HI6006 Competitive Strategy Editing Service
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The provision of financial data and advice to a company that get utilised by their management for the purpose of their development. It helps in making effective decisions, planning and also helps in enhancing performance management. With the use of it cost get managed in adequate manner and they put effective control over it. Management make use of it for the purpose of preparing management reports. With the use of these reports managers took short term decisions for the betterment of their business organisation.
Cost behaviour: - It is the change in the total costs in context to the change in some activity. Cost is having three basic nature such as fixed cost, variable cost and mixed cost (or semi-variable cost). All three cost having different characteristics that helps in observing the behaviour of the cost. Such as fixed cost is having fixed behaviour and it didn't shows any changes in its behaviour. On the other hand variable cost having fluctuating behaviour as it keeps on changing and didn't remain same. The third cost behaviour shows mix behaviour that it has both kind of qualities such as it shows fixed behaviour as well as variable behaviour (Langfield-Smith, et. al., 2015).
This concept is utilised by managers for the purpose of the management cycle as with the use of it they manage their available finance in effective manner. With the use of it they allocate their finance in such a manner that helps in attaining their desired results without facing any financial crisis. This concept helps in attaining the desired success in the desired manner. Manager make adequate use of it for the purpose of attaining competitive advantage over their competitors and helps in attaining their desired results (Langfield-Smith, et. al., 2015).
There are three main types of costs that get discussed below such as:
Fixed cost: -That part of cost that didn't get vary with the number of goods or services or products of the organisation. This cost remain same from the starting of the production process till the end of that process. There are various cost get included under it such as rent of the building and many more (Weetman, 2013).
Variable cost: -It is the reverse of the fixed cost as the part of the cost that get vary as the level of production or output get changes. The cost varies fully depend over the number of products get produced by the organisation. As the volume of production get increases there is effective increase in the variable cost and it get decreases with the decrease in the production volume. There are various costs get included under it such as cost paid for the material purchases, cost paid in the form of labour wages and many more (Weetman, 2013).
Semi variable cost: - It is the mix of the variable cost and fixed cost where the cost remain fixed for a specific limit after that it start fluctuating. Due to its mix nature it get termed as semi variable cost. The cost that get termed as semi variable cost such as electricity bill and many more (Weetman, 2013).
Cost accounting system is also get referred as costing system and it such framework that get utilised by the organisation for the purpose of making estimation of cost of their products for the purpose of analysing profitability, valuation of inventory and control cost. It is not easy to make estimation of the accurate cost for the profitable operations (Bhimani, 2012). It is important to have an cost accounting system such as: -
1. Manager become much capable in order to manage their costs.
2. They put effective control over their cost.
3. They enhance their performance with the use of it.
4. The manage their available finance in adequate manner (Bhimani, 2012).
The most common accounting system that get utilised by the organisation is managerial accounting system. The features of this accounting system are as follows such as: -
1. Control remain with the managers only.
2. With the effect of this system managers are authorised to plan, control and manage the operations of the business organisation.
3. They make use of the available important information for the purpose of the decision making for the development and betterment of the organisation.
4. It render various systems such cost accounting that helps in managing their cost for the purpose of producing their products or services. the another system is lean accounting that helps in examining process and determine results for the betterment of their performance (Langfield-Smith, et. al., 2012).
Direct cost: - The part of such cost that get completely attributed over the production process of the specified goods or services. It make inclusion of the cost paid for materials and labour (Bromwich & Scapens, 2016).
Indirect cost: -The part of such cost that are not assign to specific product or services but having indirect relation with the production process of goods or services is denoted as indirect cost. It make inclusion of the administration expenses, depreciation and many more (Bromwich & Scapens, 2016).
Double entry bookkeeping accounting: - It is an fundamental concept that based over the fact that every financial transaction having equal and opposite effect over minimum two different accounts (Lee & Epstein, 2013). It helps in satisfying the equation "Assets = Liabilities + Equity". The principles of double entry bookkeeping are: -
There are two entries passed for every transactions. One entry is termed as Debit Entry and another one is Credit entry.
