Analysis of Management Accounting Techniques at Hakim Group

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Management Accounting
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Contents
Introduction:....................................................................................................................................3
Part 1: (LO1 and LO2).....................................................................................................................4
LO1..................................................................................................................................................4
Q1................................................................................................................................................4
Q2................................................................................................................................................6
LO2..................................................................................................................................................8
Part 2: (LO3 and LO4)...................................................................................................................12
LO3................................................................................................................................................12
1.................................................................................................................................................12
2.................................................................................................................................................13
LO4................................................................................................................................................14
1.................................................................................................................................................14
2.................................................................................................................................................15
Conclusion:................................................................................................................................16
References:....................................................................................................................................17
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Introduction:
This report is prepared so that the management accounting techniques ion the company Hakim
group can be explained. HAKIM GROUP is established in the year 2001 which is portfolio
brand representing the core business activities of the company interest. Management accounting
tools and reports are very useful for the company as it helps in giving accurate information and
also useful in taking the appropriate decisions in the company. In this report, the calculation of
the cost using the method of marginal and absorption will be explained. The report will also
explain the different planning tools of the budgetary control which helps in making the plans for
the future. The report will also explain the different financial problems which arise in the
company and also suggest the measures to solve those financial problems. The planning tools
also help in responding to the financial problems which will be explained in this report.
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Part 1: (LO1 and LO2)
LO1
Q1
Management accounting techniques play an essential role in the Hakim group as it provides
accurate information to the company aboutthe both financial and nonfinancial aspects. It helps in
giving the relevant information to the company which is effective in taking the useful decision
(Cannon, 2014). Management accounting not only analyzes the data and monitors the data but
also provides the relevancy which is helpful in managing the operations of the work. This tools
and techniques are helpful in making the budgets and plans which are helpful in forecasting the
future.
Different types of management accounting system:
Image: Types of accounting systems
Source: By Author, 2019
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Jobcosting

Cost accounting: This method of management accounting helps in analyzing, summarising,
classifying the cost to the different departments of the Hakim Group. This method is very helpful
for the company as it allocates the cost and minimizes the cost in an efficient manner. in this
method, the accountant studies the elements of the total cost which are also useful in taking the
appropriate decisions (Cannon, 2014). This method not only controls the cost of the company but
also determines the selling price of the goods and services of the Hakim Group.
Inventory accounting: This method keepsthe track of all the stocks available in the company.
This method is very useful for the company as it records all the data of the stock inflow and
outflow. It manages the inventory at the warehouse and also keeps the record of raw materials,
work in process and the finished goods of the Hakim Group (Wang, et. al., 2016). With the help
of this accounting method, the company can ascertain how much stock is required more and how
much stock is available in the warehouse of the company so that they don’t face the problems of
the shortage.
Job costing: In this method, the cost is recorded on the basis of the manufacturing rather than
the job process which helps in keeping the track of the cost in the Hakim Group Company. it
helps in tracking the record for a particular job and try to reduce the cost.
Price optimization System: In this process, the price is selected which the customers are willing
to pay at the maximum level. The respond of the customers is analyzed at the different pricing
levels so that the best price can choose which helps in attaining the higher profit. In the company
Hakim Group, this method is helpful in takingthe effective decisions (Ciric, et. al., 2017).
Benefits of the management accounting system to the Hakim group:
The management accounting system is very helpful for the company as it helps in accomplishing
the goal on the time. This tools and techniques make the plans and budgets which are helpful in
expecting the future results. Management accounting tools provide financial information to the
company through which the financial performance of the company can be analyzed and
improved. This tools and techniques are helpful in monitoring the daily functions of the company
and are effective in making useful decisions (Wang, et. al., 2016). This tool maintains the
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transparency and efficiency in the company and also gives useful information. The cost can be
ascertained of the particular product and the information of the inventory can be analyzed.
Q2
Different types of report used in the company Hakim Group are stated below:
Budget Report: This report is very important for the company as it givesthe information about
the revenues and the expenses of the company. this report also predicts the future expenses and
revenues through which the plans are made accordingly. The predictions or plans for the future
are done with the help of the historical data. The company also suggest the corrective measures
by evaluating the actual performance by doing the difference of the budgeted data and the actual
deviations.
Debtor age report: This report is helpful in evaluating the transaction which is concerned with
the outstanding payment of the Hakim Group. This report is helpful in analyzing the list ofthe
credit memos the debtors overdoes collection (Ciric, et. al., 2017). With the help of this report,
the company can also ascertain the unpaid customer’s invoices and determines the credit system
of the company.
