Management Accounting and Budgeting

This assignment explores the principles of management accounting, focusing on budgeting techniques like start_base , operational, and incremental budgeting. It emphasizes how these methods are employed to navigate uncertainty in future business operations.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Different types of cost classification......................................................................................3
1.2 Calculating unit cost and total job cost by using job costing.................................................3
1.3 Calculating cost of Exquisite using absorption costing technique.........................................4
1.4 Analyzing cost of Exquisite...................................................................................................8
TASK 2............................................................................................................................................8
2.1 Preparing and analyzing cost report for the month of September.........................................8
2.2 Using performance indicators to identify areas for potential improvement........................10
2.3 Ways to reduce cost and enhance value, quality..................................................................10
TASK 3..........................................................................................................................................11
3.1 Purpose and nature of budgeting process.............................................................................11
3.2 Selecting appropriate budgeting methods for organization.................................................11
3.3 Preparation of different types of budget..............................................................................12
3.4 Preparing cash budget..........................................................................................................13
TASK 4..........................................................................................................................................16
4.1 Calculating variances...........................................................................................................16
4.2 Preparing reconciliation operating statement.......................................................................18
4.3 Findings to management in accordance with identified responsibility centers...................19
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................21
2

Index of Tables
Table 1: Working note.....................................................................................................................6
Table 2: Table 3: Allocation of cost on the basis of machine hours...............................................8
Table 3: Allocating of criteria of cost..............................................................................................8
Table 4: Units to be produced..........................................................................................................8
Table 5: Overhead absorption rate ..................................................................................................8
Table 6: Absorption rate of Exquisite..............................................................................................8
Table 7: Calculating of absorption rate on the basis of labor hours................................................9
Table 8: Cost of Exquisite................................................................................................................9
Table 9: Cost report for September month......................................................................................9
Table 10: Calculating of standard budget at 1900 units................................................................10
Table 11: Production budget..........................................................................................................13
Table 12: Material purchase budget...............................................................................................13
Table 13: Material purchase budget .............................................................................................14
Table 14: Material usage budget....................................................................................................14
Table 15: Cash budget...................................................................................................................14
Table 16: Receivable from debtors................................................................................................14
Table 17: Overhead payment.........................................................................................................15
Table 18: Production cost..............................................................................................................15
Table 19: Sales budget...................................................................................................................15
Table 20: Cash budget...................................................................................................................15
Table 21: Variable overhead..........................................................................................................16
Table 22: P & L..............................................................................................................................17
Table 23: Operating profit statement for month of May................................................................19
3

INTRODUCTION
Management accounting refers to profession which involve in management decision,
planning and performance management system. It provides assistance in financial report and
control of organizational activities. The management accounting consists of three main aspects
such as strategic management, performance and risk (Griffith, Stephenson and Watson, 2014).
Present report is based on case of Jeffrey and Son's that manufacture popular brand product
called Exquisite. This organization has basically two departments such as service and production.
Further, different types of cost classification has been done. In addition to this, cost of Exquisite
has been calculated by using absorption costing technique. Apart from this, various performance
indicator are explained in order to assess organizational performance in the marketplace.
TASK 1
1.1 Different types of cost classification
Classification of cost has been done as follows- Element-According to element cost is divided into direct and indirect segment. In this
regard, it can be said that the direct and indirect elements are associated with prodction
activities (Backer, 2004). It also covers various kinds of direct and indirect cost that
relates with the production. Function- Number of functions are present that need to be consider for effective
accomplishment of goals (Arroyo, 2012). Classification of key functions can be as
production, finance, sales and marketing. It assist in better flow of production within
market. Nature- It is also classified in diverse factors such as labour, overhead expense and
material.
 Behaviour- According to behavior cost is mainly divided into three parts such fixed, semi
fixed and variables (Chapman, 2008).
1.2 Calculating unit cost and total job cost by using job costing
Total and unit cost of project has been calculated as follows which in turn company can
effective decision for the growth and prospective.
4

