Management Accounting System and Control

This assignment delves into the realm of management accounting, focusing on the system's role in organizational control. It discusses how companies like DELL utilize managerial techniques and planning tools to enhance profitability and make effective decisions. The use of management accounting systems is also compared with another company, demonstrating its effectiveness in a competitive market. References are provided from various sources, including books, journals, and online articles.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Concept of management accounting system and their different types use in it................1
P2 Techniques which are essential for Management Accounting reporting..........................2
M1 Benefits of Management Accounting Systems................................................................2
D1 Integration of Management Accounting System and Management Accounting Reporting. 3
TASK 2............................................................................................................................................3
P3 Calculation of cost per unit by using marginal and absorption costing methods..............3
Calculation of cost per unit:...................................................................................................3
M2 Income statement under Marginal costing.......................................................................5
D2 Financial report.................................................................................................................6
TASK 3............................................................................................................................................7
P4 Advantages and Disadvantages of budgetary control.......................................................7
M3 Usage of planning tool's applidcation..............................................................................9
D3 Use of planning tools for solving financial problems.....................................................10
TASK 4..........................................................................................................................................10
P5 Examination with the challenger for choosing management accounting system............10
M4 Management accounting in respond to financial problems...........................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a managerial tool in which manager of an organisation
prepare accounting reports. In the report, all the information will be collected by the manager
and prepared in a managerial report. Organisation use this accounting system to improve the
performance level of an organisation (Ward, 2012). In this report, DELL company is use to make
effective management accounting techniques. This report gives the complete information of
management accounting and their importance in an organisation. It also describes the various
types management accounting system and Computation of cost per unit also explain in this
report. Furthermore, it also helps to prepare a financial reporting by use absorption and marginal
costing techniques. This report includes the advantages and disadvantages of different types of
budgetary tool and planning system. By making comparison of DELL with HP, effective
management accounting techniques are used so that organisation can work more better.
TASK 1
P1 Concept of management accounting system and their different types use in it
In management accounting, it consider all the know-how and idea which are useful to
make effectual preparation, choosing best alternatives among various alternatives which are best
fit for the organisation. To make effective decision in an organisation, all the information is
collected and classified as per such manner that such information can be used appropriately for
an organisation (Vosselman, 2014). Thus, to make effective decision in an organisation,
information is collected, classified and analysed by the manager.
Management accounting is essential for every organisation. Thus, DELL company use
various kinds of systems so that they can measure their performance, identify the risk and use
resources optimally. There are various kind of management accounting system, which are as
follows:
Batch costing: In this type of costing in which group of products and services are
produced which generated the cluster cost. Such cost is not easily identified and it is considered
as the best tool in which cost of batch is transferred to the individual while making the cost
accounting.
Process costing: This type of costing is suitable for those activity in which large number
of homogeneous products are produced by the organisation. In this method, cost of products is
identifying at each stage of production.
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Contract costing: This costing is used to identify the cost of product while making
contract with the customers. In this agreed party make a contract in which both parties are united
upon certain kind of compensate to the institution.
P2 Techniques which are essential for Management Accounting reporting
Cost Report: Cost report all the techniques which is used to calculate the cost of raw
material, labour and overheads. Hence, all this information are recorded in cost report which is a
summarized form, so that it will help the organisation for making effective planning and control
on profits.
Budgets: Budget is very essential of management accounting because by making the
budget organisation can forecast their future activities. It includes collection of all the income
and expenses, so that by analysis these information organisations can identify the future
condition in the market (van der Meer-Kooistra and Vosselman, 2012).
Performance report: In a performance report, it includes the variation between the actual
expenses and income in an organisation. It is a new form of budget, which help to analysis the
deviation in performance by the organisation.
Other reports: It includes all the additional information of organisational activity which
are used by the manager to make comparison of different activities which make positive as well
as negative impact on organisation.
M1 Benefits of Management Accounting Systems
Planning: Management accounting helps to prepare an effective plan for effective
operations which are used by the DELL company. To prepare and implement a plan, company
need to identify the objectives and as per decided objective effective planning helps to
accomplishes such goals and objectives.
