Management Accounting and Different Techniques

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART1.............................................................................................................................................1
1.1 Management accounting and requirement of different management accounting system......1
1.2 Different method of management accounting reporting........................................................2
1.3 Evaluation of benefits of different management accounting system....................................3
1.4 Critical evaluation of Management Accounting System, integration of management
accounting with organisational process and importance of different method............................4
2.1 calculation of cost by using different techniques ..................................................................5
2.2 Application of management accounting techniques..............................................................7
2.3 Financial reports with application of data in business activity............................................10
2.4 ..............................................................................................................................................12
........................................................................................................................................................13
PART2...........................................................................................................................................13
3.1 Budget and it purpose..........................................................................................................13
....................................................................................................................................................16
3.2 Flexible budget.....................................................................................................................18
4.1 comparison of different management accounting system....................................................18
....................................................................................................................................................19
4.2 Analysation of management accounting to solve financial problem of both company to
gain sustainable success.............................................................................................................20
4.3 Evaluation of Planning tool used in management accounting to reduce financial problem 21
4.4 Importance of variance analysis and meaning of material variance, labour variance,
overhead variance......................................................................................................................23
CONCLUSION..............................................................................................................................24
REFERENCE.................................................................................................................................25

INTRODUCTION
Management accounting refers to accounting that are used by manager of company to
make decision and formulate strategies for business. It helps manager to ensure proper control
over operation of business. It helps manager in proper planning and decision making for
organisation. Management accounting plays important role in strategic planning of business and
allow manager to identify area which need improvement. It also helps to track operation of
business, decision making related to buy or make etc. This project report include management
accounting and importance of its various system in organisation. It include management
accounting reporting, budget and purpose of budget. It also include variance analysis and
meaning of material, labour, overhead variance.
PART1
1.1 Management accounting and requirement of different management accounting system
Management accounting refers to identifying, analysing and communicating business
information to manager to make effective decision in organisation (Amahalu, Nweze and
Chinyere, 2017). Management accounting provide information about to management about
business operation. These information helps in preparing budget, making important business
decision and planning for future activity. It is an internal process as it is prepared for manager for
company not for outsiders and control business activity. Management accounting is important for
effective control over activity of UCK furniture and is required for following reason:
Inventory Management System: Inventory management system refers to those system
which monitor and track goods within organisation throughout supply chain (Busco and
Quattrone, 2018). It monitor and control goods from purchasing process to sales of goods to
customer. It avoid wastage of goods at work place and reduce cost of company by optimum
utilisation of resources. It provide information in UCK furniture of over stock and under stock as
over stock is a situation which create cost of storage of goods in warehouses whereas under stock
situation does not satisfying demand of product.
Job costing System: Job costing system refers to those process in which organisation
identify cost of specific job. It helps to identify cost of product which can be sold to the
customer. This system is important to determine price which allow UCK furniture to make profit.
It provide information of three components including direct labour, direct material and overhead
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cost. It is useful for the situation which organisation is produce some special goods for customer
as per their requirement and identify cost of those jobs.
Price optimization System: Price optimization system refers to those system in which
price is maximised against price which customer is willing to pay. UCK furniture increase or
decrease price to get right price that create demand for their product and service. Product with
high demand can not be sold in market whereas product with low price cannot make profit for
firm. This system is used by business for identify right price got their product which create
demand for product and profit for business. This price is set on the basis of competition in
market with demand and cost of product.
1.2 Different method of management accounting reporting
Management accounting reporting include report of information which is used by
managers to make decisions (Cokins and Căpușneanu, 2020). It helps UCK furniture to make
decision related to making or buying of product. It include present financial information of
business which helps to control over business activity. There are different method of
management accounting reporting which are as follows:
Budget reports: Budget reports measures performance of company and is prepared for
both small business and large organisation (Darlington, Found and Francis, 2016). UCK
furniture usually prepared budget to estimate and understand cost of business. These budgets are
prepared on the basis of previous year outcome. It helps to prepare an organisation for unstable
circumstances that may affect working of business. Budget always include source of income
along with expenses which can occur in organisation. Manager formulate strategies to operate
business within set budget and control cost. This reports helps manager in reducing cost, offer
incentives for employees.
