Management Accounting Report: Dell, Cost Analysis and Planning

This report provides a comprehensive analysis of management accounting principles, using Dell as a case study. It begins with an introduction to management accounting and its importance in organizational decision-making, particularly focusing on Dell's manufacturing of computers and laptops. The report then delves into cost calculation techniques, including cost volume profit analysis, flexible budgeting, and various costing methods such as marginal and absorption costing, with numerical examples. It also explores different planning tools, the advantages and disadvantages of various budgeting methods, and pricing strategies. Furthermore, the report examines Dell's SWOT analysis and concludes with a discussion of how management accounting systems can address financial problems. The report includes calculations, reconciliations and working notes for better understanding of the concepts. The report aims to provide a thorough understanding of management accounting's role in financial management and strategic decision-making within a real-world business context.

Management Accounting
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Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Covered in PPT.......................................................................................................................3
TASK 2............................................................................................................................................3
P3 Cost calculation using appropriate techniques of cost analysis........................................3
TASK 3............................................................................................................................................9
P4 Advantages and disadvantage of different types of planning tools...................................9
TASK 4..........................................................................................................................................11
P5 Management accounting system for respond towards financial problems.....................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
The term management accounting is explained as the collection of financial statements
and data which is used for formulating reliable financial results for organisation. Organisation
direct and determines all financial activity by monitoring the income and expense or other
monetary related details. The prime focus of management accounting is on formulation of
innovative decisions through observing and controlling all financial details. Dell is selected as an
organisation for this report and they are well for well-manufacturing computer or laptop. Further,
report will cover management accounting and its system and also importance of management
accounting system to integrate in organisation process. Different types of management
accounting system and techniques will also include in this report (Alsharari and Abougamos,
2017). In the last, respond of management accounting towards financial problems is considered
in the upcoming report.
TASK 1
Covered in PPT.
TASK 2
P3 Cost calculation using appropriate techniques of cost analysis
COST- Accounting factor explain cost as a monetary value which is spend by the buyer or an
organisation for producing the products or services (Procházka, 2017). Mostly, business factor
undertake the cost factor because it helps them to add profit margin before offering their
products in market.
Difference between cost and cost-analysis
Cost and price are two different factors or approaches as they are used for completion of
task according to appropriate value of products and services. Private or public both organisation
utilise price related system and this helps to generate right price structure. On the other side, cost
and cost analysis are different as cost only refers to the approach that evaluates product options.
But, on the other side, cost analysis refers to the interpretations related with business and this
helps to review about overall operation cost for completion of task in an organised manner.
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 Cost volume profit- This explain to the analysis which is used for identifying all
methods that demonstrate how changes related with variable and fixed cost impact on
Dell profits.
 Flexible budgeting- The primary use of flexible budgets is to increase and decrease the
number of monetary amounts which is anticipated by an organisation in upcoming
period. Dell utilise flexible budgets because it helps to change budget according to the
situation.
 Cost variance- The term cost variance is explained as a process of evaluating the
financial performance related with project. Along with cost variance is used for
comparing the budget which is set before project start. Dell use this system for
performing work with analyse of actual cost.
Marginal costing- The marginal cost of an item refer to its variable cost and also, marginal
production cost of an item is explained to the sum of their direct material cost, direct expense
cost, labour cost, etc. In simple terms, marginal costing aids Dell management for undertake or
charge only variable cost units instead of including fixed cost (Appelbaum and Nehmer, 2020)
Absorption costing- This explain to the system or method which is related with full product cost
and it also add direct cost and the proportion of production overhead cost. It results towards
analysis of overhead absorption rates to manage work in proper manner. Dell utilise the
absorption costing systems because this helps them for analyse of overall inventory values. Also,
under/over absorbed overhead all cost are included to generate accurate income statement.
Product Costing
Fixed and variable costing- In accounting or economics, variable as well as fixed are the two
types of main cost which is incurred by the respective or any other organisation at the time of
manufacturing product and services (Brusca and Martínez, 2016). As the name defines, fixed
cost remains same and it impacted either small or large how much an organisation produce.