Controlling: Management accounting system also help to make effective control on
various kinds of deviation which is generated from actual and standard performance. Through
this accounting methods it helps the DELL company to make effective control in each deviation.
Coordinating: DELL company also make effective coordination between various
departments by use of management accounting system. It makes effective coordination between
production, sales, finance etc. departments for effective functioning.
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Improving the efficiency: Managerial accounting system also helps to improve the
efficiency of the workers as well the it also enhances the profitability and productivity of an
organisation.
Motivating: It is beneficial to motivate the workers as per determining the actual
performance and make a complete reports so that workers can be identified/ classified as per
their skills, capability. In this motivation in the form of monetary and non-monetary also make a
great impact on the employees’ performance level (Simons, 2013).
D1 Integration of Management Accounting System and Management Accounting Reporting
Organisation adopt the new system to perform better so that management accounting is
used by the company. If accounting techniques are used in an organisation so that reporting also
exist. Hence, both the term management accounting system and reporting are related to each
other. If DELL company use the management accounting system, managers of the company
prepare a report for making effective plan, decision and motivate to the employees. Hence, by
using management accounting system is used to make effective management accounting
reporting. By using these techniques, it gives the opportunities to the company to achieve the
competitive advantage by providing quality of services to the customers.
TASK 2
P3 Calculation of cost per unit by using marginal and absorption costing methods
Calculation of cost per unit:
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To figure the cost of part, the results are different by using different method. The
different results are caused due to fixed overhead cost. Fixed overhead cost is a cost which
remain fixed, so that it is used in absorption costing while calculating cost of unit, but on the
other side, it is ignored in marginal costing techniques. While calculating the cost of unit by
absorption costing, it is considered as most suitable method because it includes all kinds of cost
which are generated in production activity. Hence, DELL company also calculate their cost of
unit by using absorption costing method. In this, the full value per unit is calculate by the overall
figure of unit which are produced while preparing an financial gain statements. By using both
methods cost of unit can be calculated:
 Here, Total number of units produced = 5000 units
 By using absorption costing method, it can be = 42 * 5000 = 2100000
 By using marginal costing method, it can be = 32 * 50000= 1600000
By calculating the cost of unit by using absorption and marginal costing techniques, all
the amount is generated is to be deducted from the total sales amount, so that gross profit will be
calculated by this method. If in the question, opening and closing amount are not given then net
profit will be affected. As per the above computation, cost of product is 2100000 and 1600000
by using both the two methods. It is clear that by using the absorption costing the amount of cost
is higher than the amount which comes from marginal costing techniques. Hence, absorption
coasting techniques is considered as a suitable technique of calculating the cost for any kinds of
organisation.
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M2 Income statement under Marginal costing
By using Absorption costing income statement is as follows:
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D2 Financial report
To
Managing Director
DELL Company
Date: 15 June 2017
Subject: Data are accurately implemented by using the costing techniques.
By using both of two methods like absorption costing and marginal costing techniques cost per
unit can be calculated. By using such two methods, the results are occurring differently. As per
above, gross profit is higher by using the marginal costing techniques whereas, on the opposite
side net profit of a company is lower by using the absorption costing techniques. There is
variation of changes can be done because of the use of fixed manufacturing overhead. In
absorption costing techniques, fixed overhead is taken while making the computation, but in
marginal costing fixed overhead does not take while making the computation. In this way, by
using different techniques there will be fraction changes in the company's net profit and gross
profit. It can be said that, absorption costing method is suitable for the DELL company and
company should continue with this method for achieving the growth.
Truly,
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Management Accountant
TASK 3
P4 Advantages and Disadvantages of budgetary control
Budgetary control is a technique, in which it is examined that how a manager can make
effective control in budget. It includes effective planning of budget, so that manager can utilize
the budget appropriately. It also includes the complete monitoring process which are performed
by the manager to check that budgets are allocate in different department appropriately or not.
Hence, by making effective budgetary control, manager can take effective decision and make
effective control in each operational activity.
Merits of Budgetary Control
Definite planning: Budget are based on the definite plan which help the manager to
estimate the actual earning and after that goals can be accomplished.
Enhanced efficiency: By making effective control on budget also helps to increase the
efficiency and also promote the economy (Siegel, 2010).
