Comprehensive Management Accounting Analysis for Toyota Automotive

This report provides a comprehensive analysis of management accounting practices applicable to Toyota Automotive. It begins with an introduction to management accounting and its essential requirements, followed by an examination of different reporting methods, including budget reporting, job cost reports, income statements, and accounting receivable reporting. The report delves into various cost accounting systems, such as cost accounting, job costing, and process costing, highlighting their advantages and disadvantages within the context of Toyota's operations. It also explores the use of planning tools for budgeting control and the adoption of management accounting systems to address financial management challenges. The report offers a detailed overview of cost analysis techniques, income statement preparation using marginal and absorption costing, and the significance of inventory management within the Toyota automotive business. The analysis underscores the importance of these techniques in enhancing financial efficiency and decision-making within the organization.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P.1. Explanation of management accounting and essential requirement of different
management accounting systems...........................................................................................1
P.2. Different method used for management accounting reporting........................................4
P.3. Absorption and marginal costing approach.....................................................................6
TASK 3............................................................................................................................................8
P.4. Advantage and disadvantage of using different planning tools that can be used for
budgeting control at workplace..............................................................................................8
P.5. Adoption of management accounting system to respond to financial management.....10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
In this investigation, we would discuss about to the all tools and techniques of
management accounting which is essential for better manage Toyota automotive firm's financial
issues and circumstances. We would take a look at management accounting and given the
essential requirements of different types of management accounting system. We would discuss
about to the different method used for management accounting reporting. We will calculate
costs using appropriate techniques of cost analysis to prepare an income statements using
marginal and absorption costs. Moreover, in this research we would take a look on the advantage
and disadvantage of different types of planning used for budgeting control. Ultimately we would
have discussion on compare how organizations are adopting management accounting systems to
response to financial issues within Toyota automotive business.
TASK 1
P.1. Explanation of management accounting and essential requirement of different management
accounting systems
To
The director of the Toyota automotive, japan, Date 23-1-2018
Sub: management accounting method and their significance
Management accounting is the process in which business operational work are managed
in this approach. Usually, all the businesses which are operating in production and
manufacturing sector goals to control their overall costing in the plants of the firm. Centering
requires to be improved the internal efficiency of the business operation so that cost remain
would in favor of standard costing rate (Zoni, Dossi, and Morelli, 2012). There are several
numbers of tools and techniques are presented in the management accounting which compare
its performance and standard to their current position and make suggestion to business, where
are necessary changes required and implement innovation at that position. Several sorts of
analysis such as variance analysis, budgeting, etc. are included in these approaches to that
making hard core business decision whenever required it in the business. All these strategies
have to done in order to importance of the company because these strategies and approaches
helps the business in working in right direction in legislative manner. It is because, there are
many of management accounting system reflects appropriate firms in which data, information
or facts could be stored in the books of accounting. This is the data that is prepared by the
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system which helps business in accomplishing several results and application of these
approaches which assists in remove the all barriers of management accounting and also helps in
better manage of their accounts at several levels within the firm. Different management
accounting system that are available for the enterprises are as following:
 Cost accounting system: Cost accounting approach is most vital approach for every
business to manage their cost accounting system (Yalcin, 2012). In this approach, there
are cost and expenses of Toyota automotive are recorded on the basis of their fixed
expenses, variable expenses and semi variable expenses. Nature of all these expenses is
totally different from each other. In this cost accounting system, all these categories of
expenses are recorded and calculated in these approach and mention section. There are
several advantages are associated with the cost accounting system because on the basis
of examining records and data, manager would be known by this how much fund they
are required to spend fixed, semi-variable and variable section. This approach would
help them to cost control in the Toyota automotive business and make adjustment in it to
reduce the cost increment in manufacturing process of Toyota automotive corporation.
