Management Accounting Research Review
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The assignment provided is a review of management accounting research studies, which includes a list of relevant articles and books. The articles cover topics such as adoption of management accounting innovations, popularizing the balanced scorecard, lean manufacturing, and the moderating role of environmental management accounting. The books include cost management, managerialist studies in management accounting, and the contingency theory of management accounting and control.
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UNIT 5 MA
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems...........................................................................................1
B. Explaining Different Management Accounting Reports...................................................3
C. Evaluating the benefits of management accounting systems ............................................5
D. Integration of management accounting system and reports are developed in organization ..6
TASK 2............................................................................................................................................6
A. 1 Explaining absorption costing and marginal costing methods.......................................6
A.2. Producing income statements by utilising costing methods...........................................7
B. Computation of Break-Even analysis................................................................................8
C. Applying the range of management accounting techniques and produce appropriate
financial reporting documents accurately for the scenarios given in the Task 2. ..................9
D. Producing financial reports that accurately apply and interpret data for business activities
shown in the scenarios .........................................................................................................11
TASK 3 .........................................................................................................................................11
A. Advantages and disadvantages of different types of planning tools for budgetary control 11
B. Showing application of the planning tools for preparing, forecasting and analysing budgets
..............................................................................................................................................13
C. Comparing how organization helps in adopting the management information system as
comparison with the financial problems...............................................................................14
D. Analysing how your management accounting techniques could respond to financial
problems and lead the organization to sustainable success..................................................15
E. Evaluating how planning tools could be used to solve financial problems and lead the
organization to sustainable success. ....................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems...........................................................................................1
B. Explaining Different Management Accounting Reports...................................................3
C. Evaluating the benefits of management accounting systems ............................................5
D. Integration of management accounting system and reports are developed in organization ..6
TASK 2............................................................................................................................................6
A. 1 Explaining absorption costing and marginal costing methods.......................................6
A.2. Producing income statements by utilising costing methods...........................................7
B. Computation of Break-Even analysis................................................................................8
C. Applying the range of management accounting techniques and produce appropriate
financial reporting documents accurately for the scenarios given in the Task 2. ..................9
D. Producing financial reports that accurately apply and interpret data for business activities
shown in the scenarios .........................................................................................................11
TASK 3 .........................................................................................................................................11
A. Advantages and disadvantages of different types of planning tools for budgetary control 11
B. Showing application of the planning tools for preparing, forecasting and analysing budgets
..............................................................................................................................................13
C. Comparing how organization helps in adopting the management information system as
comparison with the financial problems...............................................................................14
D. Analysing how your management accounting techniques could respond to financial
problems and lead the organization to sustainable success..................................................15
E. Evaluating how planning tools could be used to solve financial problems and lead the
organization to sustainable success. ....................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
INTRODUCTION
Management Accounting is defined as expertise of financial data and advice company to
use for a company and its business development. This assignment is about management
accounting and its significance for an organisation’s success. It will provide the meaning and
essential requirements of various types of management accounting techniques with their benefits.
The present report will study different accounting reports and their implementation in an
organization, i.e. Williams Performance Tenders which is the boat manufacturing company
which was founded in the year of 1979. It would be discussing about various advantage and
disadvantages of its planning tools in efficient manner.
Later, it will provide a profound analysis of marginal and absorption costing methods
with their income statements and interpretations for an insight about company’s overall growth.
The report will present significance of break-even analysis. This assignment will consist of
numerous advantages and disadvantages of planning tools with its applications. Along with this,
the overall impact on the decision-making process of a company.
TASK 1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems
Management accounting includes preparation of managerial reports and accounts serving
to give accurate and precise financial and statistical data to the managers of organizations which
is required for decision-making. The major role played by it includes planning, organizing,
judgement creation, controlling in an organization (Ax and Greve, 2017).
Management accounting provides effective information from Williams Performance
Tenders so that manager can utilize this information and take better decisions to integrate it in
every level of an organization. It is provided only to management as internal decisions are taken
and thus, shortcomings can be eradicated with ease.
Such accounting is a useful tool for company because it serves decision making and leads
to an increased efficiency of functions of management. It also helps in fixing target and prices of
the products (Management Accounting: Meaning, Functions and Characteristics, 2017).
1
Management Accounting is defined as expertise of financial data and advice company to
use for a company and its business development. This assignment is about management
accounting and its significance for an organisation’s success. It will provide the meaning and
essential requirements of various types of management accounting techniques with their benefits.
The present report will study different accounting reports and their implementation in an
organization, i.e. Williams Performance Tenders which is the boat manufacturing company
which was founded in the year of 1979. It would be discussing about various advantage and
disadvantages of its planning tools in efficient manner.
Later, it will provide a profound analysis of marginal and absorption costing methods
with their income statements and interpretations for an insight about company’s overall growth.
The report will present significance of break-even analysis. This assignment will consist of
numerous advantages and disadvantages of planning tools with its applications. Along with this,
the overall impact on the decision-making process of a company.
TASK 1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems
Management accounting includes preparation of managerial reports and accounts serving
to give accurate and precise financial and statistical data to the managers of organizations which
is required for decision-making. The major role played by it includes planning, organizing,
judgement creation, controlling in an organization (Ax and Greve, 2017).
Management accounting provides effective information from Williams Performance
Tenders so that manager can utilize this information and take better decisions to integrate it in
every level of an organization. It is provided only to management as internal decisions are taken
and thus, shortcomings can be eradicated with ease.
Such accounting is a useful tool for company because it serves decision making and leads
to an increased efficiency of functions of management. It also helps in fixing target and prices of
the products (Management Accounting: Meaning, Functions and Characteristics, 2017).