Proper communication: Budgets are prepared so that after making the budget funds are
allocate appropriately. In addition to this, budgets are constructed by making consultation in
different departments. In this way, it creates a proper communication facility between the staff
members and employers.
Control: By making comparison between actual and standard performance budgeting
make full control in firm's activities.
Co-ordination: By making effective control on budgets helps to make effective
coordination among various departments like production, sales etc.
Delegation of Authority: Budgeting also encourage the delegation of authority and set the
budgets limit by making effective judgement in an organisation.
Motivation: Budgets also provides incentives to the workers, so that by making effective
control in budget helps to motivate the employees.
Maximisation of profit: To make effective control on budget helps to maximize the
profits so that such profits can be used in future.
Forecasting credit needs: By making budgets it helps to determine the need of cash in
various department so that future goals of an organisation can be fulfilled.
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Uniform policy: To make control ion budget is known as uniform policy because this
technique is used in various departments (Parker, 2012).
Demerits of Budgetary Control
 It makes negative impact on relations with labours because budgets are mainly focus on
workforce so that it makes high pressure to the workers by the top-level management.
There is less chances to motivate the employees because pressure make wrong impact in
the recording of data.
 By allocating the funds inappropriately it makes conflicts and create a competitive
position in a various department.
 It only uses historical analysis while comparing the current costs with estimated cost.
 While making a budgetary control, there will be a chance of uncertainty in various
departments like demand of the cash, weather, competition, inflation, techniques etc.
A. Computation of standard cost of PVC sheets
As the present scenario, the standard cost of PVC sheets for production of 4000 keyboards is:
Analysis of deviation between actualized and standard for PVC sheets in industry 4000
keyboards.
B. Computation of material price and quantity variance
The real amount variance is determined from the following formula:
Material Quantity Variance = (Actual quantity* Standard price per unit) – (Standard Quantity*
Standard Price per unit)
MQV = (AQ * SP) – (SQ * SP)
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= (11000 * 3.60) – (10000 * 3.60)
= 3600
The physical cost deviation is ascertained from the following formula:
Material Price Variance = (Actual quantity* Actual price per unit) – (Actual quantity* Standard
price per unit)
= (11000* 3.40) – (11000* 3.60)
= 37400 – 39600
= -2200
M3 Usage of planning tool's applidcation
For fixing a budget of DELL company, there are various kinds of planning tools which
help to make effective forecasting of budgets, which are as follows:
Material price and usage variances: This concentration on value and use of real. The outcome
is adverse in the status of affirmative response and it is approving if the response is antagonistic
(Modell, 2010).
 Physical value deviation – The deviation between standardized outgo and the existent
cost for the real amount of acquisition physical is to be statement as substantial price
deviation. The expression is:
Material price variance= (Actual quantity* Actual price per unit) – (Actual quantity* Standard
price per unit)
 Material usage variance – It is to be ascertained by characteristic the divergence between
standardized amount of physical and actualized amount of physical utilized.
Material usage variance= (Actual quantity* Standard price per unit) – (Standard Quantity*
Standard Price per unit)
Labour rate and efficiency variances: It mainly concentration on revenue enhancement and
work time of labour (Macintosh and Quattrone, 2010.). The affirmative outcome is adverse and
counter effect is approximative
 Working class rate variance – This is measured by calculating the deviation between
actualised work time increased by the existent charge per unit and actualized work time
multiplied by the standardized rate.
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Labour rate variance= (Actual hours*Actual rate per hour) – (Actual hour * Standard rate per
hour)
 Labour ratio variance – This deviation calculates the deviation between actualized period
of time and modular unit of time calculate by the modular rates.
Labour efficiency variance= (Actual hours*Standard rate per hour) – (Standard hours*Standard
rate per hour)
By calculating discrepancy, DELL can determine the deviant and capable to take disciplinary act
if required for the administration.
D3 Use of planning tools for solving financial problems
Activity Based Budgeting: This technique helps to calculate the income which are created
from research activity. With help of ABC techniques, DELL company can divide the cost of
overhead so that it can reduce the wastage of cost which are unnecessary done by the company.
