Cost Efficiency Strategies in Management Accounting

The assignment highlights various methods to minimize waste and control production activities in management accounting. The provided references from academic sources provide insights into different approaches, such as accounting for decision-making and control, strategic management accounting, and environmental management accounting. The summary suggests that adopting cost-efficient strategies can be achieved by utilizing different types of management accounting systems, including the 4 main functions: planning, controlling, reporting, and decision-making. By understanding these functions and applying them effectively, organizations can reduce waste and optimize their production processes for improved profitability.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Functions of management accounting ..................................................................................3
P2 Type of management accounting system and its use to each and every department in the
context of Imda tech....................................................................................................................4
TASK 2............................................................................................................................................6
P3 Preparation of income statement of Imda tech using marginal and absorption costing .......6
TASK 3............................................................................................................................................9
P4 Planning tool with the discussion on budget and pricing strategy in the context of Imda
tech limited..................................................................................................................................9
a) Planning tools and budget advantages and disadvantgaes ................................................9
b) Process of preparing budget.............................................................................................12
c) Pricing strategy.................................................................................................................12
TASK 4..........................................................................................................................................13
P5 Balance scorecard and its implementation to improve the performance ............................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting helps the managers of an organisation to take effective decision.
These decision making are helpful for them in making their success easy in keen competitive
market. Managerial accounting specifies such type of decision which are for the short term. It
helps in conduct the daily operations systematically so that any kind of deviation chances get
reduced. Present report is all about the Imda tech limited who are dealing in special type of
chargers for mobile telephone and other gadgets. In the last board meeting department managers
complained about the lack of financial information which reduce the working operations of
business. The assignment define about the different type of costing method which use by
department managers to control their working cost. Along with this preparation of budget and its
advantages and disadvantages are also going to be discussed. Moreover balance scorecard
approach is an effective method which helps in identify about financial and non financial
position of the company(Herzig and et. al., 2012).
TASK 1
P1 Functions of management accounting
Management accounting is a method which helps in preparing the data on which the
decision making process and differentiation can made. It is generally prepared on the basis of
short term by conducting day to day operations of the business(Li and et. al., 2012). It helps in
the planning process and organise all such planning elements by controlling them to take
effective decision. So managers enable to make their working of department smooth and
appropriate. This process helps in the long run by providing short term analysis.
Hence, the management accounting have four main functions which are as follow:
1. Planning
2. Organising
3. Controlling
4. Decision making
These four are the core functions of management accounting so that its nature become
different from the financial accounting. These elements aids in taking the short term decision so
that all task and project get accomplish without any issue(DRURY, 2013).

It is prepared for taking the decision for the internal stakeholders of the business. So that
their benefits and interest do not get spoil and they keep supporting an organisation.
Financial accounting is a method through which final reports get prepared. It is maintain
on the whole year process and it includes all the short run and long run activities of a company.
There are some major difference between in the financial accounting and managerial accounting
method which are as follow:
Management accounting Financial accounting
1. It is prepared for the internal stakeholders of
the business.
1. This form of accounting is maintain for the
external audiences of an organisation.
2. Management accounting helps in facilitate
about the decision which are related with
current and future course of action.
2. It provides a great importance to the current
and potential investors.
3. Chief executive officer, employees etc. are
some of the example of this accounting
procedure.
3. Stockholders, financial institution are some
of the example of financial accounting.
Management accounting is a important tool which helps in taking all the decision which
are for the business welfare(van der Steen, 2011). It enables all the department managers to make
weekly analysis of all their 7 days operation and in any case of deviation they take decision
which are beneficial for them. Along with this it also aid them in make a proper report of their
stock and other core activities so their budget get fully utilise in a proper manner.
This helps them in taking such type of actions and judgement which promote them in
positive manner.
P2 Type of management accounting system and its use to each and every department in the
context of Imda tech
Management accounting system is a procedure through which a firm collect, store and
processing financial and accounting data which helps to the senior management in their decision
making process. This is one of the most important system because all the short term decision are
taken on this system approach. This approach is beneficial as per the department managers can
gather all the data of acts which they perform during a week or in a month. Monthly and weekly