1
Requirements of different types of management accounting systems are explained below and
are used by William Performance Tenders:
Cost Accounting Systems
Inventory Management System
Job Costing System
Price Optimization System
The requirements of each system are listed below:
Cost accounting system
This is used to identify the cost of each product or service. In the process of production,
such accounting system aids to develop efficiency to minimize the cost. This helps in more
production. Therefore, it supports to initiate control over various types of costs such as direct,
indirect, fixed, variable and semi-variable quite successfully.
Inventory management system
This system has many benefits for William Performance Tenders. It reduces over
exploitation of resources to a certain level. Further, with the help of inventory management
system, no excess inventory is ordered that reduces amount of the expenses in operative means.
It is requisite so that business may be capable to attain maximum production and fulfilling
customers’ orders with ease.
Job costing system
It is also an impelling method to examine cost incurred on different manufacturing jobs.
It is fundamentally needed to evaluate costs so that it could be reduced for gaining production at
low cost. It assists Williams Performance Tenders to control costs and supports their
management for suitable distribution of jobs. This efficaciously assist to cut down costs and thus,
business is able to accomplish production timely. Hence, job costing accounting system has
plenty of benefits to company in achieving production and met demand of customers quite
effectually.
Price optimizing systems
It is a system that helps to identify the best possible price to be quoted for production. In
this system, it provides opportunities to concentrate on various goals. Firm takes into account
consideration of customers’ and quote less price for products and services (Cooper, Ezzamel and
1
are used by William Performance Tenders:
Cost Accounting Systems
Inventory Management System
Job Costing System
Price Optimization System
The requirements of each system are listed below:
Cost accounting system
This is used to identify the cost of each product or service. In the process of production,
such accounting system aids to develop efficiency to minimize the cost. This helps in more
production. Therefore, it supports to initiate control over various types of costs such as direct,
indirect, fixed, variable and semi-variable quite successfully.
Inventory management system
This system has many benefits for William Performance Tenders. It reduces over
exploitation of resources to a certain level. Further, with the help of inventory management
system, no excess inventory is ordered that reduces amount of the expenses in operative means.
It is requisite so that business may be capable to attain maximum production and fulfilling
customers’ orders with ease.
Job costing system
It is also an impelling method to examine cost incurred on different manufacturing jobs.
It is fundamentally needed to evaluate costs so that it could be reduced for gaining production at
low cost. It assists Williams Performance Tenders to control costs and supports their
management for suitable distribution of jobs. This efficaciously assist to cut down costs and thus,
business is able to accomplish production timely. Hence, job costing accounting system has
plenty of benefits to company in achieving production and met demand of customers quite
effectually.
Price optimizing systems
It is a system that helps to identify the best possible price to be quoted for production. In
this system, it provides opportunities to concentrate on various goals. Firm takes into account
consideration of customers’ and quote less price for products and services (Cooper, Ezzamel and
1
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Qu, 2017). Williams Performance Tenders uses this technique for setting the best prices of
goods.
B. Explanation of Different Management Accounting Reports
Management accounting is also known as managerial accounting. It focuses on internal
information of organization which is obtained from their financial accounting. These reports are
used for all the amendable regulations and measurable parameters for the overall growth and
development of Williams Performance Tenders. These reports are generated throughout the
accounting period to assist management in taking decisions.
Some essential reports of management accounting are listed below.
Budget reports
This report of management accounting is generated as a whole for small businesses
especially department wise. Budget reports are critical in measuring the performance of a
company. However, to understand the grand scheme for their business, each organization
implements an overall budget. It is prepared by keeping all the circumstances in mind which may
arise throughout the year. The establishment's budget lists several sources of earnings and
expenditures.
Account receivable aging reports
The Accounts Receivables Aging Reports are vital for this company which relies heavily
on extending credits. These reports are beneficial as they allow specifying the remaining
balances and also to identify defaulters in specific time period. In case of many defaulters, the
company may need a complete transformation of its credit policies (Accounts receivable aging
report. 2018). It is prepared to recover outstanding money from credit customers’ so that
operational tasks can be performed quickly by company. If funds remain outstanding for long
time, then it is required that strict credit policies should be implemented by which amount is
recovered within stipulated time. Thus, it helps company to prepare such report and thus, clarity
is observed for remaining amount to be recovered from debtors.
Cost managerial accounting reports
Cost of articles that are manufactured are computed by the management accounting. All
raw material costs, overhead, labour and any added costs are taken into consideration. This
2
goods.
B. Explanation of Different Management Accounting Reports
Management accounting is also known as managerial accounting. It focuses on internal
information of organization which is obtained from their financial accounting. These reports are
used for all the amendable regulations and measurable parameters for the overall growth and
development of Williams Performance Tenders. These reports are generated throughout the
accounting period to assist management in taking decisions.
Some essential reports of management accounting are listed below.
Budget reports
This report of management accounting is generated as a whole for small businesses
especially department wise. Budget reports are critical in measuring the performance of a
company. However, to understand the grand scheme for their business, each organization
implements an overall budget. It is prepared by keeping all the circumstances in mind which may
arise throughout the year. The establishment's budget lists several sources of earnings and
expenditures.
Account receivable aging reports
The Accounts Receivables Aging Reports are vital for this company which relies heavily
on extending credits. These reports are beneficial as they allow specifying the remaining
balances and also to identify defaulters in specific time period. In case of many defaulters, the
company may need a complete transformation of its credit policies (Accounts receivable aging
report. 2018). It is prepared to recover outstanding money from credit customers’ so that
operational tasks can be performed quickly by company. If funds remain outstanding for long
time, then it is required that strict credit policies should be implemented by which amount is
recovered within stipulated time. Thus, it helps company to prepare such report and thus, clarity
is observed for remaining amount to be recovered from debtors.