Particulars Amount (£)
Direct cost
Direct material 200
Direct labour 270
Indirect cost
Variable production overhead 180
Fixed production overhead 120
Cost per unit 770
Units to be produced 200
Total cost 770*200 154000
Working note: 1
Fixed production overhead = (Budgeted overhead / total direct labor hours) * Direct labor hours
used in Job 444
=(£80000 / 20000 hours) * 30 hours =£120
According to the above calculation it has been found that per unit cost of job 444 is
£3.85.
1.3 Calculating cost of Exquisite using absorption costing technique
Production
Departments
Service Department
Basis of
Apportioning
Total Machine
Shop X
Machine
Shop Y
Assembly Stores Mainten
ance
000’s
Indirect
Wages
Allocated 362 100000 99500 92500 10000 60000
Indirect
Materials
Area
occupied
253 100000 100000 40000 4000 9000
Lighting
Heating
& Area
Occupied
50 10000 5000 15000 15000 5000
Rent Area
Occupied
100 20000 10000 30000 30000 10000
Insurance &
Machinery
Book value
of Machinery
15 7947 4967 993 497 596
5

Depreciation
of Machinery
Book value
of Machinery
150 79470 49669 9934 4967 5960
Insurance of
Building
Area
Occupied
25 5000 2500 7500
7500
2500
Salaries
Works
of No.
employees
of 80 24000 16000 24000 8000 8000
Sub Totals 1035 346417 287636 219927 79964 101056
Re-
of service
dept. cost
Stores Dept. 39982 29987 9995 (79964)
Maintenance 48507 32338 20211 (101056
Totals 434906 349961 250133 0 0
Table 1: Working note
Lighting & Heating: Machinery X 10/50 x £50000 — f10000
Machinery Y 5/50 x £50000 — £5000
Assembly 15/50 x £50000 — f 15000
Stores 15/50 x £50000 = £15000
Maintenance 5/50 x £50000 = £15000
Rent Machinery X 10/50 x £100000 = f20000
Machinery Y 5/50 x £100000 = £10000
Assembly 15/50 x £100000 = £30000 Stores
15/50 x £100000= £30000 Maintenance 5/50
x £100000 = £10000
Insurance & Machinery Machinery X 800/1510 x £15000 = £7964
Machinery Y 500/1510 x £15000 — £4966
Assembly 100/1510 x 15000 — £994 Stores
6

50/1510 x £15000= f 497
Maintenance 5/1510 x £15000= £596
Depreciation of Machinery Machinery X 800/1510 x £150000 = £79470
Machinery Y 500/1510 x £150000 = £49669
Assembly 100/1510 x £150000 = £9934
Stores 50/1510 x £150000 = £497
Maintenance 60/1510 x £150000 = £596
Insurance of Buildings Machinery X 15/50 x £25000 — £5000
Machinery Y 5/50 x £25000 = £2500
Assembly 15/50 x £25000 = f7500 Stores
15/50 x £25000 — £7500
Maintenance 5/50 x £25000 = £2500
Salaries of works mgmt. Machinery X 3/10 x £80000 = £24000
Machinery Y 2/10 x :E80000 = £16000
Assembly 3/10 x £80000 = £24000
Stores 1/10 x £80000 — £8000
Maintenance 1/10 x £80000 = £8000
Reappointing workings: based on material issues
Machinery X 400/800* £79964 = £39982
Machinery Y 300/800 * £79964 = £29987
Assembly 100/800 * £79964 = £99995
Based on time spent
Machinery x 12/25 * £101056 = £48507
Machinery y 8/25 * £101056 = £32338
Assembly 5/25 * £101056 = £20211
Overhead absorption rate workings
Departments = Total / actual machine hours per department
Machinery X = £ 434906/ 80000 = £5.44
Machinery Y = £349960/ 60000 = £5.83
Assembly = £250134/ 10000 = £25.01
Overhead absorption rate
Machinery X= 434906/80000=5.44
7

Machinery Y= 349960/60000= 5.83
Assembly=250134/10000=25.01
Table 2: Table 3: Allocation of cost on the basis of machine hours
Machine shop X Machine shop Y Assembly Total
Store £39982.00 £29987.00 £9995.00 £79964.00
Maintenance £45807.00 £32338.00 £20211.75 £101056.00
Total £434906.00 £349961.00 £250133.00
Table 3: Allocating of criteria of cost
Particulars Description
Indirect wages and supervision As per the provided amount.
Indirect materials As per the provided amount.
Light and heating On the basis of area occupied
Rent On the basis of area occupied
Insurance and machinery On the basis of book value of machine
Depreciation of machinery On the basis of book value of machine
Insurance of building On the basis of area occupied
Salaries of works management On the basis of number of employees.
Table 4: Units to be produced
Material cost £400000.00 £300000.00 £100000.00
per unit material 8 8 8
A/B no. of units 50000 37500 12500
Table 5: Overhead absorption rate
Machinery X 434906/80000=5.44
Machinery Y 349960/60000= 5.83
Assembly 250134/10000=25.01
Table 6: Absorption rate of Exquisite
£ £
Materials 8
Labour 15
Overheads
8

