Management Accounting System Implementation Report

Desklib provides solved assignments and past papers to help students succeed.

1
Management accounting
Student name:
Student id:
Assignment code:

2

3
Introduction
The management accounting is one of the most important unit of the business as it prepares the
reports, records and prepare the account to aid the management in decision making. The system
converts the complex financial data into simple form in order to term them in the actionable
insight. The system also helps the management in forecasting the future business condition on
the basis of existing condition. The current assignment provides the information about the benefit
of management accounting system for the organization and the way system can be implemented.

4
Activity 1:
Part A
Explanation of the concept of the managerial accounting:
The concept of the management accounting is also called as the concept of the cost accounting or
the managerial costing. It can be termed as the process for the analysis of the business costs and
the operational cost for analyzing the internal performance report of the company. This internal
financial report will help the management to take the effective decisions within the organization
with the aim to achieve the organizational or the business goals of the company. The concept of
the management accounting is completely different from that of the concept of the financial
accounting (Calfapietra, et. al., 2015). Few differences between the concept of the financial
accounting and the management accounting are presented in the table given below:
Financial accounting Management accounting
This type of the report is basically focuses on
the preparation of the external or the overall
performance report of the company for the
outside stakeholders of the company.
This type of the accounting has the main aim
for preparing the report for measuring the
internal performance or the efficiency of the
company.
These reports need to be prepared annually
within the organization.
There is no fixed duration for the preparation
of such types of the reports within the
company.
These reports are prepared in the specific
format and delivers only monetary kind
information to the outside stakeholders of the
company.
These reports do not follow any specific format
for the preparation of such report and delivers
both monetary and non monetary information
of the organization.

5
These reports are mainly prepared with the aim
to provide the financial information and
financial status of the company to the outside
stakeholders of the company.
These are the report which is prepared for
preparing the policies, plans and taking the
effective decisions within the organization.

6
Essential requirement or the need of the different kind of system of management accounting
within the organization:
Management accounting in the organization is conducted with the aim to extract the internal
information about the various activities and the operations which are conducted within the
organization. This management accounting information helps the management to take the
effective and the critical decisions for the benefit of the organization. This information is useful
in the organization as this kind of the information will help the management to take the decisions
in respect of the pricing, cost reduction and planning for the future activities of the company.
Below are the few of the management accounting system along with their benefit-
Cost accounting system- The major benefit of using the system is that it helps in controlling
cost and gets optimum result from the existing capacity. The system provides useful information
to the management for making strategic and informed decision related to the business. It also
guides in setting the price of the product and reducing cost by identifying the loopholes in the
process. The system finds the profitable and unprofitable capacity of the business and finding the
idle capacity of the company.
Price optimization system – The model is the mathematical program which calculates the
variation in the demand at different level of pricing and use the information to derive the price
which will maximize the company profitability (Kochiyama and Nakamura, 2016). It facilitates
the management to use the pricing as a powerful profit lever which is undeveloped. The model
can be used to tailor the price for the customer segment to check how the customer responds to
the change in the price. The result of the model can be used to forecast develop price, forecast
demand, determining promotional strategy and improve customer satisfaction.
Inventory management system –The use of the systemmakes the process of managing easier
and reduces the risk of overselling. The system also helps in saving the cost and prevents the
situation of excess stock or stock outs. The system also improves the business negotiation and
provides better product visibility in the event of recall. It also assists in making more profitable
business decision and controlling invaluable sales data.

