Management Accounting Report: Financial Planning and Analysis, Report
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This report provides a comprehensive overview of management accounting, focusing on its application within Rolls-Royce Holdings. It begins with an introduction to management accounting, explaining its role in business development and decision-making, and then delves into different management accounting systems, including cost accounting, price optimization, and inventory management. The report also explores the integration of these systems within organizational processes and highlights the benefits of each. Part B of the report examines various planning tools, particularly those used for budgetary control, such as flexible budgets. It compares marginal costing and absorption costing methods, providing income statements for both and interpreting the financial outcomes. Furthermore, the report discusses the use of Activity-Based Costing (ABC) and its application in Rolls-Royce. Overall, the report offers insights into how management accounting can be utilized to improve business operations and achieve sustainable success, supported by financial analysis and planning tools.

MANAGEMENT
ACCOUNTING
ACCOUNTING
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Contents
INTRODUCTION..........................................................................................................................1
DEMONSTRATE UNDERSTANDING OF MANAGEMENT ACCOUNTING SYSTEMS
..........................................................................................................................................................1
Explain the management accounting and also explain needs of management accounting
systems ..................................................................................................................................1
Management accounting system and the reporting integration within organisational processes
................................................................................................................................................3
PART B..................................................................................................................................3
EXPLAIN USE OF PLANNING TOOLING USED IN THE MANAGEMENT
ACCOUNTING..............................................................................................................................7
Use of various planning tools and their application...............................................................9
COMPARISON OF ORGANISATION USING MANAGEMENT ACCOUNTING TO
RESPOND TO FINANCIAL ISSUES..........................................................................................11
Comparison of how organisations are adapting management accounting systems to..........12
Respond to financial problems............................................................................................12
An analysis of how in responding to financial problems, management accounting can lead12
organisation to sustainable success.....................................................................................12
An evaluation of how planning tools for accounting help to solve problems and support. .13
Organisations with sustainable success...............................................................................13
CONCLUSION............................................................................................................................13
BIBLIOGRAPHY........................................................................................................................14
REFERENCES.............................................................................................................................15
INTRODUCTION..........................................................................................................................1
DEMONSTRATE UNDERSTANDING OF MANAGEMENT ACCOUNTING SYSTEMS
..........................................................................................................................................................1
Explain the management accounting and also explain needs of management accounting
systems ..................................................................................................................................1
Management accounting system and the reporting integration within organisational processes
................................................................................................................................................3
PART B..................................................................................................................................3
EXPLAIN USE OF PLANNING TOOLING USED IN THE MANAGEMENT
ACCOUNTING..............................................................................................................................7
Use of various planning tools and their application...............................................................9
COMPARISON OF ORGANISATION USING MANAGEMENT ACCOUNTING TO
RESPOND TO FINANCIAL ISSUES..........................................................................................11
Comparison of how organisations are adapting management accounting systems to..........12
Respond to financial problems............................................................................................12
An analysis of how in responding to financial problems, management accounting can lead12
organisation to sustainable success.....................................................................................12
An evaluation of how planning tools for accounting help to solve problems and support. .13
Organisations with sustainable success...............................................................................13
CONCLUSION............................................................................................................................13
BIBLIOGRAPHY........................................................................................................................14
REFERENCES.............................................................................................................................15

INTRODUCTION
Management accounting refers to analysis of the financial data and the advice to
company for the use in business development. This process of analysing the operations as well as
business cost for the purpose of prepare the internal financial reports and records helps top
management in process of decision making to attain set business objectives. It is an act of
making the sense of costing and financial data and then translating it into useful information for
top management within company (Bouten and Hoozée, 2013). This present report is based on
Rolls-Royce Holdings that is an engineering firm, focus on world- class propulsion, and power
system. In this mention report will discussed about the management accounting and essential
requirements of different types of systems. Benefits and disadvantages of different types of
planning tools, which are mainly used for the budgetary control, will discussed here.
