Search

Management Accounting for Optimisation of Financial Resources

University:

  • Unit No:
  • Level: High school
  • Pages: 26 / Words 6509
  • Paper Type: Assignment
  • Course Code:
  • Downloads: 622
Question :

This assessment will cover following questions:

  • Discuss an understanding of management accounting system.
  • Define various management accounting techniques and methods used to make effective decisions.
  • Explain the benefits of Management Accounting systems and their application within an organisational context.
Answer :
Organization Selected : NISA

INTRODUCTION

In the recent times, every business unit is placing emphasis on employing management accounting (MA) system with the motive to make optimum utilization of financial resources. Moreover, such system lay focus on cost control as well as profit maximization and thereby contributes in organizational success. For this project, NISA has been selected which offers retail products or services to the customers. In this, report will shed light on different system that can be used by the firm for evaluation and reporting purpose. Besides this, report will shed light on the tools that assists in planning as well as solving monetary problems effectually.

TASK 1

Explaining The Principles of Management Accounting And Stating Its Importance Pertaining to Integration Within An Organisation

Management accounting may be presented as a process of offering financial information and resources to the managers for decision making aspects (Weetman, 2019).

Principles of management accounting

  • Cost reduction
  • Presents solution considering both controllable and non-controllable cost
  • Optimum utilization of resources

Importance of management accounting

  • Helps in setting budgets or financial plans for upcoming time period
  • Assists in setting prices for the products or services
  • Provides management team with timely information for planning & decision making purpose (Otley, 2016).

Explaining Different Techniques And Methods Used For Management Accounting Reporting

Manger of Nisa prepares managerial reports for providing the team of higher management with suitable information about internal performance. This in turn helps in several aspects regarding panning, decision making as well as measuring and evaluating performance. Reports which can be prepared by Nisa for decision making purpose are enumerated below:

Job cost report: This report furnishes information about expenditure incurred while performing specific job. It helps in doing evaluation of existing performance over estimated revenue and thereby highlights profitability related to each job. Through this, business unit can make efforts on the profitable areas and thereby improves performance level.

Budget report: It assists manager in doing assessment of departmental performance and controlling cost. Further, variances found in the actual performance also help in setting budget for the near future (Types of managerial reports, 2020). In addition to this, owner of Nisa can also use this report for offering incentives to the employees.

Inventory report: By preparing and using this report manager of Nisa can make manufacturing process more efficient. It contains information about wastage, cost level and overhead expenses in relation to inventory usage and management (Cooper, Ezzamel and Qu, 2017). Along with this, inventory report also helps in doing comparison of different assembly lines and thereby helps in setting bonuses for the best performing areas.

Accounts receivable ageing report: By this, cash flow can be managed and monitored by Nisa prominently. Moreover, it presents time period from which debtor’s payment is due. Through this, manager can ascertain customers who are facing difficulty in paying their balances. In this way, such report helps in assessing problems that take place in company’s collection process. Referring all these aspects, firm can take decision pertaining to allowing credit extension to the customers.

Evaluating the benefits of MA systems and their application within an organisational context

Applicability And Benefits of Varied MA Tools in The Context of Nisa is Enumerated Below:

Job costing

According to this, cost of production is determined referring to the number of completed jobs. By applying this, manager of Nisa can identify whether production cost exceeds overheads and price of material. Thus, referring this, resources can be used in the profitable areas for improving overall performance.

Advantages

Disadvantages

  • Profitability can be determined pertaining to each job.
  • Helps in doing estimation about cost (Job costing advantages and disadvantages, 2020)
  • Requires clerical work
  • Time consuming process
 
Cost accounting

Such system of management accounting assists in determining cost of production (both fixed & variable). In other words, by accumulating both direct and indirect expenses manager of Nisa can assess production cost. Further, by adding mark-up or desired profit margin in the unit cost product’s price can be ascertained (Maas, Schaltegger and Crutzen, 2016). By using following formula manager of Nisa can set suitable price:

Price = unit cost + (cost * profit%)

Advantages

Disadvantages

  • Facilitates elimination of wastage, losses and inefficiencies from operations.
  • Ensures cost reduction
  • Helps in identifying reasons behind profit or loss (Advantages and Disadvantages of Cost Accounting, 2020)
  • Assists in setting suitable prices of product
  • Offers framework for decision making by taking into account previous figures, whereas management is concerned about future.
  • Leads problems of under and over absorption
 
Inventory management system

Company can track stock level more effectually by using inventory management software or system. Moreover, it furnishes information about orders, sales and deliveries aspects. Further, it also helps in preparing documents in relation to work order, material etc. Manager of Nisa can do appropriate valuation of stock by taking into account various methods such as LIFO, FIFO etc (Hopper and Bui, 2016). In addition to this, methods such JIT (just in time), EOQ (economic order quantity) etc is highly significant which assists in maintaining enough stock within an organization and reduces cost level.

