The Role of Management Accounting in Innovation Process

This assignment focuses on the intersection of management accounting and innovation process. It aims to understand how management accounting practices contribute to a company's ability to innovate and develop new products. The document will delve into the theoretical frameworks that underpin this relationship, as well as provide practical examples and case studies to illustrate its relevance.

MANAGERIAL
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Consider different types of cost in case...................................................................................1
2. Relevant and irrelevant purchases...........................................................................................2
3. Detailed calculations cost the couple to launder clothes.........................................................3
4. calculation of hire additional employees.................................................................................4
5. calculation of children that they should hire............................................................................4
PART B............................................................................................................................................6
1 Components of management accounting..................................................................................6
2 Innovation process....................................................................................................................7
3 Outcomes that help in the management accounting.................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Managerial accounting is also known as cost accounting that helps inn measuring,
identifying, analyzing, interpreting and communicating with managers for achieve organizational
goal (Alawattage, Wickramasinghe and Uddin, 2017). This accounting helps in making decision
and make strategy and plan for meet objective through evaluation and analyzation of books and
records. This accounting use by management of organization for evaluate performance and
measure success and failure of business. This report will be cover types of cost, decision for
purchase appliances, calculations, components of management accounting.
However, the report will highlight about the concept of fixed cost, variable cost and
opportunity cost along with its usage in the case study. Moreover, the project will frame about
the relevant and irrelevant cost which includes its example from the case study. On the other
hand, the assignment will outline the detail calculation of the laundry clothes and includes their
interpretation.
On the flip side, the assignment will highlight about the components of management
accounting that helps both the company Canon Inc and apple Inc in the innovation process and
new product development which is inclusive of four components namely; planning, controlling,
decision-making, and directing (Alawattage, Wickramasinghe and Uddin,2017.). Furthermore,
the report will highlight about how the management accounting contributes to the innovation
process and includes the outcome of the case study.
1. Consider different types of cost in case.
Cost is a monetary value that expense by organization for fulfill any task and produce something.
So that means organizations and business spend and expense anything in monetary term that is
called cost. In case of child care business many costs are considered in it.
Fixed cost :- fixed cost is expenses that does not change in any situation and always
remain fixed. That means cost do not increase and decrease according to flexibility in demand
and supply. Organization easily pay of every expenses of organization freely because this cost
always constant and not change with change in quantity and sale (Herschung, Mahlendorf and
Weber, 2017). This cost is not related to quantity, quality and sales but it related to time of
payment because it made time to time after fix time period. Further, the greater fixed costs an
organization has, the more sales an agency needs to interrupt even, which means it needs to
perform harder to produce and promote its products. It's because those charges occur frequently
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and rarely trade. Further, the examples of fixed charges consist of lease and lease bills, utilities,
coverage, salaries, and interest bills. In child care business case fixed cost are annual fee of
license for maintain $225 that means Pamela and Douglas start child care business in Ovilla
Texas and start this business with name of Nanna's house. It takes license and pay annual fee so
that is fixed cost. Case also include insurance that is pay annually and it cost is $3840.
Variable cost :- this cost increase and decrease according to volume of production.
Variable cost always change with quantity and output of products so it rises and fall according to
sales and produce products (Bhimani, 2015).Further, a variable cost is an enterprise's cost that is
related to the amount of goods or offerings it produces. An organization's variable cost increases
and reduces with its production extent. When manufacturing volume goes up, the variable
expenses will increase. On the other hand, if the quantity goes down, so too will the variable
expenses. In case study includes many variables cost like energy cost because it increases every
year. Washer increase energy cost $120 per year and dryer increase $145 per year. Renovations
cost incur by child care business $79500 so it also variable cost.
Opportunity cost : Opportunity cost is the price of something whilst a specific action is
selected. Thus, the opportunity fee is what the company should forgo if they want to get
something. However, the gain or price that became given up can refer to choices for your non-
personal existence, in a business enterprise, within the economic system, within the
surroundings, or on a governmental stage (Bhimani, 2015). However, opportunity fees may be
effortlessly neglected if one isn't always cautious. Thus, the potential neglected opportunities
foregone with the aid of selecting one funding over another lets in for making effective decision-
making process. Moreover, opportunity cost evaluation additionally performs an important
function in figuring out a business's capital form. At the same time as both debt and equity need
fee to balance lenders and shareholders for the risk of funding, also contains an opportunity
value. However, from the case study it has been observed that the opportunity cost is when
parents are paying additional charge of $15 per hour for each child if additional time is required
beyond 4:00 pm.
