Assignment on Management Accounting Project
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Added on 2020-06-04
Assignment on Management Accounting Project
Added on 2020-06-04
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Management Accounting
TABLE OF CONTENTSINTRODUCTION......................................................................................................................1P1 Reporting to the management team of Heath about the need of MA systems within thefirm.........................................................................................................................................1P2 Stating how managerial reports help manager in decision making..................................3P3 Evaluation of cost and profit margin on the basis of absorption and marginal costingmethod....................................................................................................................................5P4 Identifying planning tools associated with the field of MA.............................................8P5 Presenting and evaluating ways of MA that assist in responding monetary problems orissues....................................................................................................................................10CONCLUSION........................................................................................................................11
INTRODUCTIONIn order to carry out business operations & functions smoothly it is required for themanager to undertake the tools and techniques of management accounting. Moreover,techniques of MA provide highly level of assistance in exerting control on cost and hrps inmaking optimum use of resources. By undertaking tactics of MA firm can evaluate theperformance of each & every department and thereby would become able to take suitablemeasure for performance management as well as improvement. For the project of MA, Heathretail store has been selected that provides customers with the grocery and other services atsuitable price level. The main motive of such retail store is to enhance customer base andprofitability aspect by exerting control on expenditure or cost. In this, present report willprovide deeper insight about the systems of MA that firm can undertake for optimumutilization of funds. Further, it also entails the manner in managerial accounting report offersvaluable information to the management team for decision making. Along with this, it alsodepicts or describe the planning tools and other techniques of MA that assist in mitigatingfinancial deficiencies.P1 Reporting to the management team of Heath about the need of MA systems within thefirmTo Management Team HEATH Date: 7th December 2017Subject: Management Accounting SystemsIntroduction: This report is prepared on the systems of management accounting which inturn provide information to the management about the extent to which use of tools areessentially required. Main body:Meaning of Management Accounting: It is the process that helps in preparing day to daymanagerial reports. Hence, MA is highly concerned with the process of collecting, analyzingand reporting information to the management team that is associated with the internaloperations. Significance of Management Accounting:MA provides accurate financial information to the manager and aid in decisionmaking aspect.By using MA tools and techniques HEATH can develop competent plan for theupcoming time period.MA assists in increasing efficiency of business operations as it helps in measuringperformance and gives indication for performance enhancement. By undertaking MA tools HEATH can take suitable decision whether to produce inhouse or buy outside.
Types of MAInventory management: This tool of MA facilitates effective supply chain management andgive indication about the limit to which inventory needs to be ordered as well as stored. Thereare several techniques that can be undertaken for effective inventory management such asJust in Time (JIT), economic order quantity (EOQ), stock requirement planning etc (Messner,2016). It is highly required for HEATH to maintain inventory by using management toolswhich in turn ensures smooth functioning of operations. Advantages: By using the tools of inventory management, HEATH can control cost andenhance profit margin. In addition to this, by providing customers with product on time firmcan enhance their satisfaction to a great extent.Disadvantages: Company faces difficulty in assessing suitable tool that needs to beconsidered for managing inventory. Further, for managing record of stock firm requireshighly talented personnel which in turn also impose issue in front of firm. Price optimization: In the dynamic business arena, firm can attain success only when it offersproduct or services to the customers at competitive prices. Thus, by employing the system ofprice optimization HEATH can identify how much customers want to pay for the products orservices. This system of MA helps in developing plan in against to the competitors andcontributes in the success. Advantages: It encourages HEATH to exert control on operating cost or expenses and helpsin grabbing high market share. Further, price optimization system of MA also helps companyin making planning pertaining to both price as well as profit margin. Disadvantage: Price optimization system of MA is not suitable for all the industries becausein some sectors customers give high level of preference to the price level. On the other side,in some industries customers compare price with the quality of product or services. Job costing: In the field of MA, job costing method is highly effective which in turn laysfocus on the accumulation of cost pertaining to material, labour and overhead. HEATH canuse this tool for tracking the cost of individual jobs and become able to examine that it can bereduced in later jobs or not. Advantages: Business entity of HEATH can estimate basis for further evaluation by takinginto account job costing method. By using such technique, manager can do detailed analysisof each in the context of material, labour and overhead expenses (Kristensen, Nielsen andGrasso, 2016). Along with this, job costing is suitable when price of the contract isdetermined on the basis of cost. Disadvantages: In this, detailed clerical work or analysis is required to create framework fordecision making. Due to the more clerical work high level of probability exists in relation toerror. Cost accounting: It may be served as a process that is undertaken by the business unit withthe motive to collect information about the cost incurred in relation to performing activities.Requirement of using cost accounting system in the context of concerned retail unit is highlysignificant. By using such system manager can collect information about cost incurred andwould become able to take decision about pricing and profitability aspect (Weetman, 2016).Cost accounting system enables firm to assess the areas where business unit is earning orlosing money. Advantages: Cost accounting system of MA helps in identifying unprofitable activities andenables management to take strict measure for the elimination of wastage. In addition to this,cost accounting system also helps in disclosing both profitable and non-profitable activities.Hence, by doing assessment of the cost, management can assess unprofitable activities andexplore operations in the profitable area. Disadvantages: Lack of uniformity in the process is recognized as one of the mainweaknesses of cost accounting. Along with this, principles and conversions of cost
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