Del's Business Performance Analysis

This assignment delves into a detailed analysis of Del's business performance. Students are tasked with utilizing variance analysis to evaluate departmental performance and identify areas for improvement. The analysis extends to capital budgeting, standard costing, and marginal costing systems, highlighting their significance in managing financial aspects. Ultimately, the assignment aims to equip students with the tools to assess business performance and propose strategies for enhancement.

Management Accounting

INTRODUCTION
Management accounting is the tool which is undertaken by the managers of business
organization to evaluate and analyze information. Hence, by applying the tools and
techniques of management accounting managers prepare suitable report that makes
contribution in effective decision making. One of the main objectives of business
organization is to meet goals and objectives by making optimum use of funds. Hence, by
placing emphasis of managerial reporting system business entity can devise suitable strategic
framework. This project report is based on Dell which offers high quality computer and
laptop to the customers. In this, report will provide deeper insight about the extent to which
management accounting system helps in fulfilling the goals. Further, it will shed light on the
manner in which managerial reporting system helps sin responding to the financial problems.
The major focus on this report is assessing the tools which in turn help in presenting suitable
view of cost and profit.
TASK 1
P1. Explaining management accounting and its system with essential requirements
Management accounting is the field of finance which in turn assists manager in
making appropriate decisions through the means of reporting. It focuses on making
evaluation of internal data such as budget etc. and thereby prepares report by conducting in-
depth evaluation. Hence, such report provides input to the top management and aid in
preparing competent framework. Moreover, building and sustaining competitive edge over
others is one of the main objectives of firm (Zimmerman and Yahya-Zadeh, 2011). In this,
managerial reports enable manager to attain such objective by making continuous evaluation
of performance level. On the basis of this aspect, by keeping in mind the significance level of
management accounting Dell has taken decision to undertake it for making control on both
cost as well as profit. Hence, there is several management accounting systems that manager
of Dell can undertake are as follows:
 Inventory management software: This software contains information regarding the
stock level, price etc. By using such software business unit can make assessment of
finished inventory available for sell. Besides this, it also helps in identifying the stock
which Dell needs to maintain for meeting the needs and requirements on time.

Further, it also helps in identifying the ordering level and thereby assists in exerting
control on cost level significantly.
 Price optimization system: Competition and prices which are charged by other firms
have high level of impact on customer decision making. In this regard, price
optimization system provides assistance to Dell in evaluating the behavior of
personnel at varied cost level. Usually, demand level is high when prices are
affordable. In this way, by offering quality computer and laptops to the people at
suitable price Dell can entice as well as profit margin (Macintosh and Quattrone,
2010). Further, such system or method also helps in assessing the suitable unit cost.
On the basis of such method, by gathering information about total cost and dividing it
from the number of units manufactured Dell per unit charges of laptop. In this, by
adding up margin in the unit cost manager of the business organization can set
suitable price. In this way, by setting and charging suitable price firm can enhance
customer base and would become able to earn high profit margin.
 Job costing system: This system renders information about the material, labor and
overhead costs associate with the manufacturing of laptops. In this, by making
assessment of cost at each level of manufacturing aspect manager of Dell can take
suitable judgments. Hence, it helps in tracking the cost level of material, labor etc. and
thereby helps in identifying the appropriate cost level that is associated with the
manufacturing aspects or activities. The main advantages or benefits of such system
that it helps in assessing the level of wastage and provides indication about control.
 Standard and marginal costing: By undertaking marginal costing system higher
authority of Dell can identify the level of expense on the manufacturing of one
additional unit. Marginal costing system enables firm to assess break-even point in an
effectual way. Through the means of BEP assessment senior authority can determine
the units which they need to produce or sell for getting suitable profit margin. Along
with this, standard costing system is highly significant which in turn lays emphasis on
the identification of deviations via making comparison of standard figures with the
actual performances (Baldvinsdottir, Mitchell and Nørreklit, 2010). Hence, by
evaluating each aspect business entity of Dell can take suitable decision for
improvement in the financial aspects. Such systems offer high level of benefit to the
firm in terms of suitable planning.
P2. Explaining different methods used for management accounting reporting

