Strategic Cost Management and Competitive Advantage

This assignment focuses on various aspects of strategic cost management as a means to achieve competitive advantage in today's global business landscape. It includes studies on tailoring controls to strategies (Govindarajan & Shank, 2014), international comparisons of strategic management accounting practices (Guilding et al., 2016), and global supply chain risk management strategies (Manuj & Mentzer, 2015). Additionally, it covers the integration of management accounting with marketing for competitive advantage (Roslender & Hart, 2013) and the role of human resource management practices in gaining competitive advantage (Schuler & MacMillan, 2014). The assignment also delves into environmental technologies and competitive advantage (Shrivastava, 2015), knowledge management for competitive advantage (Silvi & Cuganesan, 2016), and the reflection of corporate strategy in manufacturing decisions (Wheelwright, 2013).

MANAGEMENT ACCOUNTING
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Executive summary
The report focuses on the management accounting system of the Pacific computers. Different
methods of the management accounting system are explained thoroughly. Account management
officer present a report about the negative issues of the organisation to geranial manager.
Management performs the market research by following the newspaper, text books, magazine
and so on. This helps the higher hierarchy to perform perfect strategy in order to raise the
recognition of the enterprise in global market. Systematic strategy prevents the chaotic behavior
from the enterprise.
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Table of Contents
Introduction......................................................................................................................................3
LO 1:................................................................................................................................................3
P1: Explanation of accounting system of management and the provision of key necessities of
various types of accounting systems of management......................................................................3
P2: Explanation of various methods utilized for management accounting.....................................6
P3.....................................................................................................................................................8
M2:...................................................................................................................................................9
D2:.................................................................................................................................................10
Reference list.................................................................................................................................11
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To The General Manager
Pacific Computers
Introduction
Internal managerial systems of accounting are implemented to deliver information that the
management of the company can utilise to make better decisions in its business. These systems
are often utilised by plants of manufacturing to helping managing and costing the process of
manufacturing. IT systems generally utilise this type of system that helps them in billing of
insurance and other various in-house necessities. The primary objective of this system is to give
data to managers for making quality decisions. Internal managerial systems of accounting vary
from industry to industry in which they are utilised, that allows for reports and functionalities
particular to that specific industry.
LO 1:
P1: Explanation of accounting system of management and the provision of key
necessities of various types of accounting systems of management
According to Fisman et al. (2014, p.422),in managerial or management accounting, the provision
of information for accounting are utilised by managers, they utilise the provisions of information
of accounting for better informing themselves prior to matters of decision making in the
company, that aids their performance and management of functions of control.
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Figure 1: Financial Management of Enterprises
(Source: Govindarajan and Shank, 2014, p.15)
The Certified Accountants of Public of American Institutes state that accounting of management
during its phase of implementation is extended to the following three aspects:
● Management of Strategy: Advancement of management accountant role as a strategic
collaborator in the enterprise
● Management of Performance: Developing business decision-making practice and
management of organisational performance
● Management of Risks: Contribution to practices and frameworks for measuring,
identifying, reporting and managing risks to achieving organisational objectives are
carried out.
The various necessities of different management systems of accounting are:
● Influence: According to Dyer. and Singh (2013, p.662), communication delivers insight
that can be influential. The significance of accounting of management commences and
ends with interaction. The implementation of accounting of management relies upon the
relaying of information so the foremost necessity is to depend upon communication and
better interaction leads to better making of decisions.
● Relevance: The relevance of information in accounting of management can lead to much
better and effective process of decision making. The accounting of management
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comprises of various types of data with respect to Pacific Computers regardless of of it
being financial or not. The only aspect that is relevant to cultural and social aspects of the
company.
● Analysis: This necessity is also called value. Value impact is evaluated. Referring to
Schuler and Jackson (2017, p.212), management is helped by management accounting to
analyse the given information suitably so that better decision making can take place by
the management of the company. As a result, suitable analysis is mandatory for the
management of Pacific Computers. The information needs to be analysed by the
management of the organisation so that organisational environment can be understood
and better business decisions can be implemented.
