Comparison of HP and Dell in Management Accounting

The assignment provides a comparison between HP and Dell in the context of management accounting, specifically focusing on decision support heuristics for cost estimation models and key performance indicators. It also references relevant studies and research papers on management accounting practices, including lean manufacturing and firm performance, gender budgeting, and strategic management accounting.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
P1 Explaining Management Accounting, its systems and essential requirements .....................1
P2 Assessing different method that can be used for management accounting reporting ...........2
P3 Analysing the income statement for Dell on the basis of various cost techniques................3
P4 Determining the merits and demerits of different kinds of Budgetary control systems as
well as planning tools..................................................................................................................4
P5 Performance appraisals..........................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting tools and techniques are highly significant which in turn
provides high level of assistance in monitoring internal operations as well as functions. In the
recent times, company can provide customers with quality products at suitable price only when it
has effectual control on cost. Besides this, research and development becomes the prior
requirement of business unit. In this regard, firm can manage funds and would become able to
make optimum use of funds through using the tools as well as techniques of managerial
accounting. The present report is based on the case situation of Dell computers which will
provide deeper insight about the systems of management accounting and its requirement within
the firm. Further, report will highlight the costing system either marginal or absorption will
prove to be fruitful for Dell. Along with this, report also entails the tools that can be undertaken
by Dell for planning purpose. Such report also exhibits the manner in which management
accounting system helps in dealing with financial problems.
P1 Explaining Management Accounting, its systems and essential requirements
Management accounting (MA): It may be served as process that is highly concerned with
the preparation of managerial reports that furnishes accurate and timely information to the
managers. By undertaking such information manager would become able to appropriate short
and term decisions. MA tools and reports provide high level of assistance in making forecast
about the near future (The Role of Management Accounting in an Organization, 2017). Along
with this, techniques of MA assist in taking suitable make-buy decisions. In addition to this, MA
tools help firm in understanding performance variance and gives indication in relation to taking
strategic measure or action for improvement.
Types of MA system’s and its essential requirement
 Job costing: It lays emphasis on recording cost that is related with the manufacturing
aspects rather than process. Through undertaking the system of job accounting,
management accountant can keep record of expenses incurred and would become able to
track the same. Thus, by maintaining data set and evaluating the same firm would
become able to assess the areas where cost level is high. Considering all such aspects it
can be stated that job accounting system helps in assessing irrelevant operations and
thereby helps in controlling cost.
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 Cost accounting: This system of MA focuses on recording cost that is incurred or
associated with the manufacturing or offering of products or services. Such system of
MA enables firm to ascertain unit cost and do profit planning. By using the system of
cost accounting firm can take suitable pricing decision and would become able to get
desired level of profit margin.
 Inventory management: By using tools and techniques of EOQ, JIT etc business unit can
ensure effective stock management. Moreover, EOQ entails the level to which inventory
needs to be maintained within the firm. This system of inventory management is highly
significant which in turn helps firm in ensuring smooth functioning of operations
(Fullerton, Kennedy and Widener, 2014). Nevertheless, unavailability of enough raw
materials may result into delay in the production activities and overall output.
 Price optimization: Such system of MA helps in understanding and evaluating the
behavior of customers at different price level. Thus, using such model firm can get
information about customer’s reaction and become able to appropriate pricing decision.
P2 Assessing different method that can be used for management accounting reporting
Managerial reports are highly significant which in turn provides summary report of
monetary performance pertaining to each department. By preparing managerial reports on a
daily, weekly basis etc business unit can assess the areas that require improvement. In the present
era, every business unit lays emphasis on the preparation and evaluation of managerial reports
which in turn aid in suitable and strategic decision making. Main managerial reports that can be
prepared by the firm for monitoring performance are enumerated below: Budget or performance report: This report contains information about the extent to
which standards are met by the firm. In this, manager records the reasons due to which
firm failed to meet the budgeted figures. Hence, by identifying the reasons pertaining to
deficiencies firm can assess the action needs to be taken for the purpose of improvement
(Kaplan and Atkinson, 2015). Such managerial report provides high level of assistance to
the manager in developing suitable financial plan for the upcoming time period. Inventory report: This report provides information to the manager about cost and
wastage level of inventory. In this, on the identification of high cost as well as wastage
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firm can investigate the reasons behind the same and would become able to take action
for the improvement in terms of organizing training & development session.
