Managerial Accounting: Case Study Analysis and Report

This report provides a comprehensive analysis of managerial accounting, exploring various methods and techniques such as Activity Based Costing (ABC), Just-In-Time (JIT), and Total Quality Management (TQM). It examines the relevance of Management Accounting Systems (MAS) in contemporary organizations, supported by a case study of a multinational manufacturing company. The report discusses the application of these methods, including their impact on cost management, production processes, and overall business efficiency, highlighting how MAS facilitates informed decision-making at all organizational levels. Furthermore, the report emphasizes the importance of MAS in a globalized and competitive business environment, addressing topics such as cross-functional perspectives, customer value, efficiency improvements, and the role of e-business. It concludes by summarizing the key findings on the significance of MAS in modern business operations.

MANAGERIAL
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Identification of different types of management accounting methods and techniques from
given case.....................................................................................................................................1
QUESTION 2...................................................................................................................................3
Relevance of MAS in the context of contemporary organisations..............................................3
QUESTION 3...................................................................................................................................4
QUESTION 4...................................................................................................................................5
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The concept of Managerial Accounting consists of a variety of internal systems which
enable the business to analyse, evaluate and measure their internal as well as external
environment in an effective manner so as to facilitate informed decision-making practice by the
management across all organisational levels (Balina and Idasz-Balina, 2018). Some of the most
important components of managerial accounting include budgets and internal management
performance reports among others. This report aims to provide a Journal Article Critique,
specifically two articles. These are mainly related to implementation of modern management
accounting systems as well as Australasian Accounting Business and Finance largely focusing on
evidence from Bangladesh regarding Board Composition as well as Firm Performance.
Additionally, it compares and contrasts the two articles supported by relevant evidences on the
basis of which inferences are drawn. These help in drawing conclusions regarding whether or not
MAS is relevant to organisations in the present day scenario.
QUESTION 1
Identification of different types of management accounting methods and techniques from given
case
Essentially, Management Accounting can be defined as the provision of financial data
to the management of the company in order to facilitate informed decision-making practice
within the organisation. This includes a variety of techniques and methods that may be adopted
by the firms based on the operational requirements of the company. Adoption of such
methodologies was mainly related to either bringing about a long-term strategic change or a
short-term operational one (da Cunha, Toigo and Picolli, 2016). In the context of given case
scenario, the following methods have been identified and discussed as under:
 Activity Based Costing (ABC):
In regards to the Contemporary Management Accounting Tools, this technique assists the
organisation to achieve economies of scale by providing the benefits of effective cost
management practices. This was established to provide a way of generating a far more precise
depiction of how the operations carried out to create a product or service effectively affect the
expenses. ABC also helps in removing distortions from traditional cost accounting systems, thus,
enabling the business to acquire accuracy in determination of costs for their product or service
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offerings. The case study also dwells upon the fact that such a technique is effective in allocating
resources to activities which are further helpful in identifying cost objects through imputed
causal relations based upon volume and non-volume related drivers.
 Just-In-Time (JIT):
In present day scenarios, manufacturing companies undertake this management
accounting technique so as to enhance their overall production process. Just-In-Time can be
defined as the workflow methodology wherein the primary focus is placed on the optimisation of
production flow times along with response time from suppliers as well as towards customers. In
the context of given case scenario, the multinational manufacturing company would include
different types of inventory such as Raw Materials, Finished goods and Work-in-Progress.
Implementation of JIT would ensure that there is a complete alignment between production
schedules and supplies acquisition for the purpose of undertaking such an activity within the
organisation (de Faria, 2017). As a result, the overall efficiency is increased as the waste
generated during the manufacturing procedure is minimised. At the same time it have some
drawback also such as it require more planning because companies need to have a close
understanding of their marketing patterns and variances. Most firms have temporary sales cycles,
which means that owing to greater supply a amount of products will need a greater inventory rate
at certain moments of the year. Furthermore, manager will have to make sure that providers can
fulfil distinct quantity demands at distinct moments in preparation for inventory rates.
