HI5017 Managerial Accounting Report: Executive Summary and Analysis

This report provides an executive summary of managerial accounting, emphasizing its role in economic information systems and strategic decision-making. It explores the evolution of managerial accounting, contrasting traditional costing with new guidelines, and highlights the importance of value c...Read More

HI5017
Managerial Accounting
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Executive Summary
The report includes that accounting is the essential element of the economic system
of information. Some surges believe that by particular procedure and needs the
accounting provides proper clarification for present and past economic entities and
analyses the pertinent which are directed for the market. It even provides the proper
guidance for the strategic future and includes solutions and motivations for all the
decisions which have been made by the organization. The report even analyses is
the evolution of managerial accounting through traditional costing still new
guidelines. The issue for creating the value-added and managing the third parties
requires to be present for the future in the information system.
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Table of Contents
Executive Summary......................................................................................................1
Introduction...................................................................................................................3
Part A............................................................................................................................3
Part-B............................................................................................................................5
Conclusion....................................................................................................................8
References.................................................................................................................10
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Introduction
The report depicts that managerial accounting and management accounting includes
the managers who utilize the provisions that are related to accounting information
order tales in association to inform the organization of themselves before the
organization decides upon a matter within an organization that adds the
management and the performance for monitoring the functions. Managerial
accounting is the profession that includes the performance and planning
management system that provides expertise for functional reporting for controlling
the management assistance in the implementation and formulation of the strategy of
an organization. It is the accounting method that invades reports documents and
statements with help of the management for making the decisions with a better and
associated to the performance of the business. Managerial accounting or
management accounting is used primarily for internal purposes. The important
objective for management accounting is related to assisting the company
management in performing the functions efficiently like planning, directing,
controlling, and organizing. Managerial accounting provides data that serves as the
vital source of the information that is used for planning. There is historical data that
gets captured through managerial accounting and it’s about the business growth that
is helpful in forecasting. It even analyses the data through accounting data which
represents the meaningful methods or ways through calculating the ratios and
properly projecting the trends. The information also analyses the decision-making
and planning.
Part A
1. Management accountant would be seen like a value innovator which is
amongst all the accountants:
The management accountant also plays a pivotal role in the business operations and
they are responsible for processing preparing and collecting the data that would
have the managers making the key decisions for planning through the corporate
strategies. Management accounting must not get confused with financial accounting
as the management accounting concentrates upon helping the executive that is
within an organization for making the decisions over the financial accounting also
provides information to all the people outside and inside the organization that is
related to business. It is a thing that generates energy and includes the results of the
organization and financial accounting simple eat the moon which reflects it
(Appelbaum et al., 2017 pg-98).
Pros
Management accounting includes various types of advantages by the effective
system of management accounting which could enhance the all over performance of
an organization.
Increase efficiency of an organization- The companies of the management
accounting for increasing the efficiency for the organization for performing the
operations. It even contributes to striking the better performance through comparing
an evaluation. Management accounting also makes it very easy for achieving several
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results and it includes indirect motivation for the employees for striking the better
performance. As an outcome of the received rewards in promotion, we include
management accounting which indirectly increases the company's efficiency as a
whole.
Simplifies the making of decisions in the financial statement- The managerial
activities and decisions of the management in need of the simplified report for
financial statement for an organization. There are actions in management accountant
that creates the detailed report of technical with the simpler interpretations. The
manager presents the important facts for the financial statement which enables them
to manage the officers for taking the appropriate decisions that are related to the
betterment of the company.
Enables businesses fluctuation with monetary fund- The important factors of the
business in a monetary fund include management accounting which enables for
controlling the fluctuation of the monetary fund. Monetary accounting also studies the
fund's flow. It also helps out in maintaining emergency funds in a situation of the
agency. It even helps out in any emanating the source inside the company which
misuse is all the funds.
Transparency of cost- It also incorporates the world which includes the majority of
the cost for information technology. It works with the management accounting for the
organization that includes the department of it. It includes actions that make sure
about the budget action which provides the transparency of cost for an organization
(Jiambalvo 2019 pg-32).
