Management Accounting for Optimisation of Financial Resources

TASK 1

Explaining The Principles of Management Accounting And Stating Its Importance Pertaining to Integration Within An Organisation

Management accounting may be presented as a process of offering financial information and resources to managers for decision-making aspects (Weetman, 2019).

Principles of management accounting

• Cost reduction
• Presents solution considering both controllable and non-controllable cost
• Optimum utilization of resources

Importance of management accounting

• Helps in setting budgets or financial plans for upcoming time period
• Assists in setting prices for the products or services
• Provides management team with timely information for planning & decision-making purposes (Otley, 2016).

Explaining Different Techniques And Methods Used For Management Accounting Reporting

The manager of Nisa prepares managerial reports to provide the team of higher management with suitable information about internal performance. This in turn helps in several aspects regarding planning, decision making as well as measuring and evaluating performance. Reports which can be prepared by Nisa for decision making purposes are enumerated below:

Job cost report: This report furnishes information about expenditures incurred while performing a specific job. It helps in doing evaluation of existing performance over estimated revenue and thereby highlights profitability related to each job. Through this, the business unit can make efforts in the profitable areas and thereby improve performance levels.

Budget report: It assists the manager in doing an assessment of departmental performance and controlling costs. Further, variances found in the actual performance also help in setting a budget for the near future (Types of Managerial Reports, 2020). In addition to this, the owner of Nisa can also use this report to offer incentives to the employees.

Inventory report: By preparing and using this report manager of Nisa can make the manufacturing process more efficient. It contains information about wastage, cost level, and overhead expenses in relation to inventory usage and management (Cooper, Ezzamel, and Qu, 2017). Along with this, an inventory report also helps in doing a comparison of different assembly lines and thereby helps in setting bonuses for the best-performing areas.

Accounts receivable aging report: By this, cash flow can be managed and monitored by Nisa prominently. Moreover, it presents time period from which the debtor's payment is due. Through this, managers can ascertain customers who are facing difficulty in paying their balances. In this way, such a report helps in assessing problems that take place in the company's collection process. Referring to all these aspects, the firm can make decisions pertaining to allowing credit extension to the customers.

Evaluating the Benefits of MA Systems And Their Application Within an Organisational Context

Applicability And Benefits of Varied MA Tools in The Context of Nisa is Enumerated Below:

Job costing

According to this, the cost of production is determined by referring to the number of completed jobs. By applying this, the manager of Nisa can identify whether production cost exceeds overheads and the price of material. Thus, referring to this, resources can be used in profitable areas to improve overall performance.

Cost Accounting

Such a system of management accounting assists in determining the cost of production (both fixed & variable). In other words, by accumulating both direct and indirect expenses manager of Nisa can assess production costs. Further, by adding markup or desired profit margin in the unit cost product's price can be ascertained (Maas, Schaltegger, and Crutzen, 2016). By using the following formula manager of Nisa can set suitable prices:

Price = unit cost + (cost * profit%)

Inventory management system

Companies can track stock levels more effectively by using inventory management software or systems. Moreover, it furnishes information about orders, sales and deliveries aspects. Further, it also helps in preparing documents in relation to work orders, materials, etc. The manager of Nisa can do an appropriate valuation of stock by taking into account various methods such as LIFO, FIFO, etc (Hopper and Bui, 2016). In addition to this, methods such JIT (just in time), EOQ (economic order quantity), etc is highly significant and assist in maintaining enough stock within an organization and reducing cost level.

Price-Optimization \System

In the context of Nisa, by using this system manager of Nisa can monitor or track customers' responses or behavior at varied prices eve. Hence, by taking into account price optimization system manager can set suitable prices for the products or services in line with the customer's expectations.

TASK 2

Calculating Cost And Preparing Profitability Statements as Per Absorption & Marginal Costing

Specifically, absorption and marginal costing are the two methods that Nisa undertakes for assessing profitability aspect.

Cost Assessment, as Per Absorption And Marginal Costing, Pertaining to Alpha is Enumerated Below:

Profitability Statement as Per Absorption Costing:

Computation of COGS

The income Statement According To the Marginal Costing Method Is As Follows:

By doing the assessment, it has been found that the business unit should follow an absorption costing system for cost and profitability assessment. Moreover, the absorption costing method presents a highly suitable view of production cost as it considers both fixed and variable expenses (Geddes, 2020). This in turn gives a clear indication of the profitability aspect.

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TASK 3

Explaining The Advantages And Disadvantages of Different Types of Planning Tools Used For Budgetary Control

There are several tools that Nisa can employ for the purpose of budgetary control including investment appraisal tools, cash, and operating budget. By undertaking such budgeting frameworks organization can monitor or compare expenses and thereby take suitable measures for improvement (Ax and Greve, 2017).