Advantages

Disadvantages

  • Ensures saving of both cost and time
  • Increases operational efficiency
  • Optimum utilization of stock
  • Facilitates uninterrupted production
  • Highly expensive
  • Involves high complexity
  • Elimination of business risk to the limited extent
 
Price -optimization system

In the context of Nisa, by using this system manager of Nisa can monitor or track customer’s responses or behavior at varied price eve. Hence, by taking into account price optimization system manager can set suitable prices of the products or services in line with the customer’s expectation.

Advantages

Disadvantages

  • Facilitates optimal price fixation
  • Helps in enhancing customer base
  • Requires greater understanding about the concepts
  • Time intensive practice
 

TASK 2

Calculating Cost And Preparing Profitability Statements as Per Absorption & Marginal Costing

Specifically absorption and marginal costing are the two methods which Nisa undertakes for assessing profitability aspect.

Cost assessment, as per absorption and marginal costing, pertaining to Alpha is enumerated below:

Particulars

Marginal costing

Absorption costing

Direct material

5

5

Direct labor

8

8

Variable production overhead

2

2

Fixed production overhead

-

5

Total cost per unit

15

20

Profitability Statement as Per Absorption Costing:

Particulars

Unit

Per unit figure

Amount (in £)

Sales

1500

35

52500

Less: cost of goods sold

 

 

3000

Gross profit

 

 

20000

Less: indirect expenses

 

 

 

Fixed selling & distribution expenses

 

 

10000

Variable S&D expenditure

 

 

7875

Net profit

 

 

2125

 

Computation of COGS

Particulars

Unit

Per unit figure

Amount (in £)

Opening stock

0

20

0

Add: purchases

2000

20

40000

Less closing stock

500

20

10000

COGS

 

 

30000

Income Statement According To Marginal Costing Method Is As Follows:

Particulars

Unit

Per unit figure

Amount (in £)

Revenue

1500

35

52500

Less: variable expenses (COGS

 

 

22500

Less: variable selling & distribution expenses

 

 

7875

Contribution

 

 

30375

Less: fixed expenses

 

 

 

Fixed production overhead

 

 

15000

Fixed selling & distribution expenses

 

 

10000

Profit

 

 

5375

Particulars

Unit

Per unit figure

Amount (in £)

Opening stock

0

15

0

Add: purchases

2000

15

30000

Less closing stock

500

15

7500

COGS or total variable cost

 

 

22500

By doing assessment, it has found that business unit should follow absorption costing system for cost and profitability assessment. Moreover, absorption costing method presents highly suitable view of production cost as it considers both fixed and variable expenses (Geddes, 2020). This in turn gives clear indication about profitability aspect.

TASK 3

Explaining The Advantages And Disadvantages of Different Types of Planning Tools Used For Budgetary Control

There are several tools which Nisa can employ for the purpose of budgetary control includes investment appraisal tools, cash and operating budget. By undertaking such budgeting frameworks organization can monitor or compare expenses and thereby take suitable measure for improvement (Ax and Greve, 2017).

Cash Budget

It may be presented as financial framework which includes both estimated cash inflows and outflows pertaining to the specific time frame (Weetman, 2019). By preparing cash budget manager of Nisa would become able to know whether company has enough funds for performing business activities or not.

Advantages

Disadvantages

  • Facilitates quick identification of potential deficit and surplus
  • Debt can be avoided significantly
  • Less effective in comparison to modern budgeting tools namely ABB, ZBB
  • Highly relies on estimations for meeting future needs
 

Operating Budget

It implies for the forecast of both revenue and expenses with regard to specifically one or more future period. At the beginning of year, manager of Nisa can draft operating budget which in turn exhibits expected activity levels for the concerned period (Burney and Malina, 2019). Thus, by undertaking this budget manager of Nisa can monitor operational performance.

Advantages

Disadvantages

  • Assists in tracking performance of entire business
  • Ensures flexible budgeting
  • Focuses only on financial outcomes while preparing budgeting framework
  • Time consuming exercise
 

Investment Appraisal Tools

Nisa can undertake this tool for planning purpose when it has investment or growth options. It mainly includes payback period, net present value, average and internal rate of return. This helps in analyzing the viability of capital project and thereby aid in effectual planning.

