Improving Zylla Company Management Accounting System - BTEC HND

This report defines management accounting and discusses its types and essential requirements within an organization, emphasizing its role in internal control, performance improvement, and timely decision-making. It covers various aspects of management accounting, including inventory management, cost accounting (process costing, activity-based costing, and job costing), and price optimization. The report also explores different methods used for management accounting reporting, such as segmental reports, performance reports, inventory management reports, accounts receivables aging reports, and job cost reports. Furthermore, it discusses the benefits of management accounting systems, including expense reduction and resource management. Finally, the report calculates costs using techniques of cost analysis, including marginal costing and absorption costing, highlighting their applications in production decisions and cost ascertainment. Desklib provides access to this and many other solved assignments for students.

MANAGEMENT ACCOUNTING

Define management accounting and discuss its
types and essential requirements in organisation
◦ Management accounting is quite useful for organisation as it helps it to have internal control in organisation
itself.
◦ The management accounting information is required by management to improve its performance, if
deviations exist in organisation.
◦ It is an essential requirement to managers so that they may take quick and timely decisions for betterment of
company.
◦ This will help organisation internally vibrant and will become capable of performing competitive in market.
◦ Management accounting provides accurate and timely information about financial statements. It also provides
statistical data to provide support to managers to take enhanced and better decisions for the company.
◦ Zylla Company also uses management accounting information to improve upon its working to be competitive
in market.

Cont◦ Inventory management system-
◦ It is the ongoing process, which deals with moving parts and products into and out of company location.
Zylla company also manages effective inventory management as it clarifies company that what amount of inventory is
needed and how it can manage to get the products timely produced and made available to final consumers.
◦ Company manages their inventory on daily basis as they place new order for products and ship ordered goods to
customers. It is however important that business leaders gain grasp of everything involved in inventory management
process (Burritt, Schaltegger and Zvezdov, 2011).
◦ This will give them useful insight, no wastage of stocks will be done, and no additional cost will be incurred. Thus,
they can find out ways to solve inventory management challenges by finding appropriate solutions for company to
flourish in bets possible way.
◦ Cost accounting-
◦ Cost accounting is the important phenomenon in organisation. It measures and controls cost in the
organization which helps them to keep a watch over its expenses and no additional expenditure is incurred.
◦ It also provides measures to control. Estimating accurate cost is required so as to arrive at profitable operations. Firm
must know which products are profitable and which are not.
◦ This can be ascertained by calculating correct cost of it. Further products costing system helps in calculating and
estimating closing value of materials inventory WIP (Work in Progress) and finished goods for purpose of preparation
of financial statements for organisation. It has been divided in two parts such as process costing and activity based
costing.
◦

Cont
◦ Process costing is cost accounting system that accumulate manufacturing expenses separately for each
process held in production of goods.
◦ It is more appropriate for products whose production is assigned into different departments and cost flow
from one department to another department. Example, process involved in oil refineries and chemicals
products.
◦ Activity based costing involves calculation of activity rates and application of overhead expenses to
products based on their respective activity usage.
◦ Job costing-
◦ Job costing is the process, which involves accumulating information about costs associated
with specific production or service job. This information is quite helpful in order to submit cost
information to customer’s under contract where expenses are reimbursed (Caglio and Ditillo, 2012).
◦ This information is also helpful for determining accuracy and transparency of company estimating
system regarding allocation of job to factors of production, which should be able to quote price to allow
reasonable profit to organization.
◦ It involves three type of information such as direct materials, direct labour and overhead involved in
carrying out effective production by company.

Cont
◦ Price optimisation-
◦ This method is based on mathematical models to calculate how demand varies at
different price level and then resultant data combined with information on costs and stock
levels to recommend that amount of price, which will improve and provide more profits to
firm in effectual manner.
◦ This is done because if prices are too high, customers will not purchase and if prices are too
low, then firm will not earn profits. As such, price optimisation is used to improve upon profits
to company. So, formula of price optimisation is based on overall demand for product in
market, level of competition.
◦ Finding perfect balance between the price and profit is essential part of this system.
◦ This will provide clarity to business on how much price is to be quoted to gain more profits by
analysing demand for the product in market and determine level of competition from rivals.
◦ As such, this technique is quite useful for Zylla Company to target high profits in effectual
manner.

Discuss different methods used for management accounting reporting
◦ Segmental report:
◦ It is the report of operating segments of company in disclosures accompanying in its financial statements. It is
required for public held entities and not for the private ones for its use.
◦ Creditors and investors regarding financial strength of operating departments of company use segment reporting. Zylla
Company prepares this report for providing information to them in effective way as by relying on this report, they can make
decisions regarding company.
◦ Segment report includes information like factors used to identify reportable segments, types of products sold by each
segment, revenues and indirect expense, depreciation and amortisation. It also includes information such as material expense
items, income tax expense, non-cash items and profit or loss incurred.
◦ As such, this all type of information is helpful for analysing strength of financial position of company for investors and
creditors for enhanced decision making.
◦ Performance report:
◦ This report is detailed statement that measures results of some activity in terms of its success over a specific time
(Christ and Burritt, 2013). For example, company regarding employee’s performance in accomplishing tasks may produce
annual report.
◦ Alternatively, such report might help management assess success of project or product and how well budgetary constraints are
adhered to. The actual results are compared with budgeted standards obtained under some conditional assumptions over same
period.
◦ Variations from such budget or standards are known as variance and may be favourable or unfavourable depending upon
higher or lower measurements relative to the standards.
◦ Thus, corrective action are taken if any deviations are occurred in performance of various parameter such as employees
performance report or other such thing which provides business to improve and attain stated objectives in effectual manner.

