Management Accounting Systems & Techniques

MANAGEMENT
ACCOUNTING SYSTEMS &
TECHNIQUES

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
A. Management accounting and essential requirement of different types of accounting...........1
B. Explaining management accounting reports and importance of reports to management.......2
C. Benefits of management accounting systems.........................................................................3
Integrated management accounting system................................................................................4
TASK 2............................................................................................................................................5
A.1) Explanation of absorption and marginal costing method...................................................5
A.2) Preparing Income Statement by considering absorption and marginal costing..................5
B. Calculation of breakeven point and Margin of safety............................................................8
Difference between marginal and absorption costing.................................................................8
C. Applying range of management techniques with its significance..........................................9
D. Producing financial reports with appropriate interpretation..................................................9
TASK 3..........................................................................................................................................10
A. Merits and demerits of various types of planning tools for budgetary control....................10
B. Application of planning tools for the purpose for analysing and forecasting budget..........11
C. Providing comparison for adapting management accounting system for responding
financial problems.....................................................................................................................13
D. Analysing management accounting techniques which are used for responding financial
problems....................................................................................................................................14
E. Evaluating planning tools for solving financial problems which leads to sustainable success
...................................................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is referred as presentation of accounting information for
formulating its policies which should be adopted through management. This report will help in
assisting its regular activities. The present report will discuss about various accounting systems
and techniques of Agmet. It would be providing management accounting's essential requirements
and kinds . It will be explaining various management accounting reports with its significance. It
would be reflecting income statement through both absorption and marginal costing methods
with its importance and appropriate interpretation. Further, it will state various planning tools for
purpose of budgetary control with its merits, demerits and application. In the similar aspect, it
would be providing comparison for adapting management accounting system for responding its
financial problems. It will analyse this management accounting techniques and evaluation of
planning tools for solving financial issues which would lead to sustainable success of
organization. The present report has explained management accounting techniques on basis of
Agmet Plc.
TASK 1
A. Management accounting and essential requirement of different types of accounting
Management accounting is one of the vital part of organisation as management is able to
take better decisions with regard to internal operations. In simple words, financial accounting
provides information with context to reports which is imparted to organisation's management for
assessing internal health and event of any deficiencies being observed or any decision-making
done (Laudon and Laudon, 2016). On the other hand, costs can be controlled in a better way by
evaluating managerial reports. The different types of management accounting and requirements
are highlighted below-
1. Cost accounting system-
As the name suggests, cost accounting system is used to control expenditures which may
affect company's operational activities up to a high extent. By controlling expenses, more
production could be performed through Agmet in fewer expenditures. This means that
production process can be increased and in relation to this, expenditures can be controlled by
Agmet's management. Actual costing means that it utilises only actual costs that are incurred in
production. Standard costing implies clearly that budgeted costs are substituted for actual cost.
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On the other hand, normal costing suggests that actual labour, materials and overheads costs are
included. Thus, cost accounting system is quite beneficial for company.
2. Inventory management system-
It is used by management so that only desired stock is optimised through Agmet and no
extra inventory handling costs are incurred. In relation to this, if excess inventory is ordered, it
leads to maximisation of expenditures and wastage of scarce resources. Thus, JIT (Just-In-Time)
approach is used for maintaining adequate level of inventory and attain maximum production in
the best possible manner.
3. Job costing system-
There are various jobs which are done by overheads and job costing helps to assess on
which maximum costs are made in order to have efficient production (Senftlechner and Hiebl,
2015). Costs of materials, labour and overheads are accomplished and accordingly, expenses are
made. Agmet is benefited as it is mainly engaged in production of chemicals and as a result,
various expenditures are made. It helps organisation to effectively ascertain costs of jobs.
4. Price optimisation system-
It is another management accounting system which helps to quote prices of products in a
better way. Mathematical model is implemented for price determination and is used to assess
whether demand of products varies in relation to its price quoted by company. This means that
Agmet is able to analyse the view whether customers would be willing to pay for price or it has
to lower the same for attaining customers' satisfaction (Ax and Greve, 2017).
B. Explaining management accounting reports and importance of reports to management
1. Segmental report-
The segmental report provides an overview of entire company's divisions performance
for particular period in effective manner. Management of Agmet seeks units' execution over
tasks and whether they are adequately performing or not. Users of accounting information are
benefited with such reports and are able to take decisions. Moreover, it is prepared and used by
public organisations and private firms are out of the purview. Hence, company is able to make
proper decisions as entire performance of divisions are assessed with ease.
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