• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Management accounting.

Extracts from this document...


Q1 ( i ) The purpose of management accounting in the organisation is to support competitive decision making by collecting, processing, and communicating information that helps management plan, control, and evaluate business processes and company strategy. The process of management accounting is the process of creating and using cost, quality, and time-based information to make effective decisions within the organisation. Finally, cost accounting obviously plays a key role in tracking and reporting relevant product and service costs. The significance of managerial accounting is that it has to meet several information needs. According to Horngren C. T., G. Foster, and S.M. Datar (2003) the major functions of managerial accounting include the following: Planning and budgeting. Planning extracts the most useful trends based on past performance, and incorporates known or expected changes in other variables. Budgeting goes further by incorporating motivational aspects, and expectations based on macroeconomic variables. Decision-making. Management accountants prepare analyses based on past variables and their assessments of other key variables in the future. Accountants are most familiar with the data and often participate in the decision process. Product and service costing. Allocation of cost to production and services is mandatory for tax and financial accounting purposes, and is necessary for decision making and planning. Control of operations. Frequent feedback on the cost of manufacturing operations is required to ensure that the process is "in control." Standard costs and nonfinancial measures are used as benchmarks against which the management accountant periodically compares the current cost of a specific manufacturing process. ...read more.


Decentralisation does not necessarily mean that a unit manager has the right to make all decisions relating to that unit. Top management selectively decides the types of authority to pass on and the types to deny. It also lets the individual closest to the operational unit make decisions for that unit, thereby reducing the time spent in communicating and making decisions. Decentralisation can, however, extend responsibility too thinly throughout the organisation; can effect in antagonism among managers that might lessen organisational goal congruence, and could create high costs of incorrect decisions made by the decentralised unit managers. As with any management method, decentralisation has advantages and disadvantages, which should be measured in order to reach an optimal degree of decentralisation (Horngren et al.2003). Firstly, added responsibility and decision-making authority often outcome in increased job satisfaction and provide greater incentive for the manager, hence increases the motivation and productivity of personnel and unit performance. Also greater decision-making opportunity provides valuable training for managers as they rise in an organisation. One more advantage could be the better sensitivity to unit needs as the information is a key for decision-making. Decisions are best made at the level in the organisation where a problem or an opportunity arises; the local manager typically has more information upon which to base a decision. The closer to customers, suppliers and employees the better chances to improve quality and decrease costs of production. Decentralisation also increases the speed of making decisions, although it depends on the autonomy delegated. ...read more.


Journal Entries to transfer costs from WIP to Finished Goods Dr Finished Goods 107,489.00 Cr Work in Process 107,489.00 Computation of Overhead applied: Actual $24,500.00 Applied (100% of direct-labour) $21,574.00 Under-applied Overhead $2,926.00 Q3 ( i ) All manufacturing costs not classified as direct materials and direct labour are classified as manufacturing overhead;(e.g., idle time, overtime premium, indirect labour, indirect materials, factory depreciation, factory rent, factory insurance, etc.) Some of these costs are classified as variable and others are fixed. Overtime premium is usually considered as indirect cost because the timetable for service job is normally casual or in accordance wit minimising overall work time. As Horngren et al. (2003) state, "...overtime premium is considered to be attributable to the heavy overall volume of work". That is why it is regarded as overhead, caused by all service jobs done during the reporting period. With reference to above, shop's computation of the service charge in the case has been not properly done. ( ii ) Allocation of overtime premium between direct labour costs and general overhead: Direct Labour: 9 hours x $14 = $126 General Overhead: 1 hour x $7 = $7 Total Costs: = $133 Cost per hour: 133 : 9 = $14.78 Justification for the allocation in ( i ) ( iii ) The shop can be justified in charging overtime premium if the customer has required the repair job to be done urgently, "rush job" (Horngren et al. (2003), p.44) so the overtime premium can should be allocated to that concrete job as direct cost. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE People in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE People in Business essays

  1. BMW Operations Management

    The appraisal process necessitates the employees to evaluate each of their peers so that it encourages them to produce quality work and so to satisfy their customer-supplier relationship. 4. Conclusion Successful automobile manufacturers in the future will need to maximise efficiency, eliminate waste, adapt to change and implement strategies that stay in line with their customer requirements.

  2. Produce a case study comparing two business organisations, investigating the extent to which each ...

    This is done through a rolling system. Expecting their consumer rights to be upheld To ensure the rights of every customer is upheld Tesco work in tandem with trading standards department.


    Performance monitoring provides information which is of value for identifying future training or promotion opportunities and areas where insufficient skills or knowledge could be deemed a threat to an employee's efficiency. Managers exercise control at an individual and organisational level through: * Planning by setting objectives and targets * Establishing

  2. Analysis of a Contract Specific Organisation

    For urgent or unplanned work wherever possible we would set up call of arrangements with a number of local contractors based on a deliverable output (measured term MTC) using Spon's or PSA schedule of rates. Where urgent or unplanned work involves a degree of fault diagnosis, then we would engage

  1. Free essay

    GNVQ Business Studies Unit 1

    good income because of the number of customers they have attracted and kept, and they make hardware for very important businesses to. Head of Marketing -Design/Place ads -Look after customers on visits -maintain invisibility. The marketing department communicate to different functional areas of the business for many reasons, these are:

  2. Investigate about the important roles that management plays in achieving my chosen organisation aims ...

    Planning is also preparing financial budgets for each department and forecasting which is an important step in deciding the objectives or targets to reach the organisation goals in goal congruence. Planning in Tesco is also concerned with considering the resources needed so that the work will be well achieved and timely.

  1. Performance Management/ Motivational Theory Performance Management

    different years or against competitors' profits * Performance through quality- this involves checking the quality of the products and services and making sure that they are at high standards * Performance through productivity- this involve measuring employees productivity * Performance-related pay- this involve awarding pay rise to those who have increased productivity (have produced more products or services)

  2. Gulf States Metals Inc. (GSM)

    The downside of these potential allies is that they are all relatively powerless. For example, the senior mangers would like to eliminate the Engineering Director, and the Industrial Relations Manager seems to locked out of the senior management team and senior decision making altogether, and middle managers and supervisors have been de-powered, decision-making prevented and information withheld.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work