 Total Quality Management (TQM):
This type of management accounting technique is one which is applicable across all
organisational levels and chiefly lays its focus upon the continual improvement of all those
business processes that are mainly related to the quality of inputs as well as outputs. In the
context of given case scenario, through the implementation of TQM, the multinational company
may be able to eliminate or diminish errors which are commonly found during the manufacturing
process. This guarantees that each worker works to strengthen the job culture, procedures,
facilities, structures, and so on in order to guarantee long-term achievement. As a result, it
enhances safety as well as the overall customer experience which in turn creates competitive
edge for the business within an ever-evolving environment.
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QUESTION 2
Relevance of MAS in the context of contemporary organisations
In present day business scenario, complexities within the business environment have
become more pronounced (Irsyadillah, 2016). As a result, the firms have undertaken a variety of
Management Accounting Systems (MAS) in order to make informed decisions across all
organisational levels. Thus, it is important to analyse the relevance of MAS in the context of
contemporary organisations which has been done in the following manner:
i) Evidence from Multi-national Manufacturing Company:
In the context of the given case scenario, manager of company A use to fix the KPI which
are prepared from the historical example for every production facility. While making tactical
decision these KPI assist in the measuring the performance in context of defined targets which
remain related to Company A. It has been also noticed that in order to fulfil the requirements of
external and internal shareholder such as customer, employee, community and strategic manager
of respective firm by focusing on external collected information rather than on information that
is supplied internally. Company-A has introduced a scheme that involves features which
particularly includes a range of company tasks, but it in respective firm the decision mechanisms
that establish the system's significance. In context to the decision of implementing management
accounting system there have been different range of techniques that were built into the system
of SAP R/3 such as ABC, JIT, TQM, BSC, standard costing and benchmarking. These system
provide a better functioning for respective firm for example earlier it was a simple manufacture
with few raw material and some steps in respect of manufacturing process. The system enables
interconnected use of these methods for Company-A such as manager have generalized its
method and used some of the main elements of each scheme. This implies that they use provide
some activity engines to distribute costs, operate some score cards, do sometimes comprehensive
internal and external benchmarking, use some resources and maybe some services just in
moment and have created their own TQM iteration that includes safety (Naseri and Hosseini,
2017).
ii) Discussion about management accounting systems in company.
Globalization escalation, economic reform, and rapid production and IT advances have
led in a more difficult and turbulent worldwide competitive and production environment.
Companies must be responsive and sensitive to the evolving requirements of their regional and
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overseas markets in order to thrive and survive in current business environment. This needs
companies to evaluate and monitor their production procedures and strategies continually,
including implementation of Advanced Manufacturing Technology (AMT). AMT is one of
company's embedded manufacturing methods for reducing expenses, improving quality, and
quicker manufacturing procedures to guarantee constant improvement. AMT implementation
results in substantial modifications in the manufacturing cost-structure, resulting in drastic
increases in overhead expenses while direct labour costs become a lower element of production
costs. In addition, many companies are experiencing a decrease in organizational efficiency
owing to the latest economic crisis influencing companies globally (Management accounting
systems in another real-life, 2019).
Companies use various steps to mitigate their efficiency, including continuously
improving manufacturing processes, but many found it difficult to maintain their market-
positions. Companies have been asserted to have to alter their management control systems
including modifications in communications channels such as Management Accounting Systems
(MAS) in order to meet present data requirements as the conventional management accounting
model is thought to be unable to provide appropriate and meaningful data. Marketplace's
intensifying difficulty and competition require companies to continually review and alter their
approach and how they work to survive and maintain their business positions. For manufacturing
companies, in order to stay competitive and attain the required output, it is essential to embrace
more advanced manufacturing processes. The data supplied by conventional MAS is asserted to
be outdated and unable to assist companies compete in a state of fierce competition and therefore
should be altered to suit managers ' evolving data requirements in advanced manufacturing
atmosphere. Managers would need wider information ranges in this setting to make efficient and
quicker choices (SIMSEK, 2017).
QUESTION 3
In present business world each and every management accounting system have been
playing a major role to deliver the best suitable framework which ease the process of
manufacturing and producing for almost every firm. The different type of system have played a
wider role for companies in present competitive and uncertain business environment. Such as:
Cross-Functional Perspective: Management accounting system seems to have a multi-
functional view and management accountant needs to comprehend many company tasks, from
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production to advertising to customer service delivery. When attempting to improve client
importance, all of a company tasks become interconnected; a choice that impacts one impacts the
other.