Balanced Score Cards: BSC is a framework which are used in identify and manage the
strategies of an organisation. In this, two indicators are used by the organisation like leading and
lagging. Such indicators help the company to determine their goals which are accomplished or
not and they also synthesis the right way to increase their profits.
Value chain Analysis: To identify the internal activities value chain analysis can be
applied by the organisation. By using this, company can determine that which activity is best for
the organisation. Hence, by analysing the value chain company can creates the value for the
customers and also maximise their profits (Kaplan and Atkinson, 2015).
TASK 4
P5 Examination with the challenger for choosing management accounting system
DELL HP
1. For taking the advantage of competitive
position and improving their core
competencies DELL company uses the
management accounting system.
2. There are various kind of planning tools
which are used to determine the opportunities
of success in the external environment.
1. The working style of HP is different from
DELL company but company also use the
management accounting techniques.
2. To calculate the profits company also use
marginal costing techniques.
3. Report of the company also examined the
effectual situation and interpret the plan as per
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3. Company also prepare a report which is a
part of management accounting so that
company can analysis the situation of various
departments and take effective decision which
are beneficial for the company.
4. Company also find out the deviation with
the use of variance analysis.
5. To analysis the future sales, sales budget
also prepared by the company. In this way,
manager can determine the chances of making
high sales by providing standard products.
the situation.
4. To maintain the profit margin, HP estimate
the sales plan which shows mostly positively.
Hence, company try to maintain their strength
and improve the level of functioning.
M4 Management accounting in respond to financial problems
It is a technique which the organisation to solve their various kinds of financial problems
(Busco and Scapens, 2011). This is based on cost and financial accounting, so that all these two
accounting methods helps to make effective financial solution of any organisation. While
preparing a managerial report, manager can find out the financial problems that in which areas
lack of finance are held. There are various kind of financial problems which DELL company is
faced. It includes increase in debt, shortage of funds, increase in cost, lack of working capital
requirement etc. All these problems are identified with help to management accounting
techniques. By allocation of resources appropriately and optimally, all the financial issue can be
resolved. By taking right decision at the right time and in an appropriate manner help the
organisation to achieve their pre-determined goals.
CONCLUSION
Management accounting is an essential tool for any organisation. It also increases the
efficiency of employees as well as organisation too. In this DELL company, manage their
activity by using the managerial techniques. The use of planning tools helps the organisation to
make effective planning and also help to make decision- making process which enhance the
profitability of a company. By making comparison with another company, DELL also analysis
their actual position in a competitive market. Hence, company use the management accounting
system which shows the effective control in their operational framework (Bennett, Schaltegger
and Zvezdov, 2013).
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REFERENCES
Books and Journals
Bennett, M. D., Schaltegger, S. and Zvezdov, D., 2013. Exploring corporate practices in
management accounting for sustainability (pp. 1-56). London: ICAEW.
Busco, C. and Scapens, R. W., 2011. Management accounting systems and organisational
culture: Interpreting their linkages and processes of change. Qualitative Research in
Accounting & Management. 8(4). pp.320-357.
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.
Modell, S., 2010. Bridging the paradigm divide in management accounting research: The role of
mixed methods approaches. Management Accounting Research. 21(2). pp.124-129.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1). pp.54-70.
Siegel, G., and et.al., 2010. The ongoing preparation gap in management accounting education: a
guide for change. Management Accounting Quarterly. 11(4). p.29.
Simons, R., 2013. Performance Measurement and Control Systems for Implementing Strategy Te
xt and Cases: Pearson New International Edition. Pearson Higher Ed.
van der Meer-Kooistra, J. and Vosselman, E., 2012. Research paradigms, theoretical pluralism
and the practical relevance of management accounting knowledge. Qualitative Research in
Accounting & Management. 9(3). pp.245-264.
Vosselman, E., 2014. The ‘performativity thesis’ and its critics: Towards a relational ontology of
management accounting. Accounting and Business Research. 44(2). pp.181-203.
Ward, K., 2012. Strategic management accounting. Routledge.
Online
Advantages and Disadvantages of Budget Control. 2014. [Online]. Available
through:<http://www.strategic-control.24xls.com/en211>. [Accessed on 21st March 2017].
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Management Accounting-Introduction. 2017. [Online]. Available
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