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Use of Management Accounting Techniques in AZIO

University: London School of Accountancy & Management

  • Unit No: 5
  • Level: Undergraduate/College
  • Pages 14 / Words 3500
  • Paper Type: Assignment
  • Course Code: BBAC501
  • Downloads: 0
Organization Selected : AZIO Organisation

INTRODUCTION

Management accounting refers to accountancy which is being used by manager of an organisation so that they can get proper information and make effective decisions. These determinations are being made by management in order to bettering the performance of control functions. This sort of accounting can help administrators of a company so that they can frame structure of business in a befitting manner depending upon hierarchical aims and objectives (Bradbard, Alvis and Morris, 2014). Under this assignment, management accounting reports along with strategies of it are being discussed with taking AZIO organisation. This firm is a manufacturer of electronic keyboard and having around 48 talented employees. Report will also include cost perspective and different methods to measure the profitability of company and losses that are being faced by them. Assessment will focus on different advantages and disadvantages of different types of planning tools used for budgetary control. Lastly, it will put light on usefulness of management accounting techniques in order to reduce all the financial problems.

TASK 1

P1 Management accounting and essential requirements of different types of management accounting systems

Management accounting:-

Management accounting can be referred to stipulation of financial information that can be utilised by company in order to develop business. According to Christ and Burritt, (2017), management accounting can be defined as a process in which preparation can be done of management report along with accounts which aid company in becoming more accurate so that administration can take effective decisions for both long and short term success. In other words, management accounting is a procedure that includes different things like analysis of business costs, operation and preparation of company's financial report which will help managing directors and managers in decision making process.

Management accounting system:

Managerial accounting systems refers to an instrument that has been made in order to deliver data which can be utilised by management of AZIO so that to make effective determinations through which company can accomplish set targets. It is being found that in modern world, most of business firms uses MA system that are having heavy manufacturing plants. This system may aid AZIO in reducing or measuring the cost of manufacturing process. On the other hand, it has also been examined that internal MA systems vary from company to organisation depending on the sector they are dealing in or operations that they are doing. With the help of this, AZIO may easily make changes as per the functionalities depending upon the numbers that has been computed in management accounting financial reports of industry (Christopher, 2016). Some of management accounting systems are: Cost-accounting, inventory management, job-costing and price optimising systems can be used by AZIO. If you are more interested in the H&M sample paper, then visit Importance of Developing Teams and Individuals of H&M.

Importance of integrating MA systems:

Modern business world is filled with high digital technology and if company may use different traditional approaches in order to prepare financial reports then it may consume time of them. Heavy time consumable approaches of preparing financial reports like bookkeeping a company can not afford. Main intent of MA within AZIO is to support rivalry determinations while looking at collection, processing, and communicating information. This data is majorly be used by AZIO's manager so that proper planning, control, and measurement of business can be done with the help of different strategies.

Role and principles of management accounting:

MA carries many principles along with roles as well that can help managers of AZIO when it comes to make effective decisions within the organisation so that to gain competitive advancements (D'Onza, Greco and Allegrini, 2016). Some of principles are given beneath:

  • Influence: Taking effective use of management accounting will help manager in influencing staff members so that they follow all the decisions that has been made by the company.
  • Relevance: Taking in use of management accounting, relevant information can be gathered by managers of AZIO that can help him/her in making right decisions at correct time.
  • Value: Taking in use of management accounting at AZIO will help them in computing the current value of organisation.
  • Trust: Formulating relevant information will help AZIO in building trust among staff.

On the other hand, major role of MA is that it can help managers of AZIO in preparing financial reports. With the develop report manager can easily compute costing of business and manufacturing process (Granlund, 2011).

