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Management Accounting For Decision Making Process In AVN Plc Add in library

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Questions:

1. The purpose of management accounting and the relative Importance of using management accounting tools over financial accounting, for furthering company’s growth and profit?

2. Different classification of costs namely on the basis of type, function, behavior and relevance and the implications of the cost classification for pricing?

3. Importance of the cost –volume profit in decision making activities of AVN plc?

4. The benefits of preparing budgets for the company and suggest the types of budgets to be prepared, to forecast future performance of the company?

 

Answers:

Introduction

The overall project is report is based on the management accounting policies and practices used by the different organization as per their growth and management strategies which is generally support in the operational and decision making strategies of the company AVN plc. Who are designing and assembling electronic devices (Tavana, 2012). The entire project report about the management accounting importance to understand the concept of costing in the business strategies and different implications of the pricing strategies which is required to maintained the volume of the sales strategies of the company.

In this project the company is mainly discussing about the financial strategies for discussing the future financial planning and decision making strategies of the organization for the decision making strategies and its controlling activities by using management accounting concept to increase the sales volume of the company.

1. The purpose of management accounting and the relative Importance of using management accounting tools over financial accounting, for furthering company’s growth and profit

The management accountant of the organization is generally making planning for the development and growth of the organization which is based on the forecasting of the future decision making strategies. The management accounting is the one of the best in the financial accounting to gather the financial as well as the required documents of the organization which is mainly based on the previous and future performance of the company required by the managers of the organization to plan and do analysis about the performance of the business activities of the company (Kaarbo, 2012).

Management accounting generally required for the analysis strategic planning of the business decision making done by the organization to make decision about the different products segments started by the company or required essential decision to predict and advice about the ratio analysis and budgets and forecasting about the different cash flow and the differences in the fluctuated scenarios of the business activities of the company (Seal and Noreen, 2012). There are certain numbers of tools which are assist the decision making strategies through using different analysis tool like ratio analysis, financial budgets and also the forecasting outcomes of the company for making financial decision.

 

Management accounting tools to support the financial accounting

The financial ratio analysis of the company is generally based on the financial data of the financial statement and cash flow statement of the company to analysis the previous year and current year performance of the company and also the prediction about the future growth of the organization as the company is dealing with the electronic products (Yoe, 2012).

  • The efficiency and the gearing ratios of the company is generally based on the financial abilities of the organization whether the company is solvent enough to pay off their long term debt amount of the company in the coming future and also the financial position of the company in terms of the funding the business and operational activities of the company in long run. Whereas as per the analysis it is shows that as the company is dealing in electronic semi assemble products in the market which is carrying more risk than other financing activities in the market.
     
  • Profitability ratios of the company are generally discussed about the financial abilities of the organization in terms of the performance measurement of the organization to generate more revenue from their selling and distribution activities in the market (John Y, 2012). The overall scenarios of the managerial accounting mainly help the managerial accountant to make proper decision about the accurate analysis and proper forecasting about the company.According to the following the contribution of the all the analysis of these financial statements support the decision making strategies to make huge success to the business activities of the organization.

There are some others tools which are used by the management accountant for the development and forecasting of the financial and operational status of the business activities in the organization.

  • Cash flow statement of the company AVN plc is basically based on the forecasting the future cash flow and revenue generation activities of the organization. The business planning of the company AVN plc is more accurate in terms of investing lower amount of capital in the business activities and generating huge amount of profit (Ingram, 2012