DEMONSTRATE UNDERSTANDING OF MANAGEMENT
ACCOUNTING SYSTEMS
Explain the management accounting and also explain needs of management accounting systems
Management accounting is mainly used through the managers for purpose of taking the
effective decision for performing business operation and control the different functions for
business productivity. It consists creation of the Management accounting reports to give accurate
information to formulate short term as well as long-term plans for achieving company objectives
(Cadez and Guilding, 2012). For assure that work is to be performed according to planned
activities, there are different kinds of accounting system mention below:
Cost accounting system: It is a kind of Management Accounting system that is mainly
used by managers for the purpose of recording activities tracking materials and examining the
production cost at various production phrases from the raw material to finish. This system aids in
approximation associated cost for measuring profit level valuation of inventory and controlling
cost. Rolls-Royce applies this system for examining the different cost at every product stage and
focus on the products, which will be benefited, more to firm (DRURY, 2013).
Price optimisation system: Price optimisation system is used to set prices of products
used by companies so that company and customers both can be in profitable stage. Through
using this method, company can meet with its objectives like enhancing operational costs.
1
Management accounting refers to analysis of the financial data and the advice to
company for the use in business development. This process of analysing the operations as well as
business cost for the purpose of prepare the internal financial reports and records helps top
management in process of decision making to attain set business objectives. It is an act of
making the sense of costing and financial data and then translating it into useful information for
top management within company (Bouten and Hoozée, 2013). This present report is based on
Rolls-Royce Holdings that is an engineering firm, focus on world- class propulsion, and power
system. In this mention report will discussed about the management accounting and essential
requirements of different types of systems. Benefits and disadvantages of different types of
planning tools, which are mainly used for the budgetary control, will discussed here.
DEMONSTRATE UNDERSTANDING OF MANAGEMENT
ACCOUNTING SYSTEMS
Explain the management accounting and also explain needs of management accounting systems
Management accounting is mainly used through the managers for purpose of taking the
effective decision for performing business operation and control the different functions for
business productivity. It consists creation of the Management accounting reports to give accurate
information to formulate short term as well as long-term plans for achieving company objectives
(Cadez and Guilding, 2012). For assure that work is to be performed according to planned
activities, there are different kinds of accounting system mention below:
Cost accounting system: It is a kind of Management Accounting system that is mainly
used by managers for the purpose of recording activities tracking materials and examining the
production cost at various production phrases from the raw material to finish. This system aids in
approximation associated cost for measuring profit level valuation of inventory and controlling
cost. Rolls-Royce applies this system for examining the different cost at every product stage and
focus on the products, which will be benefited, more to firm (DRURY, 2013).
Price optimisation system: Price optimisation system is used to set prices of products
used by companies so that company and customers both can be in profitable stage. Through
using this method, company can meet with its objectives like enhancing operational costs.
1
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Inventory management system: It is mainly used for production manager in order to
track the status of the current and needed stock for performing the business operations. It helps in
reducing the situation such as under stock and over stock of inventory at workplace. In context to
Rolls Royce, Inventory management system is mainly used for purpose of looking stock at the
warehousing as well as Shipping in order to track the outgoing and incoming products through
using supply chain management.
Management accounting reporting: The management accounting reports produces reports for
internal stakeholders of an organization as opposed to external stakeholders. It helps in providing
the accurate statistically and financial account records in proper time to management for purpose
of making short- term decisions (Fullerton, Kennedy and Widener, 2014). Different management
reports are given below:
Budget reports: This is formal statement and estimation of the revenue and expenditure.
This report is mainly prepare for future purpose to attain the business goal. On the other hand, it
can be prepared for the long-term and short-term purpose. It is effective for the performance
measurement and planning purpose and helpful in take necessary decision regarding growth of
firm. As Rolls-Royce, develop budget in order to anticipate the expenses as well as income for
the future and helpful in take the business decisions for the purpose of Business expansion
(Herzig and et. al., 2012).