Advantages

Disadvantages

  • Presents suitable framework for decision making by considering time value of money concept.
  • Clearly indicates return associated with project
  • Not helpful when initial investment varies
  • Payback method does not highlight profit that will be generated after the recovery of initial investment.
 

Analyzing The Use of Different Planning Tools And Their Application For Preparing And Forecasting Budgets

Cash budget for the period of 6 months is enumerated below:

Particulars

January

February

March

April

May

June

Cash inflows

 

 

 

 

 

 

Opening cash balance

3000

8500

14325

20491.3

27015.8

33916.6

Sales

15000

15750

16538

17364

18233

19144

Other income

2000

2000

2000

2000

2000

2000

Total cash inflows

20000

26250

32862.5

39855.6

47248.4

55060.8

Cash outflows

 

 

 

 

 

 

Material

5000

5250

5513

5788

6078

6381

Labor

3000

3000

3000

3000

3000

3000

Other expenses

3500

3675

3859

4052

4254

4467

Total cash outflows

11500

11925

12371.3

12839.8

13331.8

13848.4

Cash surplus or closing cash balance

8500

14325

20491

27016

33917

41212

The above depicted cash budget shows that sales and profitability of firm will increase significantly in the upcoming time period. Manager of Nisa can undertake cash budget for evaluating and monitoring performance level. On the basis of this, deviations can be assessed timely which helps manager in taking corrective measure for performance improvement.

Applicability of Investment Appraisal

For instance: Nisa has two investment proposals with varied initial investments. In this regard, company can select the most suitable option over other one by employing investment appraisal technique. Through evaluation, it has assess that manager should focus on investing funds in project A. Moreover, it shows higher and positive net present value or return as compared to option B.

Computation of NPV

Year

Cash inflow (project A)

PV factor @ 10%

Discounted cash inflow

Cash inflow (project B)

Discounted cash inflow

1

20000

0.909

18182

18000

16364

2

25000

0.826

20661

23000

19008

3

21000

0.751

15778

19000

14275

4

26000

0.683

17758

24000

16392

5

32000

0.621

19869

28000

17386

Total discounted cash inflow

 

 

92248

 

83425

Less: initial investment

 

 

70000

 

70000

NPV

 

 

22248

 

13425

Comparing How Varied MA Tools Can be Used For Responding Financial Problems

With regards to business unit, bottleneck in the performance is usual which in turn directly impacts organizational performance. Thus, there are several tools which can be undertaken by Nisa for dealing with financial problems pertaining to reduction in productivity, profitability, market share and increase in cost.

Benchmarking: Now, for assessing and getting information about performance trend business unit emphasizes on setting benchmarks. It offers input to Nisa for performance evaluation in the context of sales etc.

Key performance indicators: In the recent times, company lays emphasis on setting KPI’s pertaining to sales, profit, market share etc. Thus, by comparing actual performance in against to the KPI’s manager of Nisa can identify reason takes place behind performance deterioration.

Variance analysis: This is another most effectual tool which assists in responding monetary problem. Moreover, it clearly exhibits deviations take place in the existing performance over standards along with the causes (Quattrone, 2016). Thus, referring causes manager of Nisa can take significant measure for performance improvement.

Balance scorecard: It measures company’s performance by taking into account both financial and non-financial measures. This includes mainly four aspects pertaining to customers, financial, internal business, innovation and learning. In this way, balance scorecard offers opportunity in relation to evaluating performance from such perspectives and enables to take measure for performance enhancement.

By doing assessment, it has identified that Nisa undertakes benchmarking technique for identifying and resolving monetary problems. In the case of decrease in productivity and profitability business unit can do comparison of existing performance over benchmarks. Referring causes Nisa can take action pertaining to practicing intense promotional strategies and cost control measures. By this, Nisa can maximize sales and thereby profitability as well (Ax and Greve, 2017). On the other side, Qbic hotel undertakes balance scorecard model as it assists in measuring performance from several perspectives. Moreover, for gaining competitive edge over rivals firm is required to monitor performance from all perspectives. However, in comparison to Qbic, MA technique undertaken by Nisa is highly effectual. Moreover, it clearly indicates both variance and causes associated with the same.

Also Read :- Importance of Finance Management in A Company

Analyzing How Management Accounting Can Lead Organizations To Sustainable Success

Management accounting tools such as benchmarking, variance analysis etc gives timely indication to the firm about the areas where improvement requires. For instance: variance analysis system provides Nisa with suitable reasons pertaining to non-achievement of predetermined goals or objectives. In this way, by doing modifications in the existing strategic framework within suitable time company can avoid deficiency takes place in performance and thereby leads sustainable success.