● Trust: Trust is built by stewardship. This necessary element of financial accounting
systems on the execution of accountants of management is done so that persons are
accountable and ethical to Pacific Computers. Referring to Wheelwright (2013, p.62), an
accountant of management needs to be a loyal person for the analysis of information of
management accounting in apt ways. The trust of stakeholders needs to be considered by
the management accountants and should be accountable for improving the company via
better making of business decisions.
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Figure 2: Types of accounting systems
(Source: Learner)
There are various types of accounting systems implemented in a company. They are:
● Managerial systems of accounting: The requirement of this type of accounting is to give
managers data to control, plan and managing the business operations. Management is
provided with data required to make significant decisions regarding the business. A type
of system of managerial accounting is the cost of accounting. Systems of cost accounting
record the incurrence of real costs regarding service and product delivery.
● Inventory Accounting: Systems of inventory accounting are utilised to track and plan
inventory levels along with inventory related events. A common system of inventory is
tracking of bar codes. Each item of inventory is tagged along with a bar code. As these
items are bought inside a warehouse or carried out of the inventory, the scanning of
barcodes takes place to enhance or diminish from the inventory.
● Accounting specific to industries: Industry-specific applications are also included to
accounting systems. As per White (2016, p.222), a retail system of accounting, for
instance, has various necessities than in several other industries. At the selling point, sales
are captivated by utilising computerised point-of-sales registers of cash. When items are
bought to sale, the accounting system of retail must properly report and track on
markdowns of merchandise.
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● Not-for-profit Accounting: Referring to Dierickx and Cool (2014, p.1506), this type of
accounting comprises of its own particular set of requirements for reporting. For instance,
funds are needed to be tracked so that designated donations for particular reasons are
spent properly.
P2: Explanation of various methods utilized for management accounting.
Various techniques of accounting of management include:
● Financial Planning: It is considered an act of advance decision-making process regarding
the necessary financial activities for the criterion of achieving its foremost goals. It
comprises of determining both short and long-term financial goals of Pacific Computers,
developing policies of finance and formulating the procedure to reach the objectives. The
significance of policies of finance cannot be highlighted to achieve maximum return on
the employed capital. According to Shukla and Clement (2017, p.121), the policies of
finance might relate to determine the capital amount that would be necessary, income
distribution and governing determination. In the utilisation of equity and debt
determination and capital of the best level of investment in different assets can be acted
as a guide.
● Analysis of statements of finance: The evaluation of the financial statements is
considered an attempt to determine the meaning and significance of the data of financial
statements so that a prediction might be formulated of prospects of earning in the future,
capability to pay the interest off along with debt maturities. It also includes of a policy
that is soundly dividend. Referring to Aladwani (2014, p.266), techniques implemented
in such analysis include trend analysis, comparative statements of finance, ratio analysis
and statements of cash funds flow.
● Accounting of Historical Costs: The Accounting of Historical Costs provides past
information to the organisational management with respect to cost of every job
department and process so that comparison can be carried out with standard costs.
● Standard Costing: The development of standard costs is defined by standard costing
under the most impactful conditions of operating, calculation, comparison of reality with
standard, variance analysis and in order to realise the purposes. As per Lascu (2014,
p.122), it would also include emphasise the responsibility along with taking remedial
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actions. As a result, adverse situations might take place again. This field is important to
have control of costs.
● Control of Budget: The accountant of the management utilises the tool for budget control
for controlling and planning the different events of a business. The control of budget is
deemed as a significant technique of directing operations of business in a direction that is
desired, i.e. a satisfactory return is achieved on investment (Silv and Cuganesan, 2016,
p.314).
● Marginal Costing: The accountant of management utilises the methods of marginal
costing, break-even analysis and differential costing for controlling of costs, profit-
maximisation and decision-making.