Based on the manual maintenance of records- The system of management
accounting requires the information that is associated to cost accounting and
financial accounting. Some records are prepared through management accounting
and there based upon the records which are maintained. However, there is an
efficiency of records that are presented and relies upon the accuracy of records
which is also maintained (Weygandt et al., 2018 pg-56).
Biased interpretation- The personal interpretation also matters very much for
making decisions and the preparation of reports through the management officer
gets based upon interpretation's capability and understanding. The bias and
prejudice knowledge of a subject make then I'm possible for an organization to come
with an accurate decision. However, it becomes very impossible for getting effective
results in the end.
Deficiency of several vital management accounting skills- The description of the
job for management accountants in-wall subjects such as cost accounting statistics
economics and financial accounting. It further in walls inside of psychology and
sociology. There is a lack of knowledge that is related to the subject which might
affect the results of the management accounting.
Concept of the value chain for management accountant
As per CIMA the sequence of the value chain for business activities through which
the perspective of end-users gets added to services and products which are
produced through entity. The value chain evaluation is based upon the principle
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where the organization exists for creating value for customers. An evaluation of the
activities of an organization or divided into a separate set of activities where the
values are added. The organization could effectively evaluate its internal capabilities
by examining and identifying the activities. The evaluating objectives are considered
for the potential source of competitive advantages (Nitzl & Chin 2017 pg-32).
As for the ABC, management accounting would firstly recognize because of the
drivers which would be the cost of the capital tool there the value of production
rejection rate is due to the defect of quality and wages rate. The portable would
recognize the driver causes which would be quantifiable for being there in the scale
of economy learning experience which affects the utilization capability.
The utilization of the value chain would allow getting separate activities inside the
parts how is it would also permit the organization for achieving the former in size for
elements which could affect the cost. This would even enable them in comparing the
unit cost and differences directly in the chain. Inside the organization, they would be
general ranges of the product which would be sold to the various segments and
buyers that even includes the outcomes which would be the behavior of a cost in
cyber value change (Di & Varriale 2018 pg-24).
Strategic decision
The management accountant under the group of BHP for Australia involves the
decision-making of a strategy. It includes the role of managerial accounting and
where it includes a link among these strategies for the organization and there are
present actions that are taken to achieve the objective effectively. The management
accountant would be the one who would provide financial and operational
information which is needed through the manager in association to achieve strategic
objectives. For example, the account in management under the BHP group includes
significant decision-making that reflects the goal for the organization.
Operational decision
AS a management accountant I am utilizing the important data to make the sense of
the situation in a rabbit wave. I am even utilizing the budget to make the decision
that is of short term in an effective way. For example, the decisions of operation
would be the decision that would be related to details and information of work which
required to get completed through meeting the strategic plan objectives and to
implement the details. The operating decisions are in association with customers
who get this scheduled production.
Part-B
a) Benefits of implementing costing based on activity-
Below mentioned are the benefits of implementing the ABC costing method:
 Reduces the Cost
Implementation of the ABC method would help the company in cost reduction by
giving the information which is useful for the company about the opportunities
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available for the company. This will also be helpful for the company in making their
decisions because that classifies the various activities that are to be carried out
effectively. Moreover, that will also help the company is concentrating on the
activities which are crucially important and to ignore the activities which are not
important (Javid et al., 2016 pg-34)
 Properly classifies the Cost
Activity-based accounting will also benefit the company by specifically classifying the
cost which is incurred by the company. In addition to this, there are various kinds of
costs like manufacturing cost, marketing cost, and Advertising cost. By the
implementation of activity-based costing always cost can be allocated simply. (Ray,
2012)
Other methods of costing are unable to classify the cost. For analysis, the company
uses the cost based on volume. To all the methods of Costing are not used by the
industries which are waste on volume- driver cost.
 Improves the performance
By the implementation of activity-based costing the performance of the company will
be e increased effectively. This will be helpful for the company as it will help in the
identification of the activities which should be adopted by the companies and the
activities which are not useful for the companies and should not be adopted by them.