 Accounts receivable or ageing report: By preparing such report, manager can get
information about the time period within which debtors are making payment. From
assessment, it has been identified that working capital position of the firm is highly
influenced when receivable period is high. In this regard, by making evaluation of such
report business organization can take decision whether they need to tighten the credit
policies or not (Simons, 2013). In this way, by taking suitable decision business
organization can improve and manage working capital in the best possible way.
Hence, by preparing as well as undertaking all the above report manager can make
contribution in the attainment of goals through the means of strategic framework or decision
making.
P3 Analysing the income statement for Dell on the basis of various cost techniques
Marginal cost technique:
Particulars Amount
Revenues (40000*67.50) 2,700,000
Less; COGS
Opening inventory 0
Add: cost of
manufacturing
(50,000*32) 1,600,000
Less: closing stock (10000*32) 320,000
COGS 1,280,000
Variable selling &
admin. exp
240,000
Contribution (2,700,000-
1,280,000-
240,000)
1,180,000
Less: fixed Selling &
admin exp
600,000
Fixed manuf. exp 500,000
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Net operating Revenue 80,000
Absorption costing:
Particulars Amount
Revenues (40000*67.50) 2,700,000
Less; COGS
Opening inventory 0
Add: cost of
manufacturing
(50,000*42) 2100000
Less: closing stock (10000*42) 420,000
COGS 1,680,000
GP (2,700,000-
1,680,000)
1,020,000
Less: Selling & admin
exp
840,000
Net operating revenue 180,000
In accordance with both the costing techniques it will be said that there Absorption
costing technique will be beneficial for Dell managers in terms with having the adequate revenue
gathering and profitability. This method reflect 100000 net operating revenue for the business
which will be beneficial in terms of making operating expenditures.
P4 Determining the merits and demerits of different kinds of Budgetary control systems as well
as planning tools
In terms of making the increment in the operational activities of organisation there will be
requirement of various planning tools that will help in better decision making. On the other side,
the various budgetary control systems which in turn helps in making the adequate improvements
in the business operations (Ramljak and Rogošić, 2012). Therefore, in terms making the
adequate increments in the activities of Dell there is need to analyse such budgets and their
merits or demerits. However, it will be beneficial for managers in terms of making the adequate
decisions as well as plan for the operational development.
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Zero based Budgeting: In this technique the budgets are being presented by the
professional on the basis of considering the future prospectives, needs and demand. Thus, it can
be understand as the budgets were developed by not considering the previous expenditures of
past costs, demands and sales, but it consists of the demand going to be incurred in the coming
time (Macintosh and Quattrone, 2010). Therefore, it starts with zero balance for the budgets and
consider all the component at the zero level. Therefore, this budgeting technique will have
profitability ad drawbacks which are need to be determining by Dell's professionals in terms of
implementing such method in the operational practices.
Advantages:
 These are the flexible and can be modified or adjusted as per the requirements in the
operational aspects.
 It facilitates the zero balance to all the operations which in turn helpful In having the
lower costs and disciplined business activities.
 It will be beneficial for the non for profit organisations and the small size enterprises.
Disadvantages:
 There will be huge chance of having the manipulation as well as the personal motives of
professionals (Hopper and Bui, 2016).
 This process is very time consuming and do not come up with the adequate requirements
of funds and finance for the business process. There will be requirement of large amount of investments in order to complete any
industrial operation.
Incremental Budgeting: In accordance with this technique the budget is set to be made in
accordance with making the budgets as per the rise in the requirement ans the variation in the
rate, prices of products thus as according to the name of such method the budget is set be over
incremental state whereas, it measures the demand and sales in the coming time will be increased
(Givoly, and et.al., 2017). Therefore, there will be increment in the costs or expenses in the
current which will be beneficial for Dell's professional in terms of determining excepted costs of
making the effective plans to in terms with competing with such requirements.
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Advantages:
 It is the less complex and the easiest way of measuring the costs and expenses for the
future business operations.
