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P2) Different method used for Management accounting report

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Added on  2021-02-20

P2) Different method used for Management accounting report

   Added on 2021-02-20

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ManagementAccounting Systems &Techniques
P2) Different method used for Management accounting report_1
Table of ContentsINTRODUCTION ..........................................................................................................................3P1) Management accounting and its essential requirement ..................................................4P2) Different method used for Management accounting report ............................................6M1) Benefits and application of management accounting system.........................................8D1) Evaluation of integration of management accounting system and reporting .................8TASK 2............................................................................................................................................9P3) Cost analysis through preparation of income statement.................................................9M2) Management accounting techniques to produce financial reports................................15D2. Interpretation of data.....................................................................................................15TASK 3 .........................................................................................................................................16P4) Advantage and disadvantage of Planning tools used for budgetary control .................16M3) Application of planning tools for preparing and forecasting budget ...........................19TASK 4 .........................................................................................................................................22P5) Adoption of management accounting systems to respond to financial problems..........22M4) Management accounting lead an organisation to sustainable success .........................24D3) Planning tools for accounting help to solve problems and support organisation withsustainable success ..............................................................................................................25CONCLUSION .............................................................................................................................25REFERENCES..............................................................................................................................25
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INTRODUCTION Management accounting is a tool used for effective presentation of financial informationand resources required by internal management to formulate policies and planning forundertaking proper decision making. The main purpose of management accounting is timelyrecording of day to day transaction in a proper and most presentable way so that it can beunderstand easily. Management accounting also provide a easiest way for communicating currentposition of an organisation (Hosseinzadeh and Davari, 2018). A effective managementaccounting system provide proper accounting reports and budgetary control which ensure timelycompletion of work thus facilities better performance and future growth of an organisation . It isthe responsibility of management accounting system to mange a wide range of criticalmanagement accounting information through using various techniques like cash budget,marginal costing, absorption costing and many other relevant management reports. For this assignment, Renishaw plc is selected which is a British engineering companywell known for its coordinate measuring machine and machine tool products. It is a leadingcompany in metal additive manufacturing (The top UK engineering firms for fresh graduates,2019). The headquarter of Renishaw plc is in Wotton- under- Edge, Gloucestershire, UK. Thisreport includes essentials and requirement of different type of management accounting systemsand also explain different methods used for management accounting reporting. Calculation ofcost with appropriate techniques and income statement using marginal and absorption costing isalso form a part of this report. It also include advantage and disadvantage of different types ofplanning tools used for budgetary control. At last, use of management accounting system toeffectively handle or address financial problem is also included in this report. TASK 1
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P1) Management accounting and its essential requirement Management accounting is a system that includes timely presentation of financialinformation and proper recording of day to day transition in form of statistical data which usedby top management and other authorities for preparation of proper budgets and strategies, andalso helps in maintaining a good control and monitor over all performance of an organisation(Oldman and Tomkins, 2018). It involves preparation of various management accounting andbudget which are helpful in formulation and implementation of various plans and polices neededfor betterment and growth of organisation. All these documents and reports are very useful forstakeholders as they represent the current performance and situation of an organisation andprovide all relevant information about upcoming opportunities that can be garbed by anorganisation for ensuring future growth. Thus, the main aim of management accounting is tokeep a check and control over different expenses and cost of organisation to achieve the target ofcost effectiveness and profitability. Renishaw plc is also making use of various types ofmanagement accounting system which are explained below. Various types of management accounting systemand their essential requirementsManagement accounting system- It is basically a internal system of organisation usedfor measuring and evaluating its processes for better management of organisations. Managementaccounting system includes application of various system which are explained below:Cost accounting system – It is an accounting process or framework helpful in estimationof cost