Thus, it could be said that there is vast significance of cost accounting system within the
Toyota business. The Toyota automotive firm can use this accounting system to manage
their all costing issues and problems in the business to make them more efficient to cost
reduction and developing all the exercises which is required to be taken to manage huge
situation of cost increment can be reduced. Job costing system: Job costing system is the approach which is majorly used by those
companies which is current running in the manufacture industry. Numbers of times,
there are a huge need for company to acquire customized product for their clients and
customers by paying large amount for it (Wu, and Boateng, 2010). Due to the various
specification in the products of Toyota automotive business, there must be different-
different costing are available for those products and services. So it is very essential for
Toyota automotive firm to decide a separate price of their every customized products
and services to manage costing of essential materials within the firm. Job costing
approach assist the firm to accomplish their desired targets and goals and separate books
are maintained for each of their products and services and several types of expenses are
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recorded and calculated in them. It could be assumed that job costing is more suitable
for the Toyota automotive business, because they are manufacturing multiple of their
product and service within the firm and there is essential need for manage their costing
and make separate costing for them to identify their range and quality (vVan der Stede,
2015). Toyota automotive company is one of the growing business in the japan and all
over the world, and in this company broad range of products are manufacture and sell so
that there must be all the parts and customized products costing must be in proper
manner to manage their high costing level and these activities would assist to better
management accounting in the Toyota automotive business.
 Process costing system: Process costing methodologies is used by mostly corporations
in terms because this approach assists the business to prepare costing of their product
line more efficiently (Suomala, and Lyly-Yrjänäinen, 2012). In the process costing
method, normally, costing of each form is calculated and then reliable cost is associated
to identify whole cost of each product line. There are several advantages of
implementing this method in the business, one is, with the help of this approach it can
easily find out that which production process is increasingly at their high rate and
required manage on time to control cost in the Toyota automotive firm. It may be said
that heavy amount of data can be collected with the help of process costing techniques
rather than any other strategy of costing in management accounting. If Toyota
automotive firm does not adopt this accounting system in its firm, then there could be
find out major issues.
 Inventory management: Considering the operations under this managements accounting
technique in which determination of various operations will be adequate and helpful as
per recognizing the inventory stability in the organization. Inflows and outflows of the
stock will be administered and managed as per having effective control on the
operational efficiency.
P.2. Different method used for management accounting reporting
There are several approaches of management accounting reporting because of verity of
operational activities are exercising within the Toyota automotive business (Shields, 2015). In
these different variety of management accounting report, company performance is measured and
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examined at different-different level in the firm. Different approaches of management accounting
reporting are as following: Budget reporting: In this budget reporting report, there are several of items are covered
and their standard are given in the table. Again these standard are effective results in
order to acquiring by qualifying corporation performances. On comparison of both value
and data about to the Toyota automotive performance is examined by the junior
accountant and manager of this business. Hence, this reports would not help in the
examination of its own performance in context of standard but is also helps in measure
their previous year performance and find out relevant changes in the firm and know how
many changes are acquired from their current performance to their last performances.
Thus, it could be examined that budget reporting is very essential for Toyota automotive
to assist in measuring their performance at various region. Hence, the firm want to bring
their budgeting reports towards right direction in terms to accomplish their goals and
objectives within the business (Quattrone, 2016). Toyota automotive business need to
prepare their appropriate budgeting reports and it is simply to formulate this reports to
their expertise employee and need to hire strong technical background persons who are
eligible to prepare it. Moreover, there must be requirement of take care while preparing
the budgeting report and on the basis of it forecasting by approximation growth rate of
sales revenue and expenses in the business. In order to solve these issue, a skilled person
should be hired to make a favorable budgeting report to the firm. All these advantage of
budgeting now comes to disadvantage of this reporting, there are major disadvantage of
this reporting is that assuming is made on it and on the basis on standard are determined
that could be wrong in the future time period (Qu, S. Q., Cooper, D. J. and Ezzamel, M.,
2010). This reporting might be proved wrong for the future in terms of get their all
forecasting standard because many of time in the organization, it could be seen that
manager set negative value of their standard because several of time it had been seen that
forecasting values does not match to their actual vale. Thus, this is the big limitation of
budget reporting within the Toyota automotive business. Job cost report: This is another most vital reporting system because under this in report
costing different role of business projects are formulated in the books and accounts. This
reporting method is used by several of business venture at workplace nowadays. In this
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approach all the product lines are individually figures are calculated in order to expenses
that are mane in the firm (Nakajima, 2010). Hence, it could be assumed that job coasting
provide the vital information about to each cost of product line and for these benefits,
most of the companies are preparing their proper job costing reporting at the workplace
within the business. The Toyota automotive firm must prepare job costing reporting for
their different product lines on regular basis to make them more effective to the firm and
also know that which product lines is out of control in the business and according to it
efficiently manage them. Income statement: Income statement is one of the management accounting approach
which is essential for Toyota automotive business. Under this, the depth of separatism of
expenses in not done in the business (Libby, and Lindsay, 2010). One could see the
ultimate value of the all expenses within the Toyota automotive firm. Income statements
should be quarterly prepared to know about to the which section is performing good and
which section performing badly. This approach also furnishes the overall income
performance of the Toyota automotive firm and due to this reason, it is majorly used in
the business for making decision. One of the limitation of income statement that it does
not show segregation for making decision. Thus, in could be identified by the looking at
the income statement of that is making expenses which firm expenditure are highly made
such as expenses in social media, public relations etc.
