Management Accounting Techniques at IMDA Tech LTD

The assignment examines how IMDA Tech LTD utilizes management accounting techniques to manage its finances. It delves into tools like marginal costing, absorption costing, and cost-volume-profit analysis, highlighting their role in recovering financial losses of £1.5 million. The analysis also incorporates financial and ratio analysis methodologies to assess the company's financial position and performance.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK.1............................................................................................................................................3
A)............................................................................................................................................3
1.1 MA and differences between MA and FA: .....................................................................3
1.2 Importance of MA:..................................................................................................4
B)............................................................................................................................................5
TASK.2............................................................................................................................................6
Net profit as per absorption costing and marginal costing:....................................................6
TASK 3............................................................................................................................................8
P4 Plan and their advantages and disadvantage with Pricing strategies along with Process of
preparing budget.....................................................................................................................8
TASK4 ..........................................................................................................................................11
P5 Balance scorecard approach and its implementation......................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Nowadays, management accounting is an important in the corporate world for effective
decision making in the organisation. With the help of management accounting, organisation
would able to get the competitive advantage over the competitors. Every department is directly
or indirectly is completely linked to finance/accounting department for the organisation's
success. There has been completely changed that the organisation would able to make that the
company on the peak position with the help of implementing the management accounting
standard. Management accounting assists the business to take the crucial business decisions and
stimulate the business to take the effective business performance(Ward, 2012). Management
accountants are specially known for the mix of operations, management and strategy.
Management accounting assist the senior managers to make the strategy, for business
management, and for the business operations.
TASK.1
A).
1.1 MA and differences between MA and FA:
Management accounting helps the organisations to make an effective and efficient
strategy for making the business sustainable.
While making the strategy of IMDA Tech LTD, management accountants plays undermentioned
role in the organisation.
 Investigate professional workplace
 Assess vital choices
 Outline and run performance management system
 Assess and oversee business hazard
 Lead business or corporate valuation
 Oversee monetary hazard
 Survey, review and assess risk control
 Apply risk management tool
 Detail and assess budgetary system
 Model and estimate money streams and different funds
 Prompt on mergers, acquisitions and divestment's

 Oversee change
 and so on.
While for effective management in the organisation, management accountants also helps the
company to implement the plans for effective running of the business.
FA is implemented to display the monetary soundness of a firm to its outside partners.
Senior managers, stockholders, financial institutions and varios investors are the group who are
concerned to the FA reports. It reflects an specific time-frame in the past and authorise those
group of audience to realize how the organization has performed. FA reports must be
documented on a yearly basis, and for publicly exchanged firms, the annual report must be made
in some portion of people in general record(Zimmerman and Yahya-Zadeh, 2011).
Management accounting is utilized by the top level authorities to frame crucial decisions
which are related to their everyday operations. It is construct not in light of previous
performance, but instead on present and future trends, that does not consider correct numbers.
Since administrators usually requires to frame operational decisions under a short time-frame in
a fluctuating domain, MA depends intensely on anticipating of business sectors and patterns.
Management accounting is expose the inner picture of the organisation. While on the
other hands, FA is used mainly for various stakeholders. However, FA is of incredible
significance to present and potential investors, MA is essential for supervisors to settle on
present and future financial decisions. Financial accounting requires to adhere Generally
Accepted Accounting Principles (GAAP), However, management accounting is frequently to a
higher degree a projection or estimate, since many of the managers don't have time for an exact
numbers when a decision is required to be made.
1.2 Importance of MA:
Entrepreneurs faces with endless decisions every day. Management accounting assist to
render information driven contribution to frame these kinds of decisions, that could build the
long term decisions over the long period of time (Types of Budgets for Businesses. 2017). Private
venture supervisors can implement this effective device to assist in making their business more
fruitful and effective by seeing how management accounting benefits regular decision making.
Relevant Cost Analysis:

Management accounting information is used by the senior managers in order to know
about the cost so that the they could make business product effective and efficient. For instance,
an entrepreneur might be confused about where he need to concentrates his advertising
endeavours. To analyse this decisions, an accountant could inspect the costs that vary and
eliminate the waste cost from this. This process is better-known as relevant cost anlysis method
and is a strategy that is educated in fundamental management accounting courses.
Activity based costing techniques:
Activity based costing technique is used to know about what kind items is required to
sell, the business is required to decide to whom they ought to sell the products. By utilizing
activity based costing systems, small business administration can decide the exercises required to
frame and deliver a product line.
B).
The motivation behind MA in the firm is to aid competitive decision making by
accumulating, preparing, and imparting information which aids on making key decision plan,
control, and evaluate business procedures and firm strategy. There are so many people who work
as an accountants under the firm, yet such people commonly work as financial accountants,
internal auditors, costs accountants (Definition of 'Pricing Strategies. 2017). Although, the
capacity to frame and apply management accounting practices is really a critical capacity for
some people, including account experts, operational and so on. Cost accounting system: Evaluating the exact cost of items is the most challenging task
for productive operations. A firm should assess what kind of items are beneficial and not,
and then, this is disclosed in order to know whether it is the right cost of the item or not.
Therefore, a product costing assists in evaluating the final forecasting of materials stock,
work-in-progress and final products stock, which are needed to frame the financial
statements. Stock management system:This is framed to manage for the bigger enterprises but it is
also been used by the small scale enterprises as well(Baldvinsdottir, Mitchell and
Nørreklit, 2010). The system guarantee, that the clients have enough of what they need
and arrange that objective against a retailer's money related need to keep up as minimum

stock as would be prudent. mismanaged stock means disappointed clients, an excess of
cash trap happen and the company did not able to manage the inventory at effective way. Job costing system: It includes the way under which the cost related with a particular
production work assessed. This data is required keeping in mind the end goal to present
the cost data to a client under an agreement where costs can be repaid. The data is
likewise valuable for deciding the accuracy of an organization's performance framework,
which needs to the capacity to set price which enables for a reasonable profits.
 Price optimizing system: It is the mathematical model which calculate about the demand
changes at different product price. Afterwards, merger those data with information on
costs and stock levels to refer prices of the product that could enhance the profits of the
firm. This enables the business to tailor pricing for consumer segments by appreciating
how potential consumers will react on price changeswith the data driven scenario (Bodie,
2013).
TASK.2
Net profit as per absorption costing and marginal costing:
Net profits can be ascertained via different methods in the management accounting. Net profits
of IMDA Tech LTD according to the absorption costing and marginal costing is appeared as
underneath:
Absorption Costing: This is a procedure of management accounting by which different costs
which are connected with various sorts of production procedures are absorbed on a product. This
strategy is required to assess the stock of an organisation. forecasting is the principle component
of management accounting(Garrison and et. al., 2010).
NET INCOME AS PER MARGINAL COSTING
PARTICULAR ￡Amount £ Amount
Sales value
Less: Variable costs
Stock at the begining
producion cost
Stock at the end
Variable sales overheads
NIL
30000
(7500)
52500
(22500)
(7875)

Contribution
Less: F.C:
Fixed Production overheads
Fixed Selling overheads
15000
10000
22125
(25000)
Net loss -2875
NET INCOME AS PER ABSORPTION COSTING
PARTICULAR ￡Amount £Amount
Sales value
Less: Cost of good Sold:
Beginning stock
Cost of production
Ending stock
(Under)/Over absorbed fixed prod. O/h
Gross Profit
Less: Selling Expenses
Variable sales expenses
Fixed selling expenses
NIL
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
Net loss -375
Marginal Costing: Marginal costing is implemented for the inside decision-making reason for
short run. At various levels of exercises, motivation behind marginal costing can be resolved
about the stage at which contribution can be generated(Burritt and et. al., 2011).On the other
side, marginal costing can be characterized as change in cost of opportunity which changes
because of vary in production.