Report is the framework that is prepared by accounting personnel including both
financial and non-financial information. Hence, by undertaking and evaluating reports
manager of Dell can develop competent framework. In order to get information about the
business process and performance manager of Dell can prepare the following reports:
 Cost report: This report contains information regarding material, labor and overhead.
In this, by summing up all the expenses business entity can find total cost. Hence, cost
report summarizes information about the total cost incurred in relation to specific
products or services. Further, such report also helps in collecting information about
the unit cost of computer and laptops (Ward, 2012). Hence, by dividing total cost
from the number of units manufactured unit cost can be assessed by higher
management in an effectual way. Hence, by considering such report management of
Dell can decide suitable price of computer and laptop. Moreover, in mark up pricing
method manager adds gross margin % in unit cost. Hence, by following such report
team of management can take suitable decision regarding the price at which they need
to offer products or services to the customers.
 Budget report: In this report, manager of the firm lists all the expenses and revenue
clearly. In this, by using such report concerned authority of Dell can assess
performance of each department. Moreover, such report enables firm to make control
on cost level through the means of continuous evaluation. Along with this, current
year budget or monetary plan is highly based on the previous year’s framework. In
this, by making comparison of actual performance with standard aspects manager of
Dell can assess deviations. In this, by keeping in mind the causes of deviations firm
can take highly strategic measure (Managerial reporting system, 2017). Besides this,
budget report helps in preparing suitable incentive plan for the personnel. Further,
bonuses and other monetary rewards are also highly based on such report. Hence,
budget report may be served as a performance appraisal tool which in turn helps in
taking suitable decision regarding salary of employees and other associated benefits.
Hence, by making competent plan manager of Dell can motivate the employees to a
great extent.
 Performance report: Higher manager can prepare suitable budgeting framework
about the near future by undertaking performance report. Moreover, such report
highlights the extent the extent to which actual performance varies from budgeted
figures. Further, by taking into account such system Dell can set suitable parameters

in monetary terms. In this way, by setting suitable standards business organization can
motivate personnel to a great extent.
 Inventory report: Process of manufacturing can be made more efficient by higher
management through the means of inventory report. Such report includes information
about inventory waste, labor cost and per unit overhead cost. In this, by making
assessment of the inventory report manager of Dell can undertake strategic action for
improvement. Along with this, inventory report also provides high level of assistance
to the managers whether they should place for inventory. In this way, by maintaining
the enough stock level managers can ensure smooth functioning of the business
operations and functions (Lukka and Modell, 2010). Along with this, by maintain
suitable inventory business entity can make control on holding and ordering cost.
 Sales and expense report: By preparing sales and expense report manager of Dell can
monitor the performance level more effectually. Sales report clearly presents the
extent to which business entity and concerned department has achieved the target. By
making evaluation of such report higher management team can decide whether they
need to invest more money in the promotional aspect or not. For instance: If sales
revenue is lower then by focusing on promotional activities manager of Dell can
attract large number of customers and thereby would become able to enhance sales
revenue. On the other sides, expense report includes information regarding the direct
and indirect expenditure which business unit needs to incur during the specified time
frame in manufacturing and selling aspect. Hence, by making comparison of the
actual performance with the standard figures personnel of Dell can assess the area
which in turn demands for greater control. Hence, such report offers opportunity to
the higher management to control financial performance and thereby enhance profit
margin.
Hence, by evaluating all such reports higher authority of Dell can take suitable
decision for the organizational growth and success. Moreover, without having deeper
insight about the firm’s performance manager is not in position to undertake strategic
action for the maximization of productivity and profitability.
TASK 3