It helps in satisfying the equation "Liabilities + Equity = Assets".
Personal accounts rule (Debit the receiver and credit the giver). It means that benefit receiver's account need to be debited and benefit's giver account need to be credited.
Real accounts rule (Debit what comes in and credit what goes out). It means assets get received by business it get debited and when it goes out it get credited.
Nominal accounts rule (Debit all losses and credit all gains). It means all earned losses get debited and all incomes get credited (Lee & Epstein, 2013).
Accrual-based accounting: -As per this accounting concept revenues and expenses get recorded when they get incurred regardless when cash is exchanged. This concept helps in getting accurate image of the company's current financial position as it rendered current cash inflow or outflow combined with future expected cash inflows or outflows.
The basic principle of accrual based accounting is that accounting transactions get recorded when they occurred actually rather than that period in which cash flows get takes place (Lee & Epstein, 2013).
Cost accounting system is the systematic procedure of collecting, recording, classifying, analysing, summarizing, allocating and evaluating different cost. There are different methods available in the cost accounting system that get utilised for the purpose of the recording information or data such as standard cost accounting, lean accounting, activity based accounting and many more. Cost get classified on different basis such as element, nature, behaviour, functionality and others. On the basis of this data get recorded in effective manner and get stored securely (Nixon & Burns, 2012).
Management requires various effective information in order to make informed decisions such as information related to the cost behaviour (as the production cost get increased or not), pricing policy of their products (whether they fix appropriate prices for their goods and services or not), information related to budgeting (need to enhance the capability of evaluating their performance and assess the required information in order to prepare effective budgets) and others. With the use of the cost accounting managers are able to track the information related to various costs such as raw-materials, labour, inventory, overhead and others (Bou?ková, 2015).
An ISO 15489 is Australian Standard: Record Management also get termed as records and information management. This standard is introduce as an professional practice of managing organisational records throughout the life cycle of the business organisation on timely basis. This process make inclusion of the indentifying, classifying, storing, securing, retrieving, tracking and destroying or preserving records (Takeda & Boyns, 2014).
Management accounting information system is an provision of accounting information utilised by managers for the purpose of making effective decisions for the betterment of the business organisation (Takeda & Boyns, 2014).
There is effective relevance between both concepts as record management helps in maintaining adequate record of their data and with the help of this data their managers become much efficient in order to make effective decisions for the growth, development and betterment of business organisation. As per record management all the information is recorded under different sections in systematic manner that helps the managers in getting the relevant information at the time of requirement. It save the time and updated information is accessed by the managers for their decision making purpose. So it can be said that there is effective relevancy between the management accounting system and "Australian standard: Record Management" (Takeda & Boyns, 2014).
It put positive impact over the reliability on variance analysis technique as with the help of the maintaining integrity when policies and procedures are applied systematically during the data allocation. Once all the work done is processed in effective manner by following all policies and procedures it results into getting accurate data and reports get prepared. Proper allocation of available resources get made with the help of it and it create transparency among the process of the business organisation (Hopper & Bui, 2016).
The proper allocation of the data helps in getting the effective results with the use of the variance analysis method. Variance analysis extract the difference between their budgeted results and actual results that helps in making evaluation of their performance. And with the help of proper allocation results are more accurate and it helps in getting more accurate information related to their performance. It shows the clear and effective performance of the team members that helps in making adequate and required improvement in their processing which helps in attaining their set desired results. So it is clearly observed that it positively affect the reliability on variance analysis and helps in extracting effective results for their betterment purposes (Hopper & Bui, 2016).
Reconciliation process is such process that ensure two sets of records are in agreement and it make sure that closing balances should match with different statements. In order to reconcile the invoices and purchase order there are few steps need to followed such as: -
1. Review the supplier invoice copy of purchase order forwarded by purchasing department.
2. Review the purchase order as it include quantity and price of the goods purchased by them which is stated over the supplier's invoice.
