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Management Accounting : Renishaw Plc

   

Added on  2021-02-20

29 Pages6079 Words49 Views
MANAGEMENT ACCOUNTING

Table of ContentsINTRODUCTION ..........................................................................................................................3MAIN BODY...................................................................................................................................3L O 1................................................................................................................................................3P1) About management accounting and various types of systems for management accounting ......................................................................................................................................................3P2) Various methods for management accounting reporting......................................................6LO 2.................................................................................................................................................8P3. Calculation of costs to prepare an income statement using marginal and absorptioncosting.........................................................................................................................................8ANNEXURE A...........................................................................................................................8ANNEXURE B.........................................................................................................................19LO 3...............................................................................................................................................20P4. Advantages and disadvantages of different planning tools used for budgetary control.....20ANNEXURE C.........................................................................................................................22LO 4...............................................................................................................................................24P5. Comparison of organizations adapting to management accounting systems......................24CONCLUSION .............................................................................................................................26REFERENCES..............................................................................................................................27

INTRODUCTION Management accounting refers to the use of professional knowledge, abilities and skillsfor producing the accounting information so that, the information will support the managementof the organization in developing the policies and also support in formulating the plans relatedwith various operations of the company. It also supports the manager to monitor and control theworking of different departments of the firm(Alaeddin, O. and Thabet, 2018). The Report isbased on Renishaw Plc. The firm belongs to engineering industry. It was founded in year 1973.Key peoples of the company are John Deer, David McMurty etc. Renishaw Plc is headquarteredin Gloucestershire, UK. Firm is specialized in machine tools, motion control etc. It offers itsproducts in different countries across the world. The Report will outline the details regardingmanagement accounting and things that are required for various systems of managementaccounting. It will also describe different methods that are used by organization for reportingmanagement accounting, techniques for developing a profit and loss statement by using marginaland absorption costing. At last, the report will focus on advantage and disadvantages of varioustypes of tools that are used for controlling budgets, the way in which company uses systems ofmanagement accounting for resolving financial difficulties.MAIN BODYL O 1P1) About management accounting and various types of systems for management accounting .Management accounting-It refers to the activity of examining the cost of business and operations for preparingfinancial records, reports, and various types of accounts related with internal operations.Management accounting supports the Managers in different departments in taking variousdecisions so that, firm can achieve the aims and objectives (Crowther, 2018). It is the activity ofanalysing the cost and financial data and then converting the data into information that is usefulfor management and employees of the company. It includes various methods that helps ineffective planning for selecting the alternative business actions through evaluation of thebusiness performance. Management accounting is different from financial accounting in different ways. Reportsthat are prepared through management accounting is mainly for the utilization of management ofthe organization. It supports the decision-making of internal users, there is no limit on the

frequency for preparing financial statements. Under management accounting, financialstatements include both the type of information that is monetary and non-monetary. There arevarious major role of management accounting such as it helps to determine the profitability ofthe business either of a particular product or a project. It also supports the management toperform analysis of trend. Management accounting presents the reports at the regular intervalstherefore, it supports the management in preparing financial statements (Englund, H. and Gerdin,2018).Management accounting systems-Management accounting system is consisted of several types of concepts, businesspractices that are adopted for preparing financial reports and accounts. These reports considerstatistical and financial nature information related with operations of the company. Managementaccounting involves internal systems that are used by an organization to measure and controlvarious processes. There are different types of management accounting systems that can be usedby Renishaw Plc. These systems will provide various benefits to the company.Job costing system -System for calculating the cost of different jobs is a type of system that helps toaccumulate and distribute cost of manufacturing of an individual unit. This system is used whendifferent units that are produced by the organization is having significant cost different from eachother. Information obtained through job costing system will help Renishaw Plc. to determine theaccuracy of the system. It will also help the management to assign cost of inventory tomanufactured items. Job costing system will assist the engineering firm to track the cost of rawmaterial during the process of production (Hiebl, 2018). It also helps the management todetermine profitable business unit for promoting the growth of business.Benefit - This will help the management to minimize the expenses, to improve the efficiency andoverall profitability of the firm.Cost accounting system -It is a process that is used by various organizations for determining the cost of the units toestimate the profitability of the business, to control cost and to determine the value of inventory.Cost accounting system in Renishaw Plc. supports the management to determine the correct costof the product that results in ascertaining that which products are profitable and which are not.

The system also assist the firm to estimate work-in-progress, closing value of raw material andfinished goods etc (Hwang, Lin, H. and Shin, 2018). It is further divided in two parts -Job order costing -This method will help Renishaw Plc. to accumulate the cost of manufacturing unitsseparately for different type of jobs Such as civil engineer, site engineer etc..Process costing -This method will supports the manager of Renishaw Plc. To accumulate the expenses ofmanufacturing items for different process such as process of automation of activities etc..Benefit - It will help the company to develop financial plan for every financial year that willresult in comparison of standard cost with actual cost of the product.Price optimization system -It is a system that helps the business to evaluate the response of customers at variouslevels of the price of goods and services of the firm. Price optimization system assists themanagement of Renishaw Plc. To determine the price at which firm should sell its products tothe customers that will help to achieve goals of the firm such as providing goods at low cost etc.(Ismail, Isa, C.R. and Mia, 2018).Benefit -It will support the firm to fix the price of products that will help to achieve goals of thebusiness. Therefore, it will assist the management to determine the business area that is incurringmaximum expenses.Inventory management system -It is one of the type of system for management accounting that helps the firm to track thelevel of inventory, customer orders and delivery etc. The system supports the manager ofRenishaw Plc. in developing bill of materials and other documents related with production. Italso supports the business to control the whole supply chain that is starting from production toshipping etc. There are various features of inventory management system such as bar-coding,accounting tools, forecasting inventory and tools for reporting etc.Benefit - It will support the Manager of Renishaw Plc. to improve delivery process of goods thatwill result in increase in profits (Kaplan, R.S. and Atkinson, 2015).Inventory can be valued with the help of various methods -Economic order quantity -

It is a technique that helps the firm to determine the adequate level of inventory to bepurchased or to be ordered. This will help Renishaw Plc. to reduce cost of ordering and carryingcost of raw material ((Weetman, 2019)). LIFO -It means Last in first out. Under this method, the goods that are purchased at last by thefirm will be available for sale at first.FIFO -It means, First in first out. Under this method, goods that are purchased by the companywill be available first for sale to customers. Company should use FIFO method because it is easyto apply. (Schaltegger, 2018). P2) Various methods for management accounting reporting.Management accounting reporting refers to the process of developing the reports thatincludes all the financial as well as managerial information for a particular period. Reports thatare prepared as a result of management accounting helps the management to develop plan,monitoring and controlling and also in taking decisions related with future (Rikhardsson, P. andYigitbasioglu, 2018). There are various methods for reporting the results of managementaccounting that will assist the management of Renishaw Plc. in taking different types ofdecisions. These are as follows-Performance Reports -It is one of the important report for every type of business. Performance Report helps thebusiness to review the overall performance of the business as well to monitor the performance ofindividual employees. This type of report will help the Manager of Renishaw Plc. to takestrategic decisions regarding the future performance of the company. This will also support thefirm to evaluate the performance of each and every department. Administrator of Renishaw Plc.Will require performance reports for evaluating the future performance of the employees of th eorganization in terms of increase in production of units and cost of production. Budget Reports -The budget of an organization includes all the sources of earning income andexpenditures. Budget Reports helps the company to determine the performance of the business. Ithelps the Manager of the organization to analyse the performance of different departments tocontrol the cost of operations. Manager of Renishaw Plc. will use budget reports for providing

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