P3. Calculating cost per unit and preparing income statement according to marginal and
absorption costing system
By making assessment, it has been assessed that amount of profit or loss vary in the
case of absorption and marginal costing due to the fixed cost. Absorption costing method
offers solution by taking into account fixed expenses. On the other side, marginal costing
method avoids to consider fixed expenses while making assessment of unit cost and
profitability aspect (Parker, 2012). Thus, manager of Del should consider absorption costing
system which in turn provides them with clear picture regarding profit or loss.
Unit cost assessment
Particulars Absorption costing Marginal costing
Direct material cost 20 20
Direct labor cost 8 8
Variable manufacturing
overhead
4 4
Fixed manufacturing
overhead
10 (500000 / 50000) -
Cost per unit 42 32
Income statement according to marginal costing system:
Particulars Amount (in £)
Sales revenue 2700000
Less variable cost
Beginning inventory 0
Production cost 1600000
Closing stock 320000
Variable selling cost 240000
Contribution (Sales – variable cost) 540000
Less Fixed cost
Fixed manufacturing expenses 500000
Fixed Administration and selling cost 600000
Loss -560000

TASK 3
P4. Explaining the importance of different types of planning tools that are used for budgetary
control
Management accountant of Dell can prepare highly competent plan by using modern
techniques of budgeting. Tools and techniques of budgeting provide high level of assistance
to the manager in making proper estimation of both income and expenditures. In this way, by
preparing suitable plan manager can exert control on the level of overspending. Moreover,
system of budgeting helps company in providing direction to the personnel about money
which they need to spend on varied activities. Further, effectual plan is highly required
because it provides input to the manager for variance analysis. Moreover, for the standard
level business entity requires suitable budgeting framework (Granlund, 2011). The rationale
behind this, in the absence of having suitable plan manager is not in position to identify
suitable outcome from variance analysis. Hence, by undertaking below mention tools
manager of Dell can prepare competent plan are enumerated below:
Zero based budgeting: Del can prepare highly effective financial plan by using zero base
budgeting technique. In this budgeting manager starts with making assessment of the
activities which it needs to perform during the specified frame. Thereafter, manager identifies
the cost effectual ways through which activities can be performed more effectually. Hence,
by conducting in-depth investigation of cost and activities finance personnel of Dell can draft
suitable plan. In this, manager does not consider past framework while preparing the new
one. Besides this, in this manager includes activities and allocates cost by justifying each
aspect clearly. In the recent times, such modern techniques of budgeting help in making
competent and reliable financial plan.
 Advantages: ZBB facilitates disciplined execution of monetary resources and thereby
helps company in achieving success. Further, by employing zero base budgeting
technique manager of Dell can assess activities which need to remove from product
line. Hence, by including only suitable activities in the plan effectiveness of budget
can be enhanced (Ferreira, Moulang and Hendro, 2010). Further, business entity can
motivate personnel to perform better by allocating appropriate amount. Moreover,
when manager fails to prepare suitable plan then it may result into demotivation

among the personnel. The rationale behind this, in the absence of having enough
financial resources individuals face difficulty in performing the activities. Hence,
proper co-ordination can be developed in the activities and financial plan through
ZBB.
 Disadvantages: To prepare budgeting framework according to zero base technique
Dell requires highly qualified and competent personnel. In the absence of having
highly talented workforce it is not possible for the personnel to frame appropriate
plan. In addition to this, ZBB is highly time consuming activity which in turn places
direct impact on the productivity aspect of manager. Moreover, in this, manager
prepares completely new plans by conducting deeper evaluation of each aspect
(Francis and et.al., 2015). Hence, by keeping all such aspects in mind it can be stated
that high level of competence is require to develop plan in accordance with market
trend and other aspects.
Activity based budgeting: In the recent times, with the motive to make proper allocation of
overhead manager of various types of business unit undertakes activity based techniques.
According to such technique, manager identifies cost driver and allocates cost by considering
the activity level. This aspect shows that such technique is highly based on the actual cost
incurred (Goddard and Simm, 2017). Hence, by using budget which is based on such
technique manager can identify suitable variance level. In this way, by taking timely action
Dell can improve its existing performance level.
 Advantages: ABB system offers higher benefit to the firm in terms of making
optimum use of funds. Hence, by employing such tool business entity of Del would
become able to allocate the cost level according to the activities performed. In this
way, competent plan can be developed by the firm by adopting the technique of
activity based budgeting.
 Disadvantages: Manager is required to conduct training session for the personnel of
finance department. Moreover, all the personnel do not have ability to prepare
framework according to activity based budgeting. In this, training activity imposes
high level of cost in front of firm. Along with this, if manager fails to identify suitable
cost driver then it may result into in appropriate framework (Hernandez, L., Jonker
and Kosse, 2017). Hence, all such aspects affect the significance level of ABB.