Cost managerial accounting reports
Cost of articles that are manufactured are computed by the management accounting. All
raw material costs, overhead, labour and any added costs are taken into consideration. This
2
report helps managers to classify the cost price of products and services with respect to its selling
price. The margins for the profits are identified with help of these reports.
Performance reports
This report is basically to review the performance of Williams Performance Tenders as
well as employees at the end of accounting year. In large organizations, departments
performance reports are also generated which measures and identifies the performance of each
department of the company (Performance report. 2018). To take the key strategic decisions
about the future of the organization, managers utilize such report. Performance-related
managerial accounting reports also offer an insight into the working of a company.
Other managerial reports
There are some more reports which are essential for business such as order information
reports, project reports, competitor’s analysis etc. (Eldenburg and et.al., 2016). They are either
created internally or outsourced through professionals.
These reports are required for an up-to-date and reliable manner so that decision-making
can be made by relying on such information. Moreover, any deviations are analysed in company
that could be effectively handled by taking corrective actions and as such, overall performance
can be judged in a better way. Management is able to take better decisions by assessing such
managerial reports to enhance performance of firm and increase financial standing by enriching
internal operations.
3
price. The margins for the profits are identified with help of these reports.
Performance reports
This report is basically to review the performance of Williams Performance Tenders as
well as employees at the end of accounting year. In large organizations, departments
performance reports are also generated which measures and identifies the performance of each
department of the company (Performance report. 2018). To take the key strategic decisions
about the future of the organization, managers utilize such report. Performance-related
managerial accounting reports also offer an insight into the working of a company.
Other managerial reports
There are some more reports which are essential for business such as order information
reports, project reports, competitor’s analysis etc. (Eldenburg and et.al., 2016). They are either
created internally or outsourced through professionals.
These reports are required for an up-to-date and reliable manner so that decision-making
can be made by relying on such information. Moreover, any deviations are analysed in company
that could be effectively handled by taking corrective actions and as such, overall performance
can be judged in a better way. Management is able to take better decisions by assessing such
managerial reports to enhance performance of firm and increase financial standing by enriching
internal operations.
3
C. Evaluation of the benefits of management accounting systems
The benefits of management accounting systems are listed below in table.
Management Accounting
Systems
Benefits
Cost accounting systems It helps in measuring the efficiency of Williams
Performance Tenders.
Cost accounting system identifies profitable and
unprofitable activities that put emphasis on economic
activities of a company.
It is helpful in proper planning about machines and
labour capacity (Saeidi and et.al. 2018).
Inventory management
systems
The need of inventory management arises in
improvement of accuracy of stock orders i.e. it helps
in figuring out exact inventory needed by Williams
Performance Tenders for production.
An inventory management system helps in saving time
as well as money because it keeps track of all
information about products and their raw materials.
Job costing system By comparing actual estimates, it records cost more
accurately and facilitates to control it (Fullerton,
Kennedy and Widener, 2014).
It helps management to identify by which jobs are
profitable and are unprofitable for business.
It also supportive of quoting cost-plus contracts.
Price optimization systems It is helpful in analysing adequate cost over products
and services.
It identifies appropriate cost for various goods and
services.
4
The benefits of management accounting systems are listed below in table.
Management Accounting
Systems
Benefits
Cost accounting systems It helps in measuring the efficiency of Williams
Performance Tenders.
Cost accounting system identifies profitable and
unprofitable activities that put emphasis on economic
activities of a company.
It is helpful in proper planning about machines and
labour capacity (Saeidi and et.al. 2018).
Inventory management
systems
The need of inventory management arises in
improvement of accuracy of stock orders i.e. it helps
in figuring out exact inventory needed by Williams
Performance Tenders for production.
An inventory management system helps in saving time
as well as money because it keeps track of all
information about products and their raw materials.
Job costing system By comparing actual estimates, it records cost more
accurately and facilitates to control it (Fullerton,
Kennedy and Widener, 2014).
It helps management to identify by which jobs are
profitable and are unprofitable for business.
It also supportive of quoting cost-plus contracts.
Price optimization systems It is helpful in analysing adequate cost over products
and services.
It identifies appropriate cost for various goods and
services.
4
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D. Integration of management accounting system and reports are developed in organization
There are various components in integrated management accounting systems that benefit
Williams Performance Tender for effective decision making. It assists in the reduction of
duplication of works, saves time and control unnecessary expenditures. Moreover, such
integration helps in providing data in time so that effective decisions can be done.
In recent times, computerized accounting is proved beneficial to firms which is time-
saving. Both systems provide a systematic data of organizations which is obtained from financial
accounting. The integration is required so that management may be able to effectively ascertain
reports and calculate decisions to enhance the overall performance with ease (Kihn and Ihantola,
2015).
TASK 2
A. 1 Explaining absorption costing and marginal costing methods.
Absorption costing
It is a method of accounting for valuing inventory. It adsorbs all cost which is used in
manufacturing of goods and services including fix and variable cost. It offers exact view of cost
that how much it relies in the production of goods and services. It is contrasted by direct costing
or variable costing. It is a technique which is used for recognizing cost and profits. Hence, it is
also known as a full costing technique. It determines all the practices under which fixed and
variable cost are converted into processes and operations. These techniques collect cost which
are associated with production and distribute them in an individual part. It accumulates the cost
of process of manufacturing.
Marginal costing
To find out the total cost of production, management uses marginal costing techniques for
decision-making (Fullerton, Kennedy and Widener, 2014). This technique differentiates both
fixed and variable cost. For managerial decision-making, it presents the data where fixed and
variable cost are shown individually. The marginal cost is the cost of one additional unit. While
valuing the finished goods and work in progress, variable cost is taken into consideration at the
time of valuation of stock. Behaviour of cost leads the concept of marginal accounting. It is also
known as variable costing because it takes only variable expenses into account at the time of
production.