 It can be achieved and prepared by various department in the organisation in context with
achieving the costs derived targets
 It helps in making the promptness in the operational activities as well as brings the
consistent funding requirements for all the units in entity (Feng and et.al., 2017).
 These techniques have been implemented by various companies in terms with reducing
the competition in the market.
Disadvantages:
 This is the most expensive tool as the managers or professional in the organisation will
start more over the budgets then spending over the operational activities. It provokes the Budgetary slack which in turn reduces the revenue growth and
reciprocally rises the expenses of business.
Fixed Budgeting: This budgets do not change in accordance with the time and
requirements. Therefore, in consideration with the name of such budgets these are fixed and less
flexible which in turn do not affect the managerial decisions (Downes, von Trapp and Nicol,
2017). The managers or professionals in Dell will make the adequate decision at the very first
level which are need to be adequate and appropriate. It helps in not making variations as well as
changes in the assigned costs over such activities. However, there will be various merits and
demerits of such budgeting techniques as:
Advantages:
 Due to fixed nature these budgets are having the most appropriate or accurate profit
measurement which in turn helps managers in determining the adequate gains over such
fixed budgets.
 It helps in enhancing the performance of the business and the workforces which are
making the adequate efforts in the organisational operations (Dewa and et.al., 2016).
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 The costs over such operations were decided previously and it is fixed then there is no
need of implementing any further deepness so the costs are always lower than compared
to the other budgetary techniques.
 If there is requirement of making changes than it will be under the limits of such fixed
criteria of costs or budgets.
Disadvantages:
 The main obstacle due to such budgets are the mobility and flexibility of budgets are not
been facilitated. Therefore, at the time of increase in demand and consumer requirements
there will be less availability of funds. It is based on comparing the numerical data or variations during the past period which is
not fruitful for the business development and growth.
Activity Based Budgeting: These techniques will be helpful in determinate or allocating
the costs over various operations of the business which depended over the overheads expenses
incurred by firm during a period. The professional in the organisation will be beneficial in terms
of acquiring adequate costs over such activities of organisation (Zaleha Abdul Rasid and et.al.,
2011). Therefore, with the help of such tool managers at Dell must allot or allocate costs to each
operational activities of business. These are need to be done by the proper management as it is
helpful in measuring the costs of each activities.
Advantages:
 It is the most simple and accurate technique which helps in determining the costs of each
departments or units of business such as sales, purchase and distributional channels.
 This the easiest way of determining costs and preparing such budgets (Wu and Boateng,
2010).
 It supports the various performance indicators such as KPI, balance score card,
benchmarking. These will be beneficial for the firm in context with determining the
adequate costs for each business operations.
Disadvantages:
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 In order to make the successful application of such resources there will be need of having
the substantial resources which in turn cannot be affordable by any small scale units.
 It does not follow the internationally set accounting principles such as GAAP. So it can
be said that the outcomes derived form such budgets did not meet the adequate
requirement of business operations (Ward, 2012).
 There will be chances of having manipulation as the data set is not based on the
accounting standards and it did not reflect the reliable information to the professionals in
the firm so the misinterpretation will be incurred.
A Computing the standard costs for keyboards:
Particulars Amount
PVC Sheet cost for per Keyboard 3.6
Keyboard requirement for the PVS sheet per
feet
2.5 feet per keyboard
Units 4000
Actual cost 1100feet=37400 GBP
Material variance: Budgeted cost-actual costs 36000-374000
Adverse 1400GBP
B Analysing the material prices and quantity variances:
Particulars Amount
Material price variance= AQ*(SP-AP) 10000 feet (3.60-3.40)= 2000 F
Material usage variance= AP(SQ-AQ) 3.4(10000-11000)= 3400 A
MCV= MPV+MUV 2000 F+ 3400 A= 1400 A
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P5 Performance appraisals
In accordance with analysing the performance of Dell in comparison with the rivalry firm
Dell. However, this will help in determining the which technique is most useful in enhancing the
operational performance of business. The healthier performance will be selected by the firm in
terms of making improvement in the cost retention, profit maximisation, meeting the targets etc.
