Lean Manufacturing and Performance

This assignment examines the relationship between lean manufacturing and firm performance. It analyzes the role of management accounting practices, budgetary systems, and industry context in achieving successful outcomes within a lean manufacturing environment. The study considers various research papers and explores factors influencing performance measurement and control.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Essential the Requirements of management accounting...................................................1
P2. Explain the different methods of management accounting report...................................3
M1...........................................................................................................................................3
Task 2...............................................................................................................................................4
P3 Calculate costs using appropriate techniques and prepare the income statement of marginal
and absorption methods..........................................................................................................4
TASK 3............................................................................................................................................7
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control....................................................................................................................7
P5 Methods by which organisation use management accounting to mange financial problems.
................................................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
Management accounting system is the tool by which company analyse the financial
situation of business. It is the systematic approach which gives much information to the manager
for effective control. It also assists mangers to take better control on unnecessary expenses. It
helps to enhance the performance of the management to accomplish the organisation goals.
Present report is based on Zylla Company it is a big multinational organisation which changes
their business plans and try to enhance the business expansion. Assignment will explain about
the importance of management accounting and its different types of approaches and methods.
Furthermore, the calculation of cost accounting and income statement. And the purpose of
management accounting in the organisation. That it helps to measure the corrective action and
achieve the organisation target to full fill the needs of customers. It assists to enhance the
employee satisfaction by giving good amount of incentives.
P1 Essential the Requirements of management accounting.
Management accounting is the most important function in the organisation. Management
accounting is totally different from financial accounting. In management accounting manager
needs to adopt some innovative changes by which company get more profit(Ax, and Greve,
2017.). Manager of the organisation has responsible to take day to day activity in effective
manner. Management accounting is a term in which manager control and manage the
administration works and create more flexibility in fulfilling the activities. Management
accounting involves political science, sociology, economics, economies etc. management
accounting function is not based on double accounting system they only create effective
management plans by organisation achieve their target in effective manner. Management
accounting is based on statistical and financial data by which manager makes their short term
goals for the organisation(Fullerton, Kennedy, and Widener, 2013.). Zylla is the multinational
company its manager has the responsibility to take new management plans to make more profit.
Management is the base of every organisation through this function Zylla increase their company
image and it helps more to satisfy the customer needs. On the other side accounting this word is
refers to statistical term which helps to keep the records of the company. There are much
management accounting system that are used by Zylla company. It also helps to take better
decision in expansion of new business and take other changes as well.
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Cost Accounting System: Cost accounting system is related to the day to day
operational activities in the management. In this system manager needs to analyse the cost
involved in product and services. It helps to measure the inventory costs as well. Cost accounting
also helps to minimize the loss of products those products which gives zero level of profit. The
manager should know that which product is profitable or not. It also helps to maintain the
financial resources of the Zylla organisation. But sometimes it may become difficult task for the
manager to identify the actual expenditure of the product and services(Messner, 2016.). In that
particular situation cost accounting gives correct method to measure the value. Cost accounting
is the main system which helps to minimize the overall expenses during production. Moreover,
cost accounting is the best source to minimize the cost risk. And take the best strategic plans.
Thus, there are two types of cost accounting job order costing and the process costing.
Job order costing means collects the manufacturing cost separately. This job order costing helps
Zylla to make new different product and services which is made for some special employees. On
the other hand Process costing helps to identify the cost from other departments. Many
organisation produce two different products they have their two different process departments
this cost system, helps to this organisation.
Inventory Accounting System: This is the system in which company needs to track the
records of all required inventory or resources. In this management accounting company manage
the inventory on the basis of given bar codes. And also make sure that inventory is perfect or not.
It helps to manage the all required material which is important for the production of goods and
services. This accounting system helps Zylla to improve their inventory records in systematic
manner(Otley, and Emmanuel, 2013.). It also helps manager to determine the inventory costs
during the process. Because the price of the inventory is depended on the purchases. This
management system helps to identify the cost of goods sold and keep the records for future use.
