Management Accounting: Cost Analysis, Budgeting, and Financial Systems

This report provides a comprehensive analysis of management accounting principles and their application within a business context, specifically referencing Samsung. It covers essential requirements for different management accounting systems, including job costing, contract costing, and inventory management. The report explains various methods for management accounting reporting, such as cost reports, performance reports, and budgets. It includes a detailed cost analysis using both marginal and absorption costing techniques to prepare an income statement, highlighting the differences in profit calculation between the two methods. Furthermore, the report discusses the advantages and disadvantages of planning tools like standard costing and budgets for budgetary control, with calculations of standard cost, variance analysis, material price, and quantity variance. Finally, it compares how organizations can adopt management accounting systems to respond to financial problems, emphasizing the importance of planning and control for achieving optimal results. Desklib provides access to this and many other solved assignments.

Applying expertise in management accounting
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................4
P1 Explain management accounting and give the essential requirements for different types of
management accounting systems.................................................................................................4
P2 Explain different methods used for management accounting reporting.................................6
Task 2...............................................................................................................................................9
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................9
Task 3.............................................................................................................................................16
P4 Explain the advantages and disadvantages of different types of planning tools that can be
used for budgetary control.........................................................................................................16
A. Calculation of standard cost and difference between actual and standard cost....................17
B. Compute material price and quantity variance.....................................................................19
Task 4.............................................................................................................................................22
P5 Compare how organizations such as yours should adopt management accounting systems
to respond to financial problems................................................................................................22
Conclusion.....................................................................................................................................25
References......................................................................................................................................26
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Introduction
Management accounting is the tool that is required to be used by all the companies for the
achievement of all the targets which have been set by them. This is because by the help of it
accounting is made in a strong manner and that helps in process of decision making. In the given
report all of the important elements of it will be discussed with reference to Samsung. All the
reports which are made and the systems used for this purpose will be explained. For the purpose
of evaluation, various tools are available which can be used and that includes standard costing
with the help of which variance can be calculated. The income statement will also be made so
that the amount which is available as profits can be identified. All the techniques that can be
considered for solving financial problems will also be discussed in the below-presented report.
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Task 1
P1 Explain management accounting and give the essential requirements for different types
of management accounting systems.
In the process of management accounting, there are various functions which are required to be
performed such as collection, evaluation, and summarization of all the data which is required by
the company for further processes. By the help of the management will be able to take decisions
but in order to provide the information to some other parties, there are other methods which will
be used and that is a financial accounting (Aurora, 2013). For the better understanding of both a
comparison table is presented hereunder:
Management accounting Financial accounting
All the information that will be collected under
this shall be provided to all the parties whether
they are internal or external.
This will be the reports that will be provided to
all the external parties which are to be provided
with the information.
All the factors whether they are internal or
external will be taken into account so that
timely recording can be made.
Only the past data which is available will be
taken into use in case of this accounting.
This is to be undertaken as per own perception
and no regulations have been made in respect
of it.
Various regulations and laws have been made
in this respect that shall be followed.
Whole organization will not be taken into
consideration in this accounting.
Here every aspect will be provided with the
required importance.
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Important systems which are used in the process of accounting are as follows:
Job costing: Several functions are required to be performed in the business and for the company
will be required to incur the necessary cost. In order to determine the price in respect of a
product all of the expenses will have to be accumulated and they will be allocated to all the units
which have been produced by the company.
Contract costing: There are various activities which are performed and for them, several
contracts are to be made. In them, the work is carried out by the other party and for that payment
is to be made by the company (Bellù, 2013). So the amount which will be paid will have to be
included in the calculation of total cost in respect of the product.
Cost accounting system: In this, all the data that is required in the identification of total cost
will have to be collected so that they can be used by the company in the process of making
further decisions. All the expenditures which are made will have to be included in this that is
related to various components.
Inventory management systems: All the data which is needed in for the making of the decision
in relation to the material will be accumulated with the use of this system. That all will then be
used by the company to decide the order quantity and time so that all the problems which are
faced by the business due to it can be eliminated or avoided.
P2 Explain different methods used for management accounting reporting.
The information that is collected once will be required in the future period also. For this purpose
it is necessary that all of that shall be reported inappropriate manner and so reports will have to
be formulated and they are described below:
Cost reports: The report will be including all the relevant facts in respect of cost that has been
made by the company. This will be retained for the future and by this, they can be used by the
company in the decision making. It will be determined that whether the cost that is incurred is
within the limit or it has exceeded the set targets.
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Performance report: There are several tasks that are carried out in the Samsung and all the
people who will be performing them have different knowledge and skills. Due to this, it is
necessary that their performance shall be evaluated and this will be done with the help of this
report. In this, all the aspects in relation to the work that is performed by employees will be
covered.
Budgets: This is the report in which limit about the number of expenses and incomes is set. The
company is required to comply with them and ensure that nothing more than this shall be
incurred (Bukenya, 2014). This will help in controlling of the over expenditures which could
have been made in some of the circumstances.
Inventory management report: In this collected data about inventory will be recorded and that
will be used by the managers for deciding various things. All the issues of material shortage will
be resolved with the help of this and also cost which is blocked by the excessive stock can be
saved.
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Task 2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
In the business estimation of cost is to be made and two methods which can be used for this
purpose are as follows:
Absorption costing: This method is used to know the cost of any product and for that, all the
expenses in this are to be classified as production and other expenses. There will be no variable
and fixed cost which will be shown under it (De Jong, et. al., 2012). The cost that is related to
production will be reduced so that gross profit can be identified and then after that, all other
expenses will have to be taken into consideration.
Marginal costing: Under this categorization will be made as variable and fixed costs. Then they
will be deducted from the value of sales (Zaleha Abdul Rasid, et. al., 2014). Firstly all the
variable costs will be taken into consideration and by this contribution will be determined and
then all the other costs will be taken so that final net profit is calculated.
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Cost calculation as per both the methods:
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For marginal costing:
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In the process of calculation of net profit, the cost will be required as then only income statement
can be made. The same calculations have been made above.
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