Management Accounting and Cost Analysis in Prime Furniture

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
LO 2.................................................................................................................................................3
Microeconomic techniques.........................................................................................................3
LO 3.................................................................................................................................................9
Budgets for planning and control................................................................................................9
LO 4...............................................................................................................................................11
Compare ways in which organisations could use management accounting.............................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14
REFERENCES..............................................................................................................................17

INTRODUCTION
Management Accounting is the process in which manager uses the different provision of
accounting information in organization in order to have better information about the current
position of business and making different decision in an organization. Prime furniture is
wholesale manufacturer of furniture in United Kingdom. This report highlights different
microeconomics technique, product costing and cost of inventory. After that report highlights
different planning tool in the organization. In the end the report highlights different way in which
organization used to use different accounting system.
LO 1
(Covered in ppt)
LO 2
Microeconomic techniques
Cost is the value of the money which is incurred by an organization to deliver or to produce
something in an organization. There are many different type of cost incurred in the organization
to produce something in the market (Goddard and Simm 2017).
Cost-volume Profit: Cost-volume profit is a method of cost accounting that looks at
impact which used to be created by many different level of varying cost and volume on the
operating profit for an organization. There are many different type of assumption are made under
this regarding sales price, fixed cost and variable cost per unity are constant.
Flexible Budget: Flexible Budget is the type of budget that used to adjust or flexes with
change in volume or activity in the organization. Flexible budget used to also shows the
appropriate expenditure for different level of output.
Cost Variance: Cost Variance is define as a difference between actually cost incurred
and planned amount of cost that organization has set up in the past (Bromwich and Scapens,
2016).
Absorption cost, is a managerial accounting method which used to looks at both variable
as well as fixed overhead costs of producing a particular product in an organization. In simple
words it not only includes the material or labour, it also used to includes the manufacturing
overhead in the organization.

Marginal cost is the incremented cost which has been paid by prime furniture due to
producing of one extra level of product in the organization.
Fixed cost is the cost which is fixed in nature and do not use to change with change in
amount of production in the organization. Rent, insurance premium are some example of fixed
cost.
Variable cost at the same time is the cost which used to change with change in the
quantity of good and service produce in the organization. Raw material, packaging and labour
cost are some example of variable cost.
Cost Allocation is the process in the organization in which different cost are being
assigned to different cost object in an organization (Lada, Kozarkiewicz and Haslam, 2020).
Normal Costing is the method of costing, which is used by organization to derive cost of
an organization. In Normal costing actual data is generally used by organization to derive the
cost of product product with the exception of manufacturing overhead. Standard Costing on the
other hand is the costing method in which predetermine cost of all the different aspect of product
is generally consider by organization.
Activity Based Costing is the type of costing method in which organization used to
identify different activity & Services in the organization on the basis of actual consumption by
each in the organization.
Different type of costing in the organization used to provide a good hand of support in
setting price in the organization. As after ascertaining different type of cost in the organization,
Prime furniture used to plan different pricing strategy in the organization. Prime furniture
generally used to add profit margin with the cost of company to ascertain price of company
product (Al-Sayed and Dugdale, 2016).
Inventory cost are the different type of cost which is looks at procurement, storage and
management of inventory in an organization. Different type of inventory cost are as follows:
Ordering Cost: It is the type of cost which is incurred by an organization at the time of
ordering raw material or semi finished good. Cost of procurement and inbound logistic are two
type of ordering cost.