X (0.8*5.44) 4.34
Y (.6*5.83) 3.5
Assembly (.1*25.01) 2.5
Total cost 33.35
1.4 Analyzing cost of Exquisite
Table 7: Calculating of absorption rate on the basis of labor hours
Machinery X 434908/200000= 2.17
Machinery Y 349960/150000= 2.33
Assembly 250134/20000= 2.15
Table 8: Cost of Exquisite
£ £
Materials 8
Labour 15
Overheads
X (2*2.17) 4.34
Y (1.5*2.33) 3.5
Assembly (1*1.25) 1.25
Total cost 32.09
According to the calculated data, it has been found that per unit absorption rate is
changing. Similarly, labour hour absorption facilitates to calculate total cost of product and
services for Jeffery and Son's (Jack and Mundy, 2013).
9

TASK 2
2.1 Preparing and analyzing cost report for the month of September
Table 9: Cost report for September month
Budgeted cost Actual cost Variances
Particulars
Units 2000 units 1900 units 100 units
Material cost 24000 22800 -1200
Labor cost 18000 19000 1000
Fixed overhead 15000 15000 -
Electricity 8000 7625 375
Maintenance 5000 3000 2000
Total 70000 67425
Table 10: Calculating of standard budget at 1900 units
Budgeted cost Budgeted cost
Particulars
Units 2000 units 1900 units
Material cost 24000 22800
Labor cost 18000 17100
Fixed overhead 15000 15000
Prime cost 57000 54900
Electricity
Fixed portion 500 500
Variable portion 7500 7125
Maintenance 5000 5000
Total production cost 70000 67525
Calculating of variable cost=Variation of total cost / change in no. of units to be produced
= (8000-5000) /(2000-1200)= £3.75.
According to evaluation of above budget it can be said that due to increase or decrease in
100 units. There will be no any impact on cost. It depicts that maintenance cost will not be
changes due to increase in decrease in 100 units.
Variance analysis of budget Material cost- Material cost is the most important portion of total cost which directly
related to production process. The above is showing that in case of production of 2000
units cost of material was 24000 but it has reduced in case of 1900 units (Kattan and et.
10

al., 2007). It depicts that favourable variance will be there to manage the flow of
production. Labour cost- The cost labour has gone down in case of 1900 units. It is because nature of
labour is also same as material (Kont, 2013). On the other budgeted labor cost was 18000
whereas actual is 19000. It is showing negative variance which affect profitability of
Jeffrey and Son's. Fixed overhead-There is no significant difference in fixed cost as it does not vary in
accordance with volume of production (Merchant, 2012). It has also been shown in
budget that fixed overhead is 15000 whether at the production of 2000 units or 1900
units. Electricity-Electricity expenses was budgeted as 8000 but in actual it becomes 7628., It
depicts that actual expenses are less that what was expected. It reveals that with the
volume of production other expenses vary (Prior, 2004).
 Maintenance-As per the given budget maintenance cost has variation of 2000. It was
favourable variance for Jeffrey and Son's which in turn company can increase its
profitability.
2.2 Using performance indicators to identify areas for potential improvement Earning per share (EPS)-Earning per share is one of the performance indicators under
which management can assess performance of corporation with its increased earning per
share (Vaivio, 2008). Otherwise, corrective actions are taken to improve the performance. Return on capital employed-Return on capital employed is also the imperative aspect to
identify area of improvement. Here, if Jeffrey and Son’s has low return on capital
employed from previous year then efforts are made to increase return.
 Gross profit ratio-The increase in gross profit ratio is also an indicator to show that
corporation is performing good (Young, 2008). On the other hand, in case of low
profitability company can improve its flow of production and also can put efforts to
create competitive edge in the marketplace.
11