Account receivable reports: Account receivable reports are those which provide
information related to capacity of extending credit of business. If business is extending credit
then it is important to prepare this report is it helps to track debtors and take decision which is
necessary. It helps to manager of UCK furniture in identifying defaulter of organisation and also
failure of collection policy of business. It identify if there are too many defaulter in company ,
there company need to formulate tight collection policy which will helps to manage cash flow of
company.
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Cost managerial accounting reports: These reports determine cost of production of
article. It include different cost like raw material, overhead labour and any other cost. To identify
cost of a single unit, total cost is divided by unit produced. It is summary of all cost of operation
in UCK furniture. This reports helps the manager to identify cost price of product along with
selling price of product. Identification of cost included of procurement of products also helps to
estimate profit of company.
Performance report: Performance reports are those report which monitor or review
performance of organisation and its employees. In large organisation, performance reports is
prepared for each organisation. These reports are used by manager of UCK furniture to make
different decision for organisation. These reports also helps organisation to identify efficient
employees who deserves promotion or their benefit for their performance and also identify under
performed employee which need to be punished for not making their performance as per
organisation standard. These reports provide organisation a true picture of their performance and
helps to formulate strategy for organisation.
1.3 Evaluation of benefits of different management accounting system
Management accounting include different system which helps organisation in putting
control over business operation and reducing cost of business (Jasim and Raewf, 2020). Benefit
of different management accounting system in UCK furniture are as follows:
Inventory System: This system helps to simplify process of inventory management
(Luft, 2016). It reduce risk of over selling and over stocking which saves cost of business. It
saves cost of warehouse and provide adequate supply of stock at work place. It increase profit of
UCK furniture by maintaining supply of stock in market and maintain demand of product.
Job Costing System: It helps to ensure control over cost of business by making
correcting in stage to perform a job. It include different elements to control of cost like cost,
profit and selling price of product. It helps in assessment of performance of employee by
monitoring each step of job. This system is flexible as one can calculate indirect cost of product
and service.
Price optimization system: It provide financial benefit to organisation and determine
right price of product which get both demand and profit at the same time (Marasca and Gatti,
2020). It helps manager of UCK furniture to make decision quickly with out wasting time of
organisation.
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1.4 Critical evaluation of Management Accounting System, integration of management
accounting with organisational process and importance of different method
There is a link between different management accounting system and organisation
process as it helps to control activity of organisation effectively (Man and RĂVŞ, 2017).
Inventory system is linked with the process of purchase and sales as it ensure there is no wastage
of inventory in purchase and sales possessor. Job order costing system is liked with operation
process as it helps to decide a ideal sequence of activity and identify cost of additional cost. It
also helps to identify cost of job performed for special requirement of customer. Price
optimisation is related to research and sales process as it helps to determine right price for
product and service which maintain proper demand of product. Price should be assess in a way
that it provide sufficient profit to company. Importance of different management accounting
reporting in UCK furniture are as follows:
Forecasting: Management accounting helps organisation to forecast future and decision
like investing more in equipments, diversification in another market etc. It helps to identify
future needs of business and forecast future trends to ensure growth in business(Merino and
Aucock, 2017).
Make or Buy decision-making: Management accounting analyse cost and productivity
of business. It also helps to decide whether firm should by product or make in organisation as
this decision affect cost of business. This data helps in taking operational and strategical decision
in organisation.
Forecast Cash flow: Management accounting helps in estimation of cash flow and its
impact on organisation. It include impact of cost in future cash position of company and include
creation of budget along with allocation of financial resources in business.
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