reports enable them to take such type decision which promote their determination in a proper and
systematic manner(Soin and Collier, 2013).
Management accounting system helps in tracking the cost associated with the production
of goods and services in a company. It helps in finding out the unit which are expand on the
production process. So that firm fix such cost as the price of product which they actually
produced. Another few most common type of management accounting system are in trend also
which leads in taking the decision for an organisation and make it easy for them to work in a
proper manner.
This process promote to follow the ethical code of conduct because they find out the
differences which usually occur in a short period and their decision become appropriate which do
not provide harm to the society and business. This shows that while using management
accounting system organisation conduct CSR easily(Giovannoni, Maraghini and Riccaboni,
2011).
Some other system of management accounting are as follow through which cost can be
determine and do not get high so much. This helps an entity to set such price which can be easily
affordable to the target customers. So other system of management accounting are as follow:
1. Traditional accounting: This process helps to cited organisation to track their cost by
following job order or process costing method. Each of the method helps in determine the
cost which is related with the direct labour, direct material and overhead manufacturing.
Job order costing approach is used by firms to determine the cost which is for the large
project where all cost are easily traceable to an individual project. Whereas on the other
hand process costing states the continues production of the goods. It get done without
stopping a production activity. The cost is based on the number of process which incur at
the time of production of homogeneous goods.
2. Lean accounting: This form of accounting has provide more benefits to the large number
of firms to determine the cost. Its aid them in formulate strategies through which the
wastage of resources eliminates and it shows that this method is not solely focus on cost.
Any excess cost is a waste and get cut down from the system based on the information
and data. With the help of this method cost is determine by avoiding many elements
which directly affect the cost.

Apart from all these methods there are some other system also get introduced which help an
organisation department managers to take effective decision(Luft and Shields, 2010). These
approaches help them to determine cost and manage the inventory so that proper flow of goods
and services can take place. Moreover job costing helps in determine the cost which is generally
for the large projects and at last price optimising system in which prices company determine the
customers opinion about different prices of the product through different channels. The basic
evaluation of this system approaches are as follow:(Cinquini and Tenucc, 2010).
1. Cost accounting system:Cost accounting systems and the traditional system are the
similar method which helps in measuring the cost. Cost accounting system is a
framework used by firms to estimate the cost of their products for profitability analysis,
inventory valuation and cost control. This approach helps in estimating the cost of
product. It includes the actual cost which signifies about the actual cost of everything
which are indulge in the production activity. Normal costing helps in determine the value
of manufacturing products with the actual material cost(Garrison and et. al., 2010).
2. Inventory management system:This system helps in determine the stock value which the
company already have. It helps them in manufacture only such amount which is generally
needed in the market. So inventory management system aid in control the cost of
warehousing and production.
3. Job costing:This costing approach helps in determine the cost of each and every product
separately. It is appropriate for such type of organisation which deal in unique goods and
services. Imda tech can utilise this system because they deal in the mobile charger as well
as also in the gadgets. So they use this technique for their each job in which they are
involve.
4. Price optimising system:This technique is use to determine the price with the help of
customers response towards the special products and goods. So that their price get
optimised according to that. Also the another method for conducting this approach is to
determine the best suited price for meeting the objectives such as maximising the
operating profit.

TASK 2
P3 Preparation of income statement of Imda tech using marginal and absorption costing
Particulars Amount
Sales(1500*35) 52500
Less: Cost of production
Direct Material(2000*8) 16000
Direct labour(2000*5) 10000
Variable production
overhead(2000*2)
4000
Total variable cost of
production
30000
Fixed production
overhead(2000*5)
10000
Cost of production 40000
Less: Closing
stock(40000\2000*500)
10000
Cost of goods sold 30000
Under\over absorption
cost(1000*5)
5000
Gross profit 17500
Less: fixed selling expenses 10000
Variable selling, distribution
expenses (52500*15%)
7875
Total non-production
overhead
17875
Net profitability -375
Absorption costing is a method which get calculated with a purpose of determining the
cost of product or enterprise by taking into account all the indirect expenses as well as direct
cost. This method is one of the most suitable method because it includes all such overheads and

