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Sample managerial accounting Assignment with answer

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❶What is the average cost per policy for the three legal entities, Midwest, Gibson and Compton?

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Introduction to Management Accounting
Management Accounting
Question 1 - Current System

Management accounting is very useful for the organization as it impacts the decision making and decision making of the organization leads to the success of the organization so there is a direct link between management accounting and growth of the organization so the benefits of management accounting in an organization are as follows.

There are several abovementioned benefits of management accounting in an organization so an organization needs to utilize its management information in right ways in order to achieve its long term as well as short term goals. Budget is a statement which is prepared with a view to estimate the income and expenses of future year on the basis of present financial performance of any organization.

One of the director of Nero Limited has raised a query with regard to this statement so this statement of director is partially right as the budget is prepared to estimate the income and expenses of Nero Limited for upcoming years but it cannot be determined what is expected to happen in next year as the budget only considers the financial values so the cash flows of Nero Limited can be forecasted so that the company can estimate its incomes and expenses but except financial terms what is doing to happen in next year cannot be forecasted through budget.

The main purpose of preparing is the budget is to estimate the cash inflows and cash outflows of Nero Limited for next year.

Activity based budgeting is a type of budgeting where budgets are prepared on the basis of each activity. As the comment raised by the director of Nero Limited Activity-based budgeting is an approach that takes account of the planned volume of activity to deduce the figures to go into the budget is right as the main aim of activity based costing is to prepare budgets on the basis of the activities as well as the overall cost is also deducted from each activity.

The approach which is used for activity based budgeting is that the planned volume of activity is deducted from the particular activity and through this the budget is prepared. In activity based budgeting overhead costs plays a significant role in total costs.

In activity based budgeting activities and their costs are identified and then the cost from that particular activity is deducted Morana, Direct laborrate variance includes elements of rate of labor wages and time consumed by labor.

Thus a favorablelabor rate variance occurs when either he staff works more efficiently than planned or the staff is replaced with cheaper labor force with low wage rates.

Thu the above statement is partially correct. While calculating variances, the differences of volume of output are ignored between actual and budget by flexing the budget.

The variances in the volume or output are calculated separately. Thus, this helps in the estimation of effect on the level of activity and is not the water under the bridge by the time variances are calculated.

Feedback controls refer to as the implementation of controls after performance whereas feed forward controls are those which are implemented before the performance of business operations. Budgets are not the feedback controls but are feed forward controls since they help in controlling the business operations before their performance.

However variance analysis is conducted afterwards to monitor the deviations. In all those theories cash is included and also during consideration of the expansion plans all these theories are to be considered as this provides a fair view of choosing any project as well as it calculates the present value for a future cash so through this the present value of the project is also considered.

These theories helps in selecting the project as the project with positive NPV is beneficial for the business and the project having negative NPV is not beneficial for the business so if a project has to choose any project on the basis of NPV then it should go with the project which is having higher NPV.

IRR refers to the internal rate of return which helps in choosing the suitable project for the business on the basis of IRR so if a project is to be chosen on the basis of IRR then the project having higher IRR must be choose. Payback period refers to the present value of future cash. Profit flows of the business are circulated within the profit and loss statement of thee business and cash flows are used in these theories because these theories includes the value of cash.

There is no payback period in the projects as the payback period defines the time period in which the investment of the whole project will be recovered or can be said as the time period in which the amount that is invested in the project is equal to the inflows that are achieved from the project so in both these projects the cash inflows of the year 2 are negative that represents that both the projects have earned loss in this year and also both the projects have not earned much profits in the year so that the initial investment of the projects can be covered.

So there is no payback period of both the projects. If Nero limited want to choose one project on the basis of calculation of NPV and IRR then if Nero limited chooses a project on the basis of NPV then none of the project is profitable for the company as both the projects are having negative NPV but if Nero limited has to choose one project between both projects then Nero limited should go for the project 2 has it is having higher NPV in comparison to project 2 and if Nero limited has to choose a project between both the projects on the basis of IRR then Nero limited can choose both the projects as the IRR of both the projects are same so overall Nero limited should go for the project 2 on the basis of NPV and IRR.

Cost plus pricing is a strategic tool for determining the price of a product by adding fixed costs, variable costs and a markup percentage to arrive at a final cost of the product. The operating cycle of the company for two years can be calculated as follows:.

Principles of management accounting Management accounting is a profession that includes integration of financial and non-financial statements to provide useful information to the management so that the management can take effective decision for the organization. Role of management accounting and management accounting systems Management accounting refers to the effective use of all those information which is related to management and which evolves the efficient decision making of the organization and management accounting systems refers to the process of collection of relevant data from the business operation and then converting them into management accounting information.