CONCLUSION

By summing up this report, it has been articulated that through undertaking MA systems manager of NISA can get suitable information about cost, profit, stock level etc. Besides this, it can be inferred that by preparing reports management team of the organization can take strategic decisions and thereby gets desired level of outcome or success. It can be summarized from the evaluation that MA tools are highly significant which helps in doing and making financial forecast effectually. It can be seen in the report that by using benchmarking NISA resolves monetary problems and thereby ensures sustainable success.

Get Your Assignment Done With Experts Assistance & Secure A+ Grades

Assignmentdesk.co.uk provides excellent assignment help to UK students pursuing their degrees in colleges and universities. We have expert writers who are highly skilled and well-qualified to provide you with a unique write-up for your assignments. They strictly adhere to deadlines and submit the work within them. So what are you waiting for? Whether you seek dissertation help UK, custom academic help or essay writing service, we are a one-stop solution for all your academic worries. We also assist students in drafting the topics and structure for their university writing task. So it's time to stand out in class by scoring A+ grades. We guarantee you to hold high marks. Our qualified writers will finish your assignment on time and according to all of your specifications. All educational levels, including high school, college, university, and graduate school, can get academic writing assistance from us in the UK. If you are also one of them facing challenges in completing your assignment, then you can ask for our help! 


Download Full Sample
Cite This Work To export references to this Sample, select the desired referencing style below:
Assignment Desk.(2024) Management Accounting for Optimisation of Financial Resources Retrieved from: https://www.assignmentdesk.co.uk/free-samples/financial-management/management-accounting-for-optimisation-of-financial-resources
Copy to Clipboard
Management Accounting for Optimisation of Financial Resources Assignment Desk ,(2024),https://www.assignmentdesk.co.uk/free-samples/financial-management/management-accounting-for-optimisation-of-financial-resources
Copy to Clipboard
Assignment Desk (2024) Management Accounting for Optimisation of Financial Resources[Online]. Retrieved from: https://www.assignmentdesk.co.uk/free-samples/financial-management/management-accounting-for-optimisation-of-financial-resources
Copy to Clipboard
Assignment Desk Management Accounting for Optimisation of Financial Resources. (Assignment Desk, 2024) https://www.assignmentdesk.co.uk/free-samples/financial-management/management-accounting-for-optimisation-of-financial-resources
Copy to Clipboard
Assignment Desk Management Accounting for Optimisation of Financial Resources. [Internet]. Assignment Desk.(2024), Retrieved from: https://www.assignmentdesk.co.uk/free-samples/financial-management/management-accounting-for-optimisation-of-financial-resources
Copy to Clipboard
Struggling with writing assignments? Take our academic writing services to resolve your problems. We not only provide online assignment help but also various other services like thesis, dissertation, and essay writing services. If you have any doubts about our experts, then we suggest you check our “Samples” before seeking dissertation help from us. Our experts can ease the complexity of your work. All you have to do is ask, “Can you do my assignment?”
Boost Grades & Leave Stress

Share Your Requirements Now for Customized Solutions.

Lowest Price
USD 6

    Delivered on-time or your money back

    100+ Qualified Writers

    For Best Finance Management Assignment Help

    View All Writers
    FREE Tools

    To Make Your Work Original

    • tools Paraphrasing Tool

      Check your work against paraphrasing & get a free Plagiarism report!

      Check Paraphrasing
    • tools Plagiarism Checker

      Check your work against plagiarism & get a free Plagiarism report!

      Check Plagiarism
    • tools Dissertation Outline Generator

      Quick and Simple Tool to Generate Dissertation Outline Instantly

      Dissertation Outline Generator
    • tools Grammar Checker Tool

      Make your content free of errors in just a few clicks for free!

      Grammar Checker
    • tools Essay Typer

      Generate plagiarism-free essays as per your topic’s requirement!

      Essay Typer
    • tools Thesis Statement Generator

      Generate a Compelling Thesis Statement and Impress Your Professor

      Try Thesis Generator Tool

    Professional Academic Help at Pocket-Friendly Prices!

    Captcha Code refresh

        Estimated Price

        USD 6.32 25% OFF
        Total Price USD 6
        182532+Delivered Orders 4500+PhD Writers 4.8/5Client Rating

         
        AD whatsapp

        Limited Time Offer

        Exclusive Library Membership + FREE Wallet Balance

        Number successfylly updated