Increasing Customer Value: In present time expanding customer value is accomplished
by selecting policies to generate a feasible competitive advantage. In this phase, cost information
performs a key position and acts though a method called strategic cost management which is one
of the best techniques of management accounting system. Strategic cost management uses the
cost information in order to create and define suitable approaches that will yield a competitive
advantage which is viable for any company dealing in competitive environment. A concentrate
on customer valuation implies that both recognition and exchange data should be produced by
the management accounting system (Sinaei and Kardani, 2017).
Improving Efficiency and Reducing Time: Selling and delivery in all stages of
manufacturing processes must be an important goal for all companies. Companies should offer
goods or services to the client rapidly by removing non-value-added goods or services on regular
basis. Reduction in non-value added moment corresponds with performance rise. For many
sectors, technological innovation might have risen as well as the lives of a specific good
produced by company may remain form short time due to continuous changes arising within
industry. Managers should be willing to react to altering business circumstances rapidly and
decisively and the information should be accessible from management accounting system such as
inventory management system which enable them to make meaningful decision.
Electronic Business (E-Business): Management accounting system such as Activity
based costing use to performs an important part in e-business by offering appropriate cost data
on its advantages, hazards and possibilities. Through communication and information
technology, e-business transacts company. E-commerce uses information and communication
technology to buy and sell products. For example, the costs per electronic transaction rather than
one of costs per paper purchase have to be known to business executives (Sulastri, 2015).
QUESTION 4
In the different article there has been a detail description about the importance of
management accountant system, which ease the entire business operation of company. For
example, in company A, it follows that the management accounting methods accessible to the
SAP R/3 business in its initial format are not exactly appropriate to the setting of the business.
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The reality that Company-A has exploited aspects of a variety of management accounting
methods and incorporated them into a current structure reflects their worry about the suitability
of a single method. From the article it has been determined that using management accounting
data, it has been disclosed that each leadership level uses the scheme in different respects and in
different degrees to fulfil its leadership duties. The use of the accounting management scheme
shows a level of significance, but some of it focuses on the stage of organizational and tactical
decision-making (Trequattrini, Nappo and Lardo, 2015). Due to the clarity of the production
process the use of ABC and BSC was regarded as essentially unwanted, while JIT and TQM
elements were integrated and adapted to fit the organization. The interviewees regarded the cost
and time needed to completely integrate such method unjustifiable. This method focuses on
monitoring deviations from KPIs and planned statistics and then track and assigns them at the
time period sale for company. This method is not too complex on a concentrated scale, but it is a
much more complex scheme worldwide.
It was also founded management accounting function adopted by Company-A revealed
some challenging
results. The information presented by the MAS must take into consideration the time and
workable area accumulation and eventually also the technical or judgement models. Management
takes choices at each stage that fall within its expertise and accountability. Such as despite
academic discourse about the suitability of ABC to producers the management of company take
decision in the context of ABC by dismissing it has a authorized method. On the other side BSC
was used carefully, but the BSC model was also regarded as essentially unrealistic. Each
management accounting method seems to have chosen parts to be used, leaving unoccupied or
unimplemented most of the method. The reality that Company-A has exploited facets of a variety
of management accounting methods and incorporated them into a single scheme reflects their
worry about the suitability of a single method. It was also determined that in Company A various
management accounting system is restricted due to the nature of the recovery of data and the
realization that most of the features is pointless. Company-A chose not to create further changes
to the system, but to roll-back the setup and the management has planned to revert to an
internally advanced method called "multi-level production variance" which support in
developing more advance and beneficial goods for customer.
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In order to help organizations survive in a competitive scenario, MAS data is anticipated
to provide helpful data for planning, managing, tracking and decision making. Thereafter this
data can be used to enhance the efficiency of the organization. Management Accounting
evaluates all actual and cost-based expenses in the activities of a manufacturing company. This
data is used collectively by executives to properly manage business and is not disclosed to
institutional creditors and investors relative to financial reports that fulfil internal reporting
norms. Each management accounting system is customized, and that each system provides three
fundamental capabilities: production operations assessment, control and planning. The objective
is to calculate the total expenses of the products correctly so that they can be priced properly.
