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Management Accounting - KEF Ltd

   

Added on  2021-02-20

17 Pages4361 Words26 Views
MANAGEMENTACCOUNTING

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1LO1..................................................................................................................................................1Explaining the meaning of management accounting and essential requirements of themanagement accounting systems................................................................................................1Explaining several methods of reporting under management accounting..................................2Evaluating the advantages and the application of the management accounting systems............3Evaluating the integration in between the management accounting reporting and the systems.4LO2..................................................................................................................................................4Preparation of the income statement for the month of June &Calculation of per unitproduction cost &computing total cost of production &Advising the best technique forevaluating the net profits ............................................................................................................5Interpreting the difference in the actual and the budgeted profit for the month of June ............6LO3..................................................................................................................................................8Explaining the benefits and the limitation of the several planning tools under the budgetarycontrol ........................................................................................................................................8Analysing the uses and the application of planning tools used for forecasting the budget .......9Evaluating the use of the planning tools in responding to resolving the financial problems....10LO4................................................................................................................................................10Comparing different organization in respect of adopting the systems of managementaccounting in order to respond financial problems...................................................................10Analysing the ways in which resolving the financial problems leads the company towardssustainable success....................................................................................................................11CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................13

INTRODUCTIONManagement accounting is defined as a process of preparing and presenting all thefinancial as well as statistical information of the business in form of internal managerial report.With the help of such report, it aids the management of the company in decision making processrelated to business operations and investments. The present report is on KEF Ltd. Which is amedium sized enterprise engaged in the manufacturing business. It will define about differentmanagement accounting system and their use in business issues. Statements will be producedusing Absorption and Marginal costing techniques. Further, it will discuss about various types ofbudgetary planning tools by use of which, company can make more profit and improves itsbusiness performance. At last, it will streamline about techniques of management accountingwhich can assist in resolving financial problems of the company.LO1.Explaining the meaning of management accounting and essential requirements of themanagement accounting systemsManagement accounting is the process of formulating the management reports and theaccounts which provides for the accurate and the timely financial as well as the statisticalinformation needed by the managers in order to make the routing and the short term decisions(Management accounting and its importance, 2019). There are various management accountingsystem that plays an essential role in efficient functioning of the business as follows- Inventory management system- It refers to the system that includes proper planning ofthe purchases, storing and handling the material or stock within the organization. It aims forreaching the optimal inventory for the company and a detailed information regarding the materialthat is to be purchased, the quantity of the material and the place from which it is to be purchasedwith adequate details of associated storage cost (Huang and et.al., 2015). This system is essentialfor tracing the supply of the goods and in maintaining the adequate level of the inventory in theorganization. Cost accounting system- This system of MA considered as the framework that is used bythe organization in order to estimate their product cost for the purpose of making the profitabilityanalysis, valuation of the inventory and the controlling the cost. It is critical for the organizationto estimate accurate cost in producing the product which in turn results in the profitable1

operations (Gerrish and Spreen, 2017). Through this system the firm can know about theproducts that are profitable and the which leads to loss anticipation of the correct cost. Price optimization system- It is the system that act as the mathematical program whichcomputes the varying demand of the customers at various price levels and then combining thedata with the information relating to the cost and the level of inventory for recommending theprices that improves the profits (Lasyoud and Alsharari, 2017). This system is crucial because itallows the organization in using the pricing as the powerful tool of the profit lever, that is oftenconsidered as underdeveloped. It also helps the enterprise in achieving its objective like customersatisfaction, forecasting demand, creating promotion strategies. Job costing system- It is the practice that include accumulating the information relatingto the associated cost with the particular production and the service job. It is counted as anessential information as it helps in determining the adequacy in the estimating system of thecompany which is to be made for quoting or fixing the best possible price that accounts for thereasonable profits. Job costing system accumulates mainly three kinds of the cost that involvedirect material, labour and the overhead cost (Otley, 2016). It also facilitates managers inkeeping the track of the individual as well as the performance of the team in context of the costcontrol, productivity and the efficiency. Explaining several methods of reporting under management accountingThe reports prepared under managerial accounting are been used for regulating, decisionmaking, planning and in measuring the performance. The reports are formulated on thecontinuous basis throughout the period of the accounting as per the requirements. Major crucialdecision of the organization depends upon the preparation of the reports with authenticity.Managers analyse the reports for highlighting the particular pattern and converting it into theuseful information (Papa and et.al., 2017). There are several reports that are prepared by themanagers as follows- Budget report- This report involves the anticipation of the sources of the earnings and theexpenditure for the organization. It plays a critical role in measuring the performance of anoverall enterprise. Estimations in the report are made on the basis of previous experiences so thatany unforeseen event in the future could be met. Firm could function its operations in budgetedamount for achieving its goals and the mission effectively (Shil and Das, 2018). Budget report2

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