5
There are various components in integrated management accounting systems that benefit
Williams Performance Tender for effective decision making. It assists in the reduction of
duplication of works, saves time and control unnecessary expenditures. Moreover, such
integration helps in providing data in time so that effective decisions can be done.
In recent times, computerized accounting is proved beneficial to firms which is time-
saving. Both systems provide a systematic data of organizations which is obtained from financial
accounting. The integration is required so that management may be able to effectively ascertain
reports and calculate decisions to enhance the overall performance with ease (Kihn and Ihantola,
2015).
TASK 2
A. 1 Explaining absorption costing and marginal costing methods.
Absorption costing
It is a method of accounting for valuing inventory. It adsorbs all cost which is used in
manufacturing of goods and services including fix and variable cost. It offers exact view of cost
that how much it relies in the production of goods and services. It is contrasted by direct costing
or variable costing. It is a technique which is used for recognizing cost and profits. Hence, it is
also known as a full costing technique. It determines all the practices under which fixed and
variable cost are converted into processes and operations. These techniques collect cost which
are associated with production and distribute them in an individual part. It accumulates the cost
of process of manufacturing.
Marginal costing
To find out the total cost of production, management uses marginal costing techniques for
decision-making (Fullerton, Kennedy and Widener, 2014). This technique differentiates both
fixed and variable cost. For managerial decision-making, it presents the data where fixed and
variable cost are shown individually. The marginal cost is the cost of one additional unit. While
valuing the finished goods and work in progress, variable cost is taken into consideration at the
time of valuation of stock. Behaviour of cost leads the concept of marginal accounting. It is also
known as variable costing because it takes only variable expenses into account at the time of
production.
5
A.2. Producing income statements by utilising costing methods
Marginal costing
Particulars Amount Amount
Revenue 33000 33000
Material 5600
Labour 4800
Variable Production Overhead 1600
Variable Sales Overhead 800 12800
Less: Ending Inventory
Direct Material 1400
Direct Labour 1200
Variable Production Overhead 400
Variable Sales Overhead 200 3200
COP (Per Unit) 9600
23400
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500
5900
Net Income 17500
6
Marginal costing
Particulars Amount Amount
Revenue 33000 33000
Material 5600
Labour 4800
Variable Production Overhead 1600
Variable Sales Overhead 800 12800
Less: Ending Inventory
Direct Material 1400
Direct Labour 1200
Variable Production Overhead 400
Variable Sales Overhead 200 3200
COP (Per Unit) 9600
23400
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500
5900
Net Income 17500
6
Absorption costing
Particulars Amount Amount
Total Sales 33000 33000
Direct Material 5600
Direct Labour 4800
Variable Manufacturing
Expenses 1600
Variable Revenue Expenses 800 12800
Less: Closing Inventory
Direct Material 1400
Direct Labour 1200
Variable Sales Expenses 200
Less: Variable Sales Overhead 600 3400
Less: Absorption Of Overheads
(Fixed)
Cost Of Production 9400
Per Unit Contribution 23600
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500 5900
Net Income 17700
7
Particulars Amount Amount
Total Sales 33000 33000
Direct Material 5600
Direct Labour 4800
Variable Manufacturing
Expenses 1600
Variable Revenue Expenses 800 12800
Less: Closing Inventory
Direct Material 1400
Direct Labour 1200
Variable Sales Expenses 200
Less: Variable Sales Overhead 600 3400
Less: Absorption Of Overheads
(Fixed)
Cost Of Production 9400
Per Unit Contribution 23600
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500 5900
Net Income 17700
7
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B. Computation of Break-Even analysis
Break-Even Analysis
Particulars Formula Figures
Selling Price Per Unit 40
Variable Cost Per Unit 18
Contribution Per Unit
Selling Price Per Unit - Variable
Cost Per Unit 22
Fixed Cost 6000
BEP (In Units)
Fixed Cost / Contribution Per
Unit 273
BEP (In Value Or Monetary Terms)
BEP (In Units) * Selling Price Per
Unit
10909.0909
090909
C. Applying the range of management accounting techniques and produce appropriate financial
reporting documents accurately for the scenarios given in the Task 2.
From: Memorandum of association
To: General Manager
Subject: Providing information about the favourable management accounting technique which
are to be implicated.
Sir,
With reference in giving the productive information which could present high creativity and
effective allocation of cost. For Williams Performance Tenders, to generate the sufficient profit,
two techniques of management accounting such as marginal costing and absorption costing will
8
Break-Even Analysis
Particulars Formula Figures
Selling Price Per Unit 40
Variable Cost Per Unit 18
Contribution Per Unit
Selling Price Per Unit - Variable
Cost Per Unit 22
Fixed Cost 6000
BEP (In Units)
Fixed Cost / Contribution Per
Unit 273
BEP (In Value Or Monetary Terms)
BEP (In Units) * Selling Price Per
Unit
10909.0909
090909
C. Applying the range of management accounting techniques and produce appropriate financial
reporting documents accurately for the scenarios given in the Task 2.
From: Memorandum of association
To: General Manager
Subject: Providing information about the favourable management accounting technique which
are to be implicated.
Sir,
With reference in giving the productive information which could present high creativity and
effective allocation of cost. For Williams Performance Tenders, to generate the sufficient profit,
two techniques of management accounting such as marginal costing and absorption costing will
8
help the system. Therefore, in this case the technique of absorption costing proves to be
beneficial because it consists of those all the cost incurred in the process on production.
