MA620 Advanced Management Accounting Practices | Assignment

MANAGEMENT ACCOUNTING PRACTICES
Changes in the focus of
Management Accounting
Practices
Table of Contents

MANAGEMENT ACCOUNTING PRACTICES
1
Task 1.................................................................................................................... 2
INTRODUCTION................................................................................................... 2
LITERATURE REVIEW:.......................................................................................... 2
Changes in the focus of management accounting practices..............................2
Management Accountant’s role in the contemporary business world.............3
Customer’s value and Shareholder’s wealth...................................................5
Contemporary techniques of resource management......................................6
Task 2.................................................................................................................. 10
Cost allocation Methods................................................................................... 10
Report............................................................................................................... 11
Background................................................................................................... 11
Practical analysis of the problem...................................................................12
Implications................................................................................................... 13
Conclusion..................................................................................................... 15
Appendices.................................................................................................... 15
References....................................................................................................... 19

MANAGEMENT ACCOUNTING PRACTICES
2
Task 1
INTRODUCTION
The key focus areas of management accounting are mainly categorised as the performance
factor and the profitability factor. The practices of management accounting are mainly
undertaken with the objective of improving the said areas by arranging, organising and
delivering the necessary and material information in a systematic manner to assist any
business in its decision making process. The management oriented practices keeps on
changing rapidly with the changes in the business environment. The management accountant
has to keep himself updated about the changes occurring in the business as a result of
adopting environmental changes. Management accounting is considered as the most
fundamental element of process of management. The management accountant has to ensure
that the information delivered to the business managers is relevant enough for the respective
areas of functions.
LITERATURE REVIEW:
Changes in the focus of management accounting practices
According to Charles T. Horngren, with the globalisation the businesses are expanding and
competition in the market is increasing rapidly, it is important to deploy the advanced
technologies in the business to meet the demands of the customers effectively and efficiently
and also to grow and succeed (Dunning, 2014). These factors are imposing the requirement
on the businesses to changes their ways of operating and managing various functions of
business. With these changes the management has to make the changes in the way
management accounting practices are undertaken as some of such changes have direct
implications on the management accountant’s work (Fullerton, Kennedy& Widener, 2013).

MANAGEMENT ACCOUNTING PRACTICES
3
With the introduction of new and advanced features of technologies it is made easy for the
management accountant to perform some tasks and functions with the use of I.T services
which will relinquish the problems of counting and calculations to be done in management
accounting activities. New techniques of management accounting have been taken into the
scope in the 21st century which are of advanced level to help the managers with the required
information for better planning and decision making (Hirst, Thompson & Bromley, 2015).
These techniques have been introduced to implement modern practices of management
accounting. Some of such techniques are Activity based management Costing, Throughout
Accounting, Back flush Costing, marginal cost accounting, modern strategic management
techniques etc. The introduction of such techniques have changed the focus of practices of
management accounting from ‘plain and simple’ roles to ‘advanced’ roles since earlier the
management accounts were only responsible for the cost identification and the financial
reporting (DRURY, 2013). However, now the accountants have to be concerned about the
creation of value using the resources (Grönroos & Ravald, 2011).
There is no set of accounting practices followed by every organisation rather each
organisation has its practices of management accounting depending upon their applicability
and suitability to the respective organisation (Htaybat & Alberti-Alhtaybat, 2013). The
factors contributing to the selection of management accounting practices can be from internal
environment such as the type and size of business, years of existence or they may be due to
external concerns such as regulatory requirements, modernisation of techniques, inventory
availability.
Management Accountant’s role in the contemporary business world
Jean E. Cunningham and Orest Fiume has defined the key responsibilities of a management
accountant and the other executives of management. Management accountant has a wide
array of functions to perform as a part of management accounting practices. The role of

MANAGEMENT ACCOUNTING PRACTICES
4
management accountant is essential for any organisation in its decision making process as
they assist management with the necessary information on timely manner (Goretzki, Strauss
& Weber, 2013). Following are the key roles of Management Accountant:
Reporting and analysis work:
The management accountant is responsible for preparation of reports on the functioning of
various operations and to identify the root causes of any deficiency in the operations. Also the
accountant is required to apply the analytical skills to the data of the company to compare the
actual results with the benchmarks and to report the deviations, if any with the suitable
recommendations.
Formulation of Strategies: The management accountants are responsible to formulate the
strategies for the management and the effective implementation of the same so as to achieve
the targets and the goals effectively.
Decision Making: The decision making function is the most crucial function in any
organization as it require good amount of information to take important decisions for the
company. The management accountant provides material and necessary to the top level
management.
Interpretation of Information: Management accountant helps in the interpretation of financial
information provided to the management so that it becomes easy for the managers to
understand the operating results.
Advisor: Cost management is supposed to provide the best advice relation to various crucial
matters on which management has to take firm decisions. The accountant is required to
provide the advice which is best suitable to the company so as to improve the overall
performance of the different functions of the company.

MANAGEMENT ACCOUNTING PRACTICES
5
Change Manager: As organization has to adopt to the changes that are rapidly occurring in
the environment in which it is operating, the management accountant will help the firm to
cope up with the changes by identifying and assessing the need and implications of changes
through provision of updated information (Christ, & Burritt 2013) (Needle, 2010).
Performance measurement: The management accountant helps the organization in measuring
the performance of overall organization as well as the performance of individuals of the
management such as employees and the managers.
Customer’s value and Shareholder’s wealth
Creation of customer’s value: customer’s value is the difference between the cost that the
customer pays for the products and services and the benefits they receive from that particular
product or the service provided to them by the seller or the service provider. Benefits are
evaluated only on the customer’s perception about the level of satisfaction a product must
provide to them in comparison to the alternate products available in the market.
Customer’s satisfaction may include various things at time such as the quality of the products
and services, the price of product in comparison to the price of similar products supplied by
the other firms, the brand value of the goods etc. (Gul, et al., (2012).
To create value for its customers a firm must have to be focused on the customer’s
satisfaction through greater loyalty towards the customers and the quality maintenance so that
excellent customer base can be formed and retained by the company over its competitors
which will help it grow and expand the business.
Shareholder’s wealth: Shareholders are the individuals who invests their funds in the
company in order to get returns their investments. The company in return gives them the
dividend which may be fixed or varying depending upon the terms of company. Since the
company finances most of its funds through the shareholders, the shareholders are often