Management Accounting Systems in Ramboll: A Comprehensive Analysis

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Management accounting
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Table of Contents
Activity 1.........................................................................................................................................3
Introduction....................................................................................................................................3
Conclusion......................................................................................................................................8
Activity 2.........................................................................................................................................9
Introduction....................................................................................................................................9
Conclusion....................................................................................................................................16
References.....................................................................................................................................17
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Activity 1
Introduction
This report demonstrates the understanding of the management accounting systems and how the
Types of the management accounting system applied in the Ramboll which is a UK based
engineering, consultancy, and Design Company which was founded in Denmark in the year
1945.
Part A
Management Accounting
It is a kind of presentation of the accounting information which helps in the formulation of the
policies, which is adopted by the management to do the day to day functions of the firm. It is the
process that helps in performing the functions such as planning, organizing, staffing and
controlling (Your article library, 2019).
According to J.batty management accounting is the term which helps in explaining the
accounting methods, strategies, and techniques which also requires specialized knowledge to
help the organization in achieving the profit maximization.
In the words of American accounting information:
It is a method that involves effective planning for choosing an action in the organization which
helps in controlling with help of estimation and evaluation of performances.
Types of management accounting system
Cost accounting systems
This system involves the production cost of the company by assessing the input cost of each part
of the process of production and also it involves fixed costs such as depreciation on the capital
assets. It is the process of recording and analyzing the costs and then comparing the results of
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input with the output of the firm and assists the company in evaluating the financial performance
(Xplaind, 2019).
Inventory management system
This system is the process of using an inventory of the company, storing and ordering which
includes the raw materials and the finished products and also the processing and the warehousing
products. Ramboll involves the manufacturing and the supply chain processes so keeping the
balances about the inventory shortage and the guts become difficult so in this situation this
system of management accounting helps in achieving that balance.
Job costing system
This system of accounting used by the Ramboll as it involves the determination of the
manufacturing costs which divides the different costs such as labour cost, overhead cost, and
material cost as well as estimating these costs at their actual values. By allocating the costs of
each order of customer this firm is using the job costing method to control the overuse of the
labour working hours, equipment and raw material (My accounting course, 2019).
Price optimizing system
This system uses the data to analyze and predict the behaviour of the buyers when it comes to
buying the product at different prices. Ramboll uses this system to identify the price structures
for the process of discount pricing, promotional and initial pricing. It is a kind of mathematical
ability that observes the customer's response towards the changes in the prices of the product
(Bain & Company, 2018).
Management accounting reporting
There are various ways of making the management reports some of these are as follows:
Performance Reports
These reports help in evaluating the performance of the company as well as the performance of
the employees which also helps the manager of the company to make important decisions of the
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organizations. Great performances are awarded in the company and underperformances are
encouraged and assisted to improve their performances so the performance-related reports also
show the deep view about the working of the organization.
Cost managerial accounting reports
It actually shows the relationship between the total products which are produced in the
organization and the total costs of those products such as labour costs, overhead costs, and any
other additional costs. It helps in knowing about the cost price and the selling price which further
helps in the estimation of the profit maximization process of the firm.
Some costs such as the hourly labour costs, overhead costs and inventory costs which also come
under this cost managerial accounting reports through which an understanding of the expenses
occurring are known.
Budget reports
This kind of budget involves the difficulty in making the reports of the organization as a whole
of each unit of the department or department wise for the large organization. Ramboll is a large
organization so it finds the difficulty in using this budget report. Although budgeting involves
the estimation about the future but it also helps in solving the future unforeseen situations.
This kind of budgeting helps the manager to make better cut costs, employee incentives and
renegotiate with the wholesalers and retailers that why this system of reporting is difficult for
any of the business.
