Understanding of Managerial Accounting System

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Understanding of managerial accounting system with their benefits....................................3
P2) Relevance of management accounting reports......................................................................5
TASK2.............................................................................................................................................7
P3) Brief explanation regarding management accounting techniques.........................................7
TASK3.............................................................................................................................................9
P4) Explanation of benefits and drawbacks of planning tools.....................................................9
TASK4...........................................................................................................................................12
P5) Explanation regarding use of management accounting tools for solve financial problems.
....................................................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
APPENDIX....................................................................................................................................16

INTRODUCTION
Management accounting is tool of accounting which help in assist management
department to formulate better plan and control over the business organization. To understand
this concept Rio Tinto has been taken. It is manufacturing organization which is incorporate as
Anglo Australian corporation it is famous for run its business activities in mining sector and
provides metals products. This report has been formulated to define the use of management
accounting system relevance of management reports with theses system and how accounting
technique useful for determine value of business transactions. It also measure the benefits and
drawbacks of applying various planning tools and relevance of theses tools to solve financial
problems with using benchmarking. Key performance indicator and relevant tools of managerial
accounting.
TASK 1
P1)Understanding of managerial accounting system.
Management accounting: The term management accounting is refer as a system which
business entities apply for recording transaction and collect information , represent theses data in
effective way. Main purpose of apply this system is take relevant decision. This approach is also
know as managerial or decision making accounting (Messner, 2016). Following are different
kinds of managerial accounting system which Rio Tinto can apply are define below:
Cost accounting systematic: Organizations implement approach of cost accounting
system through which they can identify value of their profit by recognizing or calculate cost of
running business activities. Various technique has been apply for identifying cost value which
include, marginal costing, absorption as well as standard costing method. This system is useful to
calculate the value of purchasing raw material, process of running or acquiring assets and all
theses activities which help in convert raw materiel in to finished goods (Kostyukova and
er.al.2018). Cost value of theses activities has been determine
Essential requirements: This system is use by cost department of Rio Tinto. They use
this system to determine the cost value of each department. By using information from cost
management system manager of Rio Tinto able to take decision regarding cost of purchasing raw
materiel from those suppler who can provides quality of raw material at minimum cost. As well

as on the basis of this information manager can compare their budget cost with actual cost incur
and formulate policies which beneficial or their internal users.
Price optimization system: There are various types of pricing strategies which
organization can be adopt. By using price optimization system manager take decision which
pricing strategy beneficial for their business entity which help in attaining business gain. In
competitive business market organization use price skimming, price discounting, premium, and
price penetration strategy ((Bedford, and Speklé, 2018). Every strategy is useful according to the
stage of business life cycle thus by using management accounting price statement Rio Tinto able
to take decision which pricing policy useful for selling metal products.
Essential requirements:Price optimization system is used by sales manager of Rio
Tinto. On the basis of information collected by internal source, their sale manager choose the
price penetration strategy accounting to the stage of business life cycle. This strategy is
beneficial for organization as it will provides satisfaction to customers as well as useful for attain
profits. Shareholders also took their decision on the basis of recognize demand and preference of
their target market customers.
Inventory management system: Stock is consider as essential or valid element of every
organization. Managing stock help in controlling cost and useful for identify the requirement of
maximum or minimum number of order require for particular time period. Manager of Rio Tinto
by using ABC analysis, inventory management technique, help in determine level of stock. By
applying theses technique manager recognize cost of storing as well as time taken to fulfil the
order of customer. Stock management system is useful in determiner the value of inventory for
particular period of time .
Essential requirements:Information collected form inventory management system is
useful for production department of Rio Tinto. As it is the largest manufacturing organization
and to manage and control the materiel and stack of metal in efficient manner. This information
is reliable for internal department by using essential data from using various system of inventory
manager can present information in systematic manner which useful for further business
activities. Manger of Rio Tinto on the basis of identifying cost of each stock can able to divided
each segment of cost.
Job costing system: By using job costing system manger could recognize the value or
cost arising for fulfil demand of each customer. This system is separate and useful for calculate