TASK 3
P4 Plan and their advantages and disadvantage with Pricing strategies along with Process of
preparing budget
Budget is an important term because it helps in allocating all the resources according to
their needs and demands. In an appropriate budget everything is mentioned and involved through
which company can control all of its expenses as well as also helps in investing whole money
and finance in a proper manner. Each and every department have their own budgets through
which they can manage everything. It helps in reducing the risk and manage them according to
their nature. Now cited organisation focus more and more on preparing budget(5 Types of
Budgets for Businesses. 2017). They force to the departments and force them to prepare a budget
through which everything can manage properly. Below mentioned are the advantages and
disadvantages of various types of budget:
1. Master budget
2. Operating budget
3. Cash flow budget
4. Financial budget
5. Static budget
These are the famous forms of budget and helps in allocating all the resources properly.
They have some advantages and disadvantages. These are discussed more properly with the help
of taking all such budgets into consideration(Macintosh and Quattrone, 2010).
1. Master budget: As per this budget in which all operations during a financial year are
included in project. Provides a clear picture of whole year activities and their
appropriateness. This budget includes all the factors like sales, assets, operating expenses,
and income streams to allow companies to establish their goals and targets which they

want to achieve and also helps in improving their performance. It is generally prepared
in the large enterprise because with the help of this all managers are aligned properly.
Advantages of master budget is as follow:
a) Provide whole budget in a capsule form so that each and every operations and related
expenses get find out (Mitchell, Baldvinsdottir and Nørreklit, 2010).
b) Budget is prepared as the summary of whole year operations so that investment can get done
properly.
c) Brief estimation of profitability of an organisation.
d) It is helpful for the top authority because it helps inn formulating the whole budget in a
capsule form so, it become easy for them to calculate all the activities in a proper manner.
But this form have several disadvantages also which are as follow:
a) Master budget is a detail of whole year and whole organisation operations. Hence, it become
quite difficult for high authority to find out the divisions which are spending more and which are
less (Bodie, 2013).
b) It promotes the difficulty in reading and writing because it allocates whole budgets in one
term. So, it creates an problem in understanding.
2. Operating budget: It helps in estimating the day to day expenses and operations of the
business. This is prepared for estimating the day to day operations expenses because
it help in understanding the clear and appropriate report of the whole expenses which
are taking place in an organisation on regular basis. Advantages of operating budget
are as follow:
a) All unnecessary expenses have to trimmed out and include all such expenses also which are
not a part of business. So, operating budget help in managing the current expenses of a firm. So,
that their business can operate properly.
b) It helps in building reserve because by investing in proper project company can earn profit and
they can manage their daily operations properly. So, for such concern company have to maintain
reserves for the organisation.

Every budgeting system have some benefits and disadvantages so, operating budget
disadvantages are as follow:
a) It takes cost in managing all the activities because a separate person should have to hired for
this concern.
3. Financial budget: This type of budget is prepared for the entire financial year with
each and every function has its separate column. This is one of the best method of
budgeting because it gives and effective overview. So, this process is generally
taken by all the organisation in a effective manner. Some of the advantages and
disadvantages of this modern approach are as follow:
a) It helps in providing an effective over view of the whole financial activities and functions in a
proper manner(Burrittet. al., 2011).
b) It helps in making the budget effectively understandable.
c) Budget are hard to understand due to lengthy in nature. Such lack of understandability is a
reason of lengthy reports and statements.
Budget helps in estimating all the resources properly and in a efficient manner. This is
prepared with a purpose to formulate appropriate fiscal policies. So, cited firm have to use such
paths which enable them in formulation of such budget which is effective in nature and
acceptable by the firm. Steps involving in preparing budget are as follow:
1. Firstly company have to gather information for the different sources and projects on
which they have to spend money. So, that they can analyse that how much they will
going to save and what amount will be spent(Garrisonet. al., 2010).
2. Another thing of this step is to allocate all the necessary factors which help in making the
budget such as different sources through which finance can be available to them.
3. Along with that a effective budget includes all the monthly expenses with a proper list.
4. In an appropriate budget all expenses are break down into categories.
5. Total of monthly income and expenses because it helps in determine the profit and loss of
business.
6. Make adjustment for profit which means whole fund should be properly used in a
systematic manner.

