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Unit 3 Management Accounting Assignment HND

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Introduction

Management accounting data is urgent for the association to determine different issues and enhance its execution. In the current report, the significance of management accounting and its several techniques has been systematically addressed with respect to Zylla Company. In addition to this, several types of management accounting methods and techniques have also been defined in this report. The advantages and disadvantages of marginal costing and absorption costing are defined in this report. The major objective of this report is to understand the significance of management accounting and its several methods in the business enterprise. Furthermore, in the cited venture, how management accounting systems are used to respond to financial problems has been also systematically discussed in this report. Moreover, the advantages and disadvantages of planning techniques have been also discussed in this assignment.

P1 Concept of Management Accounting and System of Management Accounting

Management accounting:

Management accounting is considered one of the effective mathematical tools which assist in analyzing the data set to determine the actual requirements in the company. Along with this, it is effective enough for managers in order to make decisions and make a plan for the forecasted budgets. This technique helps in making improvements in managerial efficiency in which targeted goals can be accomplished in an effective manner.          

Management accounting system:

There are different types of techniques which are required to be implicated in the Zylla firm by managers for managing all the business operations. All the techniques will assist the manager to make appropriate plans and allotted responsibilities which need to be improved (Honggowati and et.al.,2017). In addition to this, managers can use these techniques in order to make improvements in the company’s operations. Here below are provided different accounting techniques

Job costing:  For representing the cost which is incurred in each and every operational task of the firm there is required identification of transaction activities. Hence, this accounting system provides support in keeping appropriate records of labor costs, direct materials etc. It is important to show the cost within the firm in each department (Turner and et.al., 2017.).

Inventory management: The company need to keep all records related to the inventories which are exports and imports. This all will be done on the basis of the level of inventories. Further, it is important for the production department to be more aware related to the demand of customers and the company’s profitability. Hence, it is essential for a company to do a production of goods on the basis of seasonal requirements and through identifying buyers' behaviours and carrying out production activities. Through controlling the overall production of Zylla company it will be easy for them to deliver goods to customers on time without any wastage.

Price optimization: In order to improve the operating profit of the firm, it is important to keep prices of products and services different. Therefore, managing the variation is done by the manager as per the delivery of the products at the provided consumer location. They fetch their behaviour toward the prices. Along with this, the company can keep one of the best prices on the basis of customers buying behaviour which can help the company in gaining profit. Hence, through implementing this technique in business Zylla company can make good profit.

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Cost accounting: The cost accounting technique is effective for Zylla company because it shows the cost which can be incurred in each activity of the business. In order to make a product and services company requires a high amount of funds. Therefore, with the help of an analysis of investment company can easily carry out business activity without any expenses.

Auditing:  Internal audits can assist the company in making improvements in its business and in work culture. It assists in gaining internal information which is accurate with the cost, operating expenditures and appropriate details which bound managers to make the appropriate decision. Zylla company have the right administration which can make satisfactory improvements in the operations stability. Through the help of this company can easily analyse and make its assets, liability and profit.

P2 Implication of managerial accounting reports into business operations

A report incorporated all records in which detailed information is provided with the time and date. The company need to keep records of its cash inflow in particular activities and costs incurred by day-to-day operations. These all records assist the company in making managerial decisions after analyzing the profitability and making effective decisions which help in minimizing the cost. Here, below are the techniques that can used by Zylla Company

Inventory management report: In this all records related to the use of quality, quantity and cost of products are kept. These types of information are useful for making an effective analysis for measuring the demand for products in the market and the efficiency of the firm to fulfil all the demands. Along with this, it can be said that the reporting system is effective in order to make improvements in the efficiency of business and for growth and development (Szychta and Dobroszek,  2017).

Budgetary reports: This will be effective enough for evaluating the performance of the firm which is effective for getting innovative ideas. Hence, forecasting is needed for the cost which can help the company in controlling expenses and improve business performance. A budgetary report is effective in order managing the allocation of resources. Zylla Company has appropriate information related to the use of a budgetary system in an effective manner.

Cost accounting reports: It comprises computing the cost which can be incurred at the time of making products and services for customers. Through adopting this reporting system Zylla company will be effective in order to manage its business operations and to control unimportant activities. It determines various costs such as labor costs, overheads etc. Hence these all are the records that can bind company managers to get innovative ideas and provide alternative solutions for minimizing manufacturing cost

Performance reports: These are known as the reports which are prepared by the company in order to measure the performance of its employees. Hence it can be stated that it is effective enough in order to generate adequate knowledge related to the market. These types of reports lead to put positive impact on the operational practices of the firm. Along with this, the report will assist the manager of the Zylla Company in making effective analyses and make appropriate decisions that can benefit the firm.

Hence adoption of all these effective reporting systems Zylla Company can easily reduce its unnecessary expenses and improve its employee's performance. Along with this it also motivates employees to improve their performance and work hard for the company.

