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Management Accounting - Malta Marketing Management

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  • Level: Undergraduate/College
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Introduction

Management accounting is an important tool which are used by the company to make their business operation decisions more effectively and its methods are used to measure the company's performance. It basically comprises the explanations about the different management accounting systems and their elements for smooth functioning of the business activities which are integrated with the management accounting reporting. This report also involves the various useful planning tools which are used for budgetary control to measure and monitor the company’s performance appraisal (Amoako, 2013). A comparison is provided to reflect that how the company can use the MA tools and techniques for appropriate implementation and execution. Under this report, Tech (UK) Ltd use the essential tools and techniques of management accounting to solve the department managers' complaints about the deficiency of financial information to better their decision-making. Under this report, the company will also prepare the management accounting reports for making the decisions in an efficient manner.

Task 1

P1:

It is the process which is followed by the company to examine the business costs to form internal financial reports and records and helps the management to frame the business decisions effectively and efficiently to achieve the predetermined objectives and goals. The accounting information which is obtained by doing analysis helps in financial accounting (Management Accounting, 2017). Management accounting assists the company’s management in the formulation of policies, procedures, in decisions and also helps in daily operations of the business.

  1. Distinguish between management accounting and financial accounting:

The numerous comparisons between the financial and MA are explained:

  • This accounting is used within the organization by the managers and employees whereas external users use financial accounting for the decision-making about the investment in the company’s business (Vinayagamoorthi and et. al., 2012).
  • Management accounting does not apply any rules or standards for accounting on the other hand, while financial accounting is worried with a different set of rules and regulations which are relevant to the company.
  • Management accounting uses financial and non-financial information for making reports and other useful documents whereas financial accounting uses only and only the financial information for preparing the financial statements.
  • Management accounting uses only data which are historical, current, and future-oriented whereas the source of data is historically associated to the previous year's performance in financial accounting.

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  1. The importance of management accounting information as a decision-making tool for department managers which are discussed below:

Management accountants utilise various tools and techniques for planning which helps in the decision-making process. They also focus on the main criteria of the business operations like revenue growth, productivity growth and efficient and effective utilization of assets.

  1. Cost accounting systems (actual, normal and standard costing):- This system assists the company in determining the cost of the product. This system is used by the management of the company to lower their working expenses and similarly controls them in an effective manner. This is the type of accounting system which assesses how an organisation is doing and benefits managers to form decisions which are relied on the costs of doing an operational activity (Macinati and Anessi-Pessina, 2014). This system requires five basic parts. These are the inventory valuation technique, input measurement basis, accost accumulation method, accost flow assumption, and the capability of recording cost flows at particular intervals.
  2. Inventory management system: This system keeps track of the goods via the whole supply chain or the portion of the goods used in the business operations. It covers everything from production to retail, all the movements of inventory, etc. Management of TECH (UK) LTD. can be consolidated with this type of system to attain all the targets by efficient flow of stocks in the business manufacturing operations.
  3. Job Costing Systems: This needs to collect direct materials, direct labour and overheads in an effective manner. Here are certain tools which could be implemented by the organisation to gain sustainability. Tech (UK) Ltd can implement this system at the time when products are identical for tracking of the order expenses.

P2:

  1. Diverse kinds of management accounting reports:

Budget Report: - This report lays out the plan to investigate the organization's performance at the time of creating an evaluation of the department’s performance and also control the costs. For preparing the budget, the actual expenses incurred in the past years are utilized (Lim, 2011). Forecasting the future budget based on this report assists the company in consolidating the attempts of various departments towards the company goals and objectives.

Job Cost Report: - The job cost reports are basically concerned with identifying the profits, costs, and expenses of each specific job. This report also makes an evaluation of the cost at the time of the project is work- in progressing henceforth, the waste areas can be engaged in consideration and the project can be completed more profitably for the company. All the efforts of the company are described in this report which helps the manager for future jobs.

Inventory Report:- The Company’s business operations are involved in the manufacturing processes and are required to prepare the report so that their inventory and manufacturing processes can be more efficient and effective. This report is prepared by the company in order to track the inventory level and make them accordingly in order to smooth the running of business operations.

Performance report: Cited organisations while having manufacturing processes, form these kinds of reports henceforth their inventory processes could become highly convenient and effective. This report has the per unit costs which are related to the labour, overheads and wastages of the costs which are linked to the stock.

  1. Importance of using the above accounting reporting systems:

According to the above discussion, all the useful methods of management accounting reporting are helpful to the company in tracking all the important financial transactions in their prescribed layout. By the help of all the reports which are discussed above help the company to analyse its performance level, minimize the wastage of resources, eliminate unwanted costs, improve its productivity, etc. These reports are also helpful in framing the strategies, goals and objectives for the future (van Helden and Uddin, 2016).

