Importance of Management Accounting Tools for Solving Financial Problems

MANAGEMENT ACCOUNTING
Contents
1

Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK2.............................................................................................................................................4
P3Calculation of absorption and marginal costing......................................................................4
M2 Applying managing accounting reports................................................................................6
D2 Financial report and interpretation of its data........................................................................6
TASK3.............................................................................................................................................6
P4 Description of various types of planning tools benefits’ and drawbacks...............................6
M3 Uses of planning tool for forecasting budget........................................................................8
TASK4.............................................................................................................................................8
P5 Discrimination of importance of management accounting tools for solving financial
problem........................................................................................................................................8
M4 Uses of managing accounting for sustaining organization success....................................10
D3 Assess how planning tools for accounting react appropriately to solve economic problems
to lead business entity to sustainable achievement....................................................................10
CONCLSION................................................................................................................................11
REFRENCES.................................................................................................................................11
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INTRODUCTION
Management accounting is a tool in which data are identify, calculated, recorded and
analysis in systematic way through which manager can able to take decision regarding their
future policies . In this report Prime Furniture has been select for the research , this report
includes the uses of costing technique to calculate cost and various types of planning tools which
are used for formulating of polices and taken effective decision. This report also contains the
uses of managing accounting methods in order to recognize cause of financial problem and make
policies to overcome the problems.
TASK2
P3Calculation of absorption and marginal costing
Management accounting technique: In management accounting system various techniques has
been used by corporations to identify cost and formulate statement of costing and profits.
Manager of Prime Furniture use following techniques (Dogenski, Ferreira and de Oliveira,
A2016).
Cost volume analysis: In these technique different types of methods for calculation of cost has
been defined. Job costing, process costing, marginal costing, standard costing. With the uses of
theses techniques manages able to determine their budget cost of production and standard cost.
Absorption costing: This also known as direct method of costing. N absorption costing method
managers use variable and fixed both type of item during calculation of profits.
Notes Year 1
£ £ £
Sales 66,000
Cost of sales:
Opening Stock* - 10
Add total production costs:
Variable overheads 50,700 42
Fixed production overheads 15,600 13
Less closing stock** 1,2 10,200 3
3

Cost of sales 56,100
Gross profit 9,900
Less: Selling & Administration Costs(fixed) 5,200
Interpretation: If Prime Furniture se absorption costing method for calculation of profit then
value of net profit of the organization will be 4700 for one year and 16100 for the next year.
Marginal costing: This is very essential part of managing accounting. This type of costing only
considered variable item of organizational activities thus it also known as variable costing. It
provides basis to calculate break even analysis, margin of safety and relationship between
variable of the statements (Shinyie, Ismail, and Jemain, , 2014).
Notes Year 1 Year 2
£ £ £ £
Sales 66,000 7
Marginal cost of sales:
Opening Stock - 7,800
Add variable production costs:
Variable 50,700 42,900
Less closing stock 1, 2 7,800 2,600
Marginal cost of sales 42,900 4
Fixed manufacturing costs 9,000
Selling & Administration Costs(fixed) 5,200
Gross profit 8,900 1
Interpretation: If the manager of Prime Furniture apply marginal costing method then the
organization will be able to generate 8900 profit in first year and 16900 profit in the next year.
Product costing: This type of costing technique is utilized by business organization in order to
identify the cost of manufacturing products. It includes cost of each item. The main reason of
using this costing technique in the organization is to determine the cost incurred during every
product and which item charge higher rate of cost .This will useful to reduce external cost and
making effective policies.
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