while producing a batch in a day.
Moreover, it estimates the total labour, machinery efforts and the amount of material is being
used to produce such units (Shields and Rangarajan, 2013). Therefore, Berry House Hotel need
to make the adequate estimation over the requirements of funds for the completion of producing
a batch.
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Price optimisation:
These are the techniques which will be fruitful for the business as the prices over various
products were decided by the managers. Thus, it is useful in terms of analysing the reaction of
consumers over such prices. However, with the help of such techniques Berry House Hotel will
become able to analyses the adequate prices to its products or services on which the large
numbers of buyers are interested and the costs of such operations will be managed in profits or
revenue retained by them (Sears and et.al., 2015). These techniques will help them in making the
adequate estimation over the prices of such goods and services offered by them.
Inventory Management:
In terms with managing the inventories of business there is need to make the specific
strategies or planning which in turn helpful for the succession of such techniques. Therefore,
there will be need of presenting the adequate assumptions which in turn fruitful for Berry House
Hotel. There is need to adopt the modern techniques which will be beneficial for professionals in
terms of producing the units in accordance with the demands generated by them in the market
(Hwang and N g, 2013). There will be use of methods such as Just in time inventory
management, under this method the units will be produced as per the demands generated in
environment as well as at the seasonal time.
P2 Determining and evaluating the various reporting techniques of the management accounting
The favourable decisions can be presents as per the disclosure of the financials in the
business over which managers will present their views and make the profitable decisions. These
can be done by help of various reporting techniques which in turn helps in estimating the
requirements of funds for the particular department of unit. Hence, in this regards Berry House
Hotel will be beneficial to attain the maximum amount of profit as well as can become able to
generate the fruitful revenue (Akoto and et.al. 2014). In management accounting all the
operational units have their separate accounts over which they record transactions which are
relevant with the total cash inflows and outflows, income and expenses as well as capital
obtained by them. Thus, such departments presents their reports to their heads on which the
fruitful decision can be made by the managers. There will be several reports techniques which
are need to be implement by organisation such as:
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Illustration 1: Management accounting reports
Source :(Campbell and et.al. 2014)
Debtor aging report:
These are the amount which are to be revised by the managers which are in terms with
making the adequate increment in the operational activities. Thus, such amount will be recovered
in the estimated time period is known as the debtor aging report (Goddard and Simm, 2017).
These reports can be obtained by the head of department which are from the debtors, suppliers,
distributors which in turn helps in analysing the adequate payment will be made by them for the
success of operational aspects of business.
Job cost report:
The data set which are relevant with the amount of funds were utilised over performing
the operational duties in organisation. However, Berry House Hotel will be beneficial is all the
departments present the reports which evaluate the overall transaction help in premises while
producing the goods and services (Hopper and Bui, 2016). Thus, this will be profitable for
managers in terms of making the investment decisions.
Inventory and manufacturing report:
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These are the reports which are consists of all the relevant informations such as material
being purchased by the units, labour used as well as the numbers of articles being produced in
the premises. Thus, such reporting will help the managers in analysing the adequate requirements
in the market such as consumer demands, preferences etc. which in turn helpful for deciding
whether to make the investment or not to make. This will be fruitful in terms of analysing the
actual requirements (Aouni, McGillis and Abdulkarim, 2017). Here, the management lies over
the records of all the imports and exports of the inventories as well as supplies made during the
period.
Budget report:
To fix the adequate amount of funds for the pieces of work there which in turn beneficial
for the managers in terms of making appropriate utilisation of such funds. The budgets help in
estimating the actual required cash for the completion of any business operations which in turn
helps in attaining the organisational goals (Bathurst and Schwartz, 2017). Thus, with the help of
such strategies Berry House Hotel will become able to measure the profitability of the firm in
various operational activities.
TASK 2
P3 Calculations or measurements for Marginal and Absorption costing income statements
In terms making the fruitful analyses there will be need of measuring the profitability
from the overall transaction incurred during the financial period (Kabinlapat and Sutthachai,
2017). Hence, here the techniques were used to analyse profitability in the terms of marginal and
absorption techniques of estimating the net profit.
Marginal costing
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Interpretation: In accordance with the above listed table the marginal cost technique s as
been adopted by the managers in terms of estimating the adequate profit generated in such
period. However, Berry House Hotel will have the net profit in terms with this method such as
9300. Thus, the process of estimating the profits starts with recording of the transaction step by
step. There will be sales of 600 units at the price of 35 which brings the total revenue for 2100.
the costs of production will be calculated over the units which were produced by the organisation
for 700 at the overall overhead prices such as 13 per units which include all the direct expense
such s direct material, labour and machine hours. There will be 100 units which ere left as the
closing inventory will be measure at price of 13 per unit. Thus, the contribution margin obtained
by organisation is for 13200.