Classify the activities which can improve the efficiency and performance of the
company and activities which will not. This results in a reduction of unnecessary
costs.
The Other cost system generally focuses on compiling the accounting rules and
procedures. They ignore the point of cost reduction. Additional these kinds of
methods might follow traditional regulations and rules but also help in reducing or
eliminating unnecessary expenses.
 Helps in Buying or making decisions
Costing which is based on activity will help the Company in knowing whether they
should perform the activity by themselves or they should hand it over to the
subcontractor. If they are Carrying out the activities by themselves this is results in
the company at a higher cost then they are needed to hire a subcontractor who can
perform this activity at a low cost. Similarly, the cost of the subcontract is higher than
the company should do the activity by themselves. On the other hand, the other
costing systems will not tell the company any suggestions regarding higher cost or
low cost they will let the company do activity even if the cost of an activity is high.
Indicate overall the company has to enquire high cost.
 Simple Cost determination
The use of activity-based accounting will be helpful for the company as it will identify
the cost which is incurred while caring for our activities in an effective manner. Every
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single time when activities are completed or it is being transferred to two different
departments in the company e than with method will talk about the cost which will
increase while transferring the activity from one department to another. Moreover,
this will also help the company in effectively evaluating the performance of both the
department.
If compared to the method of costing only e activity-based costing method provide
the detail of activities about there each stage. It will also provide the detail about the
whole cost which is incurred at the time of completion of activity and will talk about
the functions done effectively.
 Gives useful information regarding product/service
The method of activity-based accounting will help the company in making efficient
pricing policies for the companies as it tells the appropriate price of the service and
product. Not only helps in deciding the appropriate price of products and services but
this is also helpful for the company in realizing the correct price range for their
product which will help them in achieving their desired profits. Moreover, activity-
based accounting provides Useful information about the product and service which is
useful for the company and will help the company effectively. (Blum et al., 2013 pg-
14)
All the other methods of Costing used the traditional rules and regulations of course
saying which limit them from providing kind of information. In addition to the counting
days done activity also and locate the cost of production based on volume and also
please reach and every activity on the company or the company has to take care of
everything by themselves. This does not let the company concentrate on whether
they are having a loss of profit for the cost which is incurred is high.
Examples of the companies that will be using the ABC method of Costing: -
 Ford automobile company is one of the companies which adopted activity-
based accounting. They used the ABC method of costing to keep a check on
the cost that occurs at each stage. Moreover, the use of this method which
will tell them about the cost at every stage. This will also identify and tell the
company about the activities which are useful and should be carried out and
the activities which should be eliminated.
 One more company that will be using the ABC method of Costing is Chrysler.
The company observed that Millions of dollars could be saved by the use of
activity-based accounting. The reason behind this is that activity best
accounting tells the company about the cost which is useful and because that
is needed to be eliminated. With the decrease in the reduction of production
cost the profits of the company will also increase and this will be also effective
for the production of the company as it will speed up the activities. Tell this
also have the company by combining several steps of the production or this
method is helpful in manufacturing of products which not only reduces the
cost but also help the development of products. Moreover, activity-based
accounting tells the company the point to focus which not only saves time but
also makes the process of the company efficient and effective. (Almada et al.,
2014 pg-3)
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 Coca-Cola company uses day activity-based accounting method to classify
the cost. Activity-based accounting is helpful for the product which has a large
variety or the inventors which are large. The cost which occurs in the
maintenance of these is something that cannot be ignored. By the use of
activity-based accounting, the Coca-Cola Company will classify their products
that are sold in the international market and also the products which are not
sold in the international market. By this classification of their product, The
Coca-Cola Company will be able to set the perfect pricing policy for their
product. And does this will increase their profit and help they will graining the
desired profit from the products which are sold in both internationally and
products which are not sold internationally. (McKinlay & Starkey 2017 pg-23)
b) ABC method as a tool of planning or decision-making: -
The implementation of the activity-based costing method is helpful for all those
organizations are companies who want production in their cost and increasing profit.