Variance analysis report: This report find out the deviations by comparing the budgeted
performance with the actual data so that the measures to improve can be found out. This report
helps in improving the financial income by analyzing the gap between the standard data and the
actual data.
Profitability report: This report gives information about the financial] condition of the
company and helps in improving them. The report analyzes the financial stability of the company
by getting information about the profit and loss of the company (Laudon, 2016).
Integration of the accounting reporting with the organization process:
Management accounting reporting is integrated with the management accounting process as they
provide relevant information to the company Hakim Group. They are helpful in operating the
functions of the company and provide accurate information which is essential in takingthe
important decisions. The accounting systems of the company manage and keep the records of the
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cost, budget and the inventory of the company while the management accounting reports keep
the detailed information of this things and also monitors them on the regular basis. The
accounting system and techniques analysis the data while the reporting helps in capturing the
data to run the business in an effective manner (Laudon, 2016).
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LO2
Marginal Costing: This costing is also known as the variable costing of the company which
evaluates the cost incurred in the organization by the change in the one unit. In this costing the
cost indulged for producing one more unit is ascertained and this costing method is also helpful
in taking the appropriate decisions (Ray and Gramlich, 2015). In this method, the profit can be
gained higher when the level of the inventory decreases. This method controls the cost ofthe
production and effective for the company.
Marginal costing
Particulars Amount
Direct material 10
Direct Labour 20
V. production O.H. 5
Production cost per unit 35
Total production cost
Units produced 18000
Per unit cost 35
Total production cost 630000
Total production cost
Units sold 16000
cost per unit 35
Cost of goods sold 560000
Marginal costing Amount
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Revenue 800000
Less:
Opening Inventory 0
(+) Production cost [Working note 2] 630000
(-) Amount of closing inventory [Working note
2] 70000 560000
Contribution profit 240000
Less:
Fixed production O.H. 100000
Gross income 140000
Absorption costing: In this method of costing the cost is evaluated by considering all the
accounts fixed and variable. For the manufacturing company, this method of the costing is
appropriate so for the company Hakim Group this costing method is reliable. In this costing, the
higher profit can be achieved when the level of the inventory increases as the cost of the sales
starts decreasing (Ray and Gramlich, 2015).
Production cost per unit Amount
Direct material 10
Direct Labour 20
V. production O.H. 5
Total Variable cost (a) 35
Total Fixed O.H. 100000
Units produced 18000
Fixed O.H. pr unit (b) 5.56
production cost per unit
[a/b] 40.56
Total production cost
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Units produced 18000
Per unit cost 40.56
Total production cost 730080
The total cost of sales
Units sold 16000
cost per unit 40.56
Cost of goods sold 648960
Absorption Costing Amount
Revenue 800000
Less:
Cost of sold products
Opening inventory 0
(+) Production cost [Working note 1] 730080
(-) Amount of closing inventory [Working note
1] 81120 648960
Contribution 151040
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Reconciliation System:
Particulars Amount
profit as pr absorption costing 151040
The difference in closing stock value 11120
Numerical fraction 80
Profit as per marginal costing 140000
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Part 2: (LO3 and LO4)
LO3
1
Three planning tools used in the company Hakim Group are stated below:
Cash flow analysis: This planning tool is very essential for the Hakim Group as it helps in
evaluating the cash inflow and cash outflow of the company. This budget helps to determine the
cash balances to the company (Purnus and Bodea, 2015).
Advantages: This method of the budgeting evaluates how much cash the company has so that
whether they can pay their regular obligations or not. This budgeting also helps in evaluating that
too much cash is retained which can be better used for the productive activities of the company.
Disadvantages: This budget can cause distortions to the company. It only gives the details about
the cash inflows and outflows not about every financial aspect of the company (Purnus and
Bodea, 2015). This budget is also susceptible to manipulation.
CVP (Cost Volume Profit) analyze: It is an important tool for the company in making effective
plans and taking the appropriate decisions. It is the method which examines the relationship
between the total sales, selling price, expense, profit and the volume of the company.
Advantages: It helps the company in fixing the fair price and helpful in making the sound
decision (Palia, 2014). This method is helpful in determining the breakeven point of the company
where the total cost is equal to the total revenues. It helps in controlling the cost and determining
the margin of safety.
Disadvantages: It is the approximation so there is ea lack ofthe accuracy and precision. Total
cost and the total sales of the company are assumed in the straight line which may not be true. In
this method, it is also assumed that efficiency and the productivity of operations will remain
constant which is not valid.
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