● Statement of funds flow: The accountant of management utilises the methods of
statement of funds flow for analysing the modifications in the position of finance of an
enterprise between two different dates. It informs about the funds which are inflowing in
the business and how these are being substantial in the growth of the business.
● Statement of Cash Flow: A statement of funds flow that is based on decrease or increase
in the working capital would result in long range planning of finance. It might be highly
probable that sufficient capital of working as revealed by the statement of funds flow and
the organisation might still be unable to comply with its ongoing liabilities as and when
they are due to fall. It might be because of a gathering of inventories along with an
increase in debtors of trade.
● Making of business decisions: According to Ellram and Siferd (2015, p.55), when various
alternatives are there of executing a specific work, it turns out to be important to choose
the optimal solution out of all the alternatives. This decision is required on behalf of the
management. The accounting of management would help the management via the
methods of capital budgeting, marginal costing and differential costing to choose the
optimal solution would result in maximisation of profits of the business.
● Assessment of Accounting: The accountant of management, via Pacific Computers would
assure the preservation and assurance of the organisational capital. It takes into
consideration the influence of modifications regarding price of preparation of statements
of finance.
● LO2:
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● P3: Calculation of costs by utilizing suitable techniques of analysis of costs of
absorption and marginal costing
● The cost which varies with decision is the decision analysis. Small variation in existing
practice of cost in the enterprise for limited period of time increase the recognition of
enterprise in global market. Fixed cost of products diminishes the identification of
enterprise among their recent users. Thus, the management team performs macro and
micro factors in order to compete with their products in recent market. The cost of the
product varies widely which attract customer and the higher hierarchy creates this
strategy for short term procedure. Flynn et al. (2015, p.660) commented that long term
strategy is created by the management team by following the policies of the government
and political conflicts. This helps the organisation to prevent chaotic behavior from the
organisation. Marginal costing help the Pacific Computers to easily distinguishes
between the variable and fixed cost. The marginal cost of the enterprise includes the
variable cost of it. The variable cost includes direct labor, direct expenses, and direct
material along with variable part of the overheads. The marginal cost combines the cost
of material, expense, direct labor and overheads.
● Mahoney and Pandian (2013, p.380) opined that marginal cost refers to marginal cost per
unit and total marginal cost of the enterprise’s department or operation or batch. This
marginal cost is the contribution approach along with direct costing. This cost is directly
proportional with the production volume of the organisation. It does not include any kind
of fixed cost criteria in the enterprise. Thus, the higher hierarchy performs their research
in order to create the short term strategy. Absorption costing includes all cost of the
production in the enterprise. The cost of production may be fixed or variable. This
absorption technique allocates the manufacturing cost, direct labor and materials costs.
Therefore, this absorption procedure is also known as the full costing method as it
includes the product costs of the Pacific Computers.
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Calculation of profit using Absorption costing
Particulars ($) ($)
Sales (500 * 35)
Less:
- Direct materials (600 * 6)
- Direct labour (600 * 5)
- Variable production overhead (500 * 2)
- Fixed production overhead
Cost of goods available for sale
Less: Closing inventory {( 9400/600) * 100}
Gross profit
Less:
- Fixed administration cost
- Variable selling overhead (500 * 1)
- Selling cost
Net profit
3600
3000
1000
1800
9400
(1567)
800
500
400
17500
7833
9667
1700
7967
Calculation of profit as per Marginal costing
Particulars ($) ($)
Sales revenue ( 500 * 35)
Less: variable cost of sales
- Opening inventory
- Cost of Production
( Direct Materials ) ( 600 * 6)
( Direct Labour ) ( 600 * 5)
( variable production overhead ) ( 600 * 2 )
- Closing inventory (100 * 6)
-
3600
3000
1200
(600)
17500
7200
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Less: Variable selling costs (500 * 1)
Contribution
Less: Fixed administration cost
Less: Fixed production overhead
Less: Selling cost
Profit
800
1800
400
500
9800
3000
6800
M2:
The technique of cost benefit analysis would be implemented for the provided scenario of case.
