Management Accounting Tools for Dell Company

The provided report discusses how Dell can enhance its performance by utilizing effective management accounting tools. It calculates net profits using marginal and absorption costing methods and utilizes various budgetary tools to improve business growth. The report emphasizes the importance of sound organizational systems, such as financial governance, to control diverse financial problems affecting profitability and growth.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and its essential requirement of its diverse types of systems...1
M1...........................................................................................................................................2
P2. Explaining diverse methods used for management accounting reporting........................2
D1...........................................................................................................................................3
TASK 2............................................................................................................................................3
P3. Net profit as per absorption and marginal costing approach............................................3
M3 & D1.................................................................................................................................4
TASK 3............................................................................................................................................4
P4. Explain advantages and disadvantages of diverse kind of planning tools implemented used
for budgetary control..............................................................................................................4
M3...........................................................................................................................................5
D3...........................................................................................................................................5
TASK 4............................................................................................................................................6
P5. Management accounting systems in order to respond financial problems.......................6
M4...........................................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management Accounting is a tool which is used by the firm in order to make sustainable
development. However management accountant helps the company for making their business
objectives attainable. In this report, the management accountant uses their available resources in
an optimum manner. So that the sustainable development can be achieved. This report is based
on the Dell company. Under which the cited company would use their resources in an effective
manner. Management accountant in Dell Company optimises their net profits by using
absorption and marginal costing approach. Various advantages and drawbacks of the planning
tools are used by the MA for budgetary tools.TASK 1
P1. Management accounting and its essential requirement of its diverse types of systems
Management accounting is the process by which its comprises various decisions, making
plans and performance management systems and rendering expertness in financial reporting and
controlling. In other words, this can be said that this is the process of incorporating management
report for the firm which renders adequate financial and statistical information needed by the
managers to incorporate regular and short term decisions. However, financial accounting is the
process which records, classified and summarised financial transactions as per the generally
accepted principles of accounting (Advanced Management Accounting, 2017).
Financial Accounting records cash and credit transactions of organisations as per the
nature of expenses and income so that financial statements can be made and that would further
help various stakeholders for making their business decisions effective and efficient. This is the
reason, management accounting provides data for internal use. While, on the other hand, in
financial accounting, this provides data for the external users. FA incorporates adequate and
timely data. While on the other hand, MA stresses on the relevancy and flexibility of data.
The main users of management accounting reports are internal employees of company.
While, on the other hand, users of the financial accounting reporting are mainly outsiders.
Cost Accounting System: This is the cost accounting system which totally relied upon
total cost of production. Management accountant by using this system reduces cost of
production by avoiding wastage of cost. This is mostly used by the firm which has
manufacturing units.
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Inventory Management System: This is the system through which the management
accountant optimises the inventory so that he could use company’s resources in an effective
manner.
Job- Costing System: This is the process of costing in which flow of costs is traced by the
job. This system is an adequate one under which direct costs can be determined with certain units
of production.
Price-Optimizing System: This is the tool in which price of the product is determined by
consulting from diverse customers. This is the use of mathematical analysis by organisation in
order to identify how consumers would respond to diverse channels. This is likewise to identify
prices that the organisation identify and this would attain the objectives like- optimising
operating profits.
M1
Management accounting system is the most important tool which reduces the wastage costs
from the unit cost. In addition to this, cash flow of company can be improved effectively. Senior
manager would take effective decisions by taking the help of management accounting system.
P2. Explaining diverse methods used for management accounting reporting
There are various kinds of management accounting reports which are used by the firm in
order to gain sustainable development. Some of them are mentioned hereunder:
Budget Report: This report is an internal report which is used by management for
comparing the budgeted figure and with actual data during the period (Macintosh and Quattrone,
2010). On the other hand, a budget report is framed in order to compare how close budgeted
performance was to actual performance at the time of accounting period.
Operating budget: This is the operating budget in which all the expenses and income
which are related to the operating process are concerned. However, this can be said that
operating budget is totally relied on the past performance of the company.
Accounts Receivable Aging: This is the process of identifying customers who are willing
to pay on time and others who are not. This assessment helps in forming bad debts and in
forming credit guidelines.
Job cost Reports: This report is broken down in various categories which are Labour
Cost, Material Cost, Subcontractor Cost, Field Overhead and Liquidated Damages (Kotas, 2014).
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Inventory and manufacturing report: This is the report which comprises of all details
that are related to inventory. This is an effective report for knowing all the details related to the
management of the firm.
Profit and Loss statement: This is the statement which comprises of all the details related
to the profit and loss of the company during a particular period of time.
D1
Management accounting system and the MA reporting are inter-related to each other as
this can be rightly observed that the with the help of MA systems, reports are made in an
effective manner which would further integrate company’s process.
TASK 2
P3. Net profit as per absorption and marginal costing approach
Particulars Per unit cost Total Costs
Direct Materials (200000units) £ 20 4,000,000
Direct labour (200000 units) £ 8 1,600,000
Variable manufacturing
overheads (200000 units)
£4 800,000
Total variable costs (200000
units)
£32 £ 6,400,000
Fixed manufacturing costs £200000
Cost of goods sold £6,600,000
Net profit as per absorption costing:
Total sales (45*200000) £9,000,000
Less:COGS £6,600,000
Gross Profits
Less: Selling and Administration
£2,400,000
Operating Income as per Absorption
Costing
£2,400,000
Net profit as per Marginal Costing:
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Total Sales £ 9,000,000
Less: Marginal cost of goods sold £6,400,000
Contribution for the period £2,600,000
Less: Fixed manufacturing overheads £200,000
Net profit as per the marginal costing 2,400,000
M3 & D1
This has been seen that the net profits as per the absorption costing and marginal costing
are the same but the gross profits as per the absorption costing and contribution is totally
different. Gross profits as per the absorption costing is calculated as 2,400,000. But contribution
as per the marginal costing is calculated as 2,600,000. TASK 3
P4. Explaining advantages and disadvantages of diverse kinds of planning tools implemented for
budgetary control
Planning tools are the crucial components which are implemented for their budgetary
controls. These are the efficient tools which are used by the firm for emerging sustainability.
