Reference no: EM132705032

Unit 5 Management Accounting - Higher National Certificate / Diploma in Business

Management Accounting Systems & Techniques

Learning Outcome 1: Demonstrate an understanding of management accounting systems.
Learning Outcome 2: Apply a range of management accounting techniques.
Learning Outcome 3: Explain the use of planning tools used in management accounting
Learning Outcome 4: Compare ways in which organisations could use management accounting to respond to financial problems

Assignment Brief

Learners need to have read car fully the instructions before attempting any of the questions.

Scenario:

Small accounting practices (SAPs) operate as small businesses, confro ted with decisions such as management of knowledge, human resource, budgets, cash, client and so on, in the process of providing professional services to their clients who are generally SMEs (Kirby and King, 1997; Gibbins and Wright, 1999; Ciccotosto, et al. 2008). To retain their clients they have to be conscious about their fees, manage disputes quality compliance and non-compliance related services. Research and provide high shows that owner managers of SMEs expect, apart from routine compliance services, advice on many broad and specific aspects of their business and these include among others, financial planning, management accounting and information system, forensic accounting, cost reduction, succession planning and pricing decisions (Arnold, et al. 1984; Kirby and King, 1997; Marriott and Marriott, 2000; iccotosto, et al. 2008; Nandan and Ciccotosto, 2007; Alam and Nandan, 2007). While accountants have the expertise and skills to provide the majority of above mentioned services, they have not been extensively involved in the provision of such services (Arnold, et al. 1984; Nandan and Ciccotosto, 2007). For example, in this information age many technology but have been reluMEs have embraced computerised information processing tant to obtain these services from external advisors such as accountants (Arnold, et al. 1986; Ciccotosto, et al. 2008). This has serious implications for the accounting profession.

Cameron Ltd has taken the above - extract from "Management Accounting Needs of SMEs and the Role of Professional Accountants: A Renewed Research Agenda" by Nandan (2010) to aware the applicants on the importance of Management acco behalf of SMEs. nting; basically on Cameron Ltd Company falls o SMEs category. The General Manager of Cameron Ltd has announced a vacancy for management accountant. He has decided to shortlist only few capable people from a numbe of applicants. The short listing is based on the quality of report which has to be prepared according to following criteria:

You are required to prepare a report which is a part of recruitent procedure in Cameron Ltd:

Task 1:

i. Read the above paragraph critically, and discuss on the importance of Management Accounting in SMEs hi Accounting.

hlighting the origin and principles of Management

ii. From your research, identify the differences between Management accounting and Financial Accounting. Support your ideas with examples.

Task - 2

i. Sarika Manufacturing LTD. Produces shoes and prepares monthly management accounts. The company has produced 10,000 pairs in January and 10,000 pairs in February. The cost incurred in each month are as Follows:

The incurred cost and produced volumes are as forecasted.

The selling price of each pair of shoes is £70. The company has been able to sell all pairs of shoes in January whereas only 8000 pairs of shoes were sold in February. There were no opening stocks in January.

Direct Materials and Direct Labour are required to:

You are both variable costs.

1. Calculate the cost per unit by using:

a. Absorption costing method

b. Marginal costing method

Draft management accounts for January and February by using

a. Absorption Costing
b. Marginal Costing

3. Comments on the reasons for any differences in profits. Also, illustrate the impact on absorption costing and marginal costing when inventory level gets changed.
ii. The Arnold Brick Company manufactures a standard stone block for the building industry. The production capacity for the year is 100,000 standard blocks. The selling price per block is £1.60, variable costs are £0.60 per brick and fixed costs are £60,000 per annum.
Determine:

a. The break-even point in t rms of sales revenue and output.
b. The margin of safety if sales amount to 90,000 bricks in the year.

The market for blocks becomes uch more competitive, and Arnold Brick Company reduces its price to £1.50 per brick. Sales still decline to 80,000 bricks, whilst costs rise relentlessly. Variable costs rise to £0.66 per brick and rises in business taxes and other contributions incr
£80,000 per annum.

c. Is the firm still profitable?

(LO 3& 4):

Using the above scenario and in your capacity as a competent applic nt of Management Accountant for Cameron Ltd, continue the word report to the General Manager addressing other issues in the management accounting function such as budgeting and budgetary control, performance indicators and variances to bolster his/her interest in making the management accounting function in SMEs business a full department rather than a unit. The fact that a anagement accounting system could enable the SMEs to identify financial problems and to enable them to adopt a strategy to investigate and address them, made the General Manager determined to place high importance on establishing the department.

Task - 3.

Critically evaluate on how cost systems differ depending n costing activity. Support the arguments by providing some examples.

Explain the advantages and disadvantages of different types of planning tools for budget ry control that are relevant to SMEs. Here, you should provide example of at-least two types of planning tool used in SMEs.

Based on financial position of SMEs and technical advancement; evaluate the effectiveness of porter's five forces analysis in current market environment.

Task - 4

Analyse how management accounting techniques could respond to financial problems and le d the SMEs to sustainable success.

Discuss on ma agement accounting skills and mana ement accounting strategies which mitigate the issues that can appear in SMEs sustainable development.

Attachment:- Management Accounting.rar