Management Accounting and Costing Techniques

MANAGEMENT ACCOUNTING

Contents
management Accounting......................................................................................................................1
Introduction..........................................................................................................................................3
Task 1...................................................................................................................................................3
P1 Management accounting and requirement of different management accounting system......3
P2 Different methods used for management accounting reporting.............................................5
Task 2...................................................................................................................................................6
P3 Calculating the costs under absorption & marginal costs and examining the difference.......6
Task 3...................................................................................................................................................8
P4 Explaining advantages & drawbacks of the budgetary planning techniques.........................8
A. Computation of standards cost of PVC sheets........................................................................9
B. Calculation of material price and quantity variance.............................................................10
Task 4.................................................................................................................................................11
P5 Effectiveness of management accounting system in resolving financial problems.............11
Conclusion..........................................................................................................................................12
References..........................................................................................................................................13
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INTRODUCTION
Management accounting is the technique that is used by the companies in order to record
their financial data so that management can develop strategies for the growth of the entities.
Therefore it plays significant role in the companies and helps the firms in making sound business
decisions (Scapens and Bromwich 2010). For the present report Dell Company is being taken
into account. Assignment will discuss the requirement of different types of management
accounting system in an organization. Several methods which are required by the entity to
accounting reporting will be explained in this study. Absorption cost and marginal cost will be
calculated in this report in order to prepare income statement (Yalcin, 2012). Advantage and
disadvantage of different types of planning tools will be described in this study and material
price and quantity variance will be computed.
TASK 1
P1 Management accounting and requirement of different management accounting system
Management accounting can be considered as process that helps in preparing the
accounting reports and used economic information’s in such manner so that entity can
make sound decisions which can help in the growth of the organization to great extent
(Tucker and Parker, 2014). This is tool through which managers of the company can carry
out business operations well and can contribute in accomplishing the short term goal of the
organization. The main objective of Dell of using management accounting is to identify the
risk and allocate resources well so that issues related to shortage of funds and others can be
minimized soon. Management accountant of Dell company gather information time to time
so that they can monitor current operations and can measure the effectiveness of the
existing process (Ambe,2016).
Type of management accounting system and its essential for the Dell Company
There are several types of management accounting system used by the entity (Clark,
Menifield and Stewart, 2017). These are described as below:
Traditional cost accounting: It is traditionally used method in which managers allocate cost to
the production so that goods can be manufactured. It includes costing of process, job order
and batch costing. Direct and indirect cost expenditures are included in the production
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process so both these expenditures are considered in this cost accounting process (Hülle,
Kaspar and Möller, 2011).
Lean accounting: It is another type of management accounting tool which can be beneficial for
the Dell Company. It is the method through which cited firm make effective control over
its cost and can remove wastage from the system significantly. It is used by most of the
entities in order to gather relevant information so that they can make sound decisions for
the growth of the firms (Ball, Grubnic and Birchall, 2014 ). Lean accounting is the type
of method which is used by manufacturing firms mostly because by this way they try to
eliminate the wastage and increase efficiency level of the production. By this way
companies like Dell can understand its overall financial worthiness. If cited firm uses this
tool then it can be safe from future uncertainties and can enhance its profitability to great
exten (Clark, Menifield and Stewart, 2017)t.
Throughput accounting system: It is completely differed from the traditional management
accounting system. It concentrates more on the constrains which are exist under the
production system due to this its performance is not good. With the help of this system
Dell can minimize the issues related to material or labor and can improve production
capacity (Banerjee and Das, 2017). Throughput accounting system is the method which
focuses more on minimizing the per unit cost of produced goods so that overall profit of
the organization can get improved. Its main focus in on sales so management of Dell uses
this system and concentrates more on producing quality products so that sales volume of
the cited firm can get improved (Clark, Menifield and Stewart, 2017).
Transfer pricing accounting system: If entities are engaged in the import and export business
then it is necessary for them to follow legal guidance and they have to pay tax
accordingly (Bhimani and et.al, 2013). For example if Dell is US bases firm and it
imports some equipments from France then it will have to follow this management
accounting system and have to pay tax as per the norms of particular nation. It is applied
when business is run between two different countries (Clark, Menifield and Stewart,
2017).
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