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T/508/0495 Management Accounting Assignment

4760Downloads1 I Published: 14 May ,2020

INTRODUCTION

Managing internal activities of a firm which will require the accurate analysis and determination of the facts which were to be resolved. Management accounting tools can be assistive in terms of making improvement in the operational ability, financial health as well as better cost mechanism. In the present report there will be discussion based on various budgetary techniques, costing system, reporting methods as well as performance appraisal techniques that will be helpful in internal administration. The report is also consists with the costing techniques and planning tools that will be reflect increment in the operational level of Zylla Company.

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P1 Concept of managements accounting and system of management accounting

Managements accounting:

This is the mathematical tools which help in analyzing the data set to ascertain the actual requirements in the business. Moreover, such analyzed data set will be assistive to the managerial professionals in terms of decision making and planning the forecasted budgets for the operations (Cooper, Ezzamel and Qu, 2017). Similarly, implication of such technique will improve managerial efficiency as targeted goals will be attain by organization in a very prominent way.

Management accounting system:

There are various techniques which are needed to be implicated by the professionals of Zylla Company in managing the business activities. These techniques will funnel the managers as to have appropriate development of duties which are needed to be improved. Along with this these techniques will help in improving firm’s operational efficiencies (Honggowati and et.al., 2017). Thus, there are various accounting techniques which are as follows:

Job costing: To demonstrate the costs incurred in each operational tasks of the business there has been determination of transaction activities. Therefore, this accounting system helps in making the adequate record of all the costs such as direct material, labor and relevant costs. Thus, costs will be beneficial to demonstrate the costs requirements in each department.

Inventory management: To keep the records of the imports and exports of inventory in the business this will be based on managing the level of inventories. Therefore, the production department needs to be conscious regarding consumer demand and the business profitability (Miller and Rose, 2017). Therefore, the production of goods must be based on seasonal requirements as well as analyzing the buyer’s demand. Zylla company will be helpful as if there will be proper control over production and deliveries of goods to the consumers.

Price optimization: In relation with improving the operating profit of the business they set different prices on their products and services. Thus, such variation made by professionals as per delivering the products and services among consumers at different locations. They fetch their behavior towards such prices (Turner and et.al., 2017). Moreover, the best or profitable prices will be kept forward by them and which will be helpful in generating the appropriate amount of gains to the firm. Zylla Company will have benefits as if they implicate such techniques into operations.

Cost accounting: This technique will be helpful to Zylla Company as it demonstrate the costs incurred in each business units. Therefore, to produce a product or services there will be requirement of high amount of funds (Parker and Fleischman, 2017). Thus, to analyses the level of funds invested in the business activity, the costing technique brings the most preferable analysis.

Auditing: Periodically making the internal audit will help the business in making the adequate improvements in the work and work culture. It brings the internal information which were relevant with the costs, gains, operating expenditures and relevant details that bounds the managerial professionals to make effective decisions. Zylla Company will have appropriate internal administration which in makes favorable improvements in the operational stability. It helps in analyzing the profits, liabilities and assets during a period.

P2 Implication of managerial accounting reports into business operations

A report consist of all the records on which detailed information were listed as per their date and time. There will be records of cash inflows in a particular activity as well as costs incurred by such activities. Moreover, such records will help the managerial professional in analyzing the profitability as well as making the effective decision that will reduce costs. However, there have been various reporting techniques which are needed to be implicated by Zylla Company such as:

Inventory management report: There will be records of all details relevant with the quality,, quantity and costs of products were manufactured and delivered in the market. Thus, such information will be helpful in making the effective analysis over the demands of products in the market as well as efficiency of firm in making reorder capabilities (Kasravi, Ghasemi and Zadeh, 2017). Moreover, this reporting system will be assertive as it improves the efficiency of business and make appropriate development.

Debtors aging report: To have control over extending credits of firm, this is mandatory to prepare an account receivable report. Thus, it ascertains company’s collection process which in turn helps in making effective ideas to overcome with it (Modell, ed., 2017). Moreover, it comprises with the records of all the debtors of business which were about to make payment of the products and services obtained from the entity. It also included regarding bad debts and doubtful debts.