While, variable costing fluctuates as it relates with the amount of production units.
Normal and standard costing
Normal costing- this explain about the predetermined values and annual rates related with
overhead. This also assign towards manufacturing overhead product cost. Actual costing defines
about all actual cost and also month production values. It considered production volume is used
for assign about overhead costs.
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Standard costing- This tool is used for formulation of planning budgets, managing,
controlling cost, and also for evaluation of management performance. In simple terms, standard
costing system involves and estimates the required cost for a production process.
Activity based costing- ABC is explained as a costing method and it defines about all
activities that relates with organisation (Grishanova, Tatarinova and Kirina, 2016). This also
undertakes about cost of each activity related with products and services and it consider about all
task which is related with actual consumption of values.
Cost of inventory
Inventory cost include about all cost factors which associate with management, storage and
procurement related with inventory. This is also essential for calculation of business and the term
inventory cost engage storage facilities, depreciation and opportunity cost for capital. Dell focus
on inventory cost to manage task with understand of inventory value.
 Ordering cost- This includes payroll, taxes, benefits, wages related with procurement
department. All of these costs typically relates with overhead cost. Transportation cost,
supplier cost, formulation of purchase order, etc. are included in ordering cost.
 Inventory holding cost- Simply it defines about the rent which is paid by organisation
for its storage area (Guffey and Harp, 2014). Also, direct rent paid by companies roles
towards total rent paid by Dell to manage its operations in proper manner.
 Shortage cost- It also known as a stock-out cost and this occurs when an organisation
becomes out of stock. Dell utilised shortage cost for disrupted production cost to
complete work with maximise loyalty.
calculation of net profit by using both marginal and absorption costing method:
Quarter 1
Particulars
Amount
(in ￡)
Sales 66000
Less: Cost of sales
Opening inventory 0
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production cost (78000*0.65) 50700
Less: Closing stock (12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 1900
Quarter- 2
Particulars
Amount
(in ￡)
Sales 74000
Less: Cost of sales
Opening inventory (12000*0.65) 7800
production cost (66000*0.65) 42900
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Less: Closing stock (4000*0.65) 2600
48100
Contribution 25900
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 4700
Reconciliation
Working note Q1 Q2
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
Absorption costing for Quarter 1:
Particulars Amount
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(in ￡)
Sales 66000
Less: Cost of sales
production cost (78000*0.65) 50700 0
Semi-variable (78000*0.20) 15600
Total Variable cost 66300
Less: Closing stock 10200
56100
Gross profit 9900
Less: -400
9500
Selling and distribution as fixed 5200
Net Profit 4300
Absorption costing for Quarter 2:
Particulars
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*0.20) 13200
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production cost (66000*0.65) 42900
Total Variable cost 66300
Less: Closing stock 3400
62900
Gross profit 11100
Less: selling expenses -2800
8300
Fixed expenses 5200
Net profit 3100
Working note
Fixed costs 16000
Budgeted cost of production
80000 per
units
Budgeted fixed cost 0.2
Variable cost per units 0.65
TASK 3
P4 Advantages and disadvantage of different types of planning tools
With preparation of budget all planning and controlling actions are induced and it helps
organisation for high profit generation. Different types of budget are mention as follow:
Operational budget- This is developed by the organisation for maintaining balance between
income statements through monitoring revenue and expenses of the business.
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Financial budget- This is related with the stakeholders as it undertakes all elements which is
related with asset, equity, liability and balance of an organisation.
Alternative methods of budgeting
 Value proposition budgeting- This depends on the monetary factors which is required
for generating high value in engaged staff. To control all deliverables management
reduce the number of expenditures in a proper manner.
 Cash Budget- It expected towards formulation of task according to outflow and inflow
related with business. This aids Dell to complete work in decided budget.
Behavioural implication of budget- Design of budget also depends on the behaviour of
individuals and it relates with market goal (Ismail, Isa and Mia, 2018). Along with this it also
processed towards implementing actions that help to achieve both workforce and organisation
goal.