P3

Interpretation is actually by applying these costing systems it is finally suggested that the absorption technique is suitable to the unit as all expenses and costs are calculated for the business.  Costs related to labour, material and expenses regarding the purchase of stock and goods of the company are analyzed. It is interpreted that the cost system is more effective and affects all types of costs incurred in business activities (Alfirevic, Keeney,  Dowswell and Caldwell,  2016).  Marginal costing is defined as costing which differentiates between variable costs and fixed costs.  Absorption costing is much more beneficial as when the manufactured products are not sold during the bookkeeping period, when the business has an inventory of finished goods then every product of inventory has its own value which is measured. This includes per unit of fixed expense and the value has a fixed overhead. This results in good profits for the business. Thus, results from these methods are reliable and perfect if the marginal costing method is compared. Absorption costing has the option of considering both variable cost and fixed costs. Here fixed cost comes under the section of the production department and every product shares suitable fixed cost, thereby profitability of each product is affected by subjective allotment. The unit cost of production is affected by changes arrived in the closing stock and opening stock.  Interpretation also says that the company is more interested in this method as it is profitable for the firm rather than the marginal costing method. It provides accurate accounting regarding inventory and stock.  Additionally, unsold products which are listed for reducing real expenses are calculated in unsold products. Thus, when it is compared to another method net income of the organisation is much higher. Absorption costing can be divided into fixed overhead costs: costs of goods sold and costs of inventory.

P4 Various Sorts of Planning Techniques and Advantage and Disadvantage

Management accounting is a valuable branch of representing the administrative workforce of the firm with the goal that they might have the capacity to make improved choices in a powerful way. This is basically required as the business works in a powerful condition where changes happen now and frequently (Renz and Herman, 2016). In such a situation, expenses might be expanded for assembling specific items and in that capacity, income would be affected fundamentally. Therefore, business needs to settle on better choices with the goal that progressions can be dealt with in a viable way and this can be conceivable in light of the execution of administration bookkeeping in the association.

The different planning techniques and their advantages and disadvantages are recorded beneath

  1. Zero-based planning

This sort of planning technique is very valuable for organizations as spending plans for new periods are set up from the zero base. This implies needs and necessities of divisions are successfully examined and all things considered, the spending plan is detailed without hardly lifting a finger. It is referred to as a zero-based spending plan as no authentic information of past spending plans is taken and a whole new spending plan is readied.

Advantages

  1. This strategy is very helpful as no previous year's figures are measured for getting ready new year spending plan. Along these lines, assets are used totally.
  2. Another preferred standpoint of zero-based planning is that budget inflation can't happen as the necessity of every single division is examined and the spending plan is arranged as needs be.

Disadvantages

  1. It isn't a beneficial planning apparatus for Zylla Company as no verifiable information is embraced which expends a parcel of time to get ready a whole new spending plan.
  2. It is unacceptable as the workforce is required in overabundance as the whole spending plan is to be readied and accordingly, the routine work of representatives is influenced.

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Internal rate of return

IRR stands for Internal Rate of Return is another viable strategy used to judge the possibility of the interest in an adequate way. It utilizes a reducing rate which makes the NPV (Net Present Value) of money inflows of a new venture zero (Tappura and et.al, 2015). This implies restore that will be produced from inner activities is completed by this planning technique. The higher the IRR, the better for Zylla Company to put resources into the task.

Advantages

  1. One of the primary favourable positions of IRR is that it thinks about the time estimation of ideas in a viable way. In addition, it examines money streams that will create inward returns.
  2. Another value of this planning apparatus is that ascertaining IRR by taking marking down rate is a simpler errand to be proficient. Subsequently, the possibility and adequacy of the venture can be judged without hardly lifting a finger.

Disadvantage

  1. The primary drawback of IRR venture measure isn't considered. In this manner, money streams are broken down and contrasted and the capital put resources into the new undertaking.
  2. IRR isn't reasonable as future consumptions are not engaged by any stretch of the imagination. This strategy just considers exhibiting esteem.
  3. NPV

NPV is one of the normally utilized planning instruments by the business so as to judge how productive is the new task. This implies productivity part of the undertaking is examined and all things considered, the firm can take a choice about whether a venture ought to be made or not. The higher the NPV, the better for the association as putting resources into venture is advantageous. NPV is the contrast between money inflows and surges for a specific period.

Advantages

  1. One of the primary favourable positions of NPV is that the time esteem idea of cash is considered while assessing the gainfulness part of the task.
  2. It is helpful as the cost of capital and hazard-related while making estimations in regards to the future is found out in a viable way.

Disadvantage

  1. It is disadvantageous as it depends on reducing the rate which is hard to find out. Besides, projections on such premises may prompt off-base choices (Quattrone, 2016).
  2. This technique isn't valuable as the cost of capital is acquired with quite a bit of mystery and all things considered, the conclusion drawn on this premise may exceed great venture and a wrong conclusion can be drawn.