Budgetary reports: This will be assistive in measuring the performance of business which will be helpful in generating newer ideas. Thus, forecasting the required costs which bound the firm in controlling the expenses as well as improve performance in each department. These reports are fruitful in appropriate allocation of resources into job done by them. Zylla Company will have appropriate gains as the budgetary system is more accurate and attainable to business to reach the targeted goals.

Cost accounting reports: It comprises with computing the costs incurred in manufacturing and delivering the goods to the need users. Zylla Company will have effective improvements in the business activities as the costs incurred in each business operation will be under control. It ascertains the costs such as inventory used in production, labor costs, overheads etc. Thus, these are the record which bound managers in generating innovating ideas as well as proposing the alternatives which will help in reducing the manufacturing costs.

Performance reports: These are the reports which are prepared by the managerial heads and professionals of the business in order to assess the performance made by workforce and entity. Therefore, it will be a helpful source in terms of generating adequate gains and knowledge from the market. Thus, such reports will have positive impacts over developing the operational practices (Szychta and Dobroszek, 2017). In addition, this report helps in funneling the managers to make effective analysis and produce the fruitful decision to bring reforms in work culture. Moreover, it will have positive impacts over motivating employees to make productive efforts. Zylla Company will have fruitful gains as if the managerial professionals will make adequate analysis employee performance as well as encourage them with rewards, bonuses and incentive benefits.

P3 preparation of income statement on the basis of marginal and absorption costing techniques

Marginal costing method:

Marginal costing

     

Particulars

details

details

amount

Sales revenue

   

25000

Less: cost of goods sold

     

Direct labor

200

   

Direct material

500

   

Machine hours

600

1300

 

Less: closing stock

     

Purchase

100

   

Opening stock

400

   

Closing stock

200

300

1000

Contribution margin

   

24000

Less: variable selling overheads

 

350

 

Less: fixed expenses

 

250

 

Production overheads

 

1800

 

Fixed selling and administrative costs

 

200

1400

Net profit

   

22600

Absorption costing method:

Absorption costing

     

Particulars

details

details

amount

Sales revenue

   

25000

Less: cost of goods sold

     

Direct labor

200

   

Direct material

500

   

Machine hours

600

1300

 

Less: closing stock

     

Purchase

100

   

Opening stock

400

   

Closing stock

200

300

1000

Variable sales overheads

   

350

Cost of production

   

24350

Less: fixed expenses

 

250

 

Production overheads

 

1800

 

Fixed selling and administrative costs

 

200

2250

Net profit

   

22100

Interpretation: in relation with analyzing these costing systems it can be said that absorption costing technique will be helpful to the entity as it considers all the costs and expense incurred in the business. Moreover, it will be known as the all cost system which has influences of all the costs. Therefore, the outcomes derived from such method are accurate and reliable than compared to the marginal costing technique. Thus, it will be suggested to the professionals of Zylla Company that they implicate absorption costing system in terms of analyzing the costs incurred in the business during the period.

P4 Determining the budgetary control techniques as well as planning tools

Activity based costing:

This is the most helpful and adequate technique which in turn helps managers in forecasting the budgets based on the level of activities performed in an organization (Kihn and Näsi, 2017). Therefore, there are mainly influences of the requirements incurred in business operations such as production, marketing, distributing etc. however; there have been various advantages and disadvantages of this budgeting system such as:

Advantages:

  • This is the most accurate and appropriate costing technique as there has been better understanding for the overhead expenses.
  • It considers the unit costs instead of total costs which in turn helpful in analyzing all the costs incurred in the business operations (Budgetary control techniques, 2018).
  • It encourages the performance chart and balance scorecards which will be beneficial to the entity in terms of managing the supply chain as well as value stream.

Disadvantages:

  • This requires higher attention as well as large numbers of sustainable resources because it emphasis on collecting all the data which results in higher costs for such operations.
  • The traditional costing systems focus on improving the business efficiencies while a current technique determines the profit margin.
  • It can be misinterpreted and publish the wrong outcomes.