2. Relevant and irrelevant purchases
Relevant Cost: relevant cost is a managerial accounting method that depicts editable
prices which might be incurred whilst making enterprise decisions. However, the concept of
relevant cost is used to take away unnecessary statistics that would complicate the choice-
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making technique. As an instance, applicable fee is used to evaluate whether to promote or
maintain an enterprise unit (Messner and et.al., 2016). However, in the above case study the
relevant cost includes conveyance cost, laundry cost, laundry supplies, washing cost, dryer cost,
installation cost etc. On the other hand, an Irrelevant Cost is a managerial accounting time
period that represents a price, either positive or terrible, that could not be tormented by a
management choice. Such costs are consequently left out while that decision is made. Further,
fixed overhead and sunk fees are examples of irrelevant costs that could now not affect the
choice to shut down a division of a company, or make a good as a substitute of buying it from a
supplier. However, in the above case study, the irrelevant cost includes the annual fee of $225
which was incurred to maintain the license, insurance cost incurred by the company is $3,840
annually and the cost incurred on the meals and snacks is $3.20 per day on per children.
3. Detailed calculations cost the couple to launder clothes.
Option 1
launder the cloths by Red Oak
company
pick up and delivery cost 52
Option 2 Launder cloths in Laundromat
particular amount amount
Conveyance cost 6.72
cost of launder 32
cost of laundry supplies 11.67
total cost 50.39
Option 3 purchase of appliance
particular amount amount
cost of washer 420
cost of dryer 380
installation cost 43.72
delivery cost 35
total purchase cost 878.72
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calculation of per month cost to be
incurred for purchasing appliance
depreciation per month 9.15
energy cost of dryer 12.08
energy cost of washer 10.00
total cost per month 31.24
Interpretation :- from above table second option total cost is very low compare to both options.
It includes conveyance cost 6.72, cost of launder 32 and laundry supply 11.67 so it consumes 50
overall (Kaplan, and Atkinson, 2015). But in option third it consumes more cost because it
considers cost of washer 420, dryer 380, installation 43.72 and delivery cost 35 so total cost
consume 878.72 that is very high. Option one only includes pick up and delivery cost. Further,
from the above table it has been analyzed that we will choose appliances as it cost lower that is
31.24 as compare to the cost of laundry clothes which is around 51.
4. calculation of hire additional employees.
Calculation of net earnings of day care after employing new employees.
particular amount amount
fee from day care 7200
less: cost to be incurred
license cost 18.75
cost of new license 18.75
employment cost 1440
cost of meal 864
insurance 320 2661.5
net income 4538.5
calculation of present net income of day care.
particular amount amount
fee from day care 4800
less: cost to be incurred
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license cost 18.75
cost of meal 576
insurance 320 914.75
net income 3885.25
Interpretation :- from above table it shows that it income is more compare to expenses because
its total expenditure is 2661.5 that is less than income and total income of child care business has
7200. net income shows through above table is 4538.5 because expenses minus from fee of day
care. Further, the above table shows that present net income of the day care is 3885.25 after
deducting license cost i.e. 18.75, cost of meal i.e. 576 and insurance cost i.e. 320 from the fee of
day care.
5. calculation of children that they should hire.
