Managerial Accounting Training Report: Red Duv Aviation Details

This report provides a comprehensive overview of managerial accounting principles and practices, focusing on key areas such as the definition and purpose of managerial accounting, the responsibilities of a management accountant, and the differences between financial and managerial accounting, including ethical standards. It further explores job order costing, contrasting it with process costing, and details the flow of costs in job order systems. The report also covers process costing, including the flow of costs, equivalent units of production, and the significance of production cost reports. Additionally, it discusses cost management systems, activity-based costing (ABC), and advanced management accounting techniques like just-in-time costing and total quality management. The document also examines cost-volume-profit (CVP) analysis, variable and absorption costing methods, and relevant information for decision-making, including capital budgeting techniques. Finally, it touches on budgeting and standard costing for cost control. This document is available on Desklib, which offers a range of solved assignments and study resources for students.

managerial accounting
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Table of Contents
Answer to question 1.............................................................................................................................2
Answer to question 2.............................................................................................................................4
Answer to question 3.............................................................................................................................5
Answer to question 4.............................................................................................................................6
Answer to question 5.............................................................................................................................7
Answer to question 6.............................................................................................................................7
Answer to question 7.............................................................................................................................8
Answer to question 8.............................................................................................................................8
References.............................................................................................................................................8

Answer to question 1
Managerial accounting is an indispensable tool in the management of business
operations. This is an extremely critical process that lays an immense impact on the
success of the financial entity. It allows the managers of the business organisation to
exploit the data and information of its financial statements to enable better decision
making process. To define briefly, it is a profession that considers the necessary
requisites and provides management related solutions (Alexander, 2016). It aids in
proper planning, deployment and performance of the organisational strategies. The
major objectives of purposes behind Management accountancy are listed as follows-
a. It provides assistance to the managers in planning and formulating necessary
forecasts and budgets to develop a proper strategy.
b. It aids in thorough and brief understanding of financial information and
providing managerial solutions.
c. It motivates the employees of the business organisation through better
implementation of the production strategies.
d. It is an effective tool to control managerial performance and coordinate
internal business operations thereby to improve managerial and financial
performance.
e. It is useful in assessing the efficiency and effectiveness of the formulated
strategies and policies (Bennouna, Meredith, & Marchant, 2010).
Hence, and managerial accountant is expected to be responsible enough in
carrying out his duties-
 He prepares data in the form of reports, forecasts, notes to financial
statements, etc.
 He is in liaison with several management staff and other colleagues.

 He undertakes financial administration and several internal audit at regular
intervals
 He develops and manages financial policies as well as several
management policies and techniques.
Management accounting is not the same as financial accountancy. It differs
vastly and such are listed as below-
1. Shareholders, lenders, investors, public regulators are usually concerned
with the financial information of the entity but only the managers of the
organisation are expected to use confidential management accounting
information (Werner, 2017).
2. Financial accounting information is used related to the past, hence it is
considered to be historical in nature, while management accounting is
forward-looking. It evaluates the past trends to develop a future policy for
effective results.
3. Financial information is usually case based as opposed to management
accounting is model based. It suffices the need of an effective decision
making process.
The below mentioned are the ethical conduct standards or principles which are
essential for the management accounting to comply with.
 They’re expected to maintain an appropriate scale of professional behaviour
and expertise to development of the talent and knowledge base.
 They are explicitly required to maintain strict confidentiality through
nondisclosure of internal information (Kew & Stredwick, 2017).
 Integrity is yet another principle they need to regularly abide by the insured
any avoidance of conflict through interests.

Answer to question 2
Every business organisation produces different units and each such variety has a
significant cost associated with its production lines. Hence, job order costing can be
defined as an activity of allocating exclusive costs to the associated production unit.
A job cost record is created separately for its special order a job to ensure
maintenance of each job’s cost. It hence, serves as a special separate document for
the cost of either work in progress or finished goods to be aware of its manufacturing
costs. Process costing on the other hand involves accumulating all costs for long
productions that comprise of products easily differentiated from each other
(Goldmann, 2016). The difference between job costing and process costing are as
follows: exclusive products
1. Job Costing is usually for exclusive and unique products while process
costing is for normal Standardised goods
2. Job costing is recommended for products having smaller production runs
while resist posting on the other hand is used for large production run
3. Job costing requires major paperwork in the form of record keeping since time
as well as material are charged to specific orders (Jefferson, 2017). Since,
process costing is known to accumulate all costs, it does requires less record
keeping.
The flow of costs in the job order costing is majorly considered to be associated
with the recording of direct material, labor and manufacturing overhead.
 Direct material and direct labour costs are charged to the work in progress
account. Any other material or labor cost that are in direct to the
manufacturing process is otherwise charged to the manufacturing
overhead account