Different types of management accounting systems:

  • Cost accounting system: This kind of system plays a crucial role in context of running business in a successful manner. Cost accounting system is being utilised to compute costelated to products and services that company have manufactured so that to analyse the profitability, inventory evaluation and many other things.
  • Price optimisation system: Price optimising system is being considered as a process which finds out the sweet spot pricing of product and services. On the other hand, it also aid in maximising the prices as per the willingness that customers are having (Henri, Boiral and Roy, 2016).
  • Management information system: MIS refers to a computerised database that includes all the financial data which can be stored for a longer period of time and can be utilised by AZIO so that to analyse the current performance from past.
  • Job costing system: It is being considered as a system that helps in assigning the manufacturing cost to different commodities that has been made by AZIO. Developing a keyboard with good quality and assigning cost to it is being considered as something that can help AZIO in fixing cost of the keyboard.
  • Inventory management system: Under this software, if AZIO follows it in a proper manner than it can be helpful for them to tracking or maintaining the inventory, sales and delivery levels. It is being utilised so that to reduce over stocking chances along with outages (Jacobs and Cuganesan, 2014).

Difference between financial and management accounting:

Financial accounting Management accounting
This type of accounting is regulated by rules like principles i.e. standardised in nature. Management accounting is established and followed by entrepreneurs which is not at all standardised.
Financial accounting keeps its focus on economic conditions of company and data which is being used stay historical in nature. On the other hand, administration accounting consists with both historical and future data so that proper planning can easily be done by AZIO.
Financial accounting keeps its focus on financial years. Apart from this, management accounting keeps their focus on different time horizon.

P2 Different methods used for management accounting reporting

Presenting financial information:

Business account require to be accurate and up to date which help individual to have appropriate knowledge and information about financial position of firm. For this, it is essential that proper statement are formulated which specifies data about income and expenditure of firm. Receipts, purchase order, invoice and cash flow (Johnson, 2013).

Top personnel formulate financial statements that are Balance sheet, Profit and Loss, Cash flow and other records to inform members and other people about usage of money in different activities. It is necessary that accountant provide data to investors, employees and other individuals which are either directly or indirectly connected with firm. Company have shareholders which invest money in business to gain return in respect to their funds. For this, management require to provide them information about use of money and profit generated. This help administration to make changes in system and utilise capital properly.

Reasons that information presented require to be understandable are stated beneath:

Management require to formulate financial statements in according to format which is prescribed by authorities. It is necessary that information is presented in format which are understandable by shareholders, members and other people which have connection with firm. Along this, management even require that data is not interpreted in wrong manner that individual make wrong conclusion. This will affect on reputation and image of firm which depend upon stakeholders understanding and interpretations.

  • Different types of managerial accounting reports: These are various types of report which help organisation to have complete information about financial position of firm are described below:
  • Job cost reports: This method of reporting outlines the cost of assembling and generation of goods and services (Mistry, Sharma and Low, 2014). It is one of essential methods as it deals with less occupation and activities segments within precise manner. It is basic process which find out incomes as well as cost point of view.
  • Inventory management reports: This methods remains linked with breaking down the inventory management reports for effective generation anticipating. AZIO is having capacity is decide the level of stock which is made of water craft within deliberate manner. By using these detailed strategies management is having capacity to recognize its creation cost as well as time which is caused at per unit in an specific time period (Morden, 2016).
  • Performance reports: these reports mainly recognizes the completion as well as execution of project and business is share out with managers and executives of enterprise. It is the assignment which is lawful accomplished as far dealing with solidifying and reports them in solitary configuration.
  • Account receivable reports: Accounts management holders are the main viewpoint for enterprise which are mainly linked with investigating the total to be collected from indebted particular person after a limited period of time.

M1 Benefits of management accounting systems and their application within association

Some of the benefits of different management accounting systems are given below:

MIS system: Major benefit of this system is that it helps in storing high number of financial statements in PC for a long period of time which can be utilised at anytime by AZIO whenever it is needed.

Price optimisation system:Benefit that has been given by this system is that it can help AZIO in fixing up the price of product which has been made by them.

Job cost system: This sort of system can help organisation in reducing all the expenses of different sections like stores of the company and aid in making effective decisions through which they can reduce all the job related to cost.

