Phenomena of Cost Accounting and Management Accounting Systems

Management Accounting

INTRODUCTION
Management Accounting can be explained as the procedure of accumulating, measuring,
preparing, identifying financial data and information within enterprise so that manager can
control, plan and evaluate to take better decision. Management accounting is used only for
internal purposes and within department’s performance such as project, processes and
departments. This is widely implemented in the small and big scale firm because it aids in
accomplishing group objectives (Abernethy and Wallis, 2018). Along with this it arranges and
organize resources, accumulate factors of production and integrates available resources in
effective manner to meet the desire set standards. The assignment is concerned with Ovation
Systems Ltd which is a client company who provide high quality video surveillance products
to police, military and other governmental agencies. In the year 2009 firm was awarded The
Queen's Award for innovation. The goods range includes rugged and small audio and video
recorders. This report includes phenomena of cost accounting and focus on essential
requirements of several types of management accounting systems. Moreover, calculate costs by
using appropriate tools and techniques. Along with this design income statement by using
marginal and absorption costs. Additionally, comparison is dome on executing management
accounting system in different company to handle financial problems (Agrawal and Cooper,
2017).
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P1) Discuss the phenomena of cost accounting along with this study the essential necessities of
diverse sort of management accounting systems.
According to American Accounting Association, management accounting refers to as
application of suitable methods in processing economic data of an enterprise in order to frame
plans to achieve deserving objectives (About Management Accounting, 2018).
Management accounting is also well known by other names like, cost accounting and
managerial accounting. Cost accounting is stated as involving all those activities which provide
financial information to the top level management to guide them to formulate tactics in order to
function business operations smoothly. Management uses gathered financial knowledge and
numerical data for ascertaining product and cost of various job. By effectively implementing
managerial accounting in Ovation Systems Ltd. they will be able to deliver fast and immediate
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information to the mangers regarding product and services and day to day budgeting assist firm
to take best decision in order to rise company’s operational effectiveness and efficiency.
There are distinguished kinds of management accounting system and are mandatory
needs for the administration. Price optimization, job costing system and cost accounting system
are types of accounting system in the global market (Agrawal, 2018).
Price optimization: Business associates by adopting this kind of management
accounting system in the working environment is able to measure the suitable prices for their
innovative product that is offered. It is a mathematical evaluation in order to examine how
targeted consumers will react to several prices for product and services through various channels.
Price optimizing helps administration to determine the best prices so that Ovation Systems Ltd is
able to maximize operating profit. By this act huge customer base can be raised for the high
quality video surveillance products designed for departments of police, military and other
governmental agencies. Price optimization helps business administration to meet the set goals
and objectives in the set time duration. This is more useful for business dealing in retail sector.
Advantages of price optimizing:
 Price optimization in an organization provide consistency to the business (Ax and Greve,
2017).
 It aids in gathering authentic and reliable data which reduces the chances of error in the
working premises.
 Firm by effectively implementing this in business administration assist in automating the
entire process. That results in positive results.
Job costing system: Ovation Systems Ltd adopts job costing system effectively and
efficiently in their working environment as it assigns and collect manufacturing costs of a single
unit of output. It is used in any industry because it is usefull in checking cost of production
exceeds the overhead price. in order to gain profit for complete process (Weetman, 2019). This
aspect is more worthful when it is adopted to produce sufficiently varied goods and services
from one another and has significant cost. By systematically executing this in the business it
leads in accumulating huge revenue, management decisions, financial reporting and project
estimating. In order to get satisfactory results, it is very important to choose the most suitable
costing system as per their business type and product in the cut throat competitive world.
Advantages of Job costing system:
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 Job costing system assist the firm to calculate the revenue gained on single jobs.
 This directly aid the company to better understand weather specific jobs are desirable to
pursue in the near future.
 It prevents duplication of work as it aids in measuring of similar job. By doing so firm
quoting the price of a job always depends upon the previous job pricing.
Cost accounting system: This system is used by Ovation Systems Ltd because cost
accounting system assist in determining cost of the goods for profitability investigation, cost
control and inventory valuation (Azudin and Mansor, 2018). In the era of neck to neck
competitive world all medium and large scale businesses rely on cost accounting in order to
render data which financial accounting provides. By performing this system appropriately
business function will run smoothly in the global market. Along with this emerging needs of the
customers for video surveillance products and other rugged and small audio and video recorders
will be full-filled accordingly.
Advantages of cost accounting system:
 Cost accounting system helps in fixation of prices for the goods and services.
 In an organization this directly assist in expansion in production.
 Firm is given proper information for planning and framing unique tactics to increase sales
volume.
 It guides business administration how to reduce prices of the product and services in the
cut throat competitive world (Turner and Witteman, 2017).
Inventory management system:
P2) Discuss several methods used for management accounting reporting.
This is termed as process of providing information to distinguished stages of management
so that corrective measures can be taken for improvements. By effectively executing
management accounting reporting in the Ovation Systems Ltd distinguished benefits can be
garbed such as, it helps in setting price for the goods and services, guide in formation of budget,
aid in planning, assist in controlling business activities etc.
Budgeting report: Organization adopts this in the working premises as it helps them to
measure overall performance of enterprise (Beyer and Marinovic, 2018). By designing budgeting
report company manage cash amount of every single activity. It aids report to do comparison
between estimated and actual budget in order to keep proper control on various outcomes. Better
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