Absorption Costing
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Interpretation: In consideration with the above mention report Berry-house Hotel has
presented the income statement on the basis of Absorption costing technique. Thus, it can be said
that there will be need to make the adequate estimation for the improvement in the productivity
as well as profitability of the business. The sale revenue will be generated by the business at 600
units for 35 amounted to 2100. In this method the production overheads were reduced before
gross profit which in turn brings the gross profit for 11500. Thus, there will be reduction of
various expense which were incurred in the production of the goods and services such and thus
brings the net profit for 9600.
However, it will be suggested to the owners that they must implement the absorption
costing techniques which will be fruitful for the business in terms of making the adequate
assumptions as well as retaining the most favourable profit for the business growth. Hence, these
methods bring the most profitable return for 9600 which is better than the marginal costing.
TASK 3
P4 Evaluating the kinds of Budgetary tools and their pros and cons as well
In order to enhance the operational activities as well as maintain the financial stability in
the premiss there is need to monitor the adequate resources which are available for the
completion of the business tasks. There will be need to various budget technique which in turn
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helpful for Berry House Hotel to make the adequate profitability (Martinelli and Milosevic,
2016). However, there are some budgetary techniques which are need to be implemented by the
managers to make the fruitful operational environment in the premises such as:
Responsibility Budgeting: these are the reports which being prepared by the managers,
supervisors or director in terms of reflecting the outcomes that how capable the company in
terms of meeting the targets. Thus, such reporting techniques will be helpful for Berry House
Hotel in terms of making the adequate decisions as well as presenting the responsibility of the
management in terms of making the adequate decision as well as bringing the fruitful results
(Shields and Rangarajan, 2013). There can be need of various operational activities which in turn
helpful for the business in the context with making the adequate changes and improve the
performance efficiency.
Advantages:
 It helps in building the favourable coordination and control over the managerial tasks and
duties performed in the organisation.
 It enhances the importance of the organisational structure which in turn need to be
understand by the managers as well as analyse the importance of the delegation authority.
 This will be the best funnelling activity for the managers in terms of determining the
responsibilities of them in the premises (Sears and et.al., 2015).
Disadvantage:
 There will be increment in the conflicts between employees and the supervisors as per
such method due to which they take advantage of their rights and authority.
 It will be time consuming and difficult for analysing the responsibility (Responsibility
Accounting: Principles, Advantages and Limitations, 2017).
Activity Cost-based Budgeting: the costs which were incurred in over the particular
activity held in the premises such as production, marketing, sales and relevant operations. Thus,
Berry House Hotel must consider the use of this budgetary tool (Hwang and N g, 2013). It will
improve the efficiency of the business as well as enhance the work performance of the
individuals. However, there will be various merits and demerits of this tool such as:
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Advantages:
 This is the most appropriate technique under which the actual cost of the operations were
evaluated such as production, selling and distribution as well as making the adequate
services in the business.
 This the easiest way to analyse the costs over various departments or activities in te
premises as well as the fruitful estimation will help managers in making the favourable
decisions.
Disadvantage:
 This is the most expensive as there will be requirements of more substantial resources
which are data, collection, estimation as well as checking the organisational system.
 It does not coordinate with the principles or concepts of GAAP as well as very complex
and time consuming (Advantages, Disadvantages and Limitations of Activity Based
Costing (ABC) System:, 2011).
Zero-based Budgeting: This budgeting technique will be helpful for the business as they
follow the rule that all the investment which were made during the period which will belongs to
the zero level. The nature of this budgeting technique is that this is an ever changing or
fluctuating in terms of presenting the outcomes (Akoto and et.al. 2014). Managers at Berry
House Hotel must implement the use of such techniques which will be fruitful the organisation in
terms of making variation in the funds used in tasks.
Advantages:
 It helps in developing the adequate coordination among the staff member and reducing
the financial conflicts in the firm.
 With the help of such techniques the business will be beneficial in terms of allocation of
all the resources as well as generate the fruitful disclosure of such elements (Campbell
and et.al. 2014).
Disadvantage:
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 It is very time consuming and complex as there will be requirement of the accounting
professionals not any other individual could able to make such reports (Limitations or
Criticisms of Zero-Based Budgeting, 2017).
 There will be obstacle as the justifying solution will not be obtained from this technique.