Inventory management system: Major benefit of this system is that it directly aid AZIO in making effective decisions through which they can maintain their stock and reduce chances of overstocking situation.

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D1 Integration of management accounting system and management accounting reporting

According to Klychova, Faskhutdinova and Sadrieva, (2014),both management accounting system and management accounting reporting plays a crucial role in context of business organisation when they are looking forward to maintain the cost of products or inventory. Both of them are majorly coordinated in a befitting manner and can help organisations in maintaining or arranging different procedure & functions so that goals and objectives can be attained right on time. Apart from this, management accounting system if combines with reports it will directly help out AZIO in uncovering techniques through which company can reach to conclusions in much effective and efficient manner. Students can also easily get Java Assignment Help at a very affordable price.

TASK 2

P3 Costing techniques to analyse profit and loss for organisatioN

  • Microeconomic techniques
  • Cost- Cost is refers as the amount of cash given for an asset of the company. It consists all the cost which is important to get an asset within the place as well as ready for use (Riisgaard and Gibbon, 2014).
  • Cost volume profit- it is analysed to find out how modification in cost as well as volume impact on organisation operating net income and income. These analyses are performed by various assumptions which involve sales price per unit is constant, total fixed cost, everything produced is sold and so on.
  • flexible budgeting- This budget that flexes or adjusts for changes within volume of activities. This is very much sophisticated as well as useful than static budget. As it remains at particular amount regarding activity volume.
  • Cost variances- It is the difference within planned budget and cost real amount. There are main part of standard costing which is used for producing. It will report a minimum two variance which are direct labour, manufacturing overhead and direct material (Sánchez-Matamoros, Araujo Pinzon and Alvarez-Dardet Espejo, 2014).
  • Marginal costing- It is the technique of costing i.e. variable cost is charged to cost units. At the time of fixing cost for the period is accomplished written off against its contribution.

Calculation of net profit by using marginal costing method:

Particulars Amount
Sales revenue = (selling price * no. of goods sold = 55 * 600) 33000
Marginal Cost of goods sold: 9600
Production = (units produced * marginal cost per unit = 800 * 16) 12800
closing stock = (closing stock units * marginal cost per unit = 200 * 16) 3200
Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500

Absorption costing: A type of costing system which connected with cost related to inventories including general cost of AZIO.

Computation of net income by using absorption costing method:

Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales + selling and administrative cost = 1 * 600 + 2700) 3300
Net profit/ operating income 15675

Break-Even Analysis: It is being found that this analysis is being utilised in order to compute equilibrium point.That means this type of analysis helps in Taking both total revenues ofAZIO total expenditures equal (Klychova, Faskhutdinova and Sadrieva, 2014).

Total number of product sold
Particulars Amount
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
  1. Calculation of break even point in accordance to sales revenue
Particulars Amount
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution / sales * 100 30.00%
BEP in sales 20000
  1. Calculation for getting desire profit of 10,000
Particulars Amount
Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
Sales 1333.33

Margin of safety: This is also one of the essentials aspect in terms of maintaining the desired amount of production level.

  1. The margin of safety, if 800 products are sold
Particulars Amount
Actual sales in units 800
Break even sales in units 500

M2 Range of management accounting techniques and produce appropriate financial reporting documents

Marginal costing: It is being analysed that organisation can consolidate the data i.e. linked with computation of the cost along with production & manufacturing units. It is being calculated with production along with management so that business can get expanded in much effective and efficient manner.

Absorption costing: This sort of costing delivers equal opportunities related to all the aspects so that reduction can get all of all the expenses which were putting impact on AZIO's profit margins. Through this, company can easily hit their targets.

D2 Financial reports accurately applied and interpret data for a range of business

As given by Schaltegger and Csutora, (2012), it is being found that there are two major methods which can be utilised by AZIO's production. With the help of effective financial report, loss can be reduced to zero through which company can make alterations as per the requirements. As computed above, numbers which has been gathered are calculated with the help of margin costing method. Profit under this was computed was £17500 on the other hand, £15675 is the amount which was being considered as absorption costing.