Account receivables aging reports
Ramboll also performs the process of extending the credit, so this system of reporting helps in
breaking the balances of the customers which furthers assists in identifying the defaulters in the
organization. If there is a problem such as the more numbers of defaulter founded than the
expected then the company has to tight the credit process as cash flow is very important for the
operations in the firm. No matter what the situation is a company there will always be the debtor
which has to be written off so the company cannot make it a habit for the purpose of attaining
success in the long term.
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Other managerial accounting reports
There are various other reports such as the project reports, order information reports and various
other same kinds of reports which are very important for a business firm. These reports can be
attained either internally or externally in professional ways (Complete controller, 2017).
Part B
Cost Sheet as per Absorption Costing:
Particulars May June
Amount ($) cost pu Amount ($) cost pu
Direct Material 4,000 8 3,040 8
Direct labour 2,500 5 1,900 5
Prime Cost 6,500 13 4,940 13
Variable Production Overheads 1,500 3 1,140 3
Fixed Production Overheads 5,000 10 3,800 10
Factory Cost 13,000 26 9,880 26
Fixed Admin Overheads 2,000 4 2,000 5.26
Cost of Production 15,000 30 11,880 31.26
Add: Opening Stock - 30 6,253 31.26
Less: Closing Stock 6,000 30 2,501 31.26
Cost of Goods Sold 9,000 30 15,632 31.26
Over/Under Absorption of Overheads (1,000) (3.33) 200 0.40
Fixed Selling Costs 4,000 13.33 4,000 8.00
Sales Commission 750 2.50 1,250 2.50
Cost of Sales 12,750 42.50 21,082 42.16
Profit 2,250 7.50 3,918 7.84
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Sales 15,000 50 25,000 50
Cost Sheet as per Marginal
Costing:
Particulars May June
Amount
($)
cost
pu
Amount
($) cost pu
Sales 15,000 50.00 25,000 50.00
Less: Variable Cost
Direct Material 4,000 8.00 3,040 8.00
Direct labour 2,500 5.00 1,900 5.00
Production Overheads 1,500 3.00 1,140 3.00
Add: Opening Stock - - 3,200 -
Less: Closing Stock 3,200 - 1,280 -
Sales Commission 750 2.50 1,250 2.50
Total Variable Costs 5,550 11.10 9,250 24.34
Contribution 9,450 38.90 15,750 25.66
Less: Fixed Costs
Fixed Admin Overheads 2,000 4 2,000 5
Production Overheads 4,000 8.00 4,000 10.53
Selling Overheads 4,000 13.33 4,000 8.00
Total Fixed Costs 10,000 25.33 10,000 23.79
Profit/Loss (550) 13.57 5,750 1.87
Reconciliation Statement:
Particulars May June
Profit as per Absorption Costing
2,25
0
3,9
18
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Less: Closing Stock as per Absorption
Costing
(6,00
0)
(2,50
1)
Add: Opening Stock as per Absorption
Costing -
6,2
53
Add: Closing Stock as per Marginal Costing
3,20
0
1,2
80
Less: Opening Stock as per Marginal Costing -
(3,20
0)
Profit/Loss as per Marginal Costing
(55
0)
5,7
50
Conclusion
This report explains the advantages of Ramboll by using these types of management accounting
systems which helps in promoting and improving the growth of the organization. This report
reflects the adoption of different management reporting system by the Ramboll and also
discussed the integration of both the system and the reporting of management in the
organization.
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Activity 2
Introduction
Planning tools are tools that are used for planning and contingency. Without the application of
planning tools, any business organization cannot run or sustain in the long run. This is because of
the fact that due to dynamic environment or changes taking place in the business environment it
becomes crucial to properly develop several planning tools.
There are seven management and planning tools that are widely considered as planning tools.
However, the planning tools are not exclusive. Thus, there can be other planning tools as well
which can be formulated and accordingly applied as per the customized requirements of the
concerned business entity.
Activity network diagram, matrix diagram along with tree diagram are among one of the seven
management and planning tools. It is important to note that planning tools can also be considered
as one of the management accounting tools.