expenditure which incur at the time of manufacturing. It is also referred to as the full costing and
full absorption method. Hence, this method is one of the most useful technique in calculating the
inventory value, net profit and many things which helps in determine the cost of goods(Otley and
Emmanuel, 2013).
According to the income statement of the Imda tech it is clearly identify that after
analysing the company income statement with the help of absorption costing approach they earn
a net profitability is -375. Hence, managers can adopt this technique while making their reports
and utilise their finance properly and estimate the total cost by including all the factors in a
proper manner.
The increase and decrease in the total cost of production which manufacture by an
organisation for making one more additional unit is defined as the marginal costing. In
companies where average cost are generally fixed marginal cost is usually equal to the average
cost. It get changed and variances come again and again with this change moment. It enables the
managers to take decision by analyse the changes which take place. So that their productivity get
improved and their survival become easy(Bodie, 2013).
By conducting this approach by the Imda tech financial managers they found that their
profit become nil which signifies that this approach is not appropriate with the purpose of using.
It helps the department managers to find out the changes which take place from the last few
years in the comparison to present year analysis. So that their decision making power get

increase and they can take some important decision which helps them in making their department
and firm survival easy for long-run(Lukka and Modell, 2010).
TASK 3
P4 Planning tool with the discussion on budget and pricing strategy in the context of Imda tech
limited
a) Planning tools and budget advantages and disadvantgaes
Planning tool are the essential elements which helps an organisation to follow up all the
objectives in a proper and systematic manner. Activities should have to get done in an
appropriate format. The planning tools help in the formulation of division of task and project
according to their nature and number of days of accomplishment. This is one of the most
important method through which all the task get done in a signified framework(Ward, 2012).
There are mainly seven planning tools with different nature of working but with the same
concern which is about the organisation success by accomplishing the objectives and targets on
time. These tools suggest the smooth working flow.
One of the major point which any firm should have to get include while preparing their
strategies is the budget. Budget get prepared with the help of different reports. These reports
provide information about the total number of operations which will going to be perform by the
business entity. So the full data of such information get framed with its
expenditure(Baldvinsdottir, Mitchell and Nørreklit, 2010).
This budget formation promotes the sustainability of a company so their working become
smooth and functions get done in a signified manner. There are different types of budget which
can be consider by the Imda tech for preparing their budget. The various format of budgetary are
as follow:
1. Master budget
2. Operating budget
3. Static budget
4. Cash flow budget
5. Financial budget

These all the famous forms of budget which are used by the organisations whether they are large
or small. This helps them in facilitating their activities according to the nature. So that work
should get done in a proper nature(Simons,2013).
Master budget is prepared for the entire year in which all the operations details are
include and fund allot to each and every department on such basis. This helps in providing a
overview of all the acts which will going to take place. It helps in determine the ways from
which company can arrange fund and manage their entire year expenditure.
Operating budget is prepared with the aim of identifying the daily operations. It aid an
organisation to examine that how much amount of expenses they are going to bear for a certain
activity. This helps them in reduce the uncertainty. This budgetary format helps in the smooth
functioning.
Financial budget provides a detailed info about each and every activity through which
company and shareholders can get a summary of all the acts. In this method each and every
action have separate column which shows that this task need this much amount of money in its
accomplishment. So appropriate fund can be allotted to that department(Zimmerman and Yahya-
Zadeh, 2011).
Hence, company can use either of the one technique through which their working become
smooth and proper. It reduces the chances of risk and sometimes to ascertain the chances of
failure in advance. This is one of the major advantage for any company in preparing budget. But
all of the above methods have some drawbacks also which reduces the purity of budget
technique while choosing either of the one approach.
Operating budget Master budget Financing budget
Advantage: Benefits: Plus point:
1. Helps in cut down the
unnecessary expenses by
analysing the daily operations.
1. It helps in providing the
detail in the capsule form
which means in shorter format.
1. Provide brief detail about all
the income and expenditure.
2. Detail about each and every
daily expenses so that task
should get done on daily basis
with optimum utilisation of
2. Provide a overview of the
acts.
2. Promotes the
understandability easy to the
stakeholders and BOD.