Moreover, there are more methods which are proven to be beneficial for the Williams
Performance Tenders like
Cash Flow Statements with Historical Checking
Analysing Financial Accounts
Financial Accounting
Communicating Information
Review of Accounts
On comparing both the methods, it is seen that profit obtained from the marginal costing
technique is comparatively lower than other costing. It is highlighted that in absorption costing,
Williams Performance Tenders had a profit of $17700 than in marginal costing which was of
$17500. Hence, it can be concluded by saying that absorption costing will be more fruitful than
marginal. As it is a full costing method and shows the relevant profit for organization by
absorbing all costs. In marginal costing, it only takes fixed expenses into account to ascertain
the profits.
There are some reporting techniques which management should adopt like -
Cash Flows
Start-up Costing
Balance Sheet
Budget and Forecast Table
Thank you
9
beneficial because it consists of those all the cost incurred in the process on production.
Moreover, there are more methods which are proven to be beneficial for the Williams
Performance Tenders like
Cash Flow Statements with Historical Checking
Analysing Financial Accounts
Financial Accounting
Communicating Information
Review of Accounts
On comparing both the methods, it is seen that profit obtained from the marginal costing
technique is comparatively lower than other costing. It is highlighted that in absorption costing,
Williams Performance Tenders had a profit of $17700 than in marginal costing which was of
$17500. Hence, it can be concluded by saying that absorption costing will be more fruitful than
marginal. As it is a full costing method and shows the relevant profit for organization by
absorbing all costs. In marginal costing, it only takes fixed expenses into account to ascertain
the profits.
There are some reporting techniques which management should adopt like -
Cash Flows
Start-up Costing
Balance Sheet
Budget and Forecast Table
Thank you
9
D. Producing financial reports that accurately apply and interpret data for business activities
shown in the scenarios
Interpretation
In task 2nd, the calculation is done by applying both costing techniques. By applying these two
techniques, Williams Performance Tenders has more profit achieved with absorption costing
technique.
The interpretation of the data has been done below individually.
Marginal costing
By using this technique, it is clearly observed that Williams Performance Tenders has
obtained profits of $17500. On analysis, it can be analysed that the profit is quite low than other
technique (Kihn and Ihantola, 2015). The marginal cost uses variable cost in production process
and fixed costs is ignored.
Absorption costing
By applying this technique, Williams Performance Tenders has earned profit for $17700
which is higher than marginal costing. Absorption costing takes all cost into accounts to
ascertained the profit.
TASK 3
A. Advantages and disadvantages of different types of planning tools for budgetary control
Management accounting uses various techniques for sound decision-making. Among all
those tools, one essential tool is budgetary control or budgeting. It is the process of forming a
financial statement for a definite period.
The following are the planning tools for budgetary control.
Budgeting: A plan for a defined period in a year is called budget. It consisted of resource
quantities, cost and expenses, liabilities and cash flows. It is used in governments, families, and
other organizations to express a strategic plan of activities or events in measurable terms.
Budget is the sum total of money allocated for a particular and a summary of intended
expenditures along with the proposals how to meet them. Williams Performance Tenders
prepares a budget to meet their expenses for the future (Malmi, 2016). This preparation of budget
provides the effective result to organization and helps them to meet short term obligation.
10
shown in the scenarios
Interpretation
In task 2nd, the calculation is done by applying both costing techniques. By applying these two
techniques, Williams Performance Tenders has more profit achieved with absorption costing
technique.
The interpretation of the data has been done below individually.
Marginal costing
By using this technique, it is clearly observed that Williams Performance Tenders has
obtained profits of $17500. On analysis, it can be analysed that the profit is quite low than other
technique (Kihn and Ihantola, 2015). The marginal cost uses variable cost in production process
and fixed costs is ignored.
Absorption costing
By applying this technique, Williams Performance Tenders has earned profit for $17700
which is higher than marginal costing. Absorption costing takes all cost into accounts to
ascertained the profit.
TASK 3
A. Advantages and disadvantages of different types of planning tools for budgetary control
Management accounting uses various techniques for sound decision-making. Among all
those tools, one essential tool is budgetary control or budgeting. It is the process of forming a
financial statement for a definite period.
The following are the planning tools for budgetary control.
Budgeting: A plan for a defined period in a year is called budget. It consisted of resource
quantities, cost and expenses, liabilities and cash flows. It is used in governments, families, and
other organizations to express a strategic plan of activities or events in measurable terms.
Budget is the sum total of money allocated for a particular and a summary of intended
expenditures along with the proposals how to meet them. Williams Performance Tenders
prepares a budget to meet their expenses for the future (Malmi, 2016). This preparation of budget
provides the effective result to organization and helps them to meet short term obligation.
10
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Variance analysis: It is a qualitative tool for budgetary control. Variance is the variance
between planned, standard, budgeted amount with the actual outcome. Various organizations use
this technique to identify difference between actual and standard performance. It helps the
management to understand present cost and to control future cost at same time. The calculation
of variance is done by taking budget amount and deducting it from actual forecast value.
Williams Performance Tenders uses this technique to identify exact profit and loss for company.
Advantages and disadvantages of various planning tools
Planning tools Advantages Disadvantages
Budgeting It increases the
probability to achieve
the company’s goals and
objectives.
It helps in identifying the
strengths and
weaknesses so that firm
can concentrate.
It is helpful in better
allocation of resources.
If its targets are too difficult
to be achieved, then staff
might get demotivated.
Planning receives lower
priority and unnecessary
additional work in eye of
employees.
Lack of cooperation between
departments or functions,
which may result into
conflict.
Variance analysis It measures performance
and provide the best
options for decision
making.
It aids in cost control.
The cost consciousness
is created in every
It gives burden to employees
to maintain costs.
It tends to focus on the largest
negative deviations.
It focuses on the past without
looking future.
