Management Accounting Assignment Help

Qualification - Higher National Diploma in Business (RQF)

Unit Name - Management Accounting

Unit Number - Unit 5

Unit Level - Level 5

Assignment Title - Management Accounting

Learning Outcome 1: Demonstrating and understanding of management accounting system.
Learning Outcome 2: Appling a range of management accounting techniques.
Learning Outcome 3: Explaining the use of planning tools used in management accounting.
Learning Outcome 4: Comparing ways in which organisations could use management accounting to respond to financial problems.

Scenario

ABC Co. Ltd. specialises in manufacturing electronic products. The range comprises of 2 products, Personal Computers (‘PC') and Video Players (‘VP'). The company's products have the data shown below.

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1. You need to advise the manager the following issues:

• Explain the meaning of management accounting, various management accounting tools and role of management accountants

Solution:

The proposal is explained the analyzing the points in following sub parts:-

Definition Analysis
Management accounting is a process which helps in assisting the managers of all departments in a correct manner which may lead to assist in better planning, controlling and analysis of organizational goals. It helps in justifying the factor which may lead to focusing of the fixation of responsibility and help in justifying the important area.

Role of Management accounting helps in the budget formation along with the deviation analysis along with helping of the reasons which may lead to assist the Variance analysis as well as assuring that the corrective actions is being taken on right time to avoid any future problems. Various management accounting tools can be as follows:- financial planning, financial statement analysis, cost accounting methods, fund flow analysis along with cash flow analysis. It includes the budgetary control concepts as well (Weetman, 2019).

• Explain the classification of costs that would help the management decision-making

Classification of cost which will help decision making can be done on a border basis as follows:-

The Cost Classification by Nature, the Cost Classification by Relation to Cost Centre, the Cost Classification by Functions and the Cost Classification by Behavior and then the Cost Classification by Management Accounting Decision Making , the other is the Cost Classification by Production Process and the last by the Cost Classification by Time (Weetman, 2019).

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• Calculate the unit costs of PC and VP based on absorption costing and marginal costing methods

Computing the unit costs

Absorption Costing PER UNIT

Marginal costing per unit

• There is a special order for 10,000 units of PC at $1050 per unit:
o which costing method should be used for the accept or reject decision;
o calculate the costs using the costing method recommended above
In case of the special order where the special order for 10,000 units of PC at $1050 per unit
The unit cost will be determined as follows:-
No of units * Unit cost per product of PC marginal Costs per unit
= $ 1000 * 10000 = $ 10000000
( $ 1000 will be taken as the per unit cost of PC under the marginal costs method as only as per
this method the special order will help us earning revenue by $ 50 per unit - $ 1050 -$ 1000).

• given that direct labour available is limited to 60,000 hours per month, advise the optimum production mix of PC and VP to maximise profit

Optimum product mix when the direct labor hours is maximum Restricted by 60000 Hours

Optimal Mix will be maximum 1ST 10000 Units of PC and the 2nd 20000 Units OF VP is the best option to attain maximum profits.

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• calculate the break-even units of IP and if the manager is confident that a target profit of $1,200,000 is achievable, what would be the corresponding target units sold

Compute the Break even Units of IP and compute the target unit sold when profit to be achieved is $ 1200000.

• evaluate the proposal to spend an additional $600,000 to promote the IP so that selling price can be increased by $60 per unit to sell 6,300 units per month and discuss the corresponding pricing decisions

Evaluation of Proposal when the selling price can be increased by $60 per unit to sell 6,300 units per month

Prepare a proposal to advise the manager who has no management accounting knowledge and background.

In terms with the estimation explained above the proposal must be approved and the following aspect must be assured which must be accepted in terms with the due consideration that are listed as following factors as explained below:-
1. It is necessary to understand that when the proposal is accepted it must not harm or effect the capacity of the current or the running capacity in any given manner. Also it may not affect the production capacity in near future as well.
2. The other point which must be clear is that the market demand of the current and the existing products must not be hampered or disturbed.
3. The last effect which must be kept in mind is that the working conditions must not result in an adverse manner or condition.

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Question 2:

In nut shell all the elements must be achieved however, the existing and the current situation must not be hampered and the current working must be successfully run without any disturbance and problems.