There are two methods by which manager measure the inventory “ first in first out” and “last in
first out”. From these two methods Zylla company analyse their inventory position easily. This
system helps to make new decision and plans and show the inventory level in the organisation. It
also helps to remove waisted inventory from the organisation.
Industry Specific- Accounting: Industry specific accounting system is based on specific
industries in which manager needs to keep the records of daily activities and measure the cost
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involved in operational activities. This system helps to identify the records of the company and
gives new opportunities for growth.
Lean Accounting System: Lean accounting system helps to measure the unwanted
activities and cost involved in operations(Renz, 2016.). It also helps to provide accounting and
control expenses. Lean accounting of management helps manager to remove harmful impacts.
Overall lean system eliminates the unwanted activities and helps to make new decision making
process.
P2. Explain the different methods of management accounting report.
Management Accounting report helps manager to make a performance report of the
organisation. In respect of this report manager have to analyse the operational activities and
make new strategic plans(Suomala, Lyly-Yrjänäinen, and Lukka, 2014.). Management report
helps to measure the quality of management. Which arise from talented employees. So in context
of that manager needs to manage their team members properly so that they contribute their best
efforts towards organisational goals. This report generally make on the basis of monthly,
quarterly and yearly. There are different types of management report given below.
 Budget Report: This budget report helps to measure the actual performance out of
desired performance. It helps manager to identify the variance during measuring the
performance level. Budget report helps Zylla company to take corrective action regarding
issues. It also helps to improve the performance level of the organisation Zylla is the big
multinational; company which required big measuring plans to identify the position. This
budget report helps manager to diminish the unwanted activities from the organisation
and take corrective action to enhance the performance level. On the other side it also
helps to set the incentives for the employees to meet the financial needs of the
organisation. Budget report is the essential tool to measure the requirement of fund and
settle the all expenses.
Advantages:
 The main purpose of budgeting report is to assist the planning in proper way and
helps to identity the real position of the management accounting. It also aims to
perform day to day activities in systematic form.
 Another objective of budgeting report is to create better coordination level among
employees by giving attractive incentives.
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 Budgeting report gives performance ratio by which manager of the company takes
corrective action plans to minimize the risk.
 Sales Report: This sales report gives the sales record during the particular time
period. It includes the product and services of Zylla company which they provide
to their customers(Williams, 2014.). This report made by sales team. It assists to
measure the profit revenue earn by the Zylla. In this report all the expenses are
includes to promoting the product and services. It also gives data by which
manager analyse the actual sale out of expected sales. Sales report also helps to
identify the prices of the services and compare with their competitors as well.
Segmental Report: Segmenting report is the report which company disclose it in front
of the public. In this process company share its financial statement with the public. It gives all
information of the company to investors and creditors. It helps to determine the actual
performance of the company.
Performance report: It is the important report in the company which tells about that
communication information of the project must be communicated with others. It helps to
utilization of all resources and forecasting future results.
Task 2
P3 Calculate costs using appropriate techniques and prepare the income statement of marginal
and absorption methods.
There are two methods of calculating the cost of organisation, that are absorption and
marginal. Costing methods helps the organisation to find their profit. But both the methods have
different ways for calculating the profit. When it concerned about the absorption costing, then it
is the costing where the organisation understand both the cost that are marginal and fixed as a
same. On the other hand when it comes to the marginal costing, then it is the costing which
includes only variable cost such as product cost and the fixed manufacturing overheads are
considered. Other than that proper period cost is not being identified with the help of individual
product of the organisation (Ball, and Birchall, 2014). When it is discussed about the absorption
costing then the organisation can not able to produce the goods and services without the fixed
inventory such as land etc. Value of closing stock as well as the fixed overhead cost are
considered to be product cost and hence this will be carried forward to the closing stock. Fixed
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overhead is not included in the marginal costing but period cost will be included, thus it will help
in the reducing the value of closing stock.
