Management Accounting Systems and Techniques

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1: Management accounting systems and their essential requirements................................................3
P2: Methods for management accounting reporting..............................................................................4
TASK 2..........................................................................................................................................................6
P3: Calculation of costs using appropriate techniques............................................................................6
TASK 3........................................................................................................................................................12
P4: Advantages and disadvantages of planning tools............................................................................12
TASK 4........................................................................................................................................................14
P5: Comparison of organizations in adapting to management accounting systems to solve financial
problems...............................................................................................................................................14
CONCLUSION.............................................................................................................................................15
REFERENCES..............................................................................................................................................16

INTRODUCTION
The provision of accounting data, facts, figures and information which can be used by the
managers of an organization for the purpose of decision-making, organization and development
of the business is known as management accounting (Cooper, Ezzamel and Qu, 2017). The
people who have this role in a company are known as management accountants. It is helpful for
the firms in taking the decisions required for different purposes. This assignment is based on
Creams Ltd., a company which makes varied products such as ice-creams, doughnuts and
waffles. In this project, specific analysis will be made on the demonstration of understanding of
management accounting systems, applying a range of management accounting techniques.
Additionally, focus will be made on use of planning tools and comparison of ways in which
organizations can use the data of management accounting systems to resolve their financial
problems.
TASK 1
P1: Management accounting systems and their essential requirements
There are four systems broadly used in management accounting by the managers for
decision-making. The explanation of these systems in the context of Creams Ltd. is as follows-
Cost accounting system- A cost accounting system is a framework used the firms in
which techniques are used to find out different costs incurring in an organization
(Cuzdriorean, 2017). This is done to find out any problems and issues persisting with the
firm and also to find its excessive cost which needs to be reduced to increase the profits.
Thus is it is an effective tool for the management to control and monitor the overall costs.
Creams Ltd. can use it to find and reduce its excessive cost.
Essential requirements-
 There must be cooperation and coordination from various departments in the firm such as
production, marketing, finance, HR etc. for the successful implementation of cost
accounting system.
 The cost of installing this system should be justified in the results which are obtained in
the company as there should be significant improvements achieved.
 This system should allow for reduction in the overall costs related with the enterprise so
that profits can be maximized effectively and efficiently.
 This system should allow for reduction in overheads so that unnecessary expenditure
related to the overheads can be avoided.

Inventory management system- An inventory management system can be manual or a
computerized system which monitors and controls the flow of inventory in an
organization (Carlsson-Wall, Kraus and Karlsson, 2017). The managers of Creams Ltd.
must use it so as to track the flow of their inventory level and to ensure its proper
management. This will facilitate availability of stock items whenever required while also
ensuring that there is no mismanagement of stock items in the organization. This will
increase the efficiency and effectiveness in the organization.
Essential requirements-
 In an inventory management system there should be management of suppliers of goods in
the organization. This facilitates the tracking of inward movement of goods so as to
ensure their proper management.
 An inventory management system should also facilitate stock management which will
ensure that stock is available whenever required.
 It should facilitate for tracking of level of inventory within an organization so that there is
no loss of the items in the inventory of the organization.
 It should allow for effective use of methods for inventory control like LIFO, FIFO, and
Weighted Average Cost Method Etc.
Job costing system- It is a process of accumulation of information regarding costs
associated with a specific production or service job (da Silva Laureano, Cardoso Vieira
Machado and da Silva Laureano, 2016). It is highly useful for manufacturing companies
which take orders from their clients for producing specific products according to their
needs and requirements. As Creams Ltd. is a company which deals in ice-creams,
doughnuts and waffles it is a highly useful system for it because it can help it in tracking
and managing its various job orders and ensure that clients get their orders fulfilled on
time.
Essential requirements-
 Job costing system should be able to track the orders given by customers to the
organization and ensure their sound management so that they are completed within the
given time frame.
 Job costing system should be able to provide the clients a rough estimate of cost to be
incurred in their contract and must be able to find out profits of the company.
 It must facilitate reduction in costs of completion of order so that profits can be
maximized.
 It must be able to reduce the costs being incurred in completion of orders in the
organization.
Price optimization system- This system makes use of models which track how price
varies at different demand levels. Managers of Creams Ltd. can use it to set price
according to demands so that higher profits can be ensured.
Essential requirements-