Account receivable ageing report: This kind of report is developed by company under
which management records the details of those customers which buy product on credit basis.
This kind of report is mainly developed through those organisations, which perform trading in
credit that traits are clearly mentioned with name and other details related to credit transactions.
Rolls-Royce develop this kind of report through gathering information for identifying the
invoices, which are due for the payment purpose (Hiebl, 2014). This is mainly used for
management in order to examining potential of bad debts and this is revised for doubtful
accounts.
Evaluation of benefits of various management accounting systems
The benefits of different Management Accounting system mention below:
Advantages of cost accounting system- The main benefit of cost accounting system is
to measure expenses and the cost. It allows an organisation to measure efficiency of business.
Another benefit of this system is that it can help in identify unprofitable activities of business.
2
track the status of the current and needed stock for performing the business operations. It helps in
reducing the situation such as under stock and over stock of inventory at workplace. In context to
Rolls Royce, Inventory management system is mainly used for purpose of looking stock at the
warehousing as well as Shipping in order to track the outgoing and incoming products through
using supply chain management.
Management accounting reporting: The management accounting reports produces reports for
internal stakeholders of an organization as opposed to external stakeholders. It helps in providing
the accurate statistically and financial account records in proper time to management for purpose
of making short- term decisions (Fullerton, Kennedy and Widener, 2014). Different management
reports are given below:
Budget reports: This is formal statement and estimation of the revenue and expenditure.
This report is mainly prepare for future purpose to attain the business goal. On the other hand, it
can be prepared for the long-term and short-term purpose. It is effective for the performance
measurement and planning purpose and helpful in take necessary decision regarding growth of
firm. As Rolls-Royce, develop budget in order to anticipate the expenses as well as income for
the future and helpful in take the business decisions for the purpose of Business expansion
(Herzig and et. al., 2012).
Account receivable ageing report: This kind of report is developed by company under
which management records the details of those customers which buy product on credit basis.
This kind of report is mainly developed through those organisations, which perform trading in
credit that traits are clearly mentioned with name and other details related to credit transactions.
Rolls-Royce develop this kind of report through gathering information for identifying the
invoices, which are due for the payment purpose (Hiebl, 2014). This is mainly used for
management in order to examining potential of bad debts and this is revised for doubtful
accounts.
Evaluation of benefits of various management accounting systems
The benefits of different Management Accounting system mention below:
Advantages of cost accounting system- The main benefit of cost accounting system is
to measure expenses and the cost. It allows an organisation to measure efficiency of business.
Another benefit of this system is that it can help in identify unprofitable activities of business.
2
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Advantages of price optimisation system- It gives benefit of identifying the reliable
cost of business product and services in open markets. In identifying the price level, which can
provide advantage to consumer as well, as firms (Kaplan and Atkinson, 2015). This kind of
system is helpful for the business manager of Rolls-Royce in assigning the accurate cost of
ensuring product through considering customers’ perception towards cost.
Advantages of inventory management system- It is helpful in eliminating the excess
wastage and the overstocking of products. This kind of system gives status of the present along
with necessary inventory for eliminating today’s in completion of the project. It enables firm to
maintain centralized record of each assets.
Management accounting system and the reporting integration within organisational processes
Management accounting reports and systems both are interrelated within organisational
processes. It consists various systems like cost price optimisation system, accounting system,
job-costing system etc. All these systems play an essential role for developing the management
accounting reports through giving financial and non-financial information. If these systems fail
in give necessary information then it will be complex for management to develop management
accounting reports. Financial managers of Rolls-Royce uses the management accounting systems
for preparing management accounting reports through using different techniques. Under this,
Accounting systems minimize complexities for better composition of reports (Hilton and Platt,
2013).
PART B
ANNEX (A)
Marginal costing method- It refers to cost that change in total cost when quality
manufactured in incremented through even one unit. It is known as one of the principle costing
methods that are mainly used through mangers in process of decision-making.
Absorption costing method- This method entails full cost of the manufacturing and
offering service (Lukka and Vinnari, 2014).