Along with this, the technique of activity dependent costing can also be put into effect for this
purpose. As for choice of records that can be implemented for financial documenting, it would
involve income statements, balance sheet and a statement of cash flow.
D2:
The difference in margins of profits would take place because it is utilised for costing. This is
because profits are predicted with various ways of costing regarding methods of absorption
costing. Ass per Manuj and Mentzer (2015, p.194), the method of absorption costing results in
the segregation, followed by deduction from sales as these results in an increase of expenses
when accounting of historical costs are done. Along with this, it also minimises the profits
whereas in the method of marginal costing, expenses are divided into two categories that is
variable and fixed expenses. When this method is adopted, the fixed costs are deducted in the
beginning that is considered variable and fixed expenses. When this method is taken into
consideration, fixed costs are deducted in the very beginning from the sales that provides a
contribution and variable expenses are then divided from contribution that results in profits and
via this, the expenditures are divided into two major heads.
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LO3:
P4: Explanation of benefits and issues of various categories of planning tools
Affinity diagram
This diagram helps the organisation to deal with the chaotic behavior of the organisation. Simons
(2013, p.143) mentioned that the management team of the enterprise perform several research
before creating and implementing any strategy in the enterprise. The higher hierarchy follows the
government rules and political parties’ policies and these prevent the organisation from
governmental penalties and raise their identification in global market. Issues of this diagram are
it too large in nature and full of complexity. This complex diagram is time consuming in nature
and diminishes the production quantity of Pacific Computers.
Interrelationship diagram (ID)
This diagram focuses on the cause and the effects relationship in the enterprise. The problem of
the enterprise is marked out and possible solution is written. It is future oriented in nature and
helps the organization to create a future strategy. The demerit of this diagram is it cannot handle
the present negative issues of the organisation. Thus, the management team cannot use this ID to
create their short term strategy.
Tree diagram
Barney (2016, p.665) stated that this diagram subdivided the negative and positive issues of the
organization into finer level details of the negative issues. These diagrams directly concentrate
on the individual issues of the organisation. The management teams perform their research and
modify the rules and policies of the organization by following the issues of the organisation. The
negative issues can be diminished easily and raise the organisation identification and profit
margin in recent market. The stakeholders can easily give their feedback about the service and
product quality of the enterprise. Higher hierarchy took all the necessary steps in order to
diminish the present issues of the organisation and raise their identification in present market.
Demerit of this diagram is the management team diminishes the negative issues of the
organisation by creating short term strategy. Higher hierarchy could not create the long term
strategy of the enterprise by following this diagram. Short term strategies help the enterprise to
tackle the current situation of the organisation and help it to maintain their recognition in global
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market. Combination of technology and the organisation help the accounting officer to manage
the negative issues of the stakeholders easily.
Prioritization matrix
Oliver (2017, p.713) commented that the management team of organisation divided the negative
issues of the organisation according to its weighted criteria. It follows the combination of the
matrix and tree diagram in order to raise the identification of the enterprise in global market. The
creditor always creates a pressure to increase the production rate and the profit margin of Pacific
Computers. The management team can easily perform the cost benefits analysis, time
management strategy which includes the importance of urgency and so on. Cost benefit analysis
help the organisation to maintain their product demand in recent market. The demerit of this
diagram is the management team also cannot create the long term strategy and future strategy
cannot be prepared by following this diagram.
Quality table
Roslender and Hart (2013, p.270) demonstrated that this table focuses on the relationship
between the two or more elements in the enterprise. At each intersection the elements relation is
either present or absent. Thus, the management team can easily identify the strength and
weakness of the internal environment in the organisation. Thus, the higher hierarchies modify
their strategy along with rules and regulation in order to increase the discipline level of the
enterprise. The management accounting officer raise use news bulletins and magazines in order
to report the general manager to take the necessary steps to diminish the negative issues.