3. Ensure the received goods whether they are in the same quantity and price (Qian, et. al., 2011).
Variance analysis is the tool of evaluating the overall performance of the business organisation by getting variances between the actual results and the budgeted results. Variance is taken out for costs as well as for revenues. Variance helps in reviewing the quality and effectiveness of the cost assignment process as it render the difference between their actual results and estimated results. If the results are favourable then it is realised that every activity is processed as per the set path and vice-versa (Hirsch, et. al., 2015).
The role and purpose of budgets in an organisation are as follows: -
1. It helps in making estimations or forecasting related to their income and expenditure.
2. It get utilised as a tool for decision making process
3. It get utilised for monitoring business performance.
4. It helps in making allocation of the available resources in effective manner.
5. It helps in evaluating the performance of the business processes (Tappura, et. al., 2015).
The objectives of budgets get discussed below such as: -
1. It helps in making effective planning.
2. It builds effective coordination among different department of the business organisation.
3. With the use of it management make effective allocation of their resources (Drury, 2012).
There are different sources get accessed for the purpose of gathering information such as: -
1. Reports prepared by the management such as financial planning, variance analysis and others
2. Financial statements prepared at the end of the financial year.
3. Last year budgets (Hirsch, et. al., 2015).
1.1 Draft an e-mail
There are various issues faced by me during recording data and cost as during the cost recording different costs didn't get recorded in different heads it get recorded only under one head. There is absence of the proper accounting software that create problem in recording the data in adequate manner. During cost recording cost didn't get recorded as operating and non-operating cost system allows to record only under one entry. Due to recording cost under single entry it results into showing incorrect data as well as create lots of difficulties for differentiating their costs. It also create difficulties in making evaluation of the cost (Langfield-Smith, et. al., 2015).
In order to enhance the process of recording cost it is necessarily required to implement the new accounting system. With the help of the new and updated software it become easy to record the cost under different head. It results into getting accurate and relevant information for the purpose of preparing different reports and budgets. These are some issues and solutions that need to be implemented in adequate manner for the purpose of enhancing the internal recording system (Langfield-Smith, et. al., 2015).
Maintenance of Production machinery
Holiday pay for factory operator
Tools for the plant workshop
Raw materials to be used in manufacturing
Wages for machinist who performs repairs and maintenance in the factory
Rent paid for factory premises
Packaging costs for product
Raw material A/c Dr.
To suppliers A/c
[Purchased raw materials from various suppliers on account]
Production A/c Dr.
To Raw materials A/c
[Transferred raw materials to production]
Finished goods A/c Dr.
To Glass A/c
[Transferred glass to finished goods]
Cash at bank A/c Dr.
To Sales A/c
[Sold the glass to ABC windows]
Telephone line rental
(Langfield-Smith, et. al., 2012)
Add: - Opening stock of raw material
Raw material available for use
Less: - Closing stock of raw material
Raw material consumed
Add: - Factory overhead
Depreciation & plant equipment
Utilities and others
Add: - Opening cost of WIP
Less: - Closing stock of WIP
Cost of goods manufactured
Add: - Opening stock of Finished goods
Less: - Closing stock of finished goods
Cost of goods sold
(Bromwich & Scapens, 2016)
Budgeted contribution margin
Sales (30 * 1500)
Sales (40 * 800)
Less: variable expenses (9 * 1500)
Less: variable expenses ($20 * 800)
(Lee & Epstein, 2013)
Actual contribution margin: -
Sales (30 * 1200)
Sales (40 * 950)
Less: variable expenses (9 * 1200)
Less: variable expenses ($20 * 950)
(Lee & Epstein, 2013)
Contribution margin volume variance: -
Product A is yielding negative variance of $6,300 on the other hand Product B is yielding positive variance of $3,000 (Lee & Epstein, 2013).