11
between planned, standard, budgeted amount with the actual outcome. Various organizations use
this technique to identify difference between actual and standard performance. It helps the
management to understand present cost and to control future cost at same time. The calculation
of variance is done by taking budget amount and deducting it from actual forecast value.
Williams Performance Tenders uses this technique to identify exact profit and loss for company.
Advantages and disadvantages of various planning tools
Planning tools Advantages Disadvantages
Budgeting It increases the
probability to achieve
the company’s goals and
objectives.
It helps in identifying the
strengths and
weaknesses so that firm
can concentrate.
It is helpful in better
allocation of resources.
If its targets are too difficult
to be achieved, then staff
might get demotivated.
Planning receives lower
priority and unnecessary
additional work in eye of
employees.
Lack of cooperation between
departments or functions,
which may result into
conflict.
Variance analysis It measures performance
and provide the best
options for decision
making.
It aids in cost control.
The cost consciousness
is created in every
It gives burden to employees
to maintain costs.
It tends to focus on the largest
negative deviations.
It focuses on the past without
looking future.
11
employee's mind by
variance analysis.
B. Showing application of the planning tools for preparing, forecasting and analysing budgets
To quantify future expectations of a firm's macro and micro economics, the forecasting
method for business environment will be used. For this process of prediction, Williams
Performance Tenders must practice a lot. A proper and systematic forecasting allows the
business entity to take better decisions for productivity (Nitzl, 2018). Analysing and forecasting
methods for specific planning tools have mainly practical applications for the purpose of
business establishments. Such tools support in preparing, analysing and forecasting the budgets.
They consisted of systematic planning. It supports in planning orientations for the purpose.
Therefore, it provides appropriate way for the preparation of budget. Budgeting is the best tool
for decision making as it sets the financial framework for this important process. It benefits in
monitoring performances of business to make the best budget.
By considering variance analysis, which is beneficial for business entity. This determines
deviations that can occur among its standard and actual cost. It helps for preparation of budgets
as it determines discrepancies and variances to set objectives of business entity. Variance
analysis is a useful tool in achieving effective cost for firm.
Key performance indicators help in analysing the budget as they measure its performance
of company by considering it and identifying exceed expenses occurred in the firm's production.
In this context, planning tools provide assistance to the experts for analysing its projected
budget and its preparation in similar aspect. This fulfils requirements of effective decision
making. By using a planning tool, it has seen that organization has got an effective control on to
the exceeding cost.
There are some more planning tools like NPV, IRR and ARR which helps Williams
Performance Tenders to identify level of profitability (Otley, 2016). To earn profits, it is very
important to implement the planning tools in business entity so that better decisions can be
obtained.
12
variance analysis.
B. Showing application of the planning tools for preparing, forecasting and analysing budgets
To quantify future expectations of a firm's macro and micro economics, the forecasting
method for business environment will be used. For this process of prediction, Williams
Performance Tenders must practice a lot. A proper and systematic forecasting allows the
business entity to take better decisions for productivity (Nitzl, 2018). Analysing and forecasting
methods for specific planning tools have mainly practical applications for the purpose of
business establishments. Such tools support in preparing, analysing and forecasting the budgets.
They consisted of systematic planning. It supports in planning orientations for the purpose.
Therefore, it provides appropriate way for the preparation of budget. Budgeting is the best tool
for decision making as it sets the financial framework for this important process. It benefits in
monitoring performances of business to make the best budget.
By considering variance analysis, which is beneficial for business entity. This determines
deviations that can occur among its standard and actual cost. It helps for preparation of budgets
as it determines discrepancies and variances to set objectives of business entity. Variance
analysis is a useful tool in achieving effective cost for firm.
Key performance indicators help in analysing the budget as they measure its performance
of company by considering it and identifying exceed expenses occurred in the firm's production.
In this context, planning tools provide assistance to the experts for analysing its projected
budget and its preparation in similar aspect. This fulfils requirements of effective decision
making. By using a planning tool, it has seen that organization has got an effective control on to
the exceeding cost.
There are some more planning tools like NPV, IRR and ARR which helps Williams
Performance Tenders to identify level of profitability (Otley, 2016). To earn profits, it is very
important to implement the planning tools in business entity so that better decisions can be
obtained.
12
Hence, application of planning tools are very important for purpose of preparing,
forecasting and for analysing budget in efficient and effective aspect.
C. Comparing how organization helps in adopting the management information system as
comparison with the financial problems
The above table is depicting comparison about adopting management information system
with context of its financial issues. In a business entity, there are numerous decisions which
manager must consider for the betterment of the company. An effective result in an organization
leads it to the top. It is considered as main objective of company. In firm, the managers are liable
for numerous decisions such as closure and shut down decision, make or buy, decision for the
pricing, special orders, and capital investment.
Closure and shut down
It might be classified in two types such as temporary and permanent. It is a issue where
sometimes it became difficult to take decision. Temporary closure and shut down takes place
when employees are on strike or any malpractice takes place (Renz, 2016). At that time, manager
and owner takes a decision for temporary closure and shut. While permanent closure takes place
at the time when organization is insolvent or bankrupt.
Make or buy
Another important decision to be taken by the manager is to make or buy decisions. For
minimizing the cost, this choice must be taken by the top management of organizations. It either
makes or buys decision that includes about organization’s production from raw materials for
making goods or it will outsource from other countries. A proper estimate has been drawn to
identify the minimum cost. Among both options, whichever cost is less must be chosen by the
manager.
13
forecasting and for analysing budget in efficient and effective aspect.
C. Comparing how organization helps in adopting the management information system as
comparison with the financial problems
The above table is depicting comparison about adopting management information system
with context of its financial issues. In a business entity, there are numerous decisions which
manager must consider for the betterment of the company. An effective result in an organization
leads it to the top. It is considered as main objective of company. In firm, the managers are liable
for numerous decisions such as closure and shut down decision, make or buy, decision for the
pricing, special orders, and capital investment.