Cash Budget

It may be presented as a financial framework that includes both estimated cash inflows and outflows pertaining to the specific time frame (Weetman, 2019). By preparing cash budget manager of Nisa would become able to know whether the company has enough funds for performing business activities or not.

Operating Budget

It implies the forecast of both revenue and expenses with regard to specifically one or more future periods. At the beginning of the year, the manager of Nisa can draft an operating budget which in turn exhibits expected activity levels for the concerned period (Burney and Malina, 2019). Thus, by undertaking this budget manager of Nisa can monitor operational performance.

Investment Appraisal Tools

Nisa can undertake this tool for planning purposes when it has investment or growth options. It mainly includes the payback period, net present value, average, and internal rate of return. This helps in analyzing the viability of capital projects and thereby aids in ineffectual planning.

Analyzing The Use of Different Planning Tools And Their Application For Preparing And Forecasting Budgets

The cash budget for the period of 6 months is enumerated below:

The above-depicted cash budget shows that the sales and profitability of the firm will increase significantly in the upcoming time period. The manager of Nisa can undertake a cash budget for evaluating and monitoring performance levels. On the basis of this, deviations can be assessed timely which helps managers in taking corrective measures for performance improvement.

Applicability of Investment Appraisal

For instance: Nisa has two investment proposals with varied initial investments. In this regard, the company can select the most suitable option over the other one by employing the investment appraisal technique. Through evaluation, it has been assessed that managers should focus on investing funds in Project A. Moreover, it shows a higher and positive net present value or return as compared to option B.

Computation of NPV

Comparing How Varied MA Tools Can Be Used For Responding to Financial Problems

With regards to business units, bottleneck in performance is usual which in turn directly impacts organizational performance. Thus, there are several tools that can be undertaken by Nisa for dealing with financial problems pertaining to reduction in productivity, profitability, market share, and increase in cost.

Benchmarking: Now, for assessing and getting information about performance trends business unit emphasizes setting benchmarks. It offers input to Nisa for performance evaluation in the context of sales etc.

Key performance indicators: In recent times, the company lays emphasis on setting KPIs pertaining to sales, profit, market share, etc. Thus, by comparing actual performance in against to the KPI's manager of Nisa can identify reasons takes place behind performance deterioration.

Variance analysis: This is another effective tool that assists in responding to monetary problems. Moreover, it clearly exhibits deviations that take place in the existing performance over standards along with the causes (Quattrone, 2016). Thus, referring causes manager of Nisa can take significant measures for performance improvement.

Balance scorecard: It measures a company's performance by taking into account both financial and non-financial measures. This includes mainly four aspects pertaining to customers, financial, internal business, innovation, and learning. In this way, a balanced scorecard offers an opportunity in relation to evaluate performance from such perspectives and enables one to take measures for performance enhancement.

By doing the assessment, it has been identified that Nisa undertakes benchmarking techniques for identifying and resolving monetary problems. In the case of a decrease in productivity and profitability business unit can do a comparison of existing performance over benchmarks. Referring causes Nisa can take action pertaining to practicing intense promotional strategies and cost control measures. By this, Nisa can maximize sales and thereby profitability as well (Ax and Greve, 2017). On the other side, Qbic Hotel undertakes a balanced scorecard model as it assists in measuring performance from several perspectives. Moreover, to gain a competitive edge over rivals firm is required to monitor performance from all perspectives. However, in comparison to Qbic, the MA technique undertaken by Nisa is highly effective. Moreover, it clearly indicates both variance and causes associated with the same.

Also Read:- Importance of Finance Management in A Company

Analyzing How Management Accounting Can Lead Organizations To Sustainable Success

Management accounting tools such as benchmarking, variance analysis, etc give a timely indication to the firm about the areas where improvement is required. For instance: the variance analysis system provides Nisa with suitable reasons pertaining to the non-achievement of predetermined goals or objectives. In this way, by doing modifications to the existing strategic framework within a suitable time company can avoid deficiency takes place in performance and thereby lead to sustainable success.

CONCLUSION

By summing up this report, it has been articulated that through undertaking MA systems manager of NISA can get suitable information about cost, profit, stock level, etc. Besides this, it can be inferred that by preparing reports management team of the organization can make strategic decisions and thereby get the desired level of outcome or success. It can be summarized from the evaluation that MA tools are highly significant which helps in doing and making financial forecasts effectually. It can be seen in the report that by using benchmarking NISA resolves monetary problems and thereby ensures sustainable success.

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