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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Application of all the cost which is calculated above for making of income statement by
marginal costing
The preparation of income statement in this method will require that variable and fixed cost shall
be separated and then they shall be treated for the calculation of profit. Income statement made
by considering this is presented below:
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Produce financial reports that accurately apply and interpret data for a range of business
activities carried out at Samsung.
The calculations have been made in respect of profit identification. From that, it is noted that
profit is more in case of absorption costing and is identified at 180000 whereas marginal profits
are 80000. The variation can be noted and the reason for the same is the manner in which
apportionment of fixed expenses is carried out in case of both the methods. They are included in
case of absorption but this is not done in marginal costing.
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Task 3
P4 Explain the advantages and disadvantages of different types of planning tools that can
be used for budgetary control.
Report:
Introduction:
In business, it is very important that proper planning is made so that control can be established
which will lead to the attainment of best results. For this various tools are available and they can
be used (Hassan and Ahmed, 2012). Some of them are budgets, variance analysis, and many
others. Some of them will be discussed in the report below.
Content:
Advantages of standard costing:
 The cost will be controlled with the use of this as there will be the identification of all the
standards.
 Information will be available with the help of this which will be used in the process of
planning.
Disadvantages of a standard costing:
 The process will be involving a large process which will have to be undertaken and so
there will be a huge cost which will be incurred in it.
 The process will be time-consuming and it could be used for some other purpose which
will be much more beneficial for the company.
 The complexity of the procedure makes it hard for the users to understand it and then
implementing it.
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Budgets are also made in which all the variances will be taken into consideration and some of
them are as follows:
Operating Budget: In this budget, all the expenses which are required to be incurred in carrying
out of operations will be estimated. This will be helpful for the company as management will be
aware of the amount which is required to be spent by them so that appropriate profits can be
made in business (Konsta and Plomaritou, 2012). Also, all the wastage will be avoided by the
use of them.
Cash flow budget: The entire amount which is required to be paid by the company in cash for
the costs that are incurred will be identified and entered in this budget. This will be used by the
management in the process of collection of funds and their allocation as everything will be
known in advance together with the manner in which it shall be carried out.
A. Calculation of standard cost and difference between actual and standard cost.
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From the above calculation, it is clear that company has not been able to maintain its expenses as
the actual cost which is incurred is more than that of the standard cost which has been identified.
There is the deviation of 1400 which has been determined by Samsung and so steps shall be
taken in this regards to the same situation can be avoided in future.
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B. Compute material price and quantity variance.
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Analyze the use of different planning tools and their application for preparing and
forecasting budgets.
Variances are the differences which exist in the cost that is made in actual and standards. Some
of the relevant ones are described below:
Material price and quantity variance: Material is the most important element and all the
difference which is there in the price and volume which is made can be identified by the help of
this variance. The results will then be used for making of further budgets.
Sales price variance: The price at which products are to be delivered is set by the company and
then that is compared with actual (Lunkes, et. al., 2013). This helps in identification of this
variance.
Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success.
Financial problems are faced in all the business and in order to save the business from its adverse
effects, it is required that proper tools shall be used. There are several methods which are present
and include activity-based costing and target costing. In these methods, cost related aspects are
covered by the help of which all the expenses will be controlled and then this will reduce the
problems which are faced by the company in respect of finance (Vasile and Croiteru, 2013). All
the expenses made in various activities will be evaluated and then decisions will be made
accordingly.
Conclusion
From this report, it has been identified that various planning tools can be used by the company.
For this standard costing and budgets have been used in the given case by the help of which
business will be made a success.
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Task 4
P5 Compare how organizations such as yours should adopt management accounting
systems to respond to financial problems.
In any company, it is possible that various problems will be faced and to safeguard it from their
negative impact it is needed that proper measures shall be taken. It is important that they shall be
identified on time and for that, all the processes will have to be checked. This will be helpful in
taking the steps by which all of them can be resolved in most effective manner. This process will
require a lot of information and for that management accounting systems will be taken into
account by company (Poureisa, et. al., 2013). It has been seen that Samsung is not able to meet
the targets which are set by it and that is the reason that variance has been identified. This
problem can be dealt by the company by the use of various tools and techniques which are as
follows:
Benchmarks: These are the standards which are set by considering the other company which is
operating in the market in the best manner. In the given case apple is the one which is the best
company in this field. So all the targets which are set by it will be treated as benchmarks and
then functions will be performed in such manner by which they can be attained (Malgwi and
Dahiru, 2014). It can be noted that in present situation this has not happened and so further
modifications and improvements will have to be made.
Key performance indicators: There is the need to evaluate the performance so that corrections
can be made in the process if any shortcomings are determined. Apple is the one which is using
it and so for the improvement in Samsung it shall also adopt the same and work in the manner by
which all the parameters which are set in this regard can be achieved. There shall be proper
communication of them tall the members so they are aware of the actions that shall be taken by
them for their attainment.
Financial governance: Controlling of the financial aspects is highly required and for that proper
governance shall be established. By the help of this it will be possible that all the policies which
are formulated by the company in this respect shall be evaluated and shall also be followed in a
best possible manner (Raghunandan, et. al., 2012). Apple has made such system by which it is
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able to deal with all the problems in an easy manner and so that same shall be done in given case.
This will help in the elimination of all the problems which are faced by Samsung so that its
success can be ensured.
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Analyze how, in responding to financial problems, management accounting can lead
organizations to sustainable success.
In the company, it is necessary that success shall be maintained in long-term and for that, all the
financial problems will have to be dealt in a proper manner. There are various tools which can be
used for this and also importance will be provided to management accounting. In this, all the
recording will be made in such manner by which all the decisions will be made in a best possible
manner (Rashee, et. al., 2012). This way sustainable success will be achieved and business will
gain several advantages.
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Conclusion
From the above-presented report, it can be said that it is very relevant to ensure that management
accounting is followed. For that various aspects are considered such as systems and by the help
of them reporting are carried out in a proper manner. The incomes and variance have been
determined so that proper evaluation has been made with the help of this. It has been noted that
there are certain tools which are used by Samsung with the help of which company is able to deal
with all the problems that have been faced. Then all the techniques which are suitable in
comparison to apple have been described which helps in making the overall improvement in the
company.
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