Cont
◦ Inventory management report:
◦ Inventory means stock of goods which are held in company warehouse for the purpose of future production or sales.
◦ The stock of goods can be retained by company in for of raw materials, spare parts, partly finished goods or finished goods in its
godown or future sales or production purpose.
◦ By inventorying stock in effective manner, company requires inventory management report. This report deals with figures and facts
about inventory currently in hand in company’s warehouse.
◦ It provides managers useful information as how much amount of inventory is used for production purpose and how much more is
required to complete production of specific items.
◦ This ensures that stock is not overestimated or underestimated and no additional cost is incurred and production process is carried out
in effective manner. Managers do this as unnecessary stock in godown results in additional expense to company, which can be clarified
by inventory management report.
◦ Accounts receivables ageing report:
◦ This report lists down all the unpaid invoices, which are overdue for payments for customers. This involve all such
information, which is required by company to jot down lists of unpaid invoices from customers (Dillard, J. and Roslender, 2011).
◦ It also includes unused credit memos by date ranges. The ageing report is primary tool for company’s personnel’s to determine
invoices of customers, which are overdue for payment.
◦ This report can be used to configure to also contain contact information for each of customers liable for payment of invoices. This
report is also used by management to determine effectiveness of credit and control functions of company in effectual manner.
◦ The report is sorted by customer name with all invoices for each customer directly below its name usually sorted by either of invoice
number or invoice date on it.
◦ It is very powerful tool for management as it provides them useful information regarding the overdue payment, which should be taken
in time by the company.
◦ By analysing this information, company gains payments on time from the customers, which is needed for company’s effective

Cont
◦ Job cost report:
◦ Job cost report shows expenses incurred by company in specific project.
They are usually matched with estimate of revenue so that company can evaluate its job
profitability.
◦ Zylla company effe5ctively shows its expenses through job cost report. This report helps to
identify high earning areas of business so that company can focus its efforts on those high
earning areas instead of wasting time and money on jobs which yield low profit margins to
company.
◦ These reports are also used to analyse expenses while project is in process so that managers
can correct areas before expense is incurred on particular project.
◦ This helps company to establish those jobs, which yield them high revenue margins so that it
may flourish in manner so that it can achieve its objectives and goals in effectual manner
(Fullerton, Kennedy and Widener., 2013).

Discuss benefits of management accounting
systems and their application
◦Management accounting system helps business to reduce unwanted expenses,
which may not be incur by company as it reduces their profits and impact their
overall efficiency.
◦ Operational expenses can be lower down by managers by using this system in
effective way.
◦This also provide clarity to business what resources are being used to carry out
production.
◦ As such, expenses are controlled and management accounting system in
company observes wastage of money and time

Calculate costs by using techniques of cost analysis
with help of absorption costing and marginal costing
◦ Marginal costing-
◦ Marginal costing is the increase or decrease in total production cost by producing one more unit of product
or of service to customer.
◦ In manufacturing concern, marginal cost of production decreases as the volume of output increases because of
economies of scale in production.
◦ Expenses are lower down because company take advantage of discounts for bulk purchases of raw materials, optimise
full use of equipment’s and engage more specialised labour in carrying out production.
◦ However, production will reach point where diseconomies of scale will enter marginal expenses will begin to rise.
Cost may be aroused as company will hire more management, more labour and more use of machinery will be made
by it (Giovannoni, Maraghini and Riccaboni, 2011).
◦ This will increase marginal cost to company. Marginal costs can be used by management for production decisions.
◦ Marginal costs ae bifurcated on basis of variability into fixed and variable costs.
◦ It helps to determine prices n basis of marginal contribution. Marginal cost = Direct Material + Direct Labour + Direct
Expenses + Overheads.
◦ It also helps in determining and valuing stock.
◦ It helps company to ascertain department and product profitability based on contribution margin.
◦ As such, it is profitable technique which is used by Zylla Company to conquer its objectives and goals in effectual
manner.

Cont◦ Absorption costing-
◦ This costing helps company to ascertain cost by taking indirect expenses and overheads. It means that units
produced absorb all manufacturing costs.
◦ In simple words, cost of finished unit in inventory will include indirect materials, direct labour and both variable and
fixed manufacturing overhead.
◦ This method is also called full absorption or full costing method. Absorption costing is contrasted with variable or
direct costing.
◦ Some of direct expenses includes manufacturing a product, raw materials used in production, and all of overhead costs
such as utility expenses, used in producing a good.
◦ Absorption costing includes everything that is direct expense in producing a good at the cost base. It also includes
fixed overhead charges are included as product expense.
◦ It counts for all fixed expenses, which reflects certain situation in which inventory is not sold because
assets remain part of company’s books at end of accounting period.
◦ As such, it reflects more fixed costs attributable to those items within ending inventory. For Zylla company
absorption costing will result in more accurate regarding ending inventory (Lambert and Sponem, 2012).
◦ In addition to this. More expenses will be counted for unsold products, which reduces actual expenses reported.
◦ This eventually results in higher net income calculation when compared to variable costing calculations. This will
achieve company’s goals in effectual manner.

Different management
accounting techniques
◦ Financial planning-
◦ It is planning of investor’s current value and future financial state by using currently
known variables to predict the future cash flow, asset values etc.
◦ financial planning is based on individual clearly defined financial goals.
◦ A snapshot of assets and liabilities serve as a benchmark for measuring goals towards financial
planning.
◦ Revaluation accounting-
◦ This accounting revalue the difference between an asset’s fair market value and its
original cost by deducting depreciation.
◦ Revaluation accounting us useful for firm as it recognises firm’s equity and do nit affect
income statement.