Income statement by marginal costing method:
PARTICULARS AMOUNT
SALES 427500 427500
3
cost of business product and services in open markets. In identifying the price level, which can
provide advantage to consumer as well, as firms (Kaplan and Atkinson, 2015). This kind of
system is helpful for the business manager of Rolls-Royce in assigning the accurate cost of
ensuring product through considering customers’ perception towards cost.
Advantages of inventory management system- It is helpful in eliminating the excess
wastage and the overstocking of products. This kind of system gives status of the present along
with necessary inventory for eliminating today’s in completion of the project. It enables firm to
maintain centralized record of each assets.
Management accounting system and the reporting integration within organisational processes
Management accounting reports and systems both are interrelated within organisational
processes. It consists various systems like cost price optimisation system, accounting system,
job-costing system etc. All these systems play an essential role for developing the management
accounting reports through giving financial and non-financial information. If these systems fail
in give necessary information then it will be complex for management to develop management
accounting reports. Financial managers of Rolls-Royce uses the management accounting systems
for preparing management accounting reports through using different techniques. Under this,
Accounting systems minimize complexities for better composition of reports (Hilton and Platt,
2013).
PART B
ANNEX (A)
Marginal costing method- It refers to cost that change in total cost when quality
manufactured in incremented through even one unit. It is known as one of the principle costing
methods that are mainly used through mangers in process of decision-making.
Absorption costing method- This method entails full cost of the manufacturing and
offering service (Lukka and Vinnari, 2014).
Income statement by marginal costing method:
PARTICULARS AMOUNT
SALES 427500 427500
3

LESS VARIABLE COST
DIRECT LABOUR (15*5000) 75000
DIRECT MATERIAL (18*5000) 90000
VARIABLE PROD ( 9*5000) 45000
VARIABLE 10% OF SALES VALUE 42750 252750
LESS DIRECT LABOUR (15*500) 7500
DIRECT MATRIAL ( 18*500) 9000
VARIABLE PROD (9*500) 4500 -21000
CONTRIBUTION 195750 195750
LESS FIXED EXP (180000/4) -45000
PROFIT FOR THE YEAR 150750 150750
Income statement by absorption costing method (1st quarter)
PARTICULARS AMOUNT
SALES (4500*95) 427500 427500
COGS -231750
GROSS PROFIT AT NORMAL 195750
UNDER/OVR ABSORPTION 6800
GROSS PROFIT AT ACTUAL 202550
-FIXED EXP -45000
NET PROFIT 157550
Working note:
1.
Total variable cost per unit 51.5
COGS
Production cost 257500
Less: closing stock -25750 231750
4
DIRECT LABOUR (15*5000) 75000
DIRECT MATERIAL (18*5000) 90000
VARIABLE PROD ( 9*5000) 45000
VARIABLE 10% OF SALES VALUE 42750 252750
LESS DIRECT LABOUR (15*500) 7500
DIRECT MATRIAL ( 18*500) 9000
VARIABLE PROD (9*500) 4500 -21000
CONTRIBUTION 195750 195750
LESS FIXED EXP (180000/4) -45000
PROFIT FOR THE YEAR 150750 150750
Income statement by absorption costing method (1st quarter)
PARTICULARS AMOUNT
SALES (4500*95) 427500 427500
COGS -231750
GROSS PROFIT AT NORMAL 195750
UNDER/OVR ABSORPTION 6800
GROSS PROFIT AT ACTUAL 202550
-FIXED EXP -45000
NET PROFIT 157550
Working note:
1.
Total variable cost per unit 51.5
COGS
Production cost 257500
Less: closing stock -25750 231750
4
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2.
Per quarter standard production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
Actual cost 68200
absorption 6800
Income statement by absorption costing method (2nd quarter)
SALES (3000*95) 285000
COGS -180250
GROSS PROFIT AT
NORMAL 104750
Under ABSORPTION -5476
GROSS PROFIT AT
ACTUAL 99274
-FIXED EXP -45000
NET PROFIT 54274
Working notes:
1.