 Accounting receivable reporting: Accounting reporting is another form of preparing
reporting within the Toyota automotive firm. In this approach business receivable
transaction are reported in the books of accounts and firm would be able to know that
how many receivable transactions turned in to bed debts into the business and how many
encased directly in the little time period (Johnson, 2013). Cash management methodology
is effectively improved on the basis of account receivable reporting approach. Thus, it
could be said that there is high need of accounting receivable reporting in the Toyota
automotive firm. The Toyota automotive need to prepare accounting receivable reporting
frequently because there are several debtors can be find in the business and with the help
of this approach, it could be identified effectively. If there are bed debtors number
increasing frequently then there is a huge chance of cash could be locked into bed debts
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of the firm. Accounting receivable reporting assist the manager to ensure that all the
debts funds are received form their debtors effectively in the Toyota automotive firm.
P.3. Absorption and marginal costing approach
Marginal costing techniques in Toyota automotive business
Absorption costing technique in Toyota automotive business
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On the above financial data analysis, it could be said that net profit amount is 242216.25
in case of absorption costing process and value different in terms of 178918.75 of marginal
costing method. In could be said that both marginal and absorption costing process shows
different amount of profitability (Hutaibat, 2012). In case of marginal costing approach inToyota
auto-mobile business, variable costing approach calculation is showing which is, 500*12 it
comes value for 18000 and some its total contribution expenses is, 242216.25. After overall
calculation about marginal costing of the company its net profit is showing figure which is
242216.25, that is fair enough. Apart from it, in case of absorption costing above index, its gross
profit figure is showing that is 178918.75 and after all computing of costing in above index. It is
showing the value of net profit which is 178918.75, so that its values are more than marginal
costing, so it is more appropriate for the business. There is high profit in case of marginal
absorption pricing process. There is difference between both these costing methods which are
absorption and marginal costing method. Computing method is little different for both costing
methodologies. Important things are that in case of marginal costing approach only variable
expenses are taken into account for calculation overall cost of the product. Furthermore,
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absorption costing is completely opposite and under this both fixed and variable expenses are
taken into account to do costing of method indicate more profitability than absorption costing
process due to inn-inclusion of fixed expenses in both businesses. Hence, by doing so outcome
of these disbursal on enterprise revenue is calculated and it could be said that investigation help
managers in making decisions more in proper manner. It can be said that firms must use both
approaches at workplace as there are few of positive and negative points associated with these
approaches. According to need these approaches must be used at workplace and proper judgment
of disbursal must be done in the enterprise so that better decisions can be made and operations
can be governed in proper manner within Toyota automotive business.