Zero based budgeting:

These are the most flexible and dynamic budgets as it does not consider the past data set and performance of business. It emphasis over development of plans which will ascertain present and future needs. Similarly, due such facts these are the budgets which are mainly starts with zero bases or nil balance (Lee and Herold, 2018). The costs will be added as per the requirements of the industrial activities; Zylla Company will have appropriate budgets for the future as if they implicate the use of such techniques.

Advantages:

  • The most satisfying advantage of this budgeting technique is that it is very flexible and time changes in accordance with business requirements.
  • It comprises with lower costs as it dose not require focused operations as well as all the budgets starts from the zero balance which is helpful in having comparatively lower costs.
  • It does not require too much time in decision making or planning for the activities.

Disadvantages:

  • The flexible nature of the budgeting system dose not provides the accurate analysis over the actual required costs in an activity.
  • There will be manipulation of funds by the managers in terms with meeting their personal needs.

Incremental budgeting:

These are the methods which were base on the assumptions that there have been slight changes in the budgeting process. Thus, it emphasizes over the previous period budgets and the actual expenditure incurred in the business on which they propose the additional budgeting costs. Thus, it believes that the demand of products and services will be increase day to day so to meet such requirements there will be need of accurate funds (Cooper, Ezzamel and Qu, 2017). Moreover, before implicating this budgeting system in Zylla Company, there are various advantages and disadvantages associated with this budgeting system such as:

Advantages:

  • It is the easiest and simple method as the managerial professionals or accountant did not need to make higher decision they can only surplus the amount of budgets by reviewing for the actual needs.
  • It brings the stability in funding terms which brings the fruitfulness to the entity in retaining the favorable outcomes fro the many years.
  • It helps in balancing the operational work practices in the entity which ensures that all the departments must make stable and consistent efforts for the longer period.

Disadvantages:

  • Due to incremental nature of this budgeting techniques which only emphases over increasing the budgeting costs with considering minor changes.
  • It does not make clear analysis over the business needs as well as demands in the market. Therefore, this encourages the managerial team to overspend over non profitable activities.
  • Manager’s emphases over reducing the revenue growth while extending the higher expanses due to which they would take higher variance advantages.

NPV:

This is the present value of future cash flow which ascertains the managerial professionals in accurate planning for the proposed projects. Moreover, it helps in analyzing the profitability of the plan which will be based on various years that will brings the accurate outcomes to the professionals in analyzing and decision making (Honggowati and et.al., 2017). Thus, it will suggest to the managers of Zylla Company in terms with implicating the use of such techniques. Therefore, there are various advantages and disadvantages which are needed t be consider by the industry such as:

Advantages:

  • It determines that the future value of the projects is worth less than comparison with today’s value.
  • It considers the discounting of cash flows on the basis of periodical capital costs.
  • It brings the most accurate outcomes to the professionals of the business which will be helpful in attracting the investors to the proposed plan.

Disadvantages:

  • The main disadvantages of this budgeting system are that it will require higher guess work which in turn makes the unreliability over the gather information for the operations.
  • It emphases over increasing the costs of capital which will bring good or higher returns to the firm.
  • It is time consuming process which will be in adequate and unfavorable to the business.

IRR:

The internal rate of return focuses over return generated by the business over the proposed plan. Moreover, it can be said that it is a capital budgeting method which measured and compared with cut off rates of a specific project plan. It brings the results to the professionals that the initial investments by them in the project will giver the proportionate amount of return in each period (Miller and Rose, 2017). However, there will be various advantages and disadvantages of this planning tool such as:

Advantages:

  • It comprises with the appropriate consideration of the time value of money which in turn will be helpful in making the accurate decisions as well as improving the business health.
  • There will be equal importance were given to all the cash flows with uniform ranking.

Disadvantages:

  • It is very complex in understanding and which require the attention of accounting professionals.
  • The assumptions made in these plans are unrealistic as well as unreliable.

P5 Ascertain the techniques for resolving the financial problems in business.