Total variable cost per unit 51.5
COGS
opening stock 25750
Production cost 303850
Less: closing stock -149350 180250
2.
Per quarter standard
production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
5
Per quarter standard production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
Actual cost 68200
absorption 6800
Income statement by absorption costing method (2nd quarter)
SALES (3000*95) 285000
COGS -180250
GROSS PROFIT AT
NORMAL 104750
Under ABSORPTION -5476
GROSS PROFIT AT
ACTUAL 99274
-FIXED EXP -45000
NET PROFIT 54274
Working notes:
1.
Total variable cost per unit 51.5
COGS
opening stock 25750
Production cost 303850
Less: closing stock -149350 180250
2.
Per quarter standard
production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
5
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Actual cost 80476
absorption -5476
Interpretation: Above mention, calculation states that total profit earned through firm
and marginal costing is 150750 whereas if company uses absorption-costing technique then in
this case total profit earned through organisation is 157550 in first quarter. Firm is generating the
profit if it uses absorption-costing method as managers can take effective decisions for make
improvement in efficiency of business operations. Above calculation states, the profit earned
through firm in the second quarter is 54274.
ANNEX (B)
Absorption costing Method: It is one of the effective accounting methods that absorbs
all production cost like fixed overhead, direct labour, variable overhead, direct material to
number of units manufactured. This costing method is mainly used for financial reporting
purposes and income tax reporting.
Activity based costing method: It is an accounting technique used for allocating cost on
activities basis and it includes at the time of production process. Under this kind of costing
technique, Rolls-Royce firm determines number of different activities which are included in
production process of goods and assign cost on the basis of activities which are used through
each unit of products manufactured.
(a) Labour hour: -
Product X = £6000*1 = £6000
Product Y = £8000*2 = £16000
Labour hour = £2,64,000
------------
22,000
= £12 per hour.
Overhead absorption on labour hour: -
X Y
Overhead absorption = 1*12 = 2*12
= 12 = 24
6
absorption -5476
Interpretation: Above mention, calculation states that total profit earned through firm
and marginal costing is 150750 whereas if company uses absorption-costing technique then in
this case total profit earned through organisation is 157550 in first quarter. Firm is generating the
profit if it uses absorption-costing method as managers can take effective decisions for make
improvement in efficiency of business operations. Above calculation states, the profit earned
through firm in the second quarter is 54274.
ANNEX (B)
Absorption costing Method: It is one of the effective accounting methods that absorbs
all production cost like fixed overhead, direct labour, variable overhead, direct material to
number of units manufactured. This costing method is mainly used for financial reporting
purposes and income tax reporting.
Activity based costing method: It is an accounting technique used for allocating cost on
activities basis and it includes at the time of production process. Under this kind of costing
technique, Rolls-Royce firm determines number of different activities which are included in
production process of goods and assign cost on the basis of activities which are used through
each unit of products manufactured.
(a) Labour hour: -
Product X = £6000*1 = £6000
Product Y = £8000*2 = £16000
Labour hour = £2,64,000
------------
22,000
= £12 per hour.
Overhead absorption on labour hour: -
X Y
Overhead absorption = 1*12 = 2*12
= 12 = 24
6

Total Overheads = £6000*12 = £8000*24
= £72,000 = £192,000
(b) Using ABC approach: -
Machine hour per period:
Product X = £6000*4 = £24,000
Product Y = £8000*2 = £16,000
Cost driven rate: -
Production set up = £179,000 = 2893 per set up.