7
Job costing system- The system provide better control over the cost and apply corrective
measures at the faster pace in order to control unnecessary cost. The system provides easy
calculation of the overhead and promotes more coordination of the accounting system. It
provides the information about the profitability of the job which is used to accept or reject a job.
It helps in identifying similar jobs thus preventing duplication of work. The system uses various
statistical techniques in order to evaluate the quality of the work.
Various methods used by the organization for the management reporting
Budget report – The report are critical to measuring the company performance and is prepared
by the management to understand the grand scheme of their business. The budget is based on the
past condition and shows all the earning and expenditure of the company. The report helps the
management to guide to cut cost, provide better employee incentive and renegotiate the terms
with the suppliers and vendors.
Account receivable report–The report breaks down the balances of the client into the time
period in order to identify the defaulter and find the error in the collection process of the
company. In case the company has lots of defaulter they need to work over the credit policy in
order to reduce the number of bad debts.
Cost managerial report – The system helps in computing the cost of all the products which the
company manufacturesin the form of summary. This helps the management in comparing the
cost price with the selling price through which profit margin are monitored. The system provides
the essentials for optimization of the resources among all the department of the company.
Performance report – I helps in reviewing the performance of the company which is used by
the management to make the key strategic decision in relation to the business (Doktoralina and
Bahari, 2018). It also provides the deep insight of the business and identifies the area where the
company needs to work in order to maximize the company profit. This helps the management to
check their strategy is in aligning with the company goals and objective.
Other management Accounting report–There are many other reports which can be used by the
management to evaluate the business performance. The choice of report totally depends upon the
reporting requirements of your firm.

8
Benefits and the application of the MAS within the organizational context:
The management accounting system has a goal to obtain the information and create report which
is used by the management to get better equipped for making informed business decision. The
management accounting system should be designed in such a way that it provides useful
information to the company owner within an organization. The system should usually be based
upon the specific analytical needs or internal request of the management. The following are the
few of the benefits of the management accounting for the company-
 The management accounting promotes effective operation of the business by using the
proper plan and check there execution. For this the functional budget are prepared and
information are arranged department wise, section wise and product wise as per the proper
planning.
 The system compares the actual performance of the activity in compared to the planned
one and if any deviation is detected the management can determine the course of action which
can be used in order to exercise the control.
 The system helps in locating errors thus helps in delivering quality service to the
customer.
 The system clearly defines the authority and responsibility of key executive that everyone
knows the course of action for which they are responsible (Calfapietra, et. al., 2015).
 The system promotes effective coordination between the various activities of the
company which helps in attaining objective in the effective way.

9
Critical evaluation for making the integration of the management accounting and the reporting
with the organizational processes and the systems:
The system of management accounting provides timely information to the management in
relation to the business helps in running the business in better way (Alfian, 2017). The
management accounting requirements defers for each company and industry thus the
management should have data over the certain process in order to control the cost and make
sound business decision. In order to effectively implement the management accounting system
management need to create the list of your needs. Management needs set the requirements which
the system would meet out and provide information in specific way and format. After that
management needs to prioritizetheir needs and can decide the activities which are crucial to your
business (Siswanto, et. al., 2017). After than management needs to find the computer system that
suits with your organization structure and is as per your need. Management need to be focused
over your needs otherwise there will be complexity in the process. Further you need to check
your budget as some of the system are very much expensive and there is not much utility of the
system as per your existing business structure. After all the steps management needs to create the
plan to implement the system and train the existing staff for working over the system. The
management needs to check that the system is followed by everyone within the organization in
order to utilize the system to its best advantage.

10
Annexure A
Calculation of costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs
Calculation of Absorption Rate:
Particulars Centre A Centre B Centre C
Budgeted overhead cost(A) 66000 75000 83600
Machine Hours (B)
Labor Hours
22000 15000
41800
Overhead Absorption Rate(A/B) 3 5 2
Calculation of Total Cost of Job 427 as per marginal costing
Particulars Amount
Direct Material : (A)
Direct Material Requisitioned
26780
-Direct Material Returned to stores
780
26000

11
Direct Labor : (B)
Centre A (146*14.80)
2160.8
+Centre B (39*15.70)
612.3
+Centre C (279*16.10)
4491.9
7265
Prime cost 33265
Variable Production Overhead : (C)
Centre A (59*3)
177
Centre B (108*5)
540
Centre C (279*2)
558
1275
Works cost (D) (A+B+C) 34540
Variable Administration Overhead (E) (10% of F) (W.N) 3838

12
Cost of production (F) 38378
Selling Overhead (G) (12% of selling price )
12% of 317200
38064
Marginal cost of sales (H) (F+G) 76442
W.N – Let cost of production be x , then admin. overhead will be 0.1 x
34540+0.1x = x
X = 38378
Calculation of Profit / Loss as per marginal costing
Particulars Amount
Sales (I) 317200
Marginal cost of sales (J) 76442
Contribution (K) (I - J) 240758