Closure and shut down
It might be classified in two types such as temporary and permanent. It is a issue where
sometimes it became difficult to take decision. Temporary closure and shut down takes place
when employees are on strike or any malpractice takes place (Renz, 2016). At that time, manager
and owner takes a decision for temporary closure and shut. While permanent closure takes place
at the time when organization is insolvent or bankrupt.
Make or buy
Another important decision to be taken by the manager is to make or buy decisions. For
minimizing the cost, this choice must be taken by the top management of organizations. It either
makes or buys decision that includes about organization’s production from raw materials for
making goods or it will outsource from other countries. A proper estimate has been drawn to
identify the minimum cost. Among both options, whichever cost is less must be chosen by the
manager.
13
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Pricing
It is an important criterion for an organization. Every business entity provides goods or
services to take decisions with reference to price of goods; managers apply the techniques and
analyse pricing systems to set the best price of goods and services for customers.
Special orders
The decision regarding special order must be taken by managers. Before the production
of these orders, various questions like orders will be profitable or not come across the
establishment and such questions should be answered with the help of proper analysis.
Capital investment
Here, decisions are will be done by manager. Any capital investment is done for new and
innovative product development where cost of that product will be based on it.
Methods for purpose of comparison are given:
Key performance indicator
It is a tool that every organization uses to analyse the performance. To define on how
effectively the firm is working or to measure their efficiency in achieving the business
objectives, key performance indicators will be implemented, which are of two types, i.e. high
level KPIs and Low level KPIs (Saeidi and et.al. 2018).
High level key performance indicators evaluates performance of overall Williams
Performance Tenders while low level performance indicators measure execution of employees. It
also analyses about management accounting techniques that could respond to financial problems
and lead the organization to sustainable success.
D. Analysing how your management accounting techniques could respond to financial problems
and lead the organization to sustainable success
The optimum utilization of resources is and the proper allocation of cost are the major
problems which are being faced by every organization. The two basic accounting techniques like
management accounting techniques and costing techniques helps business entity in providing
feasible information about huge requirement of cost as well as its ability to retained the sales of
the company (Suomala, Lyly-Yrjänäinen and Lukka, 2014). Therefore, establishments need to
implement lots of things to create smooth working.
14
It is an important criterion for an organization. Every business entity provides goods or
services to take decisions with reference to price of goods; managers apply the techniques and
analyse pricing systems to set the best price of goods and services for customers.
Special orders
The decision regarding special order must be taken by managers. Before the production
of these orders, various questions like orders will be profitable or not come across the
establishment and such questions should be answered with the help of proper analysis.
Capital investment
Here, decisions are will be done by manager. Any capital investment is done for new and
innovative product development where cost of that product will be based on it.
Methods for purpose of comparison are given:
Key performance indicator
It is a tool that every organization uses to analyse the performance. To define on how
effectively the firm is working or to measure their efficiency in achieving the business
objectives, key performance indicators will be implemented, which are of two types, i.e. high
level KPIs and Low level KPIs (Saeidi and et.al. 2018).
High level key performance indicators evaluates performance of overall Williams
Performance Tenders while low level performance indicators measure execution of employees. It
also analyses about management accounting techniques that could respond to financial problems
and lead the organization to sustainable success.
D. Analysing how your management accounting techniques could respond to financial problems
and lead the organization to sustainable success
The optimum utilization of resources is and the proper allocation of cost are the major
problems which are being faced by every organization. The two basic accounting techniques like
management accounting techniques and costing techniques helps business entity in providing
feasible information about huge requirement of cost as well as its ability to retained the sales of
the company (Suomala, Lyly-Yrjänäinen and Lukka, 2014). Therefore, establishments need to
implement lots of things to create smooth working.
14
To extract social and environmental trends which might impact the organization's
goodwill.
An organization needs to analyse challenges faced by it to have an appropriate business
model.
Financial problem like imbalance cash flow, bad economic cycle needs to be modified for
the productivity of business.
E. Evaluating how planning tools could be used to solve financial problems and lead the
organization to sustainable success.
Planning tools are very effective for attaining sustainable success in appropriate aspect.
To lead the organization at high and for its sustainable success, it is very necessary to implement
the planning tools. These tools do not only provide systematic path for development of a
company but also support in better decision making. Management accounting has contributed
majorly by establishing diverse planning tools like budgeting, variance analysis, bench-marking,
etc. (Management accounting Drives sustainable success ,2015). Planning tools will provide
various ways to lead the organization towards the sustainability of business entity.
Few of them are mentioned under -
Planning tools have provided various KPIs to measure effectiveness of the performance
so that if any variance occurs then it can be resolved with time.
It provides an ability to learn the trends of changing environment so that business can
work accordingly.
CONCLUSION
It can be concluded that management accounting is one of the important parts in business.
Accounting reports which are prepared are quite useful for Williams Performance Tender's
management to strengthen it internally so that external operational tasks might be delivered quite
effectually and are able to achieve customers’ satisfaction. Furthermore, it is required that
planning tools should be implemented by business for effective decisions whether to invest in
any upcoming project or not. It is articulated from above report that management accounting
provides very effective information which is important for every business entity along with each
industry.
15
goodwill.
An organization needs to analyse challenges faced by it to have an appropriate business
model.
Financial problem like imbalance cash flow, bad economic cycle needs to be modified for
the productivity of business.
E. Evaluating how planning tools could be used to solve financial problems and lead the
organization to sustainable success.
Planning tools are very effective for attaining sustainable success in appropriate aspect.