Calculation of net earnings of day care from children:-
particular amount amount
fee from day care 7200
less: cost to be incurred
license cost 18.75
cost of new license 18.75
employment cost 1440
cost of meal 864
insurance 320 2661.5
net income 4538.5
Calculation of present net income of day care :-
particular amount amount
fee from day care 4800
less: cost to be incurred
license cost 18.75
cost of meal 576
insurance 320 914.75
net income 3885.25
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calculation of net earnings of day care by caring for 14 children:-
particular amount amount
fee from day care 11200
less: cost to be incurred
license cost 18.75
cost of new license 37.5
employment cost 4320
cost of meal 864
utility cost 125
rent 650
insurance 416.6666666667 6431.9166666667
net income 4768.0833333333
Interpretation :- from above table it shows that income is more than expenses so that means it
income is better. Earning from children is more and all income is more than expenses. Further,
the above calculation shows that net earnings of day care from children is 4538.5 after deducting
license cost i.e. 18.75, new license cost i.e. 18.75, employment cost i.e. 1440, cost of meals and
snacks i.e.864 and insurance cost i.e. 320 from the free from day care that is 7200. Moreover, the
above mentioned calculation shows that the net income of day care by caring for 14 children are
4768.08 which has evaluated after deducting license cost, cost of new license, employment cost,
cost of meal and snakes, utility cost, cost of rent, insurance cost from the fee from day care that
is 11200.
PART B
1 Components of management accounting
Innovations in management accounting are inclusive of thoughts, activities or objects that
are diagnosed as new through the organization that are introducing the innovation within their
system. However, the fundamental precept depicts that all improvements involve trade, even all
changes contain improvements. Therefore, management accounting refers as the exercise of
evaluating and reporting economic and non financial data required by managers make selections
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that are engaged towards the fulfillment of organizations’ goal and targets (Brewer, Garrison,
and Noreen, 2015).
However, the canon Inc. and apple computer Inc. have used innovation techniques in
order to reduce syntactic and semantic information. Furthermore, innovations can either be
defined as administrative or technological initiative; control accounting innovations are merely
revolutionary and administrative but most development contain new technological and
administrative factors and the execution of a few particular innovation requirements acceptation
of other technological and administrative improvements. Thus, innovation is a crucial factor of
an agency’s enterprise strategy notes that a hit organizational plan round innovation requires a
corporation hold of the invention procedure.
Furthermore, there are two components of management accounting in Canon Inc are
Planning And Directing wherein, in planning the company make effective strategies in order to
improve their technology and reach their goals. However, in planning component the company
have appointed electronic engineers in order to introduce new gadgets within their company.
Moreover, the company is planning to improve their technology by expending less amount of
money and increasing the profitability of the company (Appelbaum and et.al., 2017).
Furthermore, In directing the company will monitor the employees and engineers in
order to meet the goals and improve the technology by meeting the goal of cost reliability.
Moreover, the company will convey their staff about the creation new technology of copier being
introduced which is named as canon revolution, thus, in order to develop this new technology
they will hire design and production engineers to fulfill the aim of the company. However, the
company direct the activities of employees that leads to lower the costing by design new
technology which in turn leads to shrinking, reduction, automative machines etc.
On the flip side, Apple Inc. adopted two management accounting components namely;
Decision Making And Controlling wherein, in Decision Making the company will decide
about the introduction of new technology like Mac which contains all the feature of computer
and is convenient to carry along with it is not very expensive as it contains much more features
than usual computers (Salerno and et.al.,2015). On the other hand in controlling component the
company controls the price of the new technology and ensures that future goals and aims have
been accomplished which in turn will encourage engineers and team to wok for long hour in
order to introduce new technology like Mac book, iPhone XR etc.
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2 Innovation process
The success of the innovation procedure could be observed by using the willingness of
the members to workout the unique outputs, tensions and issues which can be related to each
level. However, the innovation process is an important element of most commercial enterprise
strategies, its enforcement and management has proved tough to maximum businesses. Thus, the
complex system mandating the involvement of all participants in a business enterprise might
prove normally stringent and taxing (Kazadi, Lievens, and Mahr, 2016). Hence, the achievement
of an innovation process will motive the control to adopt strategies in order for the individuals to
absolutely participate. However, incentives in shape of rewards, aim achievements and
innovation retraining guides might without difficulty encourage the personnel into collaborating
within the in any other case tough technique of trade.