Part A
PERT
The Program evaluation and review technique (abbreviated to PERT) provides a visual map of
all the activities in the project arranged in their planned order. The main advantage of the PERT
chart is that it clearly illustrates the dependencies among the identified project activities and
brings out the critical path of the project.
To create a PERT chart one has to first identify all the activities that will be performed to finish
the project. For each activity, one has to identify the activities it depends on to finish before, and
likely estimate to finish the task. Then one can lay out these activities in the identified sequence
in the PERT chart. Once laid out, the activities, milestones and the critical path can be easily
identified. The Gantt chart also can be used as an alternative to the PERT chart (Christ, 2014).
PERT (Program Evaluation Review Technique) has two dimensions
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 PERT Chart – A PERT chart is nothing but graphical depiction of a project. It is similar to a
network diagram. It consisting of numbered nodes, in the form of circles or rectangles,
representing events, or milestones in the project linked by labeled vectors, directional lines,
representing tasks of the project.
 PERT estimation also known as three point estimation: This technique is also referred as Three
Point Estimation. This concept originated with the program evaluation and review technique
(PERT). PERT uses three estimates to define an approximate range for an activity’s duration i.e.
most likely, Optimistic and Pessimistic.
PERT is Project Evaluation & Review Technique, a tool used to manage large projects. It is
implemented generally in research type projects where activity duration is estimated. The
durations are estimated as optimistic, most likely and pessimistic. All the 3 durations are
weighted average & estimated duration arrived is incorporated in the schedule. Schedule
completion is also estimated & Std Deviation is plotted.
Benchmarking
A benchmark is normally created when there are no standards, or when standards are somehow
not very useful e.g. When Ramboll are operating within standard but Ramboll want to improve
on the existing level.
Benchmarking is not that easy piece of cake and before Ramboll conduct one it should be aware
of its advantages and disadvantages. Although advocates of Benchmarking claim exponential
improvement in company performances due to its implementation, there are a few disadvantages
of benchmarking that may discourage companies from implementing Benchmark Business
Solutions. An organization that has attained the benchmark tends to become complacent and
stops striving for continued excellence. This results in stagnancy which could ultimately lead to
the organization losing its edge that was the reason for its excellence (Grabner and Moers, 2013).
But Benchmarking also has some advantages which may be achieved through the use
of performance benchmarking tools such as:
 Improved performance
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 Facilitating Change in stagnant practices
 It allows for accommodating an innovative approach
Forecasting
People usually do not differentiate between prediction and forecasting and may use one or the
other interchangeably. Prediction: A Prediction is often based on experience and knowledge. It
means a random event. The need of prediction arises when the past sales trend is not available.
For example- Launch of a new product which was not available in the market.
Forecasting- Forecasting is of two types- Qualitative and Quantitative.
Example: new product launch where similar kind of products are already available in the market.
Quantitative methods can be used when past information about the variable being forecast is
available. The information can be quantified.
Many commodity futures speculators and forecasters base their analysis of the likely future path
of commodity prices on technical analysis, ignoring underlying fundamentals. Physical buyers
and sellers of commodities are increasingly using technical analysis to help guide their decisions.
Technical analysis involves looking at the past performance of commodity prices to predict or at
the least point to the potential risk of future price movements. Technical analysis contradicts the
Efficient Market Hypothesis, because it means that future movements in commodity prices can
be ‘predicted’, to some degree at least based on historical price movements (Kalkhouran, et. al.,
2015).
Some argue that there are too many unknowns to predict future physical supply and demand for a
particular commodity. And they argue that, even if they could, the correlation between price and
the physical fundamentals is too loose to be of any use.
Researchers at the Copenhagen Business School sought to work out whether technical analysis
has any long lasting predictive power. They looked at three methods used in technical analysis:
moving averages, rate of change and the relative strength index (RSI). First, technical analysts
might take the near term futures price rising above the 200 day moving average as a sign that
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