Management Accounting Concept - PDF

MANAGEMENT
ACCOUNTING II

Table of Contents
TASK 1............................................................................................................................................1
Definition of standard costs:........................................................................................................1
Various types of standard costs:..................................................................................................1
Preparation of standard costs: .....................................................................................................2
Meaning of variance analysis:.....................................................................................................2
Conduct of Variance analysis:.....................................................................................................2
TASK 2............................................................................................................................................3
Importance of Standard costing:..................................................................................................3
Importance of variance analysis: ................................................................................................4
TASK 3 ......................................................................................................................................5
Uses of standard costing for control the cost: .............................................................................5
Uses of variance analysis to control the cost: ............................................................................5
TASK 4 ..........................................................................................................................................6
Limitations of using Standard costing and variance analysis:.....................................................6
SUMMARY.....................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
In any business environment, management accounting plays a an important role in
functioning of business operations. This follows many aspects of accounting such as capital
budgeting, trends, forecasting, valuation, standard costing and so on. These aspects of
management accounting helps the company in achieving its goals and objectives. A company
named Khind Holdings Berhad (KHB) is chosen for better understanding of management
accounting concept which is engaged in manufacturing the home consumer electrical appliances
and industrial electrical products. This report is divided into four task, first task explains the term
standard costs and its types. Second task describes the importance of standard costing and
variance analysis whereas third task defines the uses of standard costing to control the cost.
Fourth task defines about limitations of standard costing and variance analysis.
TASK 1
Definition of standard costs:
Standard cost is an estimated cost of material, labour and other cost which is used in
manufacturing of a product and later, this estimated cost is compared with actual cost of
production. Estimation of cost is based on some standard criteria (Standard cost, 2016). Standard
cost assist the company like Khind Holdings Berhad in reducing its actual cost by improving
efficiency of its working staff (Kaplan and Atkinson, 2015).
Various types of standard costs:
There are various types of standard costs which are as follows:
 Basic Standards cost: These cost are prepared for long term point of view which remain
unchanged in normal condition. The main purpose of setting this cost is to provide trend
and to used as a background for statistical analysis over the time and , due to this it can
not form part of reporting system.
 Ideal standard costs: These standards are set by the Khind Holdings Berhad which can be
achieved under most favourable conditions. Due to this, standard cost does not allow the
any normal production issue such as material spoilage, stoppages, idle time and so on.
 Attainable standard costs: These costs are used for product costing, pricing for stock
valuation and budgeting purposes, consequently, it form part of reporting system. By
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