(DOC) Management Accounting | Assignment

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its different types....................................................................1
M1 Benefits of management accounting system........................................................................4
D1 Critical evaluation on management accounting report integrated within organisational
process.........................................................................................................................................4
TASK 2.......................................................................................................................................5
P3 Cost calculations to prepare an income statement.................................................................5
M2 A range of management accounting techniques...................................................................8
D2 Analysis and Interpretation of data.......................................................................................8
TASK 3............................................................................................................................................8
P4 Advantages and disadvantages of different types of planning tools for budgetary control...8
Budgetary control........................................................................................................................8
M3 Analysis on use of different planning tool for preparing and forecasting budgets.............10
TASK 4..........................................................................................................................................10
P5 Comparison on how organizations are adapting management accounting system to resolve
financial problems.....................................................................................................................10
M4 Analysis on how management accounting lead to sustainable success..............................12
D3 Evaluation of how planning tools respond to solve financial problems.............................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management Accounting is determine as a presentation of accounting information so as
to formulate different kinds of policies which can further be adopted by management of an
company in order to perform day-to-day activities (Lavia López and Hiebl, 2014). Thus, in
simple words, management accounting assist management in doing entire functions that includes
planning, organising, staffing, directing and controlling. Airdi is a company which is taken in
this assignment and firm deals in manufacturing Hand Dryer thus, this report will discuss about
different methods of management accounting for performing business operations in a better
manner.
Present report will focus on understanding of management accounting system, along with
application of range if management accounting technique is included in this assignment. In
addition to this, explanation of use of planning tools for management accounting is mentioned in
this report. Other than this, comparison of ways are included in this assignment which different
organisation can use for responding to financial issues and problems (Hiebl, 2014).
TASK 1
P1 Management accounting and its different types
Management accounting is consider as a process in which accounting information that are
obtained from financial accounting and cost accounting are interpreted, analysed, identified and
presented. Thus, it can be said that management accounting assist managers of a company in
formulating policies and making decision for day-to-day activities. Therefore, in an organisation
management accounting plays a crucial role in determining as well as forecasting cash flow. For
operating its business in a better manner it is important that Airdi has proper management
accounting department who can help managers in preparing effective reports of budget.
Company is manufacturing Hand Dryer, and is well recognised around the globe.
There are different types of management accounting system which Airdi can incorporate
for operating its business in an effective manner, therefore, crucial management accounting
system are explained below for better understanding (Chiarini and Vagnoni, 2015).
Job Costing System: This is a system that after monitoring the expenses helps an an
individual and management in assigning manufacturing cost for a specific products. Job Costing
system can be used by Airdi and is applicable when company's products are identical and can
1

keep a record of order expenses. Therefore, job costing system is used by companies when they
have products that are different from one another. A significant variations in products
manufactured can be seen such as direct material can be directly linked with direct labour. Main
requirement of this, is to evaluate the actual cost and revenues of a product and commodity.
Price Optimising System: This is basically used for controlling the prices of resources,
thus, price optimising system can be incorporated by company so as to decide price of multiple
goods at the same time (Senftlechner and Hiebl, 2015). Therefore, for a firm it assist them in
determining the effects of demands after fluctuation in different price level. Moreover, Airdi
company will use this method in order to determine the price as per customer's segments so that
company can know their responses as per different price levels. Main purpose of this is to deliver
best quality products to its customers according to the needs and wants under limited period of
time.
Inventory management System: This basically guides company with when to order a
product and in what proportion. Inventory management system helps firm in minimising the total
cost of inventories so that organisation can generate high level of return. Therefore, with the help
of this method Airdi Ltd., can manufacture their products and keep them as a stock so that it can
be used whenever it is required. This can be further applied by using three different method
which is important for managing the inventory system are LIFO (Last In, First Out), FIFO (First
In, First Out) and ABC. In relation with Airdi Ltd., they are using ABC form for selling their
product. In this category products that comes under the category of A are need for attention
because it has a great impact in terms of finance. Likewise, B and C denotes moderate and low-
value commodities respectively (Bovens, Goodin and Schillemans, 2014).
Cost Accounting System: It is determine as a framework which is used by companies in
order to estimate cost of their products in order to get profitability. Therefore, it is crucial for
Airdi to know what kind of goods are profitable and which one are not. In addition to this, Cost
accounting system helps company in knowing and estimating closing value of material
inventory, work in progress and inventory of finished commodities so that financial statement
can be prepared. This includes two main cost accounting system i.e. job order costing: It is cost
accounting system that compile different manufacturing cost separately as per the job assigned.
Process costing: This is determine as a cost accounting system that accumulates cost of
2