60
Order handling = £30,000 = 416.666 = 417 per order
72
Machine cost = £55,000 = 1.375 per order
40,000
Overhead using ABC approach: -
X
Set up = 15*2983 = 44,745
Order = 12*417 = 5004
Machine cost = 24000*1.375 = 33,000
Total 82749
Y
Set up = 45*2983 = 134,235
Order = 60*417 = 25,020
Machine cost = 16000*1.375 = 22,000
Total 181,255
EXPLAIN USE OF PLANNING TOOLING USED IN THE MANAGEMENT
ACCOUNTING
Budgetary control refers to procedure of identifying different outcomes with the
budgetary figures for an organisation for future period. Continuous process aids in co-ordination
and planning. This is most powerful tool for purpose of cost control along with profit
7
= £72,000 = £192,000
(b) Using ABC approach: -
Machine hour per period:
Product X = £6000*4 = £24,000
Product Y = £8000*2 = £16,000
Cost driven rate: -
Production set up = £179,000 = 2893 per set up.
60
Order handling = £30,000 = 416.666 = 417 per order
72
Machine cost = £55,000 = 1.375 per order
40,000
Overhead using ABC approach: -
X
Set up = 15*2983 = 44,745
Order = 12*417 = 5004
Machine cost = 24000*1.375 = 33,000
Total 82749
Y
Set up = 45*2983 = 134,235
Order = 60*417 = 25,020
Machine cost = 16000*1.375 = 22,000
Total 181,255
EXPLAIN USE OF PLANNING TOOLING USED IN THE MANAGEMENT
ACCOUNTING
Budgetary control refers to procedure of identifying different outcomes with the
budgetary figures for an organisation for future period. Continuous process aids in co-ordination
and planning. This is most powerful tool for purpose of cost control along with profit
7
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maximisation. It is a procedure of preparing of budgets for different activities and then
comparing budgeted figures for arriving at deviations. Continuous process aids in coordination
and planning. It plays a necessary role to aid senior management in order to operating as well as
monitoring the operations of business in better way for attaining objectives. The manager of
Rolls-Royce use various types of planning tools for purpose of framing financial and non-
financial objectives. The benefits and disadvantages of various kinds of planning tools, which are
mainly used for the budgetary control, are given below:
Flexible budgets: This type of tool helps managers to examining any deviations between
expected output and actual output for doing some modifications in the budget statements at time
they occurs (Maas, Schaltegger and Crutzen, 2016). Financial managers are responsible for
Rolls-Royce Company to use flexible budgets for adjusts modifications in statements concerned
to alterations in tasks which can help in provide desired outcomes.
Advantages
Flexible budget makes this possible to establish the budget cost for any activity level
within relevant range. It aids in measuring effects of different activities volumes on cash position and profits.
Disadvantages
Flexible budget tends to maintain the fixed cost at same output level. (Morales and
Lambert, 2013).
As activities while developing the flexible budgets there is fluctuation with changes in
outcomes. It is complex for the financial managers of Rolls-Royce to handle every
variable.
Incremental budget: This budget is mainly used for developing budget of current year
through developing any kind of changes in budget of the previous year. Last year budget is
generally used for getting better ideas which are concerned with the current performance (Otley
and Emmanuel, 2013). Rolls-Royce managers applies these budget for the purpose of arrive at
new budget through make changing the past budget.
Advantages
This budget provides advantages to company to reduce any excess expenses in current
year budget.
8
comparing budgeted figures for arriving at deviations. Continuous process aids in coordination
and planning. It plays a necessary role to aid senior management in order to operating as well as
monitoring the operations of business in better way for attaining objectives. The manager of
Rolls-Royce use various types of planning tools for purpose of framing financial and non-
financial objectives. The benefits and disadvantages of various kinds of planning tools, which are
mainly used for the budgetary control, are given below:
Flexible budgets: This type of tool helps managers to examining any deviations between
expected output and actual output for doing some modifications in the budget statements at time
they occurs (Maas, Schaltegger and Crutzen, 2016). Financial managers are responsible for
Rolls-Royce Company to use flexible budgets for adjusts modifications in statements concerned
to alterations in tasks which can help in provide desired outcomes.
Advantages
Flexible budget makes this possible to establish the budget cost for any activity level
within relevant range. It aids in measuring effects of different activities volumes on cash position and profits.