TABLE 1-Income statement by adopting marginal costing:
When it comes the marginal costing, which state that total cost of the production will
increase or decrease. There will be increase in marginal cost when there is increment in the one
addition of production (Ionescu, 2014). The calculation is given below
Interpretation: From the above table it can be interpreted that marginal cost of Zylla
organisations can be help to increase the production process to reduce the variable production
overhead will be more burden on the organization. The way the sales has been down in the
organisation has to maintain by the organisation. The way the zylla organisation has done the
different practice in the organisation has imp-act on their marginals cost to be effective on the
raw materiel of the productions. The more the organisation will be use their better raw materiel
the production process will be easily save cost.
TABLE 2- Income statement by adopting absorption costing:
When it is concerned about the absorption costing then all the activities and calculation
are done on the basis of manufacturing process. The calculation are as follows:
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Interpretation: From the above table it can be interpret that that manufacturing cost will be
burden on the organisations to bring the various expense on the zylla. As the total variable
expenses will be 1800 which not high but it organisation is affected on the various expense must
be less to save the cost of absorption.
Basis for comparison Marginal costing Absorption Costing
Meaning When it concerned about the
marginal costing, it is the
costing which does not include
any fixed cost, in simple words
it can be said that it calculate
When it is concerned about the
absorption costing total cost
have been taken such as
variable and fixed cost. This
will help to find the total cost
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the overall cost of production.
When it is talked about the
calculation, only variable
overhead have been
considered. Whereas, fixed
cost of production are to be
taken as periodic expenses.
of production. This is called as
absorption costing. In simple
words it can be said that both
of the cost have been covered
such as marginal and fixed
cost.
Cost recognition In this, product cost have been
calculated, on the other hand
periodic cost it considers a
fixed cost.
In order to find the product
cost, variable and fixed cost
have been considered.
Classification of overhead It is categorised in the two cost
that are variable and fixed
It is categorised in the different
cost that are production,
administration, distinction and
selling
Profitability In this profitability is
measured
Profitability is impacted by the
fixed cost
Cost per unit It does not have any influence
on the cost per unit
It has good impact over the
cost per unit of the opening
and closing stock.
Aim The key aim is to find the
marginal costing on the basis
variable costing
The key aim is to find the cost
on the basis of fixed and
variable cost
Highlights Contribution per unit (CPU) Net profit per unit ( NPU)
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TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.
There are several ways of planning the budgetary control, with that every tool have some
advantages and disadvantage, that are as follows:
VARIANCE ANALYSIS: As we know budgets are prepared with the estimated figues and
sometimes these figures are very different from the actual occurred figures due to the uncertain
situation present in the organization. Hence in this the actual figures are compared with the
standard figures and if there are deviation then this method helps in correcting the same.
Advantages Disadvantages
 The key aim of the variance analysis
is to find the difference so that
organisation can easily find the
solution of the problem.
 It helps in creating the relationship
between the different variables in
order to reduce the risk (Ismail and
King, 2014)
 it calculation is based on the variance
analysis so that inefficiency can be
find in the performance
 It is more consuming as compare to the
other tools, this is because different
statistical techniques us being applied.
 The organisation need to hire expert in
order to calculate this costing.
 If it shows the negative deviation, then
effective results can not be finded
RESPONSIBILITY ACCOUNTING: Responsibility Accounting is a system of control where
responsibility is assigned for the control of costs. The persons are made responsible for the
control of costs. Proper authority is given to the persons so that they are able to keep up their
performance.
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Advantages Disadvantages
 This technique helps the organisation
to have proper control over the cost of
production.
 It helps the venture to have
comparison between the budget and
actual figure (Messner, 2016).
 It takes time when there is
classification of cost is done
 In order to do calculation, it takes lots
of efforts and this cause problems in
management.
ZERO-BASED BUDGETING- Zero-based budgeting (ZBB) is a method of budgeting in which
all expenses must be justified for each new period. Zero-based budgeting starts from a zero base
and every function within an organization is analysed for its needs and costs.
Advantages Disadvantages
 It is most accurate method, this is
because it serves more accurate data
as compare to the above two methods.
 It is efficient for the organisation
 It helps in reducing the different
irrelevant activities (Otley and
Emmanuel, 2013).
 It is very time consuming
 Proper human resources and effective
skills are needed to calculate according
to this method.
