HI5017 Managerial Accounting Assignment Help
Analysis of the Issues involved
1. Identify any three specific examples of the different types of management accounting methods from the case.
2. Are MAS relevant to contemporary organizations? Discuss this with reference to:
i) What evidence is there from the case company?
ii) Compare and contrast this finding with one other journal article you will need to find that has discussed about management accounting systems in another real-life company or companies. Did this second study have similar findings as the first chosen article, or mixed and/or different findings? Explain with examples.
3. What conclusions would you make about the relevance of MAS in competitive and uncertain business environment of today?
4. Provide four specific outcomes or lessons learned from each of the two articles’ research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer [i.e. provide 2 outcomes from each of the two studies]
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Analysis of the Issues involved (Body of the Report)
1. Identify any three specific examples of the different types of management accounting methods from the case.
Management accounting system has developed quite a number of methods and techniques which can be useful both for decision making with regard to cost of production and decision making and also with regard to what to produce and how much to produce .Among the measures which are most used are the cost volume profit analysis, variance analysis, activity based costing, balance scorecard metric end the use of total quality management.
3 methods which are critical for the decision-making process and which are very helpful for managers are:
a) activity based costing
b) total quality management
c) Balance scorecard.
Activity based costing is an alternative to the traditional method of allocation of overheads to the production system. Under the traditional method, managers often try to allocate overheads by calculating a single system wide overhead rate. The single system wide overhead rate is estimated using the total direct labor hours or machine hours expected to be used. As a result of which a uniform rate of overhead is applied to all the jobs or each unit that is produced. However over the years the system has been found to be deficient regarding the exact value of the overhead used by each process and each unit. Activity based costing is based on the amount of activity which is required to produce this specific unit of product and looks forward to allocating the overheads based on the cost drivers or Activity bases . it has been found that under activity based costing some of the products has been found to have been allocated higher or lower overheads than under the on the traditional method. And the same led to mistakes regarding pricing of the products. This made managerial decisions look bad and did not allow the managers to fully utilize the potential of most profitable products. With the use of the activity based costing this problem is expected to be solved and managers would be able to price the products better and the firms using the ABC is expected to compete much better with the competitors in the market (Anthony A. Atkinson, 2012).
The balanced scorecard is another Management accounting system method that tries to balance performance metrics by using reports the financial measurements and non-financial measures. While traditionally the success of the management is estimated using the financial metrics, now there is a change in perception that equal weightage should be given to non-financial measures. As a result of which balance scorecard includes measures like customer perspective, learning and growth perspective, internal process development perspective along with the traditional financial measures (Ferreir & Otley, 2009).
While the financial perspective uses traditional methods such as return on equity and returns on assets etc. the customer perspective looks at methods to drive higher customer satisfaction and tools which can help the management design better products to meet customer requirements. The learning and growth perspective are often used by the management to see how the employees engaged in production and manufacturing use their experience and skill to increase efficiency and productivity and engage customers effectively. Similarly the internal process perspective is used as a method and tool to find out how the learnings of the employees and supervisors and managers can be used to increase the efficiency and productivity of the internal processes and produce better quality products and create benchmarks. Overall the balanced scorecard looks at improving growth along with achieving consistency (Langfield-Smith & Thorne, 2016).
Total quality management is another tool of management accounting system which can be effectively used ofr increasing the quality of the products by both including qualitative raw materials , using skilled labor force and increasing the efficiency of the existing products and processes. This emphasizes the need for maintaining a production process which minimizes the wastes and also reduces the cost of production by taking advantage of the economies of scale and economies of scope. Particular attention is also provided towards setting up of a better supply chain environment which can deliver the product to the clients and customers in a time bound banner but keeping down delays and reducing overall costs. However, it must be remembered that TQM is not a one-time process and instead managers involved with TQM must treat it as an ongoing process over a long period of time which needs to be designed and redesigned for optimal outcomes (Besterfield, 2015).
2. Is MAS relevant to contemporary organizations? Discuss this with reference to:
i) What evidence is there from the case company?