PRICING is one of the most appropriate strategies and this is used by organisation for
accomplishing better returns after sale of their products and services. Along with this addition
among pricing strategy of Dell helps organisation for earn better margin. Price penetration
strategy is utilised by respective organisation because it helps to introduce products in an
effective manner.
Some common costing accounting system
Costing system- It explains about the certain framework that is related with management
and it helps for estimate about products and profitability in a systematic manner. Some types of
costing system are mention as follow:
ACTUAL Costing- It is defined as a costing method that reflects material cost, overhead and
labour cost. All of this collectively used for allocation of actual quantity in minimum reporting
time period.
NORMAL AND STANDARD Costing- This is defined as the method through which overall
cost is drive by matching it with manufacturing overhead system (Glushchenko, Yarkova and
Kucherova, 2017). On the other hand, it also reflects about usage of budgeted cost.
The cost system get varies from organisation and it relates with dependence of costing activities.
Some basis is mention as follow:
Job Costing- This method is used for determine about all production activities that relates with
specific cost and it helps for induce of work according to separation of project.
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Process costing- This section relates with manufacturing of unit cost and this process about
constant production to obtain average production rate.
Batch costing- The costing system effect on all production activities and it induce about
adequate activities related with repetitive work factors. On the other side, cost related with
production helps for complete of cost as per unit.
SWOT
The term SWOT impacts on internal as well as external factors of an organisation. SWOT
analysis of Dell is mention as below:
Strength
 They are recognising as World’s largest
computer and laptop manufacture.
 One of the well-known brands in world.
 Next day and on-site product services
are prime strength of Dell.
Weakness
 Range of products and components
offer by various numbers of suppliers.
 Professional computer maker so it not
attracts college students.
 Sometimes customization offer of Dell
create problems for organisation.
Opportunities
 Diversification strategy in products
helps to enter in untapped market.
 Personal laptop is essential for students
so this results towards increase in
customer base.
Threats
 Competitive rivals in computer industry
exist at global level.
 Threats related with business is the
entrants of new organisation with
almost new systems and technology.
TASK 4
P5 Management accounting system for respond towards financial problems
Financial problem- It is explained as the scenario that generates challenges for employer
to perform their work in an organised manner. It is because they face regular problems to
perform their work according to the effects (Meiryani, Susanto and Warganegara, 2019). Dell
main hassle in their monetary phrases because the cost of agency operations is growing with fast
velocity. So that is essential for control for adoption of proper strategies through which all
organisational elements for reducing cost of business operations.
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Benchmarking and KPI carry out a crucial function for overcome from the financial troubles. By
induce or adoption of an effective management accounting system this is easy for management to
perform their work in an organised way. Strategies adopted by Dell are mention as follow:
• BENCHMARKING- A powerful method and that is utilized by control to carry out all
challenge with determined technique particularly, related with financial requirements that is set
by way of enterprise to obtain organisational dreams consistent with decided benchmark (Manes
Rossi, Aversano and Christiaens, 2014). On the alternative facet, Dell triumph over from
economic problems by utilising the benchmarking techniques as it's helps to control overall price
in an organised manner.
• KPI- The economic nature adopted to improve overall productivity and this is also
utilised by means of the selected corporation and its consequences results, management is
capable to estimate and analyse the performance through tracking project. The high awareness of
Dell is to use the KPI methods for minimise economic troubles and it means of decreasing the
various problems through analysis different economic price range. Moreover, selected indicators
clear up average issues by way of the use of KPI and it additionally allows to degree organisation
performance.
Financial Governance
It refers to the methods and values that are used to measure the overall financial performance of
the organisation. Along with economic field is maintained by using techniques that control by
engaging and understanding the economic governance. On the alternative side, with use of
economic governance strategies price issue or problems are controlled through enterprise in
proper way.
Comparison
Basis Dell Lenovo
Financial issue The issue relates with
uncontrolled operational
expense. This reduces
organisational profits.
Inventory management is
complex to understand and
this results high cost materials
of Lenovo are not useful.
Accounting system used Financial problems are solved
by management through
adoption of cost accounting
Stock level is controlled and
managed through processing
inventory management action.
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