Use of techniques and methods used in management accounting There is various type of management accounting systems such as cost accounting systems, inventory management systems, job costing systems, price-optimizing systems etc. Variable cost Contribution Less: Fixed cost Profit b The differences in the profits is due the method that is used for the costing as both the profits are calculated with different methods of costing as in absorption costing method all the expenses are segregated and then are deducted from sales so this leads to increase of expenses and thus it lowers the profits where in marginal costing method expenses are deducted into two categories which is into fixed and variable expenses.

Integration of management accounting to the organization and its benefits. Management accounting helps in increasing the efficiency of the functions of management. Management accounting helps in fixing the target, fixing the prices of the products. Management accounting helps in forecasting and preparing the budgets so organization can estimate its income and expenses. Management accounting helps in providing tools and techniques that increases the reliability of functions of business.

Management accounting helps in establishing the planning and control in all the levels of organization. Management accounting helps in evolving better decision making for the business. Management accounting helps in finding ways to reduce the cost of production so that higher profits can be generated. Management accounting helps in establishing proper communication among all the levels of the organization. Management accounting helps in identifying the overall performance of the organization.

Management accounting helps in cutting the extra costs of the organization so that the benefits could be earned by the organization. Management accounting helps in integrating the individual efforts of the people of the organization towards the achievement of organizational goals and objectives.

Management accounting helps in implementing the expansion plans in the organization. Management accounting helps in defining the process for achieving the goals of the business. Part B Scenario 1 A A budget is a forecast of what is expected to happen in a business during the next year.

Scenario 2 i A. Cash budget is a plan that shows the inflows and outflows during the period for which it is calculated. It helps in evaluating if the business has sufficient cash to operate its day to day activities or not.

It includes revenues and expenses paid by the business and reflects the position as surplus or deficit. Cash budget is significant for a business.

Strategy — If the business is planning launch of a new product or expansion but it has insufficient funds then it can make plans or strategies for borrowing money and the source as well. Decision making — It helps the management make decisions. The cash budget is as follows: Information required by the banker for granting overdraft for further expansion: In case a huge sum is involved it will affect the standing of the bank.

Purpose — The banker will analyses the purpose for which the loan is to be granted and will further analyses if the expansion program to be carried out by the organization is profitable or not as that will affect the repayment of the loan amount. Security and mortgage — The banker will consider if the security that is offered or mortgaged is easily saleable or not and its worth is more than the loan amount or not.

Repayment tenure — The banker will also consider the tenure of repayment as the bank would want the repayment in easy and quick installments. Scenario 2 ii If the quantity of other two services cannot be expanded to use the spare capacity, the fixed costs allocated on the standards services will be a sunk cost and thus it is not relevant for decision making since even of the standard services are not offered, the fixed costs will be incurred.

It is therefore considered to be one of the easiest techniques for costing. The costing methodology emphasizes on adoption of similar costing techniques and principles by which expenditures can be controlled and regulated in a continuous manner Budgetary control. The below table 3 represents total cost estimated for different departments of the business.

It is seen that the highest cost is incurred within forming department. It can be therefore said that the huge amount of money is invested in this department. Direct labor and material costs result in difference between forming department cost and other departments. On the other hand, maintenance cost of the machining department is higher than others. It can be therefore concluded that the cheapest of all the departments is finishing department Burns, Hopper and Yazdifar, Company is implementing absorption costing so as to allocate cost appropriate on the basis of labor hour.

Henceforth, the organization is suggested to monitor the cost associated with forming department. This in turn results in reducing the total cost of production. Assignment Prime Assignment Prime is an online assignment writing service provider which caters the academic need of students. Cost report of Buccaneers ltd shows the money incurred on each element of cost such as production cost, material cost, labor cost etc. By using effective method they can reduce their production cost.

The report is prepared by using all the financial information of the business. Information or data should be accurate and correct. It should be collected in an effective manner. After proper collection of data, it should be organized, summarized and arranged according to the use of this information. After compiling of all the data, reports of cost should be developed.

There are many problems which may arise during the report formulation Hopwood, Issues related to inadequacy, irrelevancy, nu-authenticity and shortage must be avoided by the managers. Moreover, the organization should make appropriate estimation of facts and figures since these decide achievement of goals and objectives of the organization. Managers must find out the all errors of report perfectly. Generally, there are two types of indicators of performance of the business which are as follows:.

There are basically tree types of financial statements which show the financial position and performance of the enterprise such as income statement, balance sheet and cash flow statement. These statements help in evaluating financial performance and position of the business unit. It can be said that the profitability, liquidity and efficiency position of the organization is judged through the analysis of statements.