7. If in budget company found that their expenses are more than their saving than they have
to cut down their spendings so, that they can properly manage everything.
8. Company have to review their budget on the monthly basis so, that they can manage their
activities properly specially in case they are suffering loss(Herzig,et. al., 2012).
9. Along with that firm also have to prepare budget for making charity, and other occasions.
10. And at the last company have to balance their budget that all projects are properly
financed or not and how much they save from such task.
A business can use variety of pricing strategies which helps them in their sales of product
and service. The main purpose of using price strategies is that it helps in defending an
organisation from new entries and many such things which affects the business more and more.
Following are the types of pricing strategies which are as follow:
1. Premium pricing: In this method company generally maintain their prices high and
provide quality so, that large number of customers attracts towards them(Definition of
'Pricing Strategies'. 2017).
2. Penetration pricing: In this method, firm have to set their price according to the market
nature. At the initial stage they low down their price and after gaining the market share
they high up their prices.
3. Skimming strategy: In this strategy company set their price according to the high class
group. This strategy states that at the initial stage they first take all market share and then
after gaining it properly they low down their price.
Such pricing strategies are to be considered while making the budgeting because it helps
an organisation to maintain price according to the nature of business.
TASK4
P5 Balance scorecard approach and its implementation
Balance scorecard is the process of maintain strategic planning and management system
which helps them in maintain a proper vision and strategy of an organisation and also helps them
in recovering from all the external and internal factors.
This is generally used by the company to analyse their performance and helps in maintain
strategic management system. This method is one of the effective way.

Imda tech suffers a loss of £1.5 million and from recovering from that they should have
to use this technique because it helps them in maintain their performance along with their
employees performance. Also it helps them in making strategy so, that they can analyse all the
factors and implement the strategies according to manner(LukkaModell2010 ).
A company can identify its financial problem with help of this approach because in this
method they include all their mission and visions. It shows the list of mix financial and non
financial items. Another major question which is associated with this investment is about
stakeholders or shareholders of a company. For this, management have to maintain their
statement of accounts in which adequate amount of cash have to keep up (Li et. al., 2012). this
aid them in dealing with various issues and problems of business.
Balance scorecard is a summary of operations and activities as well as strategies which
formulate by an entity. It helps in remembering all factors on daily basis by the management. By
using proper and appropriate tools and techniques company become able to recover their loss of
£1.5 million.
CONCLUSION
From the above mentioned reports, it has been found that tools of management accounting like
marginal costing, absorption costing and cost volume profit analysis are done by the
management accountants of IMDA Tech LTD can keep up money related position and they can
likewise outline certain techniques through analysing methodology of accounting like financial
analysis and ratio analysis.

REFERENCES
Books and journals
Baldvinsdottir, G., Mitchell, F and Nørreklit, H., 2010. Issues in the relationship between theory
and practice in management accounting. Management Accounting Research. 21(2). pp.79-82.
Bodie, Z., 2013. Investments. McGraw-Hill.
Burritt, R.L., and et. al., 2011. Environmental management accounting and supply chain
management (Vol. 27). Springer Science & Business Media.
Garrison, R.H., and et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Herzig, C., and et. al., 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Li, X., and et. al., 2012. A comparative analysis of management accounting systems’ impact on
lean implementation. International Journal of Technology Management. 57(1/2/3). pp.33-48.
Lukka, K and Modell, S., 2010. Validation in interpretive management accounting research.
Accounting, Organizations and Society. 35(4). pp.462-477.
Macintosh, N.B and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Ward, K., 2012. Strategic management accounting. Routledge.
Zimmerman, J.L and Yahya-Zadeh, M., 2011. Accounting for decision making and control.
Issues in Accounting Education. 26(1). pp.258-259.
Online
5 Types of Budgets for Businesses. 2017 [Online]. Available
through:<https://www.fool.com/knowledge-center/5-types-of-budgets-for-businesses.aspx>.
[Accessed on 11th April 2017]
Definition of 'Pricing Strategies'. 2017 [Online]. Available
through:<http://economictimes.indiatimes.com/definition/pricing-strategies>. [Accessed on 11th
April 2017]