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TASK 3

P4 Advantages and disadvantages of different types of planning tools used for budgetary control

Budgetary tools are determined as a process that helps company in utilising entire money that are available to them in a cost effective manner. This consist of certain factors like s data making arrangements, formulating budgetary reports etc., so that all task are completed in a better way. Thus, it can be said that with the help of budgetary tools arrangements can be done in a in a systematic manner (Springer, Berlin, Heidelberg.Riisgaard and Gibbon, 2014). Therefore, some of the budgetary tools that company can use are explained below:

1. Forecasting Tools: It is determined as a fundamental apparatus that helps company in figuring out various figures and data with the help of a chart for example: income chart of business. This is done with the accordance of PC programming which assist in shaping statistical figures in a graphical representation. Thus, it makes easier for managers in analysing current business operations and its performance in a better manner.

  • Advantages: With the help of forecasting tool company can get adequate and appropriate data which can be further used for investigating further deals and incomes that can provide maximum
  • Disadvantages:Forecasting doesn’t give appropriate information about past data because of which forecasting future with the help of insignificant data may be not helpful in making future predictions and other business operations.

2. Contingency tool: This kind of tool assists company in collaborating useful data by eliminating components and factors which don’t add value or provide benefits to firms. Thus, it helps in illuminating data in an appropriate manner (Bradbard, Alvis and Morris, 2014).

  • Advantages:Its biggest advantage is that it helps organisation in evaluating data in a better manner so that it can be further used for making plan of action and strategies for the betterment of the company
  • Disadvantages: Due to the tools and technologies that are required for analysing data are high at cost can be one of the biggest disadvantages. Other than this, it is invariable in nature.

3. Scenario tool: It is consider as a planning tool that provides with complete range of scenarios that can occur in future. Thus, it inculcates elements that can possibly happen and further evaluates trends of uncertainties. In this a detailed study of past experience is done so that a better analysis can be made which can further provides better solutions in terms of increasing profits and productivity.

  • Advantages: It provides company with appropriate data by considering past, present and future scenarios. As a result with the help of this better strategies for improving company’s growth can be done. Further if any kind of issues are being faced than manager have plan to overcome with the situation (Granlund, 2011).
  • Disadvantages: Impact on budget can be one of the disadvantage as company for executing its activities may required skilled and knowledgeable candidates which may need ample number of money for hiring.

4. SWOT ANALYSIS:

  • Strengths: 43talented employees and effective manufacturing process of keyboard is said to be two strengths of AZIO. In terms of financial status, employees are the one who Delivers proper services to customers which helps this company to become one of the leading company of UK.
  • Weaknesses: using traditional approacheslike handmade bookkeeping is being considered as a weakness for this organisation which have impacted negative Leon their decision making process.
  • Opportunities: expansion of business at international level is being considered as an opportunity forAZIO. Along with this company needs to focus on management accounting so that financial reports can get prepared in much easy manner.
  • Technology: due to insufficient capital for Business expansion company cannot use updated Technology. In order to sustain at market place of UK for a longer period of time it is required for them to develop products and services as per the needs of customers so that profit margins can be increased.

M3 Use of different planning tools and their application for preparing and forecasting budgets

It is being analysed that particularly there are many objectives through which organisation can easily coordinate with the help of budgetary control, it is being found that AZIO's needs to use diverse masterminding gadgets. They also needs to do evaluation, credibility and look into different circumstances. Managing all the methods in a routine will help agency in preparing goods and services. On the other hand, it also joins confirmation of a mixed costs along with management as well through which they can hit companies targets (D'Onza, Greco and Allegrini, 2016).

D3 Planning tools for accounting respond appropriately to solve financial problems

It is being analysed that AZIO have faced ample number of financial problems like budgetary issues, quality, inventory related cost and others. In order to reduce all the risk related factors, it is pretty much required for AZIO to deal with various issues. Contingencies, scenario tools and forecasting tools can be utilised by business organisation in order to reduce all the problems. Here, it is being found that forecasting tools are used by organisation through which they can reduce all the risk sections from company and this may aid them in grabbing good position at marketplace (Mistry, Sharma and Low, 2014).

