Management Accounting and Financial Planning AAF0436

Management Accounting and Financial
Planning AAF0436
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INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Discuss the concept and types of standard costing along with its limitations........................3
Discuss about Target costing and how it differs with Standard costing.................................5
Discuss the role of contribution technique in taking decisions and the way it can help BETA.
Analyse the way transfer pricing approaches helps in improving the profitability of firm.
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Management accounting is defined as a process associated to preparation of reports about
business operation which helps managers to undertake short term as well as long term decisions.
Management accounting also assist business to fulfil their goals while evaluating measuring in
analysing into protecting and communicating information’s in a systematic manner (Banerjee,
2021). Management accounting play essential role through which business can conduct relevant
cost analysis which helps in determining existing expenses and offer suggestion to conduct
future activities in effective manner. Present report is conducted on better which is operating as
an IT company and conducts Dubai based business while dealing in developing apps, supporting
and maintenance of application, software consultancy, IOT services, etc. In this report discussion
has been conducted on the concept and types of standard costing in addition with its limitation,
along with is target costing. Along with this difference with standard costing is also discussed in
this report. At last role of contribution technique and the manner in which transfer pricing
approach helps in making improvement in profitability of firm is also discussed in present report.
MAIN BODY
Discuss the concept and types of standard costing along with its limitations.
Standard costing is inclusive of setting of predetermined cost estimates as to provide a
basis for the comparison with actual cost. There are mainly three primary categories of standard
cost which is ideal standard, basic standard cost and currently attainable standard cost. It has
been underlined that it is basically a procedure to eliminate the overall amount of expenses
which can take place during the time of production in the estimated cost which is further
compared with actual research with an aim to determine difference between them (Alves, Lichtig
and Rybkowski, 2017). It helps to collect information along with the reason behind the variation.
Main purpose of this is to have estimated budget in a correct manner and determine the
performance of operations. This will help better to control extra cost that can be an occurred with
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the help of his better can conduct prior researches and can determine a base of the standard for
next year.
Types of standards
There are basically four types of standards
Ideal or Perfect standard-
It is mainly a measure that can be easily obtained in normal form of condition. In this it is
essential for better to implement appropriate and accurate cost for their material and labour in
addition with maximum possible output that better produce with highest efficiency. It has been
identified that these measures are basically very tight and do not offer any space for kind of
spoilage wastage or inefficiency during work.
Normal standards-
Normal standards are basically expected to be fulfilled in future which can be the time
period of one business cycle. The standard has been duly framed by better on the basis of its
average capacity which can assist in regression as well as boom. Furthermore, it has been
underlined that the cost recognise in this method remains same for the whole cycle and does not
get revised.
Basic standards-
Basic standards are basically developed by organisation for a define time period. It has
been identified that these measures basically stay un- altered. However, they kept revised
sometime as per the fluctuations occur in price (Bielefeld and Schneider, 2017). Basic standard is
being utilised by better for identification of actual results along with expected results in simple
terms the standard are basically act as measure for other grades.
Currently attainable standards-
These are basically form of standard which are achievable by particular level of efforts.
In addition to this it has been identified that it allows for normal waste, spoilage and non-
productive time. Currently attainable standards are basically for short period of time and is
associated to current condition of work. These standards are being duly followed by better with
an aim to bring efficiency in business operations.
Limitations of standard costing
Expensive tool -
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