Cash budgets: this are the budgets which seeks the requirement of cash and funds for the
activities in the business. It also analyses the returns obtained by such activities of Berry-house
Hotel which will be fruitful in nature as it brings ability to operating department in context with
enhancing the performance (Goddard and Simm, 2017). These budgets will be helpful for the
business in terms of making the fruitful disclosure of the inflows and outflows of cash
transactions. However, there will be various advantages and disadvantages of such budgeting
method as:
Advantages:
 This will be helpful for estimating the need of cash for the completion of funds as well as
manages the inflows and outflows.
 Earning of the organisation will be managed in the books of accounts (Hopper and Bui,
2016).
Disadvantage:
 There has been lack of flexibility in the such budgeting techniques as well as there will be
risk of manipulating the informations (The Disadvantages of a Cash Budget, 2017).
 These techniques follow the use of estimates and there will be lack of non financial
factors which in turn influencing the business performance.
TASK 4
P5 Adoption of the management accounting system to overcome the financial obstacles
To over come with the financial obstacles in the organisation there will be need of
implementing various techniques or strategies which will help in enhancing the performance of
the organisation (Aouni, McGillis and Abdulkarim, 2017). Thus, in consideration with such
elements the operational activities will be appropriate and the better execution will be made by
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the Berry house Hotel managers. However, there will be various techniques which are need to be
used such as:
Key performance indicators: This will help Berry House Hotel in terms of setting the
small targets and planning to attain such targets in the firm. Thus, such small targets will help the
managers in terms of making decisions which will help in enhancing the performance of business
(Bathurst and Schwartz, 2017). The achievement of small target will help organisation in
achieving the large operational targets as well as motivates the workforce to make their efforts.
Financial governance: There is need to develop the fruitful hierarchy in the premises
which in turn helps in executing the tasks or operation held in the premises. Berry House Hotel
will be beneficial as if they appoint the qualified or talented managers for this piece of work
which will help them in generating the adequate income or gains. Thus, such performance
indicators will be fruitful as the sound management will lead the organisation to achieve the
goals as well as overcome with the financial obstacles (Kabinlapat and Sutthachai, 2017). The
allocation of such financial resources like costs and funds in terms of completion of the
operational requirements as well as having the maximum returns from such investments must be
considered by the managers.
Balance scorecard: Berry House Hotel need to implement this technique under which all
the employees and survivors in the organisation will estimate the performance made by them for
attaining the business tasks as well a bringing the appropriate transactional activities in entity
(Martinelli and Milosevic, 2016). Thus, the self estimation of all the performance will help the
managers in terms of making the adequate changes in their duties or jobs.
CONCLUSION
In terms with determining the above mentioned report there has been determination of the
various reports and costing techniques which will be beneficial for the business in terms of
making the adequate improvements. Thus, the report shed lights over the use of such costing
techniques for Berry-house Hotel which in turn help managers to enhance the organisation
performance as well as generate favourable revenue. There has been various performance
indicators which will help in developing the adequate environment in the premises as well as
building the use of such financial resources to overcome any obstacles in business.
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REFERENCES
Books and Journals
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management accounting and auditing: a new typology. Annals of Operations Research.
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Campbell, J. D. and et.al. 2014. Burden of multiple sclerosis on direct, indirect costs and quality
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Hwang, B. G. and N g, W. J., 2013. Project management knowledge and skills for green
construction: Overcoming challenges. International Journal of Project Management. 31(2).
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Kabinlapat, P. and Sutthachai, S., 2017. An application of activity-based costing in the chicken
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Martinelli, R. J. and Milosevic, D. Z., 2016. Project management toolbox: tools and techniques
for the practicing project manager. John Wiley & Sons.
Sears, S. K., and et.al., 2015. Construction project management. John Wiley & Sons.
Shields, P. M. and Rangarajan, N., 2013. A playbook for research methods: Integrating
conceptual frameworks and project management. New Forums Press.
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Online
Advantages, Disadvantages and Limitations of Activity Based Costing (ABC) System:. 2011.
[Online]. Available through
:<http://www.accountingexplanation.com/advantages_disadvantages_and_limitations_of_a
ctivity_based_costing.htm>.
Job Costing. 2013. [Online]. Available through :<https://strategiccfo.com/job-costing/>.
Limitations or Criticisms of Zero-Based Budgeting. 2017. [Online]. Available through
:<http://smallbusiness.chron.com/limitations-criticisms-zerobased-budgeting-68332.html>.
Responsibility Accounting: Principles, Advantages and Limitations. 2017. [Online]. Available
through :<http://www.yourarticlelibrary.com/accounting/responsibility-accounting/
responsibility-accounting-principles-advantages-and-limitations/65286>.
The Disadvantages of a Cash Budget. 2017. [Online]. Available through
:<https://bizfluent.com/info-7762104-disadvantages-cash-budget.html>.
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