 The cost of finished goods is transferred from WIP to finished goods
account
 When the final goods are sold, the associated costs are charged to the
COGS account.
Manufacturing overheads can be defined as the sum of all costs incurred from the
scratch of the manufacturing process. These include electricity for the equipment,
cleaning costs, material handling, wages of the employee in the factory, insurance
and other maintenance cost of the equipment (Heminway, 2017). There is a pre-
calculated overhead rate which is calculated on the given data. This rate usually
arises the difference between actual amounts of overhead incurred and the costs
applied. This difference is defined as under applied or over applied overhead. Under
applied overhead increases the cost of goods sold and thus decreases the net
income. Over applied on the other hand increases the net income.
Answer to question 3
Process costing is the management accounting technique of accumulating all direct
costs and allocating them to each individual product. This is usually undertaken by
those companies that produces homogeneous goods in large quantities. Flow of cost
means the path in which those costs move throughout the firm. Basic raw material is
added to process one that breaks down the input and produces a partially completed
product. This partial products sold as the input for the next process where further
manufacturing costs including labor are added to develop the final good. Hence the
three cost associated with process costing our raw materials, wages and
manufacturing overheads (Linden & Freeman, 2017). Equivalent unit of production is
the term used in process costing where the amount of work completed is that remind
on the basis of units of output produced. This is basically an expression of partially

completed units on the basis of fully completed units. This is usually compared to 1
finished product and likewise all the direct and indirect costs are allocated to it.
Production cost report is the detail explanation of the total operating costs relating to
the production of finished goods including raw materials, direct labour and other
manufacturing overheads. It is considered extremely useful for business managers
allowing them to undertake well organised and formatted business decisions for
product development and long-term decisions. It also helps them in making efficient
and effective marketing decisions as well through allocation of sales as well as
marketing resources. Hence, creating an accurate process cost report is important
for a successful business model.
Answer to question 4
Cost management system is extremely important to allow cost accountants to help
and provide managers of the business organisation with adequate information
regarding the course and the associated benefits of the product or service they are
willing to offer. It allows them
To exploit opportunities available with the least possibility of attracting threats and
being in a less profitable situation (Choy, 2018).
ABC or Activity based costing is a method of assigning cost of the product according
to each activity being consumed. It is an approach of monitoring the activities
performed and tracing the costs thereby. Hence, it allows the business organisation
to make sound business decisions by eliminating those products and services that
would increase the costs of the company then by lowering the profits. It also helps to
draw the attention of the managers towards those activities that are ineffective and
underperforming. Business organisations are now what is performing in challenging
market environment. Hence, to survive they have to meet the changing customer

needs through implementation of better strategies and policies. Just-in-time costing
and total quality management are those advanced management accounting
techniques that have proven to be of great use in producing quality products and
services (Visinescu, Jones, & Sidorova, 2017). Just-in-time can be defined as a
system that faces more emphasis on what, when and how inputs may serve
necessary results as better output. On the other hand, total quality management
aims to augment the quality of the product of service being offered through rigorous
improvement cycles to assure less defective products. Hence, the former works on
the quantity of inputs while the latter on the quality.
Answer to question 5
Cost volume profit analysis is a form of cost accounting that is used for short-term
decisions and elementary instructions. It employs several techniques like
contribution margin, breakeven analysis and margin of sales to determine the best
operating level at minimum costs as compared to other levels. Contribution margin is
the percentage of return after deducting the variable costs of the product from its
revenue. When the quantity of a product increases, its costs increases till a point
where profit for the firm is maximum (Johnson, 2017). Till this point marginal cost
reduces but after this point it increases again. Hence, it is essential for the
organisation to undertake a decision regarding its performance level to assure that
its profits are maximised.
Answer to question 6
Variable costing and absorption costing are two different management accounting
models that assess and allocate costs to associated products. Variable costing as
the term suggests includes only will be variable cost excluding all the fixed cost
associated with the product. On the contrary, absorption costing includes all costs

