Management Accounting Solution Assignment

Added on - 21 Feb 2021

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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1ACTIVITY 1....................................................................................................................................1Different techniques and methods used for management accounting reporting:.........................3Management accounting system and management accounting reporting is integrated withinorganisational processes:.............................................................................................................5Calculate costs using appropriate techniques of cost analysis to prepare an income statementusing marginal and absorption costs:...........................................................................................6ACTIVITY 2....................................................................................................................................8Use of planning tools used in management accounting...............................................................8Uses of different planing tools in forecasting budget..................................................................9CONCLUSION..............................................................................................................................11
INTRODUCTIONManagement accounting system refers to organisation's internal system that assist inmeasuring and evaluating various process for management of business organisation (Arnaboldi,Lapsley and Steccolini, 2015). It provide relevant data or information that can be used bymanagerial personnel to take effective decisions and to handle adverse situations. This reportcovers management accounting and its various aspects, core requirement of various managementaccounting system and their benefits, different methods of management accounting reporting,use of planning tools and, advantages and disadvantages of different planning tools in the contextof BCM Construction Ltd. BCM is UK based medium sized construction company, contractorrelated to infrastructure project in transport and rail sector. This report also cover comparisonabout way in which organisation can use management accounting to respond to various financialproblems and explanation about howresponding to financial problems, management accountingcan lead organisations to sustainable success.ACTIVITY 1Management accounting system is a process which combines key organisational activities suchas identification, collection, selecting and evaluating the accounting information and data forassisting management to take strategic decisions and to analyse organisation's performance.Under management accounting system, managerial personnels analyse and identifies events thatmay happen in business organisation and around business organisation while consideringorganisation's core needs and objectives. Main focus of management accounting system is toprovide a framework that can assist management to achieve organisation's goals and objectives inefficient manner. In BCM construction Ltd, management accounting systems is used bymanagement to identify, choose, gather and analyse the information which ultimately helporganisation to frame strategies and develop action plans. There are some major managementaccounting system like price optimisation system, inventory management system, job costingsystem, cost accounting system etc. that are used by management to identify any particularproblem and assess the performance of organisation during a particular period. Following are thesignificant management accounting system used by management of BCM, as follows:Inventory management system:It is most commonly used management accounting system thatis used by business organisations to manage various inventories such as finished goods, raw1
material, WIP, spare tools etc. This system provide assistance to accountants and management toanalyse the movement and flow of inventory within organisation which ensures properavailability of inventories in organisation (Boiral, 2016). Various methods are adopted bymanagement to manage inventories like LIFO, FIFO and weighted average method. In BCMconstruction Ltd this system is used to check the availability of raw construction material onconstruction site and to avoid any storage or other inventory cost, which also assist company toreduce any abnormal costs related to inventories.Price optimisation system:Price optimisation system is a technical system used bybusiness organisation to asses how customer or consumer may respond at different – differentprice levels for its various products and services. This system is applied by business organisationto fix and determine the proper retail price of product. In BCM this system is applied bymanagement to minimise the contract price while maintaining their current profit margin. Thissystem help to gain competitive advantages to company. It also assist management in effectiveutilisation of various resources of company.Cost accounting system:It is most significant management accounting system which isused by management to optimise the cost of product of its product and services. It help to assessthe excessive cost incurred by organisation. It also provide comparative analysis of various costwhich help to estimate or project future cost. It provides early identification of any event thatmay be incur any additional cost. In BCM, this system is used to analyse the cost of constructionproject and any escalation in cost of project. Company is using this system to asses the viabilityof any new construction project. It is also used to evaluate the cost of construction project tomaximise project profit by reducing various unproductive costs.Job costing system:This unique but important management accounting system, which isused by, business organisations, wants to allocate various cost to different jobs and task. Thissystem is generally use by business organisations for internal analysis of costs by classifyingthem as job or task to evaluate the viability of any particular job. Job order costing system isapply to assign and accumulate various manufacturing and production costs of single unit ofoutput. In BCM, this system is use when various construction projects of company are differentfrom each other or are of different nature and each of them has significant costs. Company isusing this system to classify this significant cost as job to enhance accountability. Following aresome important information is which are necessary for job costing system, as follows:2
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