Disadvantages
Flexible budget tends to maintain the fixed cost at same output level. (Morales and
Lambert, 2013).
As activities while developing the flexible budgets there is fluctuation with changes in
outcomes. It is complex for the financial managers of Rolls-Royce to handle every
variable.
Incremental budget: This budget is mainly used for developing budget of current year
through developing any kind of changes in budget of the previous year. Last year budget is
generally used for getting better ideas which are concerned with the current performance (Otley
and Emmanuel, 2013). Rolls-Royce managers applies these budget for the purpose of arrive at
new budget through make changing the past budget.
Advantages
This budget provides advantages to company to reduce any excess expenses in current
year budget.
8
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It does not need specific qualifications to prepare this budget. Person can develop
incremental budget through understanding previous budgets.
Disadvantages
The estimations are mainly used in previous year budget, which may not be certain in
current year budget.
It consists more spending in order to obtain the favourable variables for existing
budgeting of transactions of organisation (Parker, 2012).
Contingency planning tool: It is mainly used for the purpose of managing unexpected
conditions at the time of performing any activities for attains the business outcomes. Such tool
aids for Rolls-Royce in developing as well as executing plans, actions and strategies in order to
deal with risky and unfavourable conditions, which are arising at workplace.
Advantages
Through this tool, managers of Rolls-Royce can address issues quickly for reducing any
risks to attain the desired outcomes. Contingency planning tool provide the benefits through searching unfavourable
conditions and take corrective actions for minimise any kind of hurdles.
Disadvantages
The actions taken are not helpful to get over from situations because of adequacy of
knowledge for better understand arisen situations.
It is more time taking and reactive procedure that can develop negative impact on
business.
Use of various planning tools and their application
In decision-making process, planning tools plays a most necessary role. It aids
management of Rolls-Royce to take important decision for make improvement in business
operations in significant way for earn high profit. With the help of this, company can retain at
market place for long period and make improvement in its financial position (Renz, 2016). There
are many different planning tools for an instance Incremental budget, Flexible budgets and
Contingency planning tool, which aids management to examine its past performance and search
problems. The issues can be related to the financial and market position of company. The
manager of Rolls-Royce firm uses its past budget for preparing the new strategies for maximise
9
incremental budget through understanding previous budgets.
Disadvantages
The estimations are mainly used in previous year budget, which may not be certain in
current year budget.
It consists more spending in order to obtain the favourable variables for existing
budgeting of transactions of organisation (Parker, 2012).
Contingency planning tool: It is mainly used for the purpose of managing unexpected
conditions at the time of performing any activities for attains the business outcomes. Such tool
aids for Rolls-Royce in developing as well as executing plans, actions and strategies in order to
deal with risky and unfavourable conditions, which are arising at workplace.
Advantages
Through this tool, managers of Rolls-Royce can address issues quickly for reducing any
risks to attain the desired outcomes. Contingency planning tool provide the benefits through searching unfavourable
conditions and take corrective actions for minimise any kind of hurdles.
Disadvantages
The actions taken are not helpful to get over from situations because of adequacy of
knowledge for better understand arisen situations.
It is more time taking and reactive procedure that can develop negative impact on
business.
Use of various planning tools and their application
In decision-making process, planning tools plays a most necessary role. It aids
management of Rolls-Royce to take important decision for make improvement in business
operations in significant way for earn high profit. With the help of this, company can retain at
market place for long period and make improvement in its financial position (Renz, 2016). There
are many different planning tools for an instance Incremental budget, Flexible budgets and
Contingency planning tool, which aids management to examine its past performance and search
problems. The issues can be related to the financial and market position of company. The
manager of Rolls-Royce firm uses its past budget for preparing the new strategies for maximise
9

profitability of company and make some improvement in its market position. Planning tools are
helpful for to develop better road map for attain the organisational objectives.
Annex (C)
10
helpful for to develop better road map for attain the organisational objectives.
Annex (C)
10
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