2.3 Ways to reduce cost and enhance value, quality
Jeffrey and Son’s can adopt several ways to reduce cost and enhance value as well as
qualities. Here, approach of total quality management can be used so that flow of production can
be increased. It assists Jeffrey and Son’s to improve quality of products and services as well as
provide rich experience to consumers. Furthermore, recycling as the best option to reduce waste
material. This in turn company can effectively reduce cost of production and increase overall rate
of return (Vaivio, 2008). It leads to deliver good quality of services to large number of buyers in
affordable prices. In addition to this, employees should be provided training to work with
integration and in turn it will improve service quality and enhances value. Not only this, but
management of Jeffrey and Son’s can revise pricing strategies to attract more buyers and
recover cost of production effectively (Prior, 2004).
TASK 3
3.1 Purpose and nature of budgeting process
Budget is financial plan imposed by department of finance to allocate financial resources
for all business activities. The main purpose of budgeting process is to assess expenses to be
incurred in future and also the income to be derived from the same. Also, budget makes it
possible for management to compare performance of company and accordingly take right action
on right time.
Nature of budgeting process
The nature of budgeting process is to estimate financial environment of corporation on
the basis of budget of previous year. It aids to reduce uncertainty and increase earning of
business. Also, estimated amount of cash which will be generated in specified time is also
forecasted (Merchant, 2012). Furthermore, proportion of different expenditure like raw material,
production overheads and labour are also defined in advance. Likewise, expected amount of
expenditure is subtracted from the revenue so as to assess the future position of business. At last,
final budget is submitted after proper review.
12

3.2 Selecting appropriate budgeting methods for organization
Budgeting refers to process of estimating future expenses and income so as to give right
direction to business. According to case study, Jeffrey and Son’s can select following budgeting
options- Incremental budgeting-This budget is made in accordance with past reviews of budget.
Here main emphasis is laid on budget of previous year so that accordingly changes can be
made in current year's budget (Kont, 2013). This helps to ascertain success of Jeffrey and
Son’s in the marketplace and increase profitability of the same. Zero base budgeting-This budgeting method is that under which no any guidelines is
taken from previous year's budget. The process of zero base budgeting include
identifying business objectives, creating and evaluating alternative methods to
accomplish the same (Kattan and et. al., 2007). Thus, zero base budgeting is totally based
on justification of expenses which are shown in budget.
 Operational budget- This budgeting method consists of different operation activities of
Jeffrey and Son’s. These activities are marketing, production and selling as well as
distribution (Jack and Mundy, 2013). It facilitates to determine cost of products and
service so that margin can be add in the same.
3.3 Preparation of different types of budget
The different types of budget are prepared for Jeffrey and Son's which help corporation to
understand the actual cost and accordingly carry out business in right manner.
A) Production budget in units
Table 11: Production budget
Particulars July August September October
Sales 105000 90000 105000 110000
Less: opening stock 11000 13500 15750 16500
Add: Opening
stock 13500 15750 16500
15000
Units to be
produced 107500 92250 105750
108500
Closing Stock:
July = 15%*90000 (Sales of august) = 13500
13

August= 15%*105000 (Sales of September) = 15750
September= 15%*110000 (Sales of October) = 16500
October = 15%*100000 (Sales of November)= 15000
b) Material purchase budget
Table 12: Material purchase budget
July August September October
Material usage 215000 184500 211500 217000
Less: Opening stock 52000 46125 52875
Add: Closing stock 46125 52875 54250
Purchases 209125 191250 212875
Opening stock of July=52000 kg and closing = 25%* 184500 = 46125
Table 13: Material purchase budget
Particulars July August September
Units to be produced 107500 92250 104250
Material cost £3.50 £3.50 £3.50
Material to be purchased £376250.00 £322875.00 £364875.00
Add: cost of material in ending inventory £80718.75 £91218.75 £91218.75
Total cost of material needed £456968.75 £414093.75 £456093.75
Less: Cost of material in beginning
inventory -£166400.00 -£80718.75 -£166400.00
Cost of material to be purchased £290568.75 £333375.00 £289693.75
Table 14: Material usage budget
July 107500 units * 2 kg = 215000 kg
August 92250 units * 2 kg = 184500 kg
September 105570 units * 2 kg= 211500 kg
October 108500 units * 2 kg = 217000 kg
3.4 Preparing cash budget
Table 15: Cash budget
Particulars July (£) August (£)
September
(£)
Opening balance of
cash 16000 204431.25 192306.25
14