TASK 4

P5 How organisations are adapting management accounting techniques to respond financial problems

It has been analysed that organisations are rapidly making adjustments in their Management Accounting techniques in order to resolve all the financial problems that has been faced by them. This is being usually done so that company do not faces any sort of risk. with the help of this, company can go through all the needs and requirements of business and managers can easily take property seasons in order to resolve all the issues that are being faced by the company related to finance.

  • Profit level: every single organisation faces this sortissue. Thus, AZIO’s managers also cases this type of general issue. Taking in use of Management Accounting techniques can help administrators to deal with reductions that are being faced by company related to financial status.
  • Benchmarking: performance of the organisation which has been done in the past is being utilised in order to measure viability of Management Accountingsystems. accomplishments and norms are utilized to assess the viability of administration bookkeeping frameworks. With the help of this AZIO can grab a good position and managers can make effective decision so that to overcome from the problems.
  • Financial administration: It infers rules which are intended for workers with a longing for getting proper outcomes in their future. As there are various issues that may rises at workplace which are required to oversee in a practical way by the administration of firm
  • KPI: Financial KPI which gives a general examination as far as settling the issues and the quantifiable qualities that exhibits how viably an association is achieving the key business goals.
  • Non-financial KPI: non-financial KP eyes are utilised in order to assess all the activities thatAZIO sees so that to attain strategic objectives.
  • Financial KPI: this type of KPI aid AZIO in measuring all the values which indicates companies reputation related to generation of revenue and profit. Financial KPI helps in attaining long term goals on the other hand it also helps in resolving issues related to capital.

Comparison between the AZIO and Williams Performance Tenders

AZIO Williams Performance Tenders
Storing and analysing data with the help of MIS so that to make effective determinations through which they can reduce the risk factors that are related to finance and funding of company. Capacity cost of Inventory Along with managing it is became as one of the issue that can be considered as primary for this organisation.Administrator of this company decided to take use of inventory management system so that to overcome all the problems related to stock like overstocking and many more other things.

M4 Responding financial problems management accounting can lead organisation to sustainable success

Management accountancy can be understood as a system that can help managers of an organisation so that to resolve all the issues or problems that has been faced by them(Christ and Burritt, 2017). In addition, it also resolve the money related administration issues. Benchmarking, KPI are some estimation strategies utilized by organizations and associations for compelling assessment of budgetary issues. These are beneficial for manageable development and improvement of organisation and build the sustainable structure of organisation.

CONCLUSION

From the above report t has been concluded that, management accounting is considered as one of the important part for operating business in an effective manner. This is done in order to manage and organise various kinds of work through which work can be done smoothly in a systematic way. With the help of proper costing method company can hold over cost and expenditure. As a result an increasing in productivity can be seen. Therefore, it can be said that making budgetary plan and implementing them is determined as one of the basic leadership style. Thus, every company must maintain and should have department of management accounting for executing their plans in a systematic manner.

REFERENCES

  • Bradbard, D. A., Alvis, C. and Morris, R., 2014. Spreadsheet usage by management accountants: An exploratory study.Journal of Accounting Education. 32(4). pp.24-30.
  • Christ, K. L. and Burritt, R.L., 2017. What constitutes contemporary corporate water accounting? A review from a management perspective.Sustainable Development. 25(2). pp.138-149.
  • Christopher, M., 2016.Logistics & supply chain management. Pearson UK.
  • D'Onza, G., Greco, G. and Allegrini, M., 2016. Full cost accounting in the analysis of separated waste collection efficiency: A methodological proposal.Journal of environmental management. 167. pp.59-65.
  • Granlund, M., 2011. Extending AIS research to management accounting and control issues: A research note. International Journal of Accounting Information Systems.12(1). pp.3-19.
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