resources.
Disadvantage: Limitation: Drawback:
1. A separate person is hired
which increase the cost.
1. Leads in provide lengthy
overview.
1. Take lot of time in
preparation.
2. Sometime company
expenses get more as
compared to budget which
increase the chances of
uncertainty.
2. seems difficult to
understand.
2. Hard to identify each and
every aspect properly.
Above mentioned are some of the drawbacks and advantages which helps in understand about
the different forms of budgetary so that work become easy to understand and division of
expenses become appropriate. This promote the organisation to control their expenses.
b) Process of preparing budget
The main reason behind preparing any budget is that to utilise all the resources in a
proper manner without wasting them. The another function which done by the budget is that it
minimise the chances of risk which affect any business. The budget include certain number of
activities which are as follow:
1. Necessary information have to get analyse and make a proper comparison between short
term projects and long term task.
2. Next step is to find out that from where the fund get arranged.
3. A proper section of expenses have to get prepared.
4. After that expenses have to get sectionalised according to nature.
5. The addition of the expenses and income so that proper flow of money get managed.
6. Another section have to get prepared for some unforeseen liabilities.
All such things are going to be involved in the budget so that a proper and effective budget can
get framed(Macintosh and Quattrone2010).

c) Pricing strategy
A business always use some of the pricing strategy in which they show so much concern
about their customers. Prices are formulated according to the consumer opinion and preferences.
For this and effective costing system and approach have to get identify which helps in making a
efficient price. The efficient price can only determine if the cost is production is low. In this
concern certain pricing strategies are get taken into account by different number of companies:
1. Premium pricing: The basic motive behind premium pricing is that it only allows high
level income group to purchase the goods. These products have high rates which shows
that they have good quality features. Another major function which perform by this form
is that it leads in attract many customers due to high range.
2. Penetration pricing: This strategy states that in the beginning company set their rate
margin at low and after day by day they rise their prices. This process get done after the
gaining of whole market share.
TASK 4
P5 Balance scorecard and its implementation to improve the performance
Balance score card is one of the important factor which helps in measure the performance
of an organisation and their employees. Imda tech suffer a loss of £1.5 million. This shows that
after serving quality products they bear the loss. After an analysis it is identify that the main
reason behind such sum of money is the lack of financial governance. Balance scorecard aid in
setting the mission, vision and objectives so that work get done in a proper and appropriate
manner.
This helps in measuring the performance from the past year performance and in case of
any difference they have to get sorted out. This promote the chances of sustainability.
It also enables an organisation to utilise their fund and pass out the hurdle of financial
problem.
It also help in measure that which strategy is not appropriate because it mentioned on the
board from where it can get analyse that which strategy provide the lack of proper utilisation of
resources. So new strategy get formulated. Along with this it also enables the financial
governance performance so that they can do their work perfectly. And their crises can get sorted
out as soon as possible.

CONCLUSION
It get examine by the above report that for any task and project a budget have to get
prepared. This helps in the most effective manner. Also an organisation have to utilise different
pricing and cost related strategy for making its cost efficient. Different method helps in minimise
the waste and control the production activity.

REFERENCES
Books and journals
Zimmerman, J.L and Yahya-Zadeh, M., 2011. Accounting for decision making and control.
Issues in Accounting Education. 26(1). pp.258-259.
Macintosh, N.B and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Simons, R., 2013. Performance Measurement and Control Systems for Implementing Strategy
Text and Cases: Pearson New International Edition. Pearson Higher Ed.
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.
Ward, K., 2012. Strategic management accounting. Routledge.
Lukka, K and Modell, S., 2010. Validation in interpretive management accounting research.
Accounting, Organizations and Society. 35(4). pp.462-477.
Bodie, Z., 2013. Investments. McGraw-Hill.
Otley, D and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
Garrison, R.H., and et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Cinquini, L and Tenucci, A., 2010. Strategic management accounting and business strategy: a
loose coupling?. Journal of Accounting & organizational change. 6(2). pp.228-259.
Luft, J and Shields, M.D., 2010. Psychology models of management accounting. Foundations
and Trends® in Accounting. 4(3–4). pp.199-345.
Scapens, R.W and Bromwich, M., 2010. Management accounting research: 20 years on.
Giovannoni, E., Maraghini, M.P and Riccaboni, A., 2011. Transmitting knowledge across
generations: the role of management accounting practices. Family Business Review.
p.0894486511406722.
Soin, K and Collier, P., 2013. Risk and risk management in management accounting and control.
van der Steen, M., 2011. The emergence and change of management accounting routines.
Accounting, Auditing & Accountability Journal. 24(4). pp.502-547.
DRURY, C.M., 2013. Management and cost accounting. Springer.