Furthermore, in the technique of measuring and reporting economic and non financial
information required by managers make selections, management accountants play a much greater
position in the development of the innovation system. For example, the managerial accounting
contribute to the innovation procedure by the way of problem creation technique. This is, the
positing of the problem, which lets in the answer to be discovered be created. However,the key
to the introduction technique is data wherein, information may be divided into categories:
syntactic and semantic (Bosch‐Sijtsema, and Bosch, 2015). Syntactic facts may be decreased to a
digital shape which has no intrinsic meaning which is represented by way of the distinct form of
facts used in computer systems and which can be modified through logical operation. The
method of decoding the outcomes gives this type of information worth and meaning. On the
other hand, Semantic data is qualitative; what is essential here is the that means or content
material of the information. Further, Semantic records is more holistic and able to developing
and reconstructing. Therefore, managerial accounting help the innovation process for continuous
evolution and development of the company. Another example of innovation process of Apple Inc
is, the Mac might undertake among the features of these machines in a laptop that was smaller,
faster and plenty much less high-priced. Thus, to alleviate this, many members of the Mac crew
had been recruited from Xerox Parc and the Apple Lisa teams which have been for that reason
capable of benefit from the expertise that changed into evolved in these in advance projects.
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3 Outcomes that help in the management accounting
1. It has been observed that the innovation process of both the companies Canon Inc and
Apple Inc help the management accounting in forecasting, analysing and over-viewing
the advancement in the technology which help them to plan and control the budget of the
company and help to achieve the objectives (Bain, and Kleinknecht, 2016).
2. However, it has been analysed that the new product development and design helps the
management accounting of the company in evaluating the sales management score,
profitability and decision regarding the operational research which is to be conducted by
the company.
3. Moreover, the management accounting will gain advantage in preparation of monetary
reviews, reconciling of information to source structures and risk as well as regulative
reporting because it's miles charged with compilation of financial statistics from all
segments of both the companies like innovation, new product development.
4. Furthermore, it has been resulted that the innovation and new product development
technique helps the management accounting system of the both the companies to make
decisions that positively leads the achievement of organizational goals according to set
standard and budgets that is recorded in the files of the company (Powell,2016).
CONCLUSION
The report briefly summaries about the managerial accounting which have included about
the types of cost namely; fixed cost, variable cost, and opportunity cost. Furthermore, the report
have outlined about the relevant and irrelevant cost which have been used in the child day care.
Moreover, the report have commented on the calculation of the laundry clothes in the day care
for evaluating the net income earn by the company. However, the project have highlighted about
the components of management accounting use by the companies Canon and Apple which are
inclusive of four elements namely; planning, controlling, decision-making, and directing that
help the company to manage its innovation process and product development. Eventually the
assignment have framed about how the management accounting help in the innovation process of
the company.
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REFERENCES
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Herschung, F., Mahlendorf, M.D. and Weber, J., 2017. Mapping quantitative management
accounting research 2002–2012. Journal of Management Accounting Research. 30(1).
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Bhimani, A., 2015. International comparative management accounting. Wiley Encyclopedia of
Management, pp.1-6.
Messner, M. And et.al., 2016. Struggles for legitimacy and identity: the development of
Germanic management accounting research. Research Gate, pp.1-38.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Brewer, P.C., Garrison, R.H. and Noreen, E.W., 2015. Introduction to managerial accounting.
McGraw-Hill Education.
Appelbaum, D and et.al., 2017. Impact of business analytics and enterprise systems on
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Weygandt, J.J and et.al., 2018. Managerial Accounting: Tools for Business Decision-making.
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Salerno, M.S and et.al.,2015. Innovation processes: Which process for which
project?. Technovation.35. pp.59-70.
Kazadi, K., Lievens, A. and Mahr, D., 2016. Stakeholder co-creation during the innovation
process: Identifying capabilities for knowledge creation among multiple
stakeholders. Journal of Business Research.69(2).pp.525-540.
Bosch‐Sijtsema, P. and Bosch, J., 2015. User involvement throughout the innovation process in
high‐tech industries. Journal of Product Innovation Management.32(5).pp.793-807.
Bain, D. and Kleinknecht, A. eds., 2016. New concepts in innovation output measurement.
Springer.
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Huang, B. and Wu, A., 2017. Reduce shortage with self-reservation policy for a manufacturer
paying both fixed and variable stockout expenditure. European Journal of Operational
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