M3 Use of different planning techniques

The planning apparatuses, for example, zero-based planning, NPV and IRR are powerful planning instruments which are useful in getting ready conjectures and spending plans. Zero-based planning helps to prepare a ready spending plan starting with no outside help base and in that capacity, no verifiable figure of past spending plans are taken and all things considered, a new spending plan is readied. This planning instrument is generally utilized as a part of the business to figure spending plan (Turner and et.al, 2017). Also, IRR is utilized to test the probability of a venture with the goal that the task might be broken down whether satisfactory returns will be produced by speculation or not. Then again, NPV is broadly used to check whether a new task would be beneficial for the firm or not. In addition, the idea of time estimation of cash is used by NPV. In this manner, planning techniques are a compelling approach to forecast a budget.

P5: Organisations Adapting Management Accounting to Respond to Financial Problems

Various performances and techniques are needed to improve the financial environment of business entities.  So do their improvement different appraisal techniques are used to get a positive result in the productivity of the firm. These techniques are applied in the operational and functional departments of the organization. There is always a ray of financial instability or, said uncertainty regarding the financial department. However, efficiency can be achieved through proper execution and development of the organization (Richards and Taylor, 2015).  By using financial and non-financial indicators, using benchmarks, identifying major financial problems and attaining budgetary targets variances and hurdles of the firm can be sorted out. Characteristics of an effective management accountant are defined.  Strategies and systems which require proper listing and reporting of financial positions and disclosure are governed by the department and responsibly tackled. Below are some techniques which are worth discussing to gain revenue as well as to achieve the desired goal:

  1. Balance Scorecard: It is a kind of strategic activity that is performed to analyze and execute tools and techniques that can control over administration department through proper work performance in the firm. Professionals here make efforts and complete execution is done through their level in their department as well as in business in the required state to get satisfactory results. Thus these techniques are useful for the development of each department of the organization and help the entity in keep pace with their rivalries (Warren, Reeve and Duchac, 2015). The main aim of the company is to implement techniques in an efficient way so that performances of every level are admired and fruitful. It helps in bringing out quantitative results because all information is collected by high authorities which results in fine decisions.
  2. Bench-Marking: This technique where one’s own performance is measured with the performance of other organizations (Ibarrondo-Dávila, López-Alonso, 2015)It works in the form of a true motivator as it motivates employees because a competitive work culture is developed in the organization. New and innovative ideas are planned, and implemented with new techniques that indicate profits of the company. Such techniques should be used to reach desired goals and objectives.
  3. Financial Governance: Managerial professionals use this technique to get beneficial and impelling results. For better outcomes, they focus on the evaluation of financial deals during the financial period. Thus, auditors, accountants, managers and owners apply these tactics to improve capital stability as well as functional efficiency in the firm (Eldenburg, Wolcott,  Chen and Cook,  2016). These techniques need to be applied by the firm so that organizational growth and development are assured by the professional team and sufficient increment is also there in sales and profitability of the business.
  4. Variance Analysis: This is the most suitable technique which is used in controlling costs and other expenses incurred in the activities performed in the business. All organizations may not lead necessary variances but is enough to differentiate two or more variances. When the amount of variance is viewed on the trend line then it is effective to review. Then outcomes are always a statement different from desired expectations and then finally it is interpreted as if why variance occurred. Variances explain the fluctuations and the way to handle them in the management system. Purchase price variance, labour rate variance, spending variance overhead, fixed overhead, selling price variance, and material yield variance are some of the variance analyses which are commonly used for financial interpretation. The main reason behind variances is fluctuation in market conditions for example. Shortage of raw materials leads to a rise in the prices of suppliers. Another reason may be budgeting values that would be too idealistic and product and service delivery may not be appropriate.

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Conclusion:

  • So through this report, it is concluded that for the development and regular growth of business management accounting is very beneficial and effective in nature. It plays an important role in achieving the financial targets of the firm. Financial techniques most importantly absorption technique are very useful f to ascertaining the internal health of an organization and influence managers and team leaders to evaluate targets in the right direction and consider each aspect of the operational area widely and smoothly. By applying these techniques all differences and fluctuations of the market get cleared up and appraisal tools provide an increment in the productivity of the organization. Therefore, for an organization managerial accounting is very necessary to ascertain and resolve the financial aspects of a firm.
  • Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser? Management Accounting Research. 31. pp.118-122.
  • Renz, D. O. and Herman, R. D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.
  • Tappura, S. and et.al, 2015. A management accounting perspective on safety. Safety science. 71. pp.151-159.
  • Turner, M. J and et.al, 2017. Hotel property performance: The role of strategic management accounting. International Journal of Hospitality Management. 63. pp.33-43
  • 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 Commerce., 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.
  • Szychta, A. and Dobroszek, J., 2017. Academic aspects of management accounting and controlling in Poland since the 1990s. Zeszyty Teoretyczne RachunkowoÅ›ci. (93 (149)). pp.175-209.
  • Turner, M. J. and et.al., 2017. Hotel property performance: The role of strategic management accounting. International Journal of Hospitality Management. 63. pp.33-43.

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