involved in production of an article. It is very essential for an organisation to analysis itscost for properly determining its profit level. Cost accounting system facilitates proper valuationof stock or inventory which is very help full in overall cost control of production process. Thisprocess of estimation of cost of production is very critical as well as very crucial for everyorganisation as overall productivity and profitability of business depends on this. It helps intaking decision that which product is more cost effective and profitable for the businessorganisation and thus helps in decision making about the product in which it should deal tomaximize its profit (Agrawal, 2018). Cost accounting system provide approximate value of opening and closing raw material,work in progress and amount of finished good. This information is necessary for calculation ofdata needed for preparing financial statement and other documents. Renishaw plc can make useof this cost accounting system as it helps in measurement and improvement of efficiency through
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implementation proper cost control and also helps in fixation of prices of product. To properlyimplement a cost accounting system in any organisation, some essential requirement must befulfilled which includes proper coordination and participation of all executives from differentdepartments of a firm. It is also necessary that proper balance should be maintain between cost ofinstillation of system and its future benefits. It also necessary that cost accounting system shouldnot reduce the utility of organisation through making tasks and activity mare complex and rigid.In Renishaw plc proper measures are adopted to implement the cost accounting system tomaintain the authenticity of decision making. Inventory management system - It is a procedure used for monitoring and controllingstock of raw of material to keep a balance between demand and supply of raw material. It is veryimportant to maintain a adequate amount of inventory to ensure uninterrupted production ofproduct but keeping a huge amount of stock is also very risky and costly. So proper accountingfor inventory management is necessary to reduce the cost of warehousing and other expensesrequired for safely storing the material (Weetman, 2019). A proper and effective communicationwith supplier of raw material is necessary to ensure the timely availability of stock. Properanalysis of demand of the product is also essential before implementation of an inventorymanagement system. Proper controlling and auditing techniques are also an essential requirementfor inventory management system. Inventory management system is useful for Renishaw plc as itkeeps a track on inventory and offers a centralised view of stock. It also helps in controlling coststhrough making proper stock reports and also manges planing and forecasting of inventory.Themain methods for inventory management are explained below, Renishaw plc can select anyoneof these methods for effectively managing its inventory or other stock: First in first out (FIFO) – Under this method inventory purchased or entered warehousefirst is put to use on priority basis and the newest inventory entering the warehouse last isused at the end after all old inventory is used, thus the cost paid for oldest products areused for calculation of cost of product. Last in first out (LIFO) – This method is just opposite of LIFO, under this methodinventory entering the warehouse last is put to use first. Thus, the cost which is incurredfor newest stock is used for calculation of cost of inventory.
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Weighted average method – This method is mainly adopted for valuation of inventoryand average cost of inventory is assign to each and every piece of inventory at the tie ofselling that product. Economic Order Quantity (EOQ) – This method helps in calculation of that number ofunits of raw material that a company should buy at one time to minimize the total cost ofinventory by reducing holding cost and order cost (Roussy and Rodrigue, 2018). Renishaw plc is a manufacturing company, so it is necessary to maintain sufficientamount of inventory with lower holding and storage cost, therefore for them EOQ method ismost suitable. EOQ is useful for Renishaw plc in reducing the holding cost of inventory as EOQsystem eliminates the need of having big warehouse to store goods as under EOQ companyorders raw material in limited quantity to ensure that the current production process does notcome to a halt. Price optimisation system –This method is used to analysis the change in response ofcustomers on different prices offered for a particular product, hence helps in determining the bestsuitable price for an organisation to meet its objective and also to achieve maximum operatingprofit. Renishaw plc can make use of this method as it provide proper strategies for regulatingpricing decisions and helps in obtaining accurate price for its product which foster sales of itsproduct and also yield higher profits (Tools and techniques of Management Accounting. 2019).The essential requirement of price optimisation system includes availability of past records toproperly analysis the pricing strategy of competitors and to get information about economicconditions. After proper analysis of all the the records and strategy a price is set for the productto maintain a balance between demand and profit margin . Price optimization system is essentialfor Renishaw plc to analysis its business environment and pricing strategy of customers to fix amost suitable price for its product. P2) Different method used for Management accounting report Various methods are used by business mangers for effective reporting of managementaccounting which facilitates proper management and decision making and also allows timelyperformance analysis of on organisation to promote better control. Management accountingreports are used for keeping records of day to day operations which facilitates easy planning anddesign making. Some of the important methods which are used by Renishaw plc formanagement accounting are discussed below :
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