To lead the organization at high and for its sustainable success, it is very necessary to implement
the planning tools. These tools do not only provide systematic path for development of a
company but also support in better decision making. Management accounting has contributed
majorly by establishing diverse planning tools like budgeting, variance analysis, bench-marking,
etc. (Management accounting Drives sustainable success ,2015). Planning tools will provide
various ways to lead the organization towards the sustainability of business entity.
Few of them are mentioned under -
Planning tools have provided various KPIs to measure effectiveness of the performance
so that if any variance occurs then it can be resolved with time.
It provides an ability to learn the trends of changing environment so that business can
work accordingly.
CONCLUSION
It can be concluded that management accounting is one of the important parts in business.
Accounting reports which are prepared are quite useful for Williams Performance Tender's
management to strengthen it internally so that external operational tasks might be delivered quite
effectually and are able to achieve customers’ satisfaction. Furthermore, it is required that
planning tools should be implemented by business for effective decisions whether to invest in
any upcoming project or not. It is articulated from above report that management accounting
provides very effective information which is important for every business entity along with each
industry.
15
Moreover, financial problems could be resolved by taking into consideration related to
management accounting system so that the firm can easily build and alter decisions for quick
solving of issues with ease. On the other hand, accurate and up-to-date information is provided to
the management for the overall upliftment and expansion of a company. It is also helpful for
business by accomplishing higher amount of production. It has reflected its various importance
with context of it advantages and disadvantages of planning tools of William Performance tender
and it is summed up, by orderly decision-making, an organisation can attain profits and better
outputs will be imparted to customers leading to optimum level of gratification.
16
management accounting system so that the firm can easily build and alter decisions for quick
solving of issues with ease. On the other hand, accurate and up-to-date information is provided to
the management for the overall upliftment and expansion of a company. It is also helpful for
business by accomplishing higher amount of production. It has reflected its various importance
with context of it advantages and disadvantages of planning tools of William Performance tender
and it is summed up, by orderly decision-making, an organisation can attain profits and better
outputs will be imparted to customers leading to optimum level of gratification.
16
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REFERENCES
Books and Journals
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research. 34.
pp.59-74.
Cooper, D. J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research. 34(2). pp.991-
1025.
Eldenburg, L. G. And et.al. 2016. Cost management: Measuring, monitoring, and motivating
performance. Wiley Global Education.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management. 32(7-8). pp.414-428.
Kihn, L. A. and Ihantola, E. M., 2015. Approaches to validation and evaluation in qualitative
studies of management accounting. Qualitative Research in Accounting & Management,
12(3), pp.230-255.
Malmi, T., 2016. Managerialist studies in management accounting: 1990–2014. Management
Accounting Research. 31. pp.31-44.
Nitzl, C., 2018. Management Accounting and Partial Least Squares-Structural Equation
Modelling (PLS-SEM): Some Illustrative Examples. In Partial Least Squares Structural
Equation Modeling (pp. 211-229). Springer, Cham.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research. 31. pp.45-62.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Saeidi, S. P., and et.al. 2018. The moderating role of environmental management accounting
between environmental innovation and firm financial performance. International Journal
of Business Performance Management. 19(3). pp.326-348.
Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A
reflective analysis of conducting interventionist research in management accounting.
Management Accounting Research.25(4). pp.304-314.
17
Books and Journals
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research. 34.
pp.59-74.
Cooper, D. J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research. 34(2). pp.991-
1025.
Eldenburg, L. G. And et.al. 2016. Cost management: Measuring, monitoring, and motivating
performance. Wiley Global Education.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management. 32(7-8). pp.414-428.
Kihn, L. A. and Ihantola, E. M., 2015. Approaches to validation and evaluation in qualitative
studies of management accounting. Qualitative Research in Accounting & Management,
12(3), pp.230-255.
Malmi, T., 2016. Managerialist studies in management accounting: 1990–2014. Management
Accounting Research. 31. pp.31-44.
Nitzl, C., 2018. Management Accounting and Partial Least Squares-Structural Equation
Modelling (PLS-SEM): Some Illustrative Examples. In Partial Least Squares Structural
Equation Modeling (pp. 211-229). Springer, Cham.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research. 31. pp.45-62.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Saeidi, S. P., and et.al. 2018. The moderating role of environmental management accounting
between environmental innovation and firm financial performance. International Journal
of Business Performance Management. 19(3). pp.326-348.
Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A
reflective analysis of conducting interventionist research in management accounting.
Management Accounting Research.25(4). pp.304-314.
17
Online
Management accounting Drives sustainable success. 2015 [Online]. Available
through :<https://www.cgma.org/Community/DownloadableDocuments/How-
management-accounting-drives-sustainable-success.pdf>.
Management Accounting: Meaning, Functions and Characteristics. 2017. [Online]. Available
through: <http://www.yourarticlelibrary.com/management-accounting-2/meaning/
management-accounting-meaning-functions-and-characteristics/65345>.
Accounts receivable aging report. 2018 [Online]. Available Through:
<https://www.accountingtools.com/articles/what-is-accounts-receivable-aging.html>.
Performance report. 2018 [Online]. Available
Through:<http://www.businessdictionary.com/definition/performance-report.html>.
18
Management accounting Drives sustainable success. 2015 [Online]. Available
through :<https://www.cgma.org/Community/DownloadableDocuments/How-
management-accounting-drives-sustainable-success.pdf>.
Management Accounting: Meaning, Functions and Characteristics. 2017. [Online]. Available
through: <http://www.yourarticlelibrary.com/management-accounting-2/meaning/
management-accounting-meaning-functions-and-characteristics/65345>.
Accounts receivable aging report. 2018 [Online]. Available Through:
<https://www.accountingtools.com/articles/what-is-accounts-receivable-aging.html>.
Performance report. 2018 [Online]. Available
Through:<http://www.businessdictionary.com/definition/performance-report.html>.
18
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