P5 Methods by which organisation use management accounting to mange financial problems.
Management accounting is the tool by which organisation resolve the problems of
finance and manage the proper tracking of daily operations. By formulating the issue's manager
can make new strategic plans for the betterment of the organisation. Management accounting
helps to manage the economic problems in the organisation as well. Financial problems of the
organisation may give harmful effects and decrease the quality of product and services. Zylla is
the big multinational company and it requires huge amount of funds to manage their expenses.
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Management accounting helps to manage all those expenses(Deegan, 2013). Manager of the
company needs to analyse the issues and try to avoid unwanted activities. There are such
management systems used by Zylla to minimize the financial risk. These are discussed below.
The management accounting skill can be easily used to prevent financial problem in which the
these KPI will be help to plan more accurate in the firm.
Cost accounting system:
This method of management accounting system helps to estimate the cost and
identify the inventories which helps manager to take business expansion plans. Zylla company
has adopted many of this management accounting methods to protect their organisation through
future uncertainties. Because they help to minimize the expenditures and other expenses.
Through this system company pay good amount of incentives to their employees due this happen
employees motivate and give better performance towards organisational goals.
Audit Committee: This aspects state that the audit committee have been assigned by the
organisation in order to audit the organisation resources. Further, they find the different risk
associated with the financial transaction done by the venture. With the help of audit different risk
can be solved by the firm.
Ratio Analyses:
The other management accounting method gives flexibility to identify the present
financial position and the liquidity ratio of the company. It gives to measure the performance and
power to make new strategic plans. From this method Zylla company address the changes and
give positive plans to enhance the business growth. From the use of ratio analysis manager get to
know about the expenses so that they take step to minimize those unwanted expenses through the
system. With the help of ratio analyse manager get lots of data to make next selling plans.
Management accounting system is the function through which company manager their financial
resources(Williams, 2014.). Ratio analysis is the part of methods. With the help of data manager
defines their goals in more sufficient manner and earn maximum profit. For example low
liquidity ratio shows that company have high liabilities in that situation manager control on
debts. On the other side if profitability ratio will decrease in that situation manager needs to
identify the problem and take corrective action.
Lean accounting:
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It is the another method of management accounting to minimize the risk in
financial system. This system guides to identify the manufacturing costs. It helps to control the
manufacturing costs. It identifies the cash inflow and cash outflow of the organisation. Lean
management method helps to reduce the cash outflow and maximize the profit. It helps to utilise
the all resources and accomplish the organisation goals.
Financial Accounting Method:
In this method manager collects information by which they minimize the
problems in effective manner. Financial department is the most important department which
provides funds for the day to day activity(Weil, Schipper, and Francis, 2013.). Funds helps to
expand the business for new product making strategies and other day to day activities. This
method of management accounting helps to measure the position of finance and take better
strategic planning. This method helps to make profitability plan and increasing the profit
opportunities.
Analysis of cost variance:
Cost variance is the another method of management accounting which helps to
identify the cost variance means they analyse the actual cost out of estimated cost. This method
helps to identify the cost effective plans and make new strategies. For business growth. Zylla
company adopt this method to maintain their cost expenses.
The above can be the KPI of organisation which can measure the organisations financial
problems which are important to considered.
CONCLUSION
From the report management accounting it is concluded that for every organisation it is
important to manage their cost in term of fixed and variable for the different process such as
manufacturing and productions. For the organisation it is important for to bring the zero based
budgeting will help to bring the new budget plans. The way the performance ratio by which
manager of the company takes corrective action plans to minimize the risk. The more the
organization will try to reduce their absorption cost will be decrease in the organisation will
helpful in the manufacture cost. It is important for the organisations to manage their budget.
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REFERENCES
Books and Journal
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practices in a lean manufacturing environment. Accounting, Organizations and
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Ionescu, A.M., 2014. The role of the budgetary system in achieving enterprise
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systems in small and medium sized Malaysian manufacturing firms. Journal of
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Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research, 31, pp.103-111.
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Springer.
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Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
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the Ashanti chapter (Doctoral dissertation).
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