The analysis made in the article points towards the fact that Top level management has mostly kept all the powers related to strategy decision making and directing the operational and divisional Heads as to which goals must be pursued. However it was also learned that various operational managers enjoyed complete authority to make decision regarding implementation of the strategic objectives. for example the Top management often found to set goals to be pursued I'm what should be the end objective but the operational managers are given ample authority to keep going on the ground show that the organization is he's able to achieve these objectives . Management accounting system authority is often found to have layered in most of the organizations and the middle and lower level managers enjoyed autonomy with relation to operational and tactical decision as long as they complied with strategic decision making objectives and goals (DavidOtley, 2016).
The analysis further revealed the fact that the lowest level of the managers who are the ones who actually were most involved in the implementation of the management accounting system objectives and works of achievement of the desired goals were allowed to take operational decisions based on the same. The middle level managers use the MAS system in a very different manner. The middle level managers we're involved in the accumulation of information and analyzed the information and on the basis of the analysis the middle level managers took tactical decisions which are filtered out to the lower level managers for implementation. (M.Datar & Horngren, 2012).
The other interesting thing which has been noted by the analysis who's that the Top management is often concerned with meeting the goals set by the shareholders, strategic investors and the needs of the customers. Top level management did not use the management accounting system as much as the middle level and the lower level management. On the other hand Top level management was found to have used external information’s and external reports from the markets and the government regulations to take to make strategic decisions. the middle level managers whether actual beneficiaries of the management accounting system is it made heavy use of the available information with them to make tactical decisions which aligned with the organization’s overall objectives. So it has been clear that the ground rules were prepared by the middle level managers and note the Top level managers (Speklé & Verbeetenb, 2014).
ii) Compare and contrast this finding with one other journal article you will need to find that has discussed management accounting systems in another real-life company or companies. Did this second study have similar findings as the first chosen article, or mixed and/or different findings? Explain with examples.
Both the articles were aimed at different analysis and as a result of which the findings were quite different.
a) The management accountants quite often found to have engaged in an enormous amount of data related to the products, product mix, and the current processes, cost of production, process capability, and process variance, etc. the management accounting system was also more concerned with generating enough data to pinpoint exact cost of production which allowed the management to take pricing and competitive decisions. However the other article found that these data were not used by the Top management. These internally generated reports were used by the middle management for making tactical decisions like pricing. The Top management, on the other hand, relied more on external reports and very seldom they used the management accounting reports to make the decision regarding overall growth of the organization (Nonaka & Kenney, 1991).
b) Management accounting system generated enough reports which were eventually used by the Top level management off Apple Inc and Canon to take decisions regarding speeding up the new cycles to innovation. They kept an eye on the market movement and foresaw what the consumers want and also kept in mind the innovations made by its competitors. They were able to recognize the fact that innovating new products would be key to future growth and future profitability and this is exactly why they have set up groups which can work together as idea incubation centers. These groups used the data and information created by the respective management accounting systems to create and design new innovative products and makes sure these products are qualitative and cost effective. Management of both firms recognizes the fact that if these products are successful, they would create new benchmarks for others to follow for many years (Banerjee, 2006).
3. What conclusions would you make about the relevance of MAS in a competitive and uncertain business environment of today?
The job of the management accounting system is to find information which has been collected by the traditional accounting system related to product, processes, direct cost of production, overheads and, the variances which has been recorded and analyze the same to find causes of variations. Once causes of the variations are known the management of the organization can use the same to bring in remedial measures to bring down the variations in the coming production periods. One of the major advantage of using the management accounting system to reduce discrepancies in the estimated costs and the actual costs incurred by the system. This eventually reduces the costs, reduce the wastages and brings more uniformity into the process of production and increases quality. Quality can reduce maintenance costs and costs warranty etc. once the same is achieved the system becomes more efficient and more productive and lets the individuals learn quickly on the job (ANTHONY A ATKINSON, 2012).
The attractiveness of the management accounting system stems from the fact that:
a) Cancel the selection of the most profitable product mix which helps in the maximization of the limited resources available. This helps in finding the most profitable product mix and once the same is implemented, the top level managers can concentrate on new designs, new product mix and bringing in more and more product innovations (Douban, 2005).