Expected cost drivers per activity
Allocation of overheads
Number of tests
Avg. ltrs. on hand
Number of runs
(Nixon & Burns, 2012)
Expected cost drivers per activity
Allocation of overheads
Number of tests
Avg. ltrs. on hand
Number of runs
Oil-based lubricant overhead cost per unit = Total overhead cost/ total budgeted litres
Total overhead cost = $1,439,400
Total budgeted litres = 875,000
= $1,439,400 / 875,000 = 1.64
Oil based lubricant overhead cost per unit = $1.64/unit
Water based lubricant = Total overhead cost/ total budgeted litres
Total overhead cost = $1,960,600
Total budgeted litres = 1,000,000
= $1,960,600 / 1,000,000 = $1.96/ unit
Water based lubricant cost per unit = $1.96/unit (Takeda & Boyns, 2014).
(Hopper & Bui, 2016)
Motor vehicle depreciation
Council rates and other taxes
(Qian, et. al., 2011)
In order to make sure that the prepared budgets and other reports are accurate, comprehensive and compliant it is required to make use of relevant information. It is necessary to make use of the current information as with the use of it reports and budgets get prepared in effective manner. Information must gathered from the trustworthy sources and in case of requirement clarify any kind of doubt with the managers or management (Hirsch, et. al., 2015).
It is concluded that management accounting is effectively utilised by the management for the purpose of systematic recording of their data, and utilise them in their decision making. Cost get recorded for the purpose of managing their cost and helps in making effective decisions.
Bhimani, A. 2012, Introduction to management accounting, Financial Times Prentice Hall, Harlow.
Bou?ková, M. 2015, "Management Accounting and Agency Theory", Procedia Economics and Finance, vol. 25, pp. 5-13.
Bromwich, M. & Scapens, R.W. 2016, "Management Accounting Research: 25 years on",Management Accounting Research, vol. 31, pp. 1-9.
Drury, C. 2012, Management and cost accounting, 8th edn, Cengage Learning, Andover.
Hirsch, B., Seubert, A. & Sohn, M. 2015, "Visualisation of data in management accounting reports: How supplementary graphs improve every-day management judgments", Journal of Applied Accounting Research, vol. 16, no. 2, pp. 221.
Hirsch, B., Seubert, A. & Sohn, M. 2015, "Visualisation of data in management accounting reports", Journal of Applied Accounting Research, vol. 16, no. 2, pp. 221-239.
Hopper, T. & Bui, B. 2016, "Has Management Accounting Research been critical?",Management Accounting Research, vol. 31, pp. 10-30.
Langfield-Smith, K., Thorne, H. & Hilton, R.W. 2012, Management accounting: information for creating and managing value, 6th edn, McGraw-Hill Australia, North Ryde, N.S.W.
Langfield-Smith, K., Thorne, H., Smith, D.A. & Hilton, R.W. 2015, Management accounting: information for creating and managing value, 7e  edn, McGraw-Hill Education, North Ryde, N.S.W.
Lee, J.Y. & Epstein, M. 2013, Advances in Management Accounting, Emerald Group Publishing Limited, Bradford.
Nixon, B. & Burns, J. 2012, "Strategic management accounting", Management Accounting Research, vol. 23, no. 4, pp. 225-228.
Qian, W., Burritt, R. & Monroe, G. 2011, "Environmental management accounting in local government: A case of waste management", Accounting, Auditing & Accountability Journal,vol. 24, no. 1, pp. 93-128.
Takeda, H. & Boyns, T. 2014, "Management, accounting and philosophy: The development of management accounting at Kyocera, 1959-2013", Accounting, Auditing & Accountability Journal, vol. 27, no. 2, pp. 317-356.
Tappura, S., Sievänen, M., Heikkilä, J., Jussila, A. & Nenonen, N. 2015, "A management accounting perspective on safety", Safety Science, vol. 71, pp. 151-159.
Weetman, P. 2013, Financial and management accounting, 6th edn, Pearson, Harlow, England.