M1

  • Job Costing System: It will assist the company in estimation all types of costs throughout the production process. Also helps in determining the quality of the work done by the employees.
  • Cost accounting system: Tech (UK) Ltd could measure their effectiveness in manufacturing procedures and then help in preparing developments with implementation of this system.  It will also assist the manager of the company in fixing the price and also in reducing the price of the particular product.
  • Inventory management system: Tech (UK) Ltd can change and recover the accuracy of the orders with the help of this system. It will improve the business efficiency and saves the money, time and also the unnecessary wastages.

D1

  • Budgeting reports: The integration between the organizational procedures related to Tech (UK) Ltd and budgeting reports makes way for the activities of the business to properly concentrate on the budgeted outcomes.
  • Job cost reports: The business activities of Tech (UK) Ltd must be directed to the fulfilment of the cost objectives and this report makes an easier way to the manager to decide the pricing strategies for the company.
  • Inventory reports: The integration between processes covered in Tech UK Ltd. this report gives effective management of inventory control and also gives an estimation of how much-required level of inventories is needed in the production process.

Task 2

P3:

Marginal costing: This is the cost which contains the variable cost while calculating the net profits. This is also known as the net profits as per the contribution per unit. This is also known as the marginal costing approach which can be implemented by the company for assessing objectives in an effective manner (Gates, Nicolas and Walker, 2012). All the fixed costs are not considered while calculating the marginal cost.

Absorption costing: This is the method that can be used by the organisation in order to know about the product costs effectively. Various variable and fixed costs are to be adopted while producing per unit costs.

Net profit using marginal costing

Amount

Amount

Sales value

Less: Variable costs

Stock at the beginning  

Cost of production

Stock at the closing              

Variable sales overheads                                

Contribution     

Less: Fixed costs:

Fixed Production overheads                         

Fixed Selling overheads                                     

Net loss                                                   

 

 

NIL

30000

(7500)

 

 

 

15000     

10000

 

52500

 

 

 

22500 

(7875)

22125

 

 

(25000)

-2875

 Income statement as per the absorption costing:

 

Selling Price per unit

35

Unit costs

 

Direct materials cost

8

Direct Labour cost

5

Variable manufacturing overhead

2

Total variable production cost                       

15

Fixed production overhead

Fixed production overhead incurred actually

Fixed selling & distribution expenses

Variable selling & distribution expenses

Sales

5

15,000

10,000

15% of sales value

2,000 units

 

 

Net profit using absorption costing

Amount ï¿¡         

  Amount ï¿¡

Sales value                                                                                                        

Less: Cost of Sales:

Opening stock                                    

Cost of production                                                  

Closing stock      

(Under)/Over absorbed fixed production overhead

Gross Profit              

Less: Selling Expenses

Variable sales expenditure

Fixed selling expenditure

 

 

 NIL

40000

(10000) 

 

 

 

7875

10000

 

  52500       

 

 

 

(30000)

(5000)

17500

 

 

17875

Net profit/loss

 

-375

M2

In this case, the company is required to apply management accounting tools and techniques to increase profits. This will assist Tech (UK) Ltd to run their business activities in a sufficient and accurate way. The above methods are used by the management accountant to improve the productivity of the business. These tools are useful and important for each and every division of the company for making effective and efficient decisions for the company’s growth and achieving its objectives.

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D2

The net profit is attained with the help of absorption and marginal costing. Both the methods of calculation are different which reflects different net profits. As per the marginal costing and absorption costing method the company lost its profit. In absorption costing the company lost (£) 375 and in marginal costing, the company lost (£) 2,875. So, it is beneficial to use absorption costing because the loss in it is less than the loss of marginal costing.

Task 3

P4:

A). The budgets are a source of plans which help the company to evolve a financial plan that includes preparation of how the company will find the resources which are required and utilise them in various activities of the business during the particular period of time. It is in a statement form which is made on the basis of the past performance of the company. It is an effective tool which is used by the management of the company in order to prepare their business activities to run smoothly without any disruptions (Hiebl and et. al., 2015).

The different types of budgets are:

            Sales budget: This budget is the main or important budget for the business which is used by the manager to estimate the sales figure in the future. For this estimation company prepares various strategies and these strategies will be introduced in this budget. This budget is used to make the operations of the business effective manner and uses certain tools for the achievement of goals.

Advantages:

  • The sales budget is useful to find out the sale which is estimated.
  • This is also helpful to the management of the company to control the sales-related expenditure and also enhances to allocation of the available resources.

Disadvantages:

  • This can't predict the future trends of events.
  • Making a sales budget takes high managerial time and it may not be easily accepted by all the people in the company.

            Operating budget: This budget assists the manager in planning for the day-to-day operations of the business so the company doesn’t run into a financial deficit. This budget is used by the company to achieve the predetermined objectives. All the expenses which are related to the business operations are needed to be considered in this budget.

            Advantages:

  • The benefit of this budget is that it keeps tracking the entire business.
  • It is prepared for financial responsibilities and aids the manager in controlling working expenses in an optimised manner so that the operating profits can be enhanced.