To improve the financial health of the entities needed to have implication of various techniques and performance appraisal techniques which will have positive impacts over the productivity. Therefore, there are some tools and techniques which are needed to be applied by Zylla Company for better operational management in the firm. There may be uncertainty of losing the financial stability but proper administrating and execution will help the business in efficient development (Turner and et.al., 2017). Moreover, there have been various performance appraisals which will be fruitful to Zylla Company such as:

Key performance indicators:

This technique is implicated by various firms in relation with encouraging the staff to make productive efforts. Therefore, there are various targets and objectives which were set by managers of the organization in order to motivate the professionals in making the adequate development of the performance (Kasravi, Ghasemi and Zadeh, 2017). Therefore, it is a quantifiable technique which ascertains the growth in the performance capacity of employees as well as organizations. Moreover, it evaluates the performance of organization especially on the basis of activities on which it was engaged.

Variance analysis:

This the most effective technique to control the costs incurred in business activities. Therefore, comprises as per the balance between budgeted costs as well as actual costs. Moreover, the budgeted costs are comparatively higher than the actually incurred costs than the surplus amount will be known as variance (Szychta and Dobroszek, 2017). In addition, Zylla Company can implicate the use of variance analysis which will be helpful in appropriate utilization of funds for each activity in the business.

Bench-marking:

This is he technique which implies with analyzing the own performance with the other organization’s performance. Therefore, it might indicate the competitive nature in the work culture but it is a true motivator. To reach and overtake the performance made by other companies the firm plans newer ideas and implicate the innovative techniques which will be indicative for the appropriate business gains. Similarly, this technique can be helpful to Zylla Company in order to have appropriate revenue gains as well as reaching to the desired level.

Balance scorecard:

This is a strategic performance analyzing and executing tool which comprises with proper administration and control over the work performed in the organization. Moreover, this technique comprises with the executing the efforts made professionals as well as business in proper manner of in the required state (Lee and Herold, 2018). Thus, such techniques will be helpful and beneficial for the growth of the entity. Zylla Company needs to have appropriate implication of such techniques in improving the performances.

Financial governance:

This is most effective and beneficial techniques which are need to be implicated by the managerial professionals. Thus, it emphasis over executing the financial transactions held during the period. Thus, these governance tactics will be applied and administered by the auditors, accountant, owners and various managers in the business. These have importance in improving the capital stability as well as build the proper operational efficiency to the firm. Zylla Company needs to implicate the use of such techniques which in turn helps in making the adequate increment in the growth and profitability of the firm. The financial governance will allow them in appropriate planning and development practices.

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CONCLUSION

On the basis of above report it can be said that management accounting play the vital role in improving the efficiency and ability of business in meeting the targeted aims. Therefore, the application of various planning and budgetary control tools will assist the managers of Zylla Company for having accurate analyzing over projected plans. Moreover, the implication reporting and costing technique will ascertain the internal financial health of business which forces the professionals to think wisely and make effective decision.

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REFERENCES

  • Cooper, D. J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research. 34(2). pp.991-1025.
  • Honggowati, S. and et.al., 2017. Corporate governance and strategic management accounting disclosure. Indonesian Journal of Sustainability Accounting and Management. 1(1). pp.23-30.
  • Kasravi, A., Ghasemi, M. and Zadeh, N. N., 2017. The Effect of Management Accounting, Financial Performance and Organizational Performance in Tafresh University. Journal of Internet Banking and Commerc., 22(3). pp.1-10.
  • Kihn, L.A. and Näsi, S., 2017. Emerging diversity in management accounting research: The case of Finnish doctoral dissertations, 1945-2015. Journal of Accounting & Organizational Change. 13(1). pp.131-160.
  • Lee, K. H. and Herold, D. M., 2018. Cultural Relevance in Environmental and Sustainability Management Accounting (EMA) in the Asia-Pacific Region: A Link Between Cultural Values and Accounting Values Towards EMA Values. In Accounting for Sustainability: Asia Pacific Perspectives (pp. 11-37). Springer, Cham.
  • Miller, P. and Rose, N., 2017. Political power beyond the state: Problematics of government. In Foucault and Law (pp. 191-224). Routledge.
  • Modell, S. ed., 2017. The Societal Relevance of Management Accounting. Routledge.
  • Parker, L. D. and Fleischman, R. K., 2017. What is Past is Prologue: Cost Accounting in the British Industrial Revolution. 1760-1850. Routledge.
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