Unit 5 - Management Accounting Assignment
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Added on 2021-02-20
Unit 5 - Management Accounting Assignment
Added on 2021-02-20
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UNIT 5 –MANAGEMENTACCOUNTING L-4
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Various Management Accounting Systems and their essential requirements .................1P2. Different Methodologies utilised in Management Accounting Reporting ......................3M1. Evaluating benefits of Management Accounting Systems and their application inorganisational context.............................................................................................................5TASK 2............................................................................................................................................5P3. Computing Costs through Marginal and Absorption Costing to prepare financial incomestatements...............................................................................................................................5M2. Application of management accounting techniques to produce appropriate financialreporting documents...............................................................................................................7TASK 3............................................................................................................................................8P4. Advantages and Disadvantages of various planning tools utilised to exercise budgetarycontrol.....................................................................................................................................8M3. Analysing use of different planning tools and their application for developing andforecasting budgets...............................................................................................................10TASK 4..........................................................................................................................................10P5. Examining how companies adapt to management systems in the face of financial issues10M4. Analysing how management accounting systems contribute towards sustainableorganisational success..........................................................................................................12D3. Evaluating how accounting planning tools help in resolving financial problems.........12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONThe concept of 'Management Accounting' is related to the processes and systems adoptedby the organisations in order to ensure smooth functioning of their internal operations. Hence, itincludes the procedures that recognise, measure, evaluate, interpret and convey importantinformation regarding the business activities to the managers across all levels. This helps them toundertake informed decisions as well as facilitate the successful fulfilment of organisationalgoals within a stipulated time-frame (Achleitner and others, 2014) .This project report aims to provide an insight into how the management accountingsystems and techniques contribute towards the successful and smooth operation of a businessentity. For this purpose, Oshodi PLC has been taken into account which is a manufacturingenterprise that produces JOJO fruit juice across all age bracket. Using this information, anincome statement has been produced under Marginal and Absorption Costing. Additionally, thisreport also explains the merits and demerits of different planning tools that are utilised forbudgetary control as well as compares how different organisations adopt such systems to respondto financial problems.TASK 1P1. Various Management Accounting Systems and their essential requirements Management Accounting can be defined as a system that facilitates the analysis ofvarious business activities so as to enable the business managers to make better decisions from ashort-term and long-term perspective. Due to this reason, it is essential for a manager to analysetheir internal as well as external business environment in order to translate raw data intomeaningful information. This, then, helps the enterprise in achieving a comparative advantagefor the company as a whole. In the context of given case scenario, Oshodi PLC is amanufacturing business which produces JOJO fruit juice that is consumed across alldemographics. In order to ensure that the business is able to perform well and control its costs inan effective manner, the following management accounting systems can be employed by it:Price Optimisation System: This can be referred to as a method that facilitates thedetermination of optimum price levels for a company's products or services underalternative scenarios (Zvezdov and Schaltegger, 2015). Thus, enabling the managementto better achieve their goals in a sustainable manner as well as meet customer acquisition1
targets within stipulated time periods. As price is a driving factor in determining thebottom-line sales for any organisation, it is important for the management to know itsideal level of price, strategies and structure (Aouni, McGillis and Abdulkarim, 2017) .This would not only help in maintaining competitiveness within the market but alsocreate comparative advantage for the company, thus, enhancing their overall marketshare. For its implementation, it is required by Osholdi Plc to consider its current pricingstrategy as well as value of the product to both buyer and itself. Based on this, the mostsuitable pricing optimisation system can be identified and utilised by the business.Inventory management System: Stock-keeping is one of the crucial practices of anyorganisation. Each and every manufacturing business enterprise holds inventory in theform of finished goods, work-in-progress and raw material. Thus, it becomes paramountfor the management to know that the inventory management system implemented by it issuitable for the organisation to full extent. For Osholdi, most of the inventory is in theform of fruit-juice bottles or packs. In order to ensure that no abnormal wastage orshortage of material takes place, its inventory systems must be fully suitable to itsoperational requirements. Thus, the essential requirements of an ideal inventorymanagement system include location, storage needs, types of the products included in theinventory are some of the key factors that determine what policies and systems related toinventory management need to be adopted by the business.Cost Accounting System: Another important accounting system of management, CostAccounting Systems include different activities which facilitate the business manager todetermine whether or not the available resources are being utilised optimally. Being amanufacturing company, Osholdi's cost-based system is of paramount importance as ithelps in deciding the overall pricing strategies for the company (Waters, 2015) . Thus,one can say that the essential requirements of this management system is to beinformative, simple, accurate, authentic, uniform, adaptive and flexible enough to beintegrated with other managerial functions such as finance, taxation, operations andmarketing among others.Job Costing System: This involves the process of accumulating information regardingcosts that are specific to the production and deliverance of a particular job. For Osholdi2
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