consisting of fixed and variable both. Hence, this is known as full cost method as
well. Hence, the variable costing increases the net operating income as compare to
the absorption costing (Sithole, Chandler, Abeysekera, & Paas, 2017). Furthermore
it also shows the contribution per unit which is actually the relevant cost for the
purpose of decision making as the fixed costs remains the same in almost all the
scenarios.
Answer to question 7
The relevant information means those data and information is useful for making
decisions but in the long run and short term. It ensures undertaking a better decision
making activities by considering only those facts that can affect the acceptance or
rejection of a business decision. Depending on the type of business undertaking,
pricing of the product or service can affect the operating income of the business.
Capital budgeting techniques is another decision making activity that allows the
financial entity to undertake a decision regarding accepting or rejecting a potential
business proposal (Trieu, 2017). The npv approach calculates the discounted net
cash flows. If it generates a positive npv, the project is accepted and vice versa. The
accounting rate of return estimates the net operating return from the proposals
available. Higher the ARR, higher are the chances of accepting the proposal.
Payback period as the term suggests is the time when the inflows from the project
shall recover the outflow investment. The lesser the time is, higher is the probability
of accepting the proposal. Out of the above, NPV is considered to be the best
method used for the purpose of capital budgeting.
Answer to question 8
Budgets are estimates of the prepared in advance to assure that a potential project
undertaken shall be profitable for the organisation. Hence, there are many budgets

prepared like purchase budgets, sales budgets and production budgets to assure
and lay focus on any deviation being incurred while the process is undertaken
actually (Oberoi, 2018). Such deviations can be examined effectively by standard
costing where the budgeted and actuals results of either costs or incomes are
compared and requisite actions are undertaken to ensure quality and reliability of the
output. It has proved to very effective in controlling the costs and thereby suggesting
the management of the areas to be worked upon.
The standard costs are used to determine the variances as and when the same is
compared with the actual expenses. This helps in determining if the variance is due
to price or quantitative difference or there is a deficiency issue.
References
Alexander, F. (2016). The Changing Face of Accountability.
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411-431.
Bennouna, K., Meredith, G., & Marchant, T. (2010). Improved capital budgeting decision making:
evidence from Canada.
SCHOOL OF BUSINESS AND TOURISM, 48(2), 225-247.
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview
Analysis.
Ecological Economics, 3(1), 145.
doi:https://doi.org/10.1016/j.ecolecon.2017.08.005
Goldmann, K. (2016). Financial Liquidity and Profitability Management in Practice of Polish Business.
Financial Environment and Business Development, 4(3), 103-112.
Heminway, J. (2017). Shareholder Wealth Maximization as a Function of Statutes, Decisional Law,
and Organic Documents.
SSRN, 1-35.
Jefferson, M. (2017). Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland .
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Johnson, R. (2017). The Best Strategies for Investing.
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Kew, J., & Stredwick, J. (2017).
Business Environment: Managing in a Strategic Context (2nd ed.).
London: Chartered Institute of Personnel and Development.
Linden, B., & Freeman, R. (2017). Profit and Other Values: Thick Evaluation in Decision Making.
Business Ethics Quarterly, 27(3), 353-379. Retrieved from
https://doi.org/10.1017/beq.2017.1
Oberoi, J. (2018). Interest rate risk management and the mix of fixed and floating rate debt.
Journal
of Banking and Finance, 86(3), 70-86.
Sithole, S., Chandler, P., Abeysekera, I., & Paas, F. (2017). Benefits of guided self-management of
attention on learning accounting.
Journal of Educational Psychology, 109(2), 220. Retrieved
from http://psycnet.apa.org/buy/2016-21263-001
Trieu, V. (2017). Getting value from Business Intelligence systems: A review and research agenda.
Decision Support Systems, 93(1), 111-124.

Visinescu, L., Jones, M., & Sidorova, A. (2017). Improving Decision Quality: The Role of Business
Intelligence.
Journal of Computer Information Systems, 57(1), 58-66.
Werner, M. (2017). Financial process mining - Accounting data structure dependent control flow
inference.
International Journal of Accounting Information Systems, 25(1), 57-80.