Explaining Management Accounting System for Determining Cost and Profit Margin

Management Accounting

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................1
P1 Explaining MA systems along with their essential requirements.....................................1
P2 Presenting managerial reports that are related to MA......................................................4
P3 Presenting different types of costing system for determining cost and profit margin......5
P4 Assessing planning tools that are related with management accounting system..............9
P5 Explaining management accounting system that can be undertaken for responding
financial problems................................................................................................................12
CONCLUSION........................................................................................................................13
REFERENCES.........................................................................................................................15

INTRODUCTION
Management accounting (MA) is highly associated with the preparation and analysis
of internal business reports. Tools & technique of MA assists in evaluating cost and
operations of business unit. By using MA tools manager of the business unit can assess the
area of cost control and would become able to take action for improvement. Further, field of
MA also assists business organization in developing competent framework for the upcoming
time period. For this project, Murano restaurant unit has been selected which offers dinning
services to the customers at affordable prices. In this, report will shed light on the essentials
or need of MA in the context of concerned restaurant unit. Further, it also entails the manner
in which absorption and marginal costing method helps in ascertaining cost as well as
margin. Along with this, it also develops understanding about the planning tools that helps in
developing competent financial framework. Report will also describe the way in which MA
tools help in mitigating monetary issues.
P1 Explaining MA systems along with their essential requirements
Management accounting: Filed of MA is highly concerned with the recording and
analysis of business activities related to the internal aspects or business activities. MA tools
and report helps in enhancing efficiency, productivity and profitability to a great extent.
Hence, by employing the tools and techniques of MA Murano can ensure effective
management of operations.
Significance or need of management accounting
 MA provides high level of assistance to the restaurant unit in doing
appropriate forecast about future and aid in significant decision making
 By undertaking MA, owner or concerned authority of Murano can make
appropriate forecast regarding cash flows (Management accounting and its
importance, 2017).
 It also helps in understanding variances and makes contribution in the
attainment of goals by suggesting suitable improvement measure.

 Murano can analyze suitable rate of return through using the techniques of
management accounting.
Different types of management accounting system that can be undertaken by Murano
are as follows:
Cost accounting: Such system or technique of MA assists in making decision about
the cost pertaining to products, services, projects etc. Hence, by using such accounting
system owner of Murano can assess unit cost and thereby able to sets suitable price.
Moreover, cost accounting lays high level of emphasis on capturing or recording cost of
production, fixed expenses, depreciation on capital equipment etc (What is cost accounting?,
2017). Along with this, cost accounting also enables management team of Murano to measure
financial performance by making comparison of actual output with the standards. Hence, the
main goal of management accounting system is to enhance the level of cost efficiency and
capability by advising appropriate course of action to the management team.
Thus, it can be said that cost accounting system aid in effective decision making by
recording, classifying, analyzing, summarizing and evaluating alternative ways to control
expenses. Hence, in the context of Murano, requirement of such accounting tool is highly
significant. Moreover, it considers cost plus method for the determination of pricing. Thus,
for setting price business unit is required to calculate or have information regarding per unit
cost.
Advantages Disadvantages
 Helps in finding areas of wastage
losses and inefficiencies
 Facilitates cost reduction and
maximizes profit margin
 Advising decision in relation to make
or buy
 Assists in setting prices of the
products or services offered
 Under cost accounting, past
information’s are available whereas
management is concerned about
future
 For the installation of cost accounting
system firm has to make several
expenses because it demands for the
high maintenance of records.
 Rigid in nature so it does not meet all
the objectives