Labour, raw-materials and overhead expenses are monitored by total expenses as well as by
period expenses. These numbers enable executives to optimize activities by using the correct
quantity of labour, decreasing waste, and determining and eliminating all indirect costs accrued.
Technology advancement has compelled manufacturing companies to embrace advanced
manufacturing methods in order to obtain competitive benefits. Adopting these methods would
have an impact on managers' data requirements. The data range supplied by management
accounting systems performs an significant role in enhancing organizational efficiency in AMT
settings in this research. The wider the data of MAS, the smarter the organization can attain its
performance goals (Widianingsih, Maghfiroh and Sunarmo, 2019). It implies that if executives
use more external, non-financial and future-oriented data supplied by MAS, their performance
objectives will be more likely to be met. External data on financial circumstances and
potential for certain events, for instance, could assist executives find methods to attain desired
performance goals. In addition, the data provided during meeting sessions confirms the
significance of wide range MAS data. All participants accepted that to accomplish their intended
performance, they used non-financial, forward-looking, external data, to manage their activities
such as monitoring revenues, compilation, and inventory status. Overall, the findings indicate
that the AMT- performance connection is indirect, instead of direct, through management-
accounting systems. This finding is comparable to the research by Dean and Snell (1996) that
AMT had no important performance connection. The perspectives collected through the non-
structured interviews even farther support this outcome. Rising costs of industrial machinery,
spare components, servicing and personnel, as well as incorrect cost structure, absence of
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feasibility study, and cost factor are one of the major variables listed by the respondents which
could negatively influence the efficiency of AMT companies.
CONCLUSION
Management accounting Plays important role in different types of organisation that
develop bridge between the finance function and other parts of the business. Through their
systems control activities and ensure about the long term success. There are including different
types of management accounting methods that can help to effectively analysed all business
activities such as financial statement analysis, fund flow analysis, budgetary control etc. On the
basis of these methods ascertain all operational activities and find out the actual position of the
company. With the help of different methods get financial information that utilised to present in
front of board of directors. On the basis of these information they were taking appropriate
decision effectively. Management accounting system is internal part of the company that utilised
by the manufacturing company in order to smoothly run organisational procedure. There are used
such systems, job costing system that was related to specific job, inventory management system
to track raw material at different production level, price optimization system to set specific price
structure for different types of products and last cost accounting system to analysed cost of
product to calculate profit.
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REFERENCES
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auditoria: uma análise bibliométrica e sociométrica de periódicos internacionais. Revista
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Irsyadillah, I., 2016. Critical Theory And Accounting Research: A Critical Review. Proceedings
of AICS-Social Sciences. 6. pp.279-284.
Naseri, H. and Hosseini, M., 2017. Identification and ranking of effective factors on operational
budgeting of Municipality of Golestan province. UCT JOURNAL OF MANAGEMENT
AND ACCOUNTING STUDIES. 5(03). pp.76-80.
SIMSEK, H., 2017. Considerations of Managerial Change in Knowledge Based
Organization. Valahian Journal of Economic Studies. 8(4).
Sinaei, A. and Kardani, H., 2017. Identification and Prioritization of the Hindrances to the
Application of Human Resources Accounting in Iran with AHP Approach. Journal of
Economic & Management Perspectives.11(4). pp.1062-1073.
Sulastri, P., 2015. Akuntansi Keperilakuan Terhadap Pengembangan Akuntansi
Manajemen. DHARMA EKONOMI. 17(32).
Trequattrini, R., Nappo, F. and Lardo, A., 2015. Accrual Accounting in the Italian Higher
Education System: A Case Study. Administratie si Management Public. (24). p.6.
Widianingsih, R., Maghfiroh, S. and Sunarmo, A., 2019. Pengaruh Teknologi Informasi dan
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Online
Management accounting systems in another real-life. 2019. [Online] Available through
<https://umexpert.um.edu.my/file/publication/00004718_71862.pdf>
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