Publications of market research by the accounting officer help the general manager to manage
these negative issues of the organisation and increase their recognition and profit margin in the
recent market.
Activity network figure
This diagram helps the account manager to discuss the negative issues with the general manager
and mitigate the issues of the organisation. This decrement of negative issues increases their
identification in global markets. Bharadwaj et al. (2013, p.90) opined that the account officer
uses the long sequences of the task in order to manage the complex activities of the enterprise.
Thus, the general manager can modify the rules of the enterprise which diminishes the rate of the
negative issues from the organization. With the help if this diagram the higher hierarchy can set
schedule of different task in the enterprise. It also increases the interaction with the higher and
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lower hierarchy. Performance level and creativity of the worker is also increased. Demerit of this
diagram is it doesn't help the enterprise to solve the external issues of the enterprise.
LO4:
P5: Comparison of organizations and why it should adopt management accounting
techniques
Factors that influence the organization to adopt the technique of management accounting are as
follows:
Financial rules of reporting
These reporting rules help the organisation to adopt the different technique of costing technique.
The variable costing, overhead costing, adsorption costs and so on are included in the budgetary
report of the enterprise. The journals and magazines help the organisation to tackle the negative
issues of the organisation. Production cost can be varied according to the need of the
organisation. The project managers manage the information of the magazines and journals in
order to create a perfect strategy. The advancement of technology helps it to increase their
interaction and communication between the stakeholders and the company. Strategy is created in
order to meet the recent trends of the customers and increase their profit margin.
Inventory management
Schuler and MacMillan (2014, p.250) stated that this management focuses on the risks and the
negative issues of the enterprise. The management teams follow the feedback of the stakeholders
and modify their strategy. They took help from the internal journals, magazines and other
gadgets in order to create the perfect strategy. Discussions with the higher and lower hierarchy
diminish the negative issues of the strategy and make it much more helpful for the organisation.
Economic orders technique help the enterprise to manage cost of the production in the enterprise.
This management helps the organisation to diminish the production costs and increase their
profit margin and identification in global market. Quality product and services raises the
customer satisfaction and raise their identification in recent market. Thus, Pacific Computers can
easily compete with other enterprise present in the recent market.
Strategy management of accounting
Shrivastava (2015, p.200) illustrated that this management focuses on the external factors of the
enterprise. The budget of the enterprise depends on the competitor's products, products demands
among recent users and so on. It helps the enterprise to increase the interaction with the suppliers
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and consumers relationship. The target is set to the worker according to their experience and
conduct level by following the strategy. This management helps the organisation to raise their
identification, profit margin, workers performance.
Life cycle costing
Guilding et al. (2016, p.113) stated that this costing method track all the records of the products
and help the management team to perform the adequate research to improve their product
quality. The management team performs research which helps the enterprise to raise their
product quality and profit margin. Good product quality and the reasonable price attract more
customers to the products. The wages of the workers, production costs are also included in this
costing method. Thus, the life cycle method helps the enterprise to diminish the chaotic
behaviour from the enterprise and raises the disciplinary attitude in the enterprise. Discipline and
respect for each other in the organisation diminish the ego and grudges from the enterprise.
Benchmarking
The management teams perform industry analysis by the help of twitter, magazines, journals,
newspaper and so on in order to create a long term and systematic strategy. (2014, p.39)
mentioned that systematic strategy help the enterprise to increase their profit margin and
performance level of the workers. Good performance and creativity of the workers help the
organisation to increase their profit margin and identification in global market. Market analysis
helps the enterprise to compete with their competitors easily in the recent market.
Conclusion
Pacific computers use different management tools in order to control the negative issues of the
enterprise. The management team of the organisation performs market analysis in order to create
a perfect strategy. The modifications of the enterprise’s rules depend on the macro and micro
factors of the company. Constant research and notification of the strategy help the enterprise to
meet the recent trends of the organisation. Good interactions with the stakeholders help the
enterprise to raise their recognition in global market.
From
Management accounting officer
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