Received from debtors 333000 335250 330750
Cash sales 567000 486000 567000
Total receivable 916000 1025681.25 1090056.25
Expenses
Payment to creditors 290568.75 333375 289693.75
Direct wages 300000 300000 300000
Variable overhead 46000 100000 100000
Fixed overhead 75000 100000 100000
Total payable 711568.75 833375 789693.75
Closing balance of cash 204431.25 192306.25 300362.5
Working note:
Table 16: Receivable from debtors
July August September
Amount received for sales before a month 247500 236250 236250
Amount received for sales before two months 85500 99000 94500
Sum 333000 335250 330750
Table 17: Overhead payment
Overhead payment July August September
Variable overhead 46000 100000 100000
Fixed overhead 75000 100000 100000
Table 18: Production cost
July (£) August (£) September (£)
Material cost 3.5 3.5 3.5
Wages 3 3 3
Variable overhead 1 1 1
Total variable cost 7.5 7.5 7.5
Fixed overhead 100000 100000 100000
Units to be produced 107500 92250 104250
Total variable cost 806250 691875 781875
Total production cost 906250 791875 881875
Table 19: Sales budget
July August September
Units to be sold 105000
Key Performance
Indicators.
201490000 105000
Sale price 9 9 9
15

Sales 945000 810000 945000
Table 20: Cash budget
Particulars July (£) August (£) September
(£)
Cash inflow
Sales receipts
(w.n.1)
900000 731250 864000
Cash outflow
Purchase 365969 334688 372531
Labour (w.n.2) 322500 276750 317250
Variable O/H
(w.n.3)
108500 98350 100350
Fixed O/H 75000 87500 87500
Net cash flow 28031 -66038 -13631
Opening balance 16000 44031 22007
Closing balance 44031 -22007 -35638
Working note:
Sales (£) July (£) August
(£)
September
(£)
May 855000 85500
June 990000 247500 99000
July 945000 567000 236250 94500
August 810000 486000 202500
September 945000 567000
July: 105000*9 = 945000
August: 90000*9 = 810000
September = 105000*9 = 945000
July receipts August receipts September receipts
10%*855000 May 10%*990000 June 10%*945000 July
25%*990000 June 25%*945000 July 25%*810000 Aug.
60%*945000 July 60%*810000 Aug. 60%*945000 Sept.
Working note:
16

Labour
July 1075000*3 = 32250Key Performance Indicators.
20140
August 92250*3 = 276750
September 105750*3 = 317250
Working note:
Table 21: Variable overhead
July August September
June £44000
July £64500 £43000
August £55350 £36900
September £63450
Total £108500 £98350 £100350
Based on June's Sales = 40% * 110000 and it need to be based on production of June and the
difference is in immaterial.
40%*110000 units = 44000*1 = £44000 of June and paid in July
60%*107500 units = 64500*1 = £64500 of July and paid in July
40%*107500 units = 43000*1 = £43000 of June and paid in Aug.
60%*92250 units = 55350*1 = £55350 of June and paid in Aug.
40%*92250 units = 36900*1 = £36900 of July and paid in Sept.
60%*105750 units = 55350*1 = £63450 of June paid in Sept.
Budgeted profit and loss account
Table 22: P & L
July (£) August
(£)
September
(£)
Total (£)
Sales 945000 810000 945000 2700000
Less: bad debts 47250 40500 47250 135000
897750 769500 879750 2565000
17

Total MC of
production
806250 691875 793125 2291250
Add: opening
stock
82500
Less: closing
stock
123750
Cost of sales 2250000
Contribution 315000
Fixed
overheads
300000
Profits 15000
July (£) August (£) September (£) Total (£)
Material 376250 322875 370125 1060500
Direct labour 322500 276750 317250 916500
Variable O/H 107500 92250 105750 305500
Total MC of
production
806250 691875 943125 2582500
TASK 4
4.1 Calculating variances
Sales variances The material prices
variances
The labor variances Fixed overhead
sending
Sales volume
variance(4160- 3040)
= (1120) (A)
Sales prices variance
(14000- 13820) =
(180) (A)
AQ (1425Kg) X AR
(£2.40) = £3420
0(A)
AQ (1425Kg) X SR
AH(345Hrs) X AR
(£7.8 )
=£2690
The labor variance rate
70 (F)
AH(345Hrs) X SR
Actual fixed overheard
= £4900
The fixed
overhead expenditure
variances
100(A)
18

