Management Accounting: Types, Techniques, and Applications

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................4
LO1..................................................................................................................................................5
Management accounting and different types of management accounting systems...................5
Different methods used for management accounting reporting..................................................6
Benefits of management accounting systems and their application............................................7
Integration of management accounting systems and management accounting reporting within
organisational processes..............................................................................................................8
LO 2.................................................................................................................................................9
Calculation of costs using techniques of cost analysis to prepare an income statement using
marginal and absorption costs.....................................................................................................9
Application of management accounting techniques to produce appropriate financial reporting
documents.................................................................................................................................12
Application and interpretation of financial reports for a range of business activities...............12
LO 3...............................................................................................................................................13
Advantages and disadvantages of different types of planning tools used for budgetary control
...................................................................................................................................................13
Different planning tools and their application for preparing and forecasting budgets.............14
LO 4...............................................................................................................................................15
Comparison of how organisations are adopting management accounting systems to respond to
financial problems.....................................................................................................................15
Analysis of how in responding to financial problems, management accounting can lead
organisations to sustainable success .........................................................................................17
Evaluation of how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success..............................................................17
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................18

INTRODUCTION
Managerial accounting consider collection, examine and coverage information about the
dealing and funds of a business concern. These reports are specifically meant for the use of
managers of the business and are not meant for external stakeholders. Objective of management
accounting is to use these reports and help managers in taking accurate decisions about
controlling business activities to aid in growth and profitability of the business. The Berkeley
Partnership is a financial consultancy organisation which provides it's clients with crucial
information they need for managerial decision-making. To understand various concepts of
management accounting Airdri Ltd. which is located in Technology House, Eynsham OX29
4AQ, UK is taken. It is a provider of sustainable hand dryers which are designed to dry hands
quickly and are recognised for their reliability, low energy consumption, longevity, reduced
noise and ease of service. In this report different methods of management accounting reporting
and techniques to prepare financial statements, planning tools for budgetary control and how
management accounting systems help in responding to financial problems are discussed
(Amiram, Bozanic and Rouen, 2015).
LO1
Management accounting and different types of management accounting systems
According to the Institute of Management Accountants (IMA) : “Management accounting is
a occupation that affect relation in management decision-making, devising preparation and
execution establishment systems, and render skillfulness in financial reporting and control to
assist management in the preparation and execution of an administration strategy”.
According to Chartered Institute of Management Accountants (CIMA) : “Management
accounting is analysing information to advise business strategy and drive sustainable business
success.”
Management Accounting systems help Airdri Ltd. in analysing costs associated with
manufacturing of hand dryers that provide fast hand drying services to it's customers, preparation
of plans, determining ways of reducing prices, decision making, organising and understanding
financial data, identifying business problem areas and strategies of solving them etc. so that
performance of the business can be improved and sustainable profits can be gained for successful

running of the business. Some management accounting systems used by Airdri Ltd. are as
follows :
Different management accounting systems
Job costing system : This system is used to assign manufacturing cost to each individual
product while keeping track on expense monitoring. The products provided by Airdri Ltd. are
sufficiently different from each other and each has a significant cost. Various types of hand
dryers based on the customer requirements are manufactured so as to satisfy different needs.
Whether a robust, cast iron dryer is needed to sustain high usage, or a quiet, contemporary dryer
is preferred by the customer, Airdri has a dryer to fit every wash room environment (Bogsnes,
2016).
Price optimising system : This system is used to take control of the prices of resources
and help in deciding prices of multiple products at a time. This helps in determining how demand
will fluctuate at different price levels. Airdri Ltd. use this system to tailor prices for different
products based on the demand of the customers. It also helps in determining pricing structures
for promotional pricing, initial pricing and discount pricing. Before determining the prices
product life cycle, category goals of different products and competitors pricing strategies are
considered.
Cost accounting system : It is a framework used by firms to estimate the cost of their
products for profitability analysis, inventory valuation and cost control. Airdri Ltd. uses this
system to track the flow of inventory continually through the various stages of hand dryer
production. It allows the company to maintain just-in-time inventory system where materials are
ordered from vendors and suppliers on an as needed basis. It helps production managers and cost
accountants to check the inventory at every stage of production (Chenhall and Moers, 2015).
Inventory management system : This system is a combination of technology and
processes and procedures that oversee the monitoring and maintenance of stocked products and
determine if they are assets or raw materials or finished goods ready to be delivered to the end
consumers. It helps the managers of Airdri Ltd. to map the complete journey of the product.
Through accurate tracking of goods, the company can minimize waste, analyse trends and make
better investment decisions.
Vital role of management accounting in Airdri Ltd