These statements will assist in identifying the growth opportunities that exist for the organization Kastantin, It is the scientific way of finding out the exact efficiency, effectiveness, profitability, liquidity etc. They can compare their performance with existing years as well as with the other enterprise to find out new development, growth and expansion opportunities for the company.

Efficiency of the labor, satisfaction level of consumer etc are included in non financial performance indicators, and these can be found out with the help of effective use of research tools and techniques. Company can conduct market research in order to find out valuable and significant data regarding consumers, employees etc.

Cost incurred, value offered and quality delivered of the product are considered to be interrelated elements. The approach of value enhancement emphasizes on rising level of profits and reducing cost of production. However, the approach ensures maintenance of adequate level of quality Kate-Riin Kont, They can use many cost controlling techniques and value enhancement methods so as to develop business activities.

Moreover, the list of expenditures which have high value can be prepared. This in turn helps in finding out efficient ways to reduce the expenditure. The organization should pay wages as per the nature and quality of work completed by distinct set of employees. The business unit can employ stock and cash controlling techniques such as just-in-time, economic order quantity and so on. These techniques help in reducing cost of holding, insurance and damages. They also can set the priority of different set of expenditures according to the respective prices.

Moreover, the top management is responsible to control the high level of expenditure. The organization can adopt the latest technology so as to produce quality products at reasonable price. Moreover, the implementation of novel and fast machinery and equipment can make the production process faster Kinney and Raiborn, The process of budgeting initiates with the stage of formulation whereby the future forecast for income and expenses are made.

The forecasting is done on the basis of past performance of the organization. Once the forecasting is done and budget is prepared; the actual performance is compared to that of budgeted values. This in turn helps in identifying variances which are removed through adoption of appropriate measures. It can be said that the budgeting process helps in quantifying the future performance of the organization. The key purposes of budgeting process are as follows.

Budgeting will help to manage limited resources effectively. It provides an appropriate way of allocation of economic resources in an effective manner. The basic purpose of budgeting is decision making and planning Lillis, The main aim behind the process is to efficiently plan financial operations of the organization. Moreover, the adequate level of co-ordination is established in allocation of resources and cost of production.

It will help to predict the outcomes of an adjustment before action. It is classical and one of very simple methods of budgeting. Moreover, the budget as per incremental budgeting is prepared by continuously increasing financial figures of past years at constant or increasing rate. It will be prepared on consistent basis. The main limitation of this kind of budgets is considered to be its approach to ignore the impact of changes within organization.

Moreover, limited amount of efforts are involved in development due to lack of innovation. It can be therefore said that the approach is not considered to be valuable in present dynamic environment Obura and Bukenya, It overcomes the disadvantage of incremental budgeting. This approach says that the managers should start their budgeting with zero bases.

They should consider the changes and make a new budget every year by starting with zero level. It is the modern method through which they can allocate resources efficiently. This type of budgeting may be used by the big companies because it requires trained and expert employees.

It provides importance on the priority of work done. It says that they should estimate the expenditure of raised level tasks introductory and use this approximation to constrain the calculation for subordinate level.

This way takes very fewer time frames than others and appraises upper level loyalty Standard Costs and Variance Analysis. This is the method utilized by the company in the present case. Hence, it can be said that it is the best way of controlling and managing variance as it includes less involvement of low level workers of the entity.

In this technique, budgets are formed by incorporating the input of subordinate level administration. The counsel and procedure are developed by strategic level but budgets are prepared by the individual departments.

It is also a good method which can provide full information of activities easily.

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Management Accounting is the process of collecting, analyzing and interpreting the business information to get some useful insights for the management. It acts as a tool that aids the management in the decision-making process.

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Management accounting is very useful for the organization as it impacts the decision making and decision making of the organization leads to the success of the organization so there is a direct link between management accounting and growth of the organization so the benefits of management accounting in an organization are as follows.

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Assignment on management accounting 1. Management Accounting Report on ABC implementation on ACME Pharmaceuticals Ltd. and BIOPHARMA Pharmaceuticals Ltd. 2. In order for it to be practical to undertake the redesign of a company's cost accounting system, there are two general requirements. a. What are they and b. how well does /5(K).

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Assignment management accounting - Let specialists deliver their tasks: get the required task here and expect for the best score Stop getting unsatisfactory marks with these custom essay tips Only HQ academic services provided by top specialists. Management Accounting Assignment Sample Posted by Charles Beckman on December 18 Management accounting is a new integrated part of the economic knowledge where the main goal is the informative and analytical support of the managers of the economic organizations to make the effective management decisions on the .