There are certain tools which are mentioned hereunder:
Forecasting tools: This is a kind of planning tool which helps company’s management in
its attempts for correlating along with future contingencies which is totally relied on the data
from earlier and existing analysis of the trends. This can be said that forecasting can be started on
the basis of assumption which totally depends on the management’s experience. There are few
examples of this tool such as Delphi technique, regression analysis and trend projection.
Advantages:
Forecasting is the crucial tool which is implemented by company for satiating the pre-set
targets. Although, forecasting tools assist company to forecast an amount of revenues and
expenses. Henceforth, company will implement them for budgetary control.
Disadvantages:
Forecasting is based on the assumption as this does not always reflects the exact
predication for the firm. If the company would implement this tool, then in that case,
organisation would form false budgets which would finally influence the pre-set targets.
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Scenario tools: This is the stranded tool for managers for assessing alternative opinion of
what happened in the forthcoming year as this helps in strategic, functional and financial
planning (Herzig and et.al. 2012). As this provides answers to three questions about: What about
happened?, what would influence on our strategies?, How the organisation respond? By
implementing these tools, company can respond these issues.
Advantages:
By using scenario planning, company’s managers’ investigate the choices and
opportunities. This starts enhanced quality strategy plans and this also enables a conscious
apprehension of the sensitivity of key crucial drivers of the company and possible influence of
the future outcomes.
Disadvantages:
This does not always render an effective provided forecasting values which could be
implemented by the organisation. This is the time consuming procedures as this incorporates
majority of the time for making planning tool.
M3
For enhancing the efficiency and achieving optimum benefits from the resources,
company can implement diverse planning tools that can overcome issues and form essential
decisions by implementing satisfactory budgets.
D3
The firm performance is depends upon the finance division which is totally accountable.
The finance manager could incorporate decisions on relying the current and last year
performance. This can be said that financial issues could negatively affect performance of the
company. This is evaluated that financial problems could influence company’s performance.
However, this is the most effective tools for managers to identify all those financial problems
and incorporate essential steps for attaining future sustainability. Balanced Score-Card is a
crucial tool which could be implemented for resolving financial issues which emerge in the
future.
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TASK 4
P5. Management accounting systems in order to respond financial problems
This can be emerged to have the essential information which are available. Henceforth,
this can be said that the performance can be assessed and this can be determined that this could
be attainable or not (DRURY, 2013). Budgetary control system is a suitable tool which assists in
facilitating control system in the entire firm’s operation. Dell can keep an effective control in the
cash flows by using management accounting systems. By introducing them, the desired
profitability can be achieved.
Comparison between Dell and Lenovo:
Basis of comparison Dell Lenovo
Desktop Comparison This is the largest
manufacturer in US along with
the larger market share. This
provides high quality desktop
which are required to made
effective comparison.
This offers the traditional
desktops which cover all in
one professional-grade
workstations and server
computers.
Quality and Reliability The quality of the Dell is of
finest level which emerges
great opportunity for attaining
the market worldwide.
This offers consumers superb
value and selection. Lenovo
laptops are made of quality
standards for enhancing
reliability, durability.
Some of the tools for responding financial problems are defined in detail:
Benchmarking: This is the system via which Dell’s administrative authorities set standard
outcomes in front of business team and also ask them to emerge at the similar output. Such kind
of act looks like a similar objective for each organisation and everyone is striving hard to attain
it. Entire available resources of the firm renders so that no issues is faced out by the business
members. An appropriate time is provided to the manufacturing department in order to attain the
pre-set targeted benchmark.
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Financial governance: For operating the business in an optimum manner, this is crucial
that all activities are performed in an effective manner which they are regulated by it. Financial
governance is an effective tool via which dell can be directed and regulated via financial
transactions (Arroyo, 2012). Via this process, the outcome achieved by each employee is
achieved and compared with its desired outcome in order to improve those areas which are
identified and after that adequate planning can be made.
M4
This is observed that there are basically diverse financial problems which affect the firm’s
profitability and growth. Pre-set objectives cannot be fulfilled in the standard time frame. For
controlling all these issues, firm is required to have a sound organised system. Financial
governance is one of the other tools which comprises of many policies and norms that are made
by government for smooth flow of organisation.
CONCLUSION
From the above mentioned report, this can be said that the dell company can improve
their performance by using effective management accounting tools. In this report, net profits are
calculated as per the marginal and absorption costing method. Also, various budgetary tools are
used for improving the performance of company.
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REFERENCES
Books and Journals
Arroyo, P., 2012. Management accounting change and sustainability: an institutional
approach. Journal of Accounting & Organizational Change, 8(3), pp.286-309.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Herzig and et.al. 2012. Environmental management accounting: case studies of South-East Asian
Companies. Routledge.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Macintosh, N. B and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Otley, D and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Online
Advanced Management Accounting. 2017. [Online]. Available through:
<http://www.bristol.ac.uk/efm/courses/undergraduate/units/level3units/efim30003.html>.
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