Management Accounting of Agmet and Nero ltd

Management Accounting

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
SECTION 1......................................................................................................................................1
LO 1.................................................................................................................................................1
1. Explain why management accounting is important in the decision making process for
improving the performance of the company. .............................................................................1
2. Explain three different types of management accounting systems used for management
accounting reporting....................................................................................................................3
3. Critically evaluate the benefits of these types of management accounting systems, and their
applications within the organisational context............................................................................4
LO 2.................................................................................................................................................5
4...................................................................................................................................................5
A) Preparing P&L Statement utilising absorption and Variable costing....................................5
B) Profit from both the system is different.................................................................................9
C Produce a reconciled Statement of profits or loss...................................................................9
SECTION 2 ...................................................................................................................................10
LO3 ...............................................................................................................................................10
PART A.........................................................................................................................................10
Compare and contrast three planning tools used in management accounting...........................10
LO 4...............................................................................................................................................13
PART B..........................................................................................................................................13
Compare the ways in which management accounting is applied and their effectiveness of
management accounting in order to dealing with financial activities.......................................13
CONCLUSION..............................................................................................................................14
REFERENCES .............................................................................................................................15
Books and Journals:..................................................................................................................15

INTRODUCTION
Management accounting is the management tool which holds the financial decision
making process and guide businesses to take best dealing techniques and strategies in order to
ensure the best productive task. It is the process to identifying, analysing, interpreting, measuring
and communicating the organizational goals. Along with that, management accounting is also
known as cost accounting approach. Moreover, the main part of the organisation is to make
effective planing of accounting in order to achievement the annual budget. Besides, present
report based on management accounting which divides into two sections, in Section one it will
cover the importance of management accounting in decision making process. It will also explain
the types of management accounting systems which helps in accounting reports. It will also
calculate absorption and variable cost in section one. Apart from that, further, report will discuss
on three planning tools which is used in management accounting system. Moreover, Agmet and
Nero limited has been taken into consider in section one and two respectively.
SECTION 1
LO 1
1. Explain why management accounting is important in the decision making process for
improving the performance of the company.
Management accounting is the essential part of the business, incorporate management
accounting and techniques into the businesses operations to improve the data based and also
helps to utilizing the also company resources. Agmet is the manufacturing company which
served industries, global connections, fostering sustainability. Management accounting helps
Agmet to measure the effective areas of development also guide for better investment techniques
(Otley, 2016). Small businesses based regular challenges and issues with countless activities.
Besides, management accounting systems helps organisation to collect information from the
processes to make accounting report to provide ongoing insight into the business performance.
For example, management accounting report helps Agmet to provide profit margin and labour
utilization in during the whole activity. With the help this information or data manager can easily
make every decision making process. Along with that, this is the important source to make better
decision making approach for the company betterment. There are some importance of
management accounting giving below:
Relevant Cost analysis
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Management accounting information helps to determine the actual cost of the company
which they occurred during the task or for completing the project. This helps to measure that
what company should sold and how to sell it. For example Small businesses are unsure about
their investments or where they need to focus (Fullerton, Kennedy and Widener, 2014). To
evaluate this decision making process company measuring the costs that differ between
advertising alternatives for each products. Moreover, this is the process company measure the
relevant cost analysis which helps to take the investment decision making approach. Besides this
approach also helps company at the time of adding new product line or discontinue the
operations' activity.
Buy or Make analysis
This is the another important aspect of the management accounting system which helps
businesses to make or buy decision analysis. With the help of management accounting company
can easily decide on which area they need to be invest in what manner. Along with that,
management accounting helps to enhance the opportunity level of profitable choices. This could
be the another financial metrics which is important to be consider to make better decision
making process.
Utilization the Data
Managerial accounting information or data is very significant to see the actual scenario of
the company which helps to make the future opportunities or growth. This helps to look at how
to improve the operational activities. This is the source or management guide for the small
businesses which helps to make future decisions (Cooper, Ezzamel and Qu, 2017). Management
accounting data assist to focus on the specific activities which is necessary for the task. On the
basis of the accounting data manager of Agmet can easily decide their aims and objectives in
order to accomplish the company objectives. This helps company to focus on the regularly
activities. This also helps to identify the employees' performance towards the organisation goals.
Activity based costing techniques
At the time when company decided what products to sell, then after next process is to
decide to whom they want to sell the products and services. Moreover, this is the significant
factor to analysing the target group of customers. For that, company used activity based costing,
with the help of this tool of management accounting businesses can determine activity required
to produce and services a product line. Moreover, the main objective of the company is to higher
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