Understanding ABC Inventory Analysis

RUNNING HEAD: Managerial accounting for cost and control
Managerial accounting for cost
and control

Managerial accounting for cost and control
Table of Contents
Question 1............................................................................................................. 3
Purpose of management accounting reports......................................................3
Question 2............................................................................................................. 3
Control function of management........................................................................3
Question 3............................................................................................................. 4
Purpose of product costing................................................................................. 4
Question 4............................................................................................................. 5
A. Two aspects of labour costing......................................................................5
B. Overtime premium treatment......................................................................5
Question 5............................................................................................................. 6
Journal entries.................................................................................................... 6
Question 6............................................................................................................. 6
Introduction........................................................................................................ 6
Arguments for ABC analysis...............................................................................7
Arguments against ABC analysis........................................................................7
Conclusion.......................................................................................................... 8
Recommendations.............................................................................................. 8
References............................................................................................................. 9

Managerial accounting for cost and control
Question 1
Purpose of management accounting reports:
Means of communication: Management reports are used for upward communication. It is
made for use by internal users. Examples are management, government agencies, creditors
and many more uses the report to know about inside condition of organization (Garrison, et
al., 2010).
Record for future: The reports provide valuable and significant information that can be used
as reference in future. Due to this data is collected with maximum care to become source of
information in future.
Prepare budget: Managers analyse department’s performance in order to control cost. The
managers prepare budget in order to estimate expenses and income over a future period of
time. A manager also uses these reports to provide incentive and increment to its employees.
From budget reports analysis for future goals and budgets is prepared.
Inventory process efficiency: Companies having physical inventory system uses managerial
accounting reports to keep their manufacturing process effective. The reports prepared shows
the labour hour wasted, overhead cost and many more which helps company to analyse
profitable department and areas needing improvement.
Question 2
Control function of management:
Controlling as function of management is of significant value in business
organization. It assures of the actual state of business condition is parallel to expectation. It
also gives the exact data needed for effective decision making process and maintaining