Management Accounting: Methods, Benefits, and Techniques

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MANAGEMENT ACCOUNTING
Management Accounting
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MANAGEMENT ACCOUNTING
Table of Contents
Task 1...............................................................................................................................................2
Introduction to Management Accounting....................................................................................2
Methods used for Management Accounting Reporting...............................................................3
Benefits of Management Accounting System in Ryanair............................................................4
Integrating Management Accounting System and Report in Ryanair.........................................4
Task 2...............................................................................................................................................5
Product Cost Under Absorption and Marginal Costing Techniques...........................................5
Income Statement under Marginal and Absorption Costing.......................................................6
Task 3...............................................................................................................................................7
Advantages and Disadvantages of Budgeting tools.....................................................................7
Use of Different Planning tools...................................................................................................9
Task 4.............................................................................................................................................10
Comparison between Ryanair and Southwest Airlines.............................................................10
Implementation of the Budgeting policy...................................................................................10
Reference.......................................................................................................................................12

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MANAGEMENT ACCOUNTING
Task 1
Introduction to Management Accounting
Management accounting is the process of analyzing the costs which are incurred by the
business and also the activities of the business in order to prepare internal business reports,
accounts and records which can be of help in the decision-making process (Hilton & Platt, 2013).
In simple words it is the process of analyzing financial and cost related data for the purpose of
taking important decisions.
Nowadays management accounting System are widely used in businesses for the purpose
effective reporting and decision-making process. There are many kinds of management
accounting system with different objective and components (Fullerton, Kennedy & Widener,
2013). However, the basic purpose of following such a system is to analyze the data and
communicate the same. Some of the management accounting process are given below:
1. Cost accounting system: in case of cost accounting system cost allocation to the products
are done on the basis of either activity based costing or traditional method of costing
(DRURY, 2013). Cost accounting enables the business to identify the production costs
and step by step departmental cost associated with the product. The system measures and
records costs of the product then compare the results with the standard set by the
management for analyzing the performance of the company.
2. Inventory Management: Inventory management refers to the process of keeping track or
records of the stocks or inventory of the business (Dekker et al., 2013). It involves
keeping track of the inventory through all process such as sales, purchase (Wild, 2017).
The objective of inventory management is to accurately understand the present inventory
level of the organization.

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MANAGEMENT ACCOUNTING
3. Job costing: Job costing refers to the allocation of costs on different batches of product or
individual products. This type of costing method is applied when the products which are
to be produced are different from one another (Braun, 2013). The costing technique
considers the three major costs which are direct material, direct labour and overhead
costs.
Methods used for Management Accounting Reporting
The different methods which are used for management accounting reporting are given
below in details:
1. Cost Reports: In such types of reports management computes and records costs of the
goods which are manufactured. The computation is done considering direct material
costs, labour costs and overhead expenses of the product (Dale & Plunkett, 2017). The
cost reports present the management with insights of costs of the product and thereby
estimate the profit associated with the product.
2. Budgets: One of the most used tools of management accounting is budgets. It helps the
management to forecast the expenses which the business will incur in near future and also
plan for the same. Budgeting techniques are used by the management to plan for the
future of the business and also measure the current performance of the business
(Midrigan & Xu, .2014). There are various types of budgets which are prepared by the
management such as sales budget, master budget, cost budget and similar other kinds of
budgets.
3. Performance Reports: The management utilizes budgets such that they are able to
measure the actual results in terms of income and expenses of the company with the
budgeted figures. The difference is than computed and for the purpose of evaluation is