Management Accounting: Tools and Techniques for Decision Making

Management Accounting

Table of Contents
INTRODUCTION......................................................................................................................2
LO1............................................................................................................................................2
P1 Explaining management accounting along with their essential requirements..................2
P2 Assessing the use of managerial reporting in decision making........................................4
LO 2.......................................................................................................................................5
P 3 Calculation of Income statement under Marginal costing and Absorption costing
method...................................................................................................................................5
LO 3.........................................................................................................................................12
P 4 Advantages and Disadvantages of planning tools used by budgetary control.......12
LO 4.........................................................................................................................................14
Comparison between different organizations regarding how they are adapting
management accounting for dealing with their financial problems..............................14
Managerial accounting leads business enterprises towards sustainable success.........16
Evaluation of how planning tools for accounting respond suitably for solving
Financial problems to lead organizations to sustainable success...................................16
CONCLUSION........................................................................................................................17
REFERENCES.........................................................................................................................18

INTRODUCTION
In the context of business unit, management accounting (MA) plays a significant role
in decision making. Now, managers lay focus on tracking business performance with the
motive to develop suitable or competent strategic framework. This in turn helps firm in
attaining goals and gaining competitive position over others. The present report is based on
Qbic hotel which offers accommodation services to the customers. In this, report will
provide deeper insight about MA tools which business units undertake for reporting purpose.
Besides this, it will shed light on the manner in which MA report aid in profitable decision
making. It also depicts the use of costing system namely absorption and marginal in the
assessment of cost and profitability aspects. Report also presents MA tools that can be used
by Qbic for planning purpose. It also entails how MA techniques assist in responding
financial problems.
LO1
P1 Explaining management accounting along with their essential requirements
Management accounting may be defined as a process which lay focus on analyzing
business cost and operations for preparing internal financial report. This provides managers
with suitable framework for decision making and contributes in goal attainment (Cowton,
2018). There are several management accounting systems which Qbic can undertake for
ensuring smooth functioning of operations from both monetary and non-monetary perspective
such as:
Job costing
In MA, job costing system is highly important which emphasizes on capturing or
tracking cost associated with each job. It presents cost of material, labor and overhead
associated with production aspect. Thus, by summing up all the expenditures total cost of job
can be identified. By dividing total costs from number of units, CPU can be assessed
prominently.
Advantages Disadvantages
 Offers detailed information about
cost regarding material, labor and
 Expensive and time consuming
exercise

overhead
 Profitability of job can be gauged
using this system
 Prevents duplication of work
 Helps in evaluating quality of work
(Job costing: advantages and
disadvantages, 2019)
 Lack of standardized process

Cost accounting
This system of MA may be served as a framework which firm’s undertake with the
motive to make appropriate estimation about product cost and performing profitability
analysis. Cost accounting system includes fixed, variable, direct and indirect expenditure
incurred by the firm. Profit attainment is the main motive of an organization for the purpose
of survival and gaining competitive position. In this regard, using such system cost per unit
can be assessed by the manager of Qbic using this accounting system. Hence, by adding
profit margin in per unit cost manager of Qbic can set price for the products or services
offered.
Advantages Disadvantages
 Assist in identifying cost per unit and
price
 Facilitates better monitoring and
controlling of labor costs
 Ensures profit maximization by
eliminating waste, losses and
inefficiencies (Cost accounting:
advantages and disadvantages, 2019)
 Leads problem in relation to under or
over absorption of overhead
 Focuses on past performance,
whereas management is concerned
about future
 Imposes more expense due to high
maintenance associated with the
installation of cost accounting system
Inventory accounting
This system of MA includes several tools which help in taking appropriate decision
about stock such as LIFO, FIFO, economic order quantity (EOQ), just in time (JIT) etc. In the
context of business unit, effectual inventory management is highly required for controlling