Part A:
Analyse and evaluating ABC's financial performances by using the various management accounting technique, and make the possible recommendations in dealing with the financial problems and the price strategies in revising its price

Solution:

The financial performance of the company is explained as below in a mathematical explanation :

In connection with the management accounting of the marginal costing

On Basis of the Absorption Costing

(Kaplan, and Atkinson, 2015)

As per analysis the same results is achieved therefore, any strategies can be opted to achieve the desirable results.

Part B: Budgeting Process:

• the major functions of budgeting process (3.1)
• the advantages and disadvantages in operating a budgetary control system (3.1);

The Major Functions of the process are listed as follows:-
Firstly it helps in proper and rightful planning, and the other is that the level of coordination which being that the business must be right perspective. The other is that the communication which must be aimed in terms with the objectives of the company. On the more, it will help in evaluating performances as well as the business management process.
Advantages Include the following: -
- The objective is properly defined and managed.
- Controlling activities in connection with the proper evaluation.
- It assist in elimination of waste and abnormal costing (Weetman, 2019).

Disadvantages Include the following: -
- It Involves the high cost.
- It is difficult not to manage time period in time of inflation.
- Lack of support in connection with the management as well as failure lead analysis.

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Part C: Budgetary Planning:

• whether fixed or flexible budgets should be prepared for the coming January to March (3.1)
• based on information provided in question, prepare the monthly budgets as follows: (3.1, M3)
o sales budget
o cash collection budget from sales (assuming 40% of current month sales being paid within the same month with the remaining 60% payable in the following month)
o production budget (assuming monthly production units equals to monthly sales units)
o raw material purchase budget (assuming the company purchases the exact quantity of raw material in each month to meet the monthly production requirement)
o cash payment budget for raw material purchases (assuming payment being made in the month following the month of purchase)
• prepare the monthly cash budget (assuming that the only other item is cash payment of $300,000 in January for the purchase of production equipment and that the projected cash and bank balance as at 1 January is $20,000) (3.1, M3)

Solution:

The flexible budgets must be prepared as the same can be bifurcated and computed with the difference of the productions and the price variation. The monthly budgets are stated as below:-

Budgets for Selling price

Budget for Cash Collection Pricing

Budget for Production

Budget for Purchase of Raw material

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Part D: Budgetary Control:
• if the actual purchase and usage of raw material amounted to $435,600 in January, calculate the raw material variance (4.1)
• it is found that the actual purchase price of raw material is $66 per unit and the actual purchase and usage quantity is 6,600 units to produce 3,000 units of IP in January. Compute the raw material price and usage variances to analyse the raw material variance in question (4.1)
• prepare a cost reconciliation statement reconciling budgeted and actual raw material costs for the month of January (4.1)
• it is discovered that raw material was purchased in January from a new supplier not on the company's approved vendor list. Report your findings to the manager in accordance with the responsibilities of the relevant departments and recommend possible corrective actions for the identified variances (4.1, 4.2, M3 and M4).

Solution:

Raw Material Variance = $ 4, 35,600 - $ 4, 20,000(Actual Price - Budgeted Price) = $ 15600 Adverse.

Reconciliation analysis of the actual and the budget cost

Recommendations for corrective actions and responsibilities of manager
In the above conditions it is expressed that the manager must purchase the material from the standard and a given authorized supplier which checked and properly attained. Further, excess level of raw material regular check must be made on the operations. On the more, wastage and losses must be completely avoided. On the more, all the operations must be implied in a effective manner and the same time the comparison level of the actual along with expected performance should be done on a regularly basis so that the financial loss can be avoided to the maximum.

Part E: Compare ways in using management accounting tools
• In addition to the budgeting and variance analysis methods stated above, discuss other possible ways in using management tools to respond to financial problems. (4.3)

Solution:

Management tools to respond to the financial problems can be listed as below:-

It is very necessary that the budgets must be listed and the improvements are based by studying financial positioning. Further, the evaluation analysis must be based on the factor that the corrective action must be monitored and progressed in a right manner. The tools which are best accustomed can be based on the matter which may be the profitability tools along with the pricing tools as well as the costing tools and various operational tools (Schroeder, Clark, and Cathey, 2019). The financial problems can be well managed and accustomed to ensure that the variance analysis method must be used and applied in a right direction so that the problems can be solved and processed in a right manner.