Key performance Indicators:
It helps in measuring the performance of the various department in the organisation on
the basis of their outcomes. In this, the performance of the operational tasks in the premises such
as production process, revenue generation, marketing of the brand are measured on which the
managers of professionals make plans for the future development (Vasile and Man, 2012). Dell
used to follow such techniques which helps it in monitoring the performances of all the
department in the organisation.
Financial Governance:
It consists of allotting duties and responsibilities of the managers or heads in the
organisation to make the adequate performances. Therefore, it can be said that, the heads of such
units will have overall governance of the business performances which are focusing over the
financial requirements such as funds, investments or costs in such operations (Schäffer, 2013).
However, HP uses this technique in terms of allotting the responsibilities and duties to the
departmental heads which in turn produces the reports of the business operations.
Balance scorecard:
This can be known as making the record of all the industrial transactions which in turn
helps in enhancing the organisational efficiency as well as motivate the workforce to make the
efforts in terms of attaining the goals. This technique will be beneficial for the firm in terms of
acquiring the healthy measurements of performances (Macintosh and Quattrone, 2010). These
techniques are being used by HP to record all the necessary transactions of business or workforce
performance. Therefore, with the help of such tools the business will enhance the quality
performance and retention of
Bench marking:
To set the small aims and objectives which in turn helpful for the business in accordance
with acquiring the huge success in the future. Therefore, in this context the managers of firm set
small targets and motivate the workforce in terms of making efforts to attain such small targets
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which will be beneficial for the organisation in terms of attaining the growth in this rivalry world
(Ramljak and Rogošić, 2012). However, this technique has been used by the Dell in terms with
motivating the staff as well as completion of work within limit.
CONCLUSION
As per the above report study, it will be said that management accounting will be
beneficial in terms of enhancing the decision making techniques for the organisation. Dell will
be profitable if the managers in the firm use the budgetary and costing techniques into
operations. Therefore, it will improve the quality of operations in firm. Further, the report is also
consisted of eventuating various performance appraisals which will help in making the efficient
development of performance of business. The comparison was held between HP and Dell in
context with facilitating the fruitful performance appraisals.
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REFERENCES
Books and Journals
Dewa, M. T. and et.al., 2016, October. DECISION SUPPORT HEURISTICS FOR COST
ESTIMATION MODEL FOR INJECTION MOULDS. In Institute for Industrial
Engineering Conference (p. 163).
Downes, R., von Trapp, L. and Nicol, S., 2017. Gender budgeting in OECD countries. OECD
Journal on Budgeting. 16(3). p.1.
Feng, S. C. and et.al., 2017, June. PROCEDURE FOR DEVELOPING KEY PERFORMANCE
INDICATORS FOR SUSTAINABLE MANUFACTURING. In ASME 2017
International Manufacturing Science and Engineering Conference.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management. 32(7). pp.414-428.
Givoly, D. and et.al., 2017. Information Content of Key Performance Indicators and the
Properties of Their Analyst Forecasts.
Hopper, T. and Bui, B., 2016. Has management accounting research been critical?. Management
Accounting Research. 31. pp.10-30.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Macintosh, N. B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Ramljak, B. and Rogošić, A., 2012. Strategic management accounting practices in
Croatia. Journal of international management studies.7(2). pp.93-100.
Schäffer, U., 2013. Management accounting research in Germany: from splendid isolation to
being part of the international community. Journal of Management Control. 23(4).
pp.291-309.
Simons, R., 2013. Performance Measurement and Control Systems for Implementing Strategy
Text and Cases: Pearson New International Edition. Pearson Higher Ed.
Vasile, E. and Man, M., 2012. Current dimension of environmental management
accounting. Procedia-Social and Behavioral Sciences, 62, pp.566-570.
Ward, K., 2012. Strategic management accounting. Routledge.
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Wu, J. and Boateng, A., 2010. Factors influencing changes in Chinese management accounting
practices. Journal of Change Management. 10(3). pp.315-329.
Zaleha Abdul Rasid, S. and et.al., 2011. Management accounting and risk management in
Malaysian financial institutions: An exploratory study. Managerial Auditing Journal.
26(7). pp.566-585.
Online
The Role of Management Accounting in an Organization. 2017. [Online]. Available through:
<https://www.invensis.net/blog/finance-and-accounting/what-is-management-accounting-
and-its-importance/>.
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