             Disadvantages:

  • The operating budget does not so easily match the individual and corporate objectives.
  • There is not always to generate reliable outcomes for the business.

(b): Budgeting preparation process covering identification of pricing and different costing systems:

Price skimming: This is price skimming is a pricing strategy through which a marketer fixes a relatively high initial price for a good or service during first after lowering down price over the price over time.  This is an efficient pricing method which assists in optimising sales of new products and services. During the initial stage, prices are higher than in the starting phases. The prices are normally lower after the appearance of the products of the intense contenders.

Economy prices: As per this method, diverse of cited is planned to fix low prices of their diverse goods to attract highly price-conscious clients. Firms lower the costs that are linked with the goods and marketing activities.

Different costing systems:

Direct costing: Here, only those costs covered which are directly related to the manufacturing of the goods. This covers direct materials, direct labour and direct overheads.

Standard costing: This system assists in controlling costs and determination of variances that could arise in comparison to the standards (Zang, 2011). Diverse activities to which relates which is executed in the valuation of the stock, work in progress and making the price in fixing selling prices. These systems assist in controlling costs and determining the variances that could emerge in comparison to the set standards. This covers diverse kinds of elements such as valuation of stock, work in progress and setting selling prices.

C). Importance of budget as a tool for planning and control purposes:

There are various budgets which are used by the cited organisation for planning and controlling aims. These budgets render diverse kinds of information which are related to diverse aspects that assist the manager in planning their future course of action. This likewise renders an opportunity to admire performance and risk management which enhances the entire performance of the organisation. there are various aims for which an organisation’s budget is implemented for controlling purposes. Budgets also help to make comparisons between the actual and forecasted value which ultimately helps to gain the business operations in an effective manner.

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M3

  1. SCORE: It provides the management of TECH (UK) Ltd with numerous budgets instead of using various tools for managing the finances. It also combines budgeting with Customer Management and online project management which assist in the entire business management in one single solution (Bodie, 2013).
  2. PROPHIX: The tool which is offered to the cited company with wholesome upgrades to the product and constant growth of the company. It is an easier tool due to its flexibility and adaptability. The budget preparation will be better and the resource allocation can be properly evaluated and investigated.

D3

There are numerous tools implemented in order to evaluate the financial problems of the firm. By implementing those techniques organisations can recognise any financial risk and likewise assist them to respond to these financial risks in the proper way (Lukka and Vinnari, 2014). These techniques will aid in control to be applied and investment decisions could be considered in an adequate manner. The analysis and interpretation of financial data will support external reporting which in turn will assure the growth of the company’s business.

Task 4

P5:

BSC Approach: For the purpose of reducing financial stress and issues, there are various techniques and methods that Tech UK can adopt. The BSC approach is given by Norton and Kaplan which can be considered as the strategic approach as well as performance management framework which can enable the proper translation of strategies and vision in TECH UK into execution. These can be performed by working from major 4 perspectives which are mentioned below:

  • Financial Perspective: Norton and Kaplan do not neglect traditional requirements for the purpose of financial information. Accurate and timely data funding will often remain their priority as well and managers provide necessary activities and execute to render it. In fact, there are, on the other aspects, more controlling and financial data processing. Through corporate data execution, this is expected that major processing can be automated and centralised (Wickramasinghe and Alawattage, 2012). There is a proper requirement for additional data and information on finance like cost advantage data, risk assessment etc. in this.
  • Consumer Perspective: The present philosophy of management, has presented a raised realisation of the value of consumer satisfaction and a consumer-centred approach in any business organisation. This can be considered as one of the leading indicators, if clients or customers are not satisfied with the service given by the company, they seek a supplier gradually which provides the products and services according to their demands.
  • Business procedure Perspective: It can be referred to as the internal business procedure. This is essential to carefully plan these metrics through those who understand this procedure most initially.
  • Growth and learning perspective: This consists of corporate culture attitude and training associated with the corporate self-development and individual. Agencies of government often find themselves unable to recruit more technical workers as well as presents a decline in existing worker training (Hilton and Platt, 2013).

M4

  • The management accounting techniques and tools like standard costing, marginal costing absorption costing etc. will help in the consolidation of matters of sustainability into various decisions of the company.
  • The managers of the company will necessary to support the strategy and goals of sustainability with the strategies and policies to be developed.
  • Helps in the expansion of reporting strategy that will consolidate problems of sustainability which in turn will permit in reporting of financial and non-financial data.

Conclusion

From this report, it has been concluded that management accounting can give the managers of the company important and vast information about the financial and also states its position in the market. For this

purpose, there are so many accounting systems and reporting are utilized. This report also indicates that the costing system methods are used to evaluate the net profit of the cited company like marginal & absorption costing. The proper planning techniques are used for budget preparation and this budget also helps the company to achieve their targets on time. Finally, it has been concluded that management accounting is the heart of the company’s management by which the company achieve its goals and objectives.

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