(Budgeted: 35000*£4-
Actual sales)
(£2.40) = £3420
The material usage
variance
60(A)
SQ (3500 Units x 0.4)
X SR (£2.40) = £3420
(£8.0) =£2760
the labour efficiency
variance
SH (3500 Units
x0.1)350hrs X SR
(£2.40) = £2800
Budgeted fixed
production overhead
= £4800
Original Flexed Actual
Output (Production and
sales units )
4000 3500 3500
Sales revenue £16000 14000 13820
Raw materials -(3840) (3360) (1400)Kg (3420)
(1425Kg)
Labour -3200 (2800)(350Hrs) (2690)
(345Hrs)
Fixed overheads -4800 -4800 -4900
Operating profit £4160 £3040 £2810
According to the budget it can be said that Jeffrey and Son’s has variation in its budgeted
and actual results. It is because sales revenue was estimated to be 14000 but actual results is
showing 13820. It depicts that estimation was not appropriate and corporation should put efforts
to overcome the issues. Furthermore, material consumption was expected to be 3360 but the
actual consumption was 3420 (Griffith, Stephenson and Watson, 2014). Apart from this, fixed
overhead was estimated to be 4800 but the actual overhead become 4900. It depict variation in
the actual and expected results.
According to the above mentioned variation it is very important for management to take
corrective action by bringing improvement in current working practices. In this regard,
management can take assistance from expert as well as emphasis need to be laid on research
activities (Backer, 2004). Likewise, research will facilitate to assess uncertainty in an appropriate
so as to give upward direction to Jeffrey and Son’s. Apart from this, impact external factors like
technological, environment and legal barriers need to be assessed in right manner.
19

4.2 Preparing reconciliation operating statement
The reconciliation operation statement has been prepared as follows which helps
management to assess the actual position of corporation in the marketplace. It facilitates to take
appropriate action by identifying appropriate areas of improvement.
Particulars Amount
Budgeted profit £3040
Less: Variance of sales -£180
Less: Variance of cost -£60
Add: Labor £110
Less: Overhead -£100
Actual profit £2810
Table 23: Operating profit statement for month of May
Favorable Adverse
Sales volume variance £1120
Sales price variance £180
Material price variance 0
Material usage variance £60
Labor rate variance £70
Labor efficiency variance £40
Fixed overhead expenditure
variance
£100
Total variance £110 F £1460A
Total net variance -£1350
Budgeted operating profit £4160
Less: Net variance -£1350
Actual operating profit £2810
The above budget is showing that actual profit of Jeffrey and Son’s is decreasing as there
exist different between actual and expected profitability. It shows that prices for products and
services are quoted low which in turn ratio of earning is decreasing. On the other hand, labour
variance is positive and help in reducing cost of production.
20

4.3 Findings to management in accordance with identified responsibility centers
The aforementioned results are showing that company is having issue related to man
power and finance department (Arroyo, 2012). It affect overall performance to a great extent.
Further, responsibility of different department are explained as follows to resolve issues faced by
Jeffrey and Son’s- Production department-Under this department it is very important for management to
assess issue behind increasing cost of production. Here recycling need to be ensure
through which waste material can be used and cost of production can be reduced to a
great extent (Chapman, 2008). Also, updated technologies can be used to increase flow of
production which in turn sales turnover will also be increased. Finance department-Finance department should fulfil its responsibility by setting budget
in right manner and anticipating uncertainty of corporation (Jack and Mundy, 2013). It
helps to reduce gap between actual and expected results and enhance overall rate of
return of Jeffrey and Son’s.
 Human resource department-Human resources has prime responsibilities to provide
training to work on time to time and also motivate them to perform good. It helps to
increase efficiency of workforce and accordingly they contribute towards achieving long
as well as short term objectives of Jeffrey and Son’s (Kattan and et. al., 2007).
CONCLUSION
The aforementioned report concludes that management accounting makes it possible to
take right strategic decision to give upward direction to business. It enables management to
reduce cost of production and have proper control over flow of cash. It can also be said that
different department like production, finance and accounting are responsible for poor
performance of company. In addition to this, management of corporation can also take corrective
action in current strategies by considering effective performance indicators like EPS, ROCE as
well as gross profit ratio. Other than this, different kind of budgets like zero base budgeting and
operational as well as incremental budget are made to give uncertainty for future business
activities.
21

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emerging market economies. Journal of Economic Studies. 37(1) .pp.96 – 116.
Butters, J., 2004. Managing finances for a fulfilled Canadian retirement. Leadership in Health
Services. 17(1) .pp.12 – 18.
Chapman, S. C, 2008. We are not alone: qualitative management accounting research: Rationale,
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