b) One of the critical things for the managers in both the short term and in the long term is to set up correct pricing for the products and the product mix. If the products are priced correctly then it would be able to compete with the best of competitors rationally. If the prices are not set correctly then it would be very difficult for the organization to compete in the market. One of the issues has been faced for managers in pricing is that of wrong cost estimations made under traditional costing systems. But now a days under the new management accounting system techniques such as the activity based costing, the cost volume profit analysis and total quality management can make the managers reduce the costs and cost of production are estimated in the right manner which eventually will lead to cost optimization and right apportionment of the cost of production. The same will eventually result in the right pricing to be competitive in the market. So it becomes clear that if cost of production can be estimated in the right manner then it would be possible to be competitive in the market. Higher prices can lead to loss of opportunities in terms of loss market shares and lower would result in loss of opportunity in the form of lost sales. This shows that the management accounting system can help an organization become more competitive both in the short run in the long run (Bhimani, Datar, & Horngren, 2017).
a) Management accountants have become an integral part of the decision making process of whether the organization is a smaller one or a larger one. Different kinds of budgets are often prepared by middle level managers and then the same is sent to the top management decision making body to be approved with or without modifications. Some of the better organized companies have now started to apply bottom up budgeting process which takes help and sues the skillset of lower level supervisors and workers for setting up budgets. These kinds of budgets made with the help of lower level workers and managers help the organization’s budgeting exercise more democratic and often helps in implementation and getting to the goals. As the budget is prepared by them employees remain committed and not stressed out as in the case of a budget which has bene imposed on them by the top management (Anthony A. Atkinson, 2012). Budgeting is very key tool whether the same is a sales budget or a production department as the same shows the way to go about both temporarily and permanently.
4. Provide four specific outcomes or lessons learned from each of the two articles’ research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer [i.e. provide 2 outcomes from each of the two studies].
The outcome which was recognized from both the articles about the use and benefits of management accounting system and which can benefit today's companies operating in Australia are as follows:
1. Both articles have come to the conclusion that the Top level management of an organization is responsible for the decision making related to achievement of objective and goals aligning with the long term vision and mission. However it must be noted that decision making is a continuous process and which needs attention from the Top decision makers for providing a culture which calls for continuous innovation and development of the working culture. Top management is also needed to support maintenance of quality and product innovation on a continuous basis. This is why the Top management must endeavor to put part of the current incomes on research and development and also use the experience of the current workforce to bring on new but disruptive technologies (Nonaka & Kenney, 1991).
2. It was also observed that sometimes indecision on the part of the management could lead to chaotic situations but in a chaotic situation management can play the role of Bing constructive and incubate ideas by utilizing the human resources and use the experience of the workforce create entirely new products which can satisfy current and future consumer demands. However, creating new products but the existing and new markets should not be a onetime process and instead the management of organization support and focus on the creation of idea incubation groups within the organizations. These groups should meet on a regular basis to deliberate on their ideas and by deliberating upon their ideas day should be able to bring about some radical ideas which can be commercialized and we shall benefit the organization active high growth of revenue and profitability (Nonaka & Kenney, 1991).
3. it was also recognized that more and more firms are making it a requirement to use the activity based costing and balanced scorecard. They have understood the need for putting more and more emphasis on the correct cost determination and which can help them price their products better. Activity based costing systems can be costly when implemented but once it has been put into use the same can totally change the way we look at the current product mix. A better and scientific product mix is developed through ABC and as the different perspectives of BSC thrown in, the same would make a radical change on the way these companies function. Processes can be made better and supply chain development would be faster leading to higher profits etc. (Watts1, Yapa, & Dellaportas, 2014).
4.It is also observed the Top level management did not make use of management accounting system based internal reports too much we're taking the seasons are related to organizations future and hence it must be recommended that Top level management Shall make use of management accounting system reports along with industry reports and other forms of market information .Top management sell also consider delegating some of their authorities' to the middle level managers for better tactical decision making as these tactical decisions would be helpful in turning around from negative situations and make better use of the limited resources. The lower level managers and workers must also be encouraged to share their ideas with the middle and Top level managers an empirical basis (Speklé & Verbeetenb, 2014).
Management Accounting Systems worldwide has been made robust with an eye on better performance measurement and also for making the best long range decisions. If the management accounting information is sued better than the future growth can be made sustainable and decision making would be information based rather than being guess work. However not all the time the top managers would be totally dependent upon MAS reports and internally generated data. They can make use of industry reports, guidelines issued by research organizations but their decision must correlate with the overall resources at their disposal. So it is concluded that decision making can be made much better if the management accounting reports can be used along with external data and information in the long run and MAS reports not left entirely for the middle level managers to use.
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