TASK 3
P.4. Advantage and disadvantage of using different planning tools that can be used for budgeting
control at workplace
There are several kinds of tools that are using by many business companies for their
budgeting control at workplace and all of them have some advantage and disadvantage (Haskin,
2010). Different kinds of business tools that are available to the firms which are budgeting and
capital budgeting approaches, are as following:
 Cash budget: This is most vital kind of budgeting which is fitted out for all types of
business ventures (Harris, and Durden, 2012). In this cash budget approach estimation is
made about inflow and outflow statement and from that net available balance is identified
in the business. By using all cash expenditure budget planning is prepared about to
expenditure that are made in the firm. Moreover, in could be said that all expenditure
statements to be prepared with efforts of determining limits and according to this plan
would be prepared. On the basis of this approach, it could be said that cash budget is one
of the major essential tool for business. There are several advantages and disadvantage of
cash budget are as following:
Advantage:
 The major advantage of cash budget is all the expenses and cash flows in the Toyota
automotive firm can be identified and with the help of tools effective manage them as
well (Goretzki, Strauss, and Weber 2013). This would increase the profit generation of
the business.
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 Another main advantage of cash budgeting is, it is easy to made for every business and
there is no need for hire specific skilled person to prepare cash budget.
Disadvantage: The main disadvantage of this approach is that it is made on the basis of approximation
and if the estimation goes wrong in the future then it would make negative impact on the
firm.
 Fixed Budget: Fixed budget is another option that is available to Toyota automotive
business. It is totally inverse of cash budget as in this manner of budget measure of all
elements of budget is made different (Gates, Nicolas, and Walker, 2012). Like cash
budget there are some variants of merit and demerit of fixed budget.
Advantage:
 One of the main Advantage of fixed budget is its value always remain same and it would
never change. Thus, Toyota automotive firm manager required to prepare it with their full
dedication and efforts.
 Another main advantage of fixed budgeting is that one just required to take a look at
budgeting and also make ensure that it can be implemented in company even business
circumstances changes frequently.
Disadvantage: One of the major disadvantage of fixed budgeting is that in the situation is change rapidly
in the firm then it is not possible to effective use of fixed budget within the Toyota
automotive corporation. There is always possibility of making wrong decision by using
this method.
 Zero based Budgeting: it is different form above approaches, in this approach portion are
not simply made to each department within the firm until manager of this company
present own department budget in front of their senor manager (Fadzil, and Rababah,
2012). There are few advantages and disadvantage of zero based budgeting as following:
Advantage:
 The major Advantage of this budgeting is that a systematic process if followed in the
preparation method of zero based budgeting and many appropriate tools are used by their
experts. Hence, it could be said that it is more effectively beneficial for the Toyota
automotive business.
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Disadvantage: One of the main disadvantage of this approach is, it is totally time consuming and lengthy
process, which could create negative impact on the business.
 Capital budgeting method: In this approach project development process if completed
and under this project value method. Some of their advantage and disadvantage of this
capital budgeting method are as following:
Advantage:
 Major advantage of this approach is that projection is made about to expenses that could
be incurred in business project. Thus, planning goes hand in hand with passage of project
duration period.
Disadvantage:
 Major disadvantage of this method is that with increase in duration project cost may be
raised and it could be hard task to set up project in appropriate way which make the cause
of waste of time.
P.5. Adoption of management accounting system to respond to financial management
Most of the firm are facing their financial issues and problems within the business. It is
the management accounting system that are used to respond to financial issues (Boyns, and
Edwards, 2013). Some management accounting strategies that could be utilized to response to
financial problem are as following: Key performance of indicators: Key performance indicator is one of the essential tool
that is used to solve business financial problems (Bennett, and James, eds., 2017).
Volkswagen automotive business is currently facing many of their financial issues such
as cash availability in the business. In context of solving financial issues of firm KPI
could be used in which actual value are compare to their standard value in the business
and it could recognize that how much big is firm's current financial issues. According to
the level of issues in the firm, with the help of KPI tools an appropriate solution can be
implemented in terms of effective response to the all financial problems of Volkswagen
automotive business as compare to Toyota business in the industry. Balanced score card: Balanced score card is one of the essential tool that is used for
measuring their financial performances and their score cards (Abdel-Kader, ed., 2011).
There are four parameters in where company performance could be measured and
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