Balance scorecard: Such tool lays emphasis on setting financial and non-financial
measures which are associated with the organizational success. By using balance scorecard
tool firm can align vision and goal with the business activities. Hence, this planning tool
enables Dell to make improvement in both internal and external business performance.
Further, by monitoring the performance level in against to the pre-determined standards
manger can aid in decision making aspect to the significant level.
 Advantages: This tool helps company in overcoming challenges regarding the
performance measurement, strategy execution and incline in the level of intangible
assets level. Along with this, by using this system manager can evaluate the
performance level from four perspectives such as financial, customers, business
processes as well as learning and growth (Advantages and disadvantages of balance
scorecard, 2017). Thus, by considering all such perspectives manager can devise
suitable plan.
 Disadvantages: Balance scorecard includes few information regarding the monetary
aspects,. This aspect limits the significance of such tool to the significant level. For
the preparation of balance scorecard business unit requires highly talented personnel.
A. Compute standard cost of PVC sheet and make comparison with standard cost
Given that:
 Cost of 2.5 PVT sheet = £3.60
 Standard cost = £37400
Particulars Figures (in £)
Standard cost of PVC sheet 11000 / 2.5 * 3.60 = 15840
Variance (Standard cost – actual cost) 37400 - 15840
=21560
B. Assessing material price and quantity price
Particulars Formula Figures (in £)
Material price variance (Standard price - Actual price) *
Actual quantity
(3.60 - 3.40) * 11000
= 0.2*11000
= 2200 F
Material quantity variance (Standard Quantity - Actual (10000 - 11000)*3.60

Quantity) * Standard price = -1000 * 3.60
= -3600 (Adverse)
TASK 4
P5. Comparing the management accounting system of Dell with HP
By doing investigation, it has been identified that HP is one of the main competitors
of Dell. In the recent times Dell is facing stiff competition with HP in terms of market share
and making control on cost level. Hence, to respond financial problems manager of Dell
undertakes zero base budgeting system. On the other side, HP undertakes activity based
budgeting techniques. Both the companies undertake modern budgeting tools for the
preparation of monetary framework. However, it can be stated that technique which is
employed by Dell for coping up with the financial issues highly effectual (Huang, Kauffman
and Ma, 2015). By providing individuals with effectual training session business unit can
devise prominent plan. In this way, by conducting evaluation standard performance with
actual aspects business unit can easily find out the areas needed control.
CONCLUSION
By summing up this report, it has been concluded that by using several systems
related to management accounting Dell can achieve success. It can be stated that by using
cost and profit report business unit can evaluate the areas which require high level of control.
In this regard, by taking strategic action Dell can maximize profitability aspect to a great
extent. It can be revealed from the report that by conducting variance analysis business
organization can evaluate the performance of each department. Hence, by making changes in
the strategies within suitable time frame manager of Del can take suitable action for
improvement. Along with this, it has been articulated that capital budgeting, standard and
marginal costing system is highly significant which helps in dealing with financial aspects.

REFERENCES
Books and Journals
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