Other than this, activity-based accounting initiated manufacturing with the efficiency
of all kinds of products and services. This method will be helpful for the company in
the identification of cost and will also help the company through combining the
various stages of production which will decrease the time of production of products
or services. Moreover, this will also help in eliminating the cost which is unnecessary
for the company and will also contribute to manufacturing and production of products
by decreasing the time of production. All this will also be helpful for the company in
making their decisions and planning. Mother benefit accounting waste cost things in
decision making and planning tool are mentioned below:
 The company and understanding and implementing the process of production.
But the company will make the decisions about the cost which is useful and it
needed to be incurred and the cost what should be eliminated from the
production. By reducing the cost, it will also write the company in combining
various steps in the process of production which will save the time production
process. This helps menu planning for the production and making the
decisions to reduce the unnecessary cost. So, it makes the process of
production of company efficient.
 If the company wants to decide between weather, we want to use specific
activities in this case they will do a comparison among estimated budget and
activities actual performance. Activity-based accounting will contribute to
helping the company for making the decision effectively. If the company finds
that the results which are provided by actual performance are better in
comparison to the estimated budget then the company will decide the
activities that should be carried out. Every situation is opposite that which
means that the results of actual performance are giving less good
performance in comparison to budget estimated then the company will find its
substitute. However, in both the case the method of activity-based accounting
will help the company in making their decision about which method is battle
for the company.
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Conclusion
This report concludes that the use of activity-based costing will help the company
and Management in fixing the appropriate price for products and services by making
beneficial pricing policies. And by classifying different activities will help the company
in effectively performing their activities. The accountant of management will be
providing the operational and financial information that is required for the managers
in planning for the strategies which will help in effectively achieving their objective.
References
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approach to enhance decision making in a Lean context: A case study. International
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https://www.emerald.com/insight/content/doi/10.1108/IJQRM-04-2013-0063/full/html
Appelbaum, D., Kogan, A., Ashely, M. and Yan, Z., 2017. Impact of business
analytics and enterprise systems on managerial accounting. International Journal of
Accounting Information Systems, 25, pp.29-44.
https://www.sciencedirect.com/science/article/pii/S1467089517300490
Baldoni’s, T. and Dyreng, S.D., 2021. Special Interest Forum on the Interface
between Managerial Accounting and Tax.
https://meridian.allenpress.com/jmar/article-abstract/33/1/1/464906
Blum, M.G., Nunes, M.A., Prangle, D. and Sisson, S.A., 2013. A comparative review
of dimension reduction methods in approximate Bayesian computation. Statistical
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https://projecteuclid.org/journals/statistical-science/volume-28/issue-2/A-
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10.1214/12-STS406.short
Di Vaio, A. and Varriale, L., 2018. Management innovation for environmental
sustainability in seaports: Managerial accounting instruments and training for
competitive green ports beyond the regulations. Sustainability, 10(3), p.783.
https://www.mdpi.com/271918
Javid, M., Hadian, M., Ghaderi, H., Ghaffari, S. and Salehi, M., 2016. Application of
the activity-based costing method for unit-cost calculation in a hospital. Global
journal of health science, 8(1), p.165.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4803948.
Jiambalvo, J., 2019. Managerial accounting. John Wiley &
Sons.https://books.google.com/books?
hl=en&lr=&id=QB7HDwAAQBAJ&oi=fnd&pg=PA1&dq=Managerial+accounting+&ots
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McKinlay, A. and Starkey, K., 2017. Between Control and Consent?: Corporate
Strategy and Employee Involvement in Ford UK. In A Flexible Future? (pp. 157-168).
De Gruyter. https://www.degruyter.com/document/doi/10.1515/9783110863345-
010/html
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Nitzl, C. and Chin, W.W., 2017. The case of partial least squares (PLS) path
modeling in managerial accounting research. Journal of Management Control, 28(2),
pp.137-156. https://link.springer.com/article/10.1007/s00187-017-0249-6
Ray, S., 2012. Relevance and applicability of activity based costing: An
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https://www.academia.edu/download/35054358/596-1587-1-PB.pdf
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Accounting: Tools for Business Decision-making. John Wiley & Sons.
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