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Management Accounting Techniques

Introduction

Management accounting is the process of controlling, managing, analysing, assessing and evaluating reports that are generated by the managers of the companies. All of them presented in front of internal stakeholders such as managers, directors, equity shareholders in order to analyse organisation's performance its position in the market (Hiebl, 2014). It helps the managers to make strategic decisions so that all the predetermined goals like profits maximisation and customer satisfaction can be successfully achieved. For all the business entities it is very important to conduct management accounting every year so that actual status of the company can be examined.  The company which is chosen for this report is UKC Furnitures. Various aspects are discovered under this report such as application of range of different management accountant techniques and uses of planning tools. Comparison of the way in which company can use management accounting to respond financial problems have also been covered  under this assignment.

TASK 1

1.1 Calculation of cost by using various management accounting techniques

Cost: 

It can be defined as the total expenses that have been faced by an organisation while manufacturing a product. There are various types of cost that may take place in the production process. These are fixed, variable and semi variable. The expenses that does not change with the production are considered as the fixed. All the costs that are varies with the manufacturing units are the part of variable costs. All the expenses that are partially fixed and partially variable are called semi variable. As UCK Furnitures is a manufacturing company hence all these costs are faced by the company in the production process. It is very important for the managers of the company to set appropriate prices for all the items that are sold by the organisation so that large number of customers can be attracted. It will help to expand the business in different locations (Arroyo, 2012). There are two main types of costing techniques that can be adopted by the company in order to determine profits. Both of them are described below with the cost card:

Marginal costing: 

It is technique which is used by the companies to calculate the marginal cost that depicts that organisation is achieving economy of scale or not. In UCK Furnitures this method is used by the managers to evaluate the level where the organisation can attain profits. It helps to analyse the impact of variable costs on the output units of the company. Cost card for this method for two months is as follows:

 

 

January

Particulars

 

Amount

Total sales (35*9000)

 

315000

Variable costs:

 

 

Opening inventory

Nil

 

Direct material (12*11000)

132000

 

Direct labour (8*11000)

88000

 

Variable overheads (5*11000)

55000

 

Closing inventory (25*2000)

-50000

-225000

Variable selling cost

-9000

-9000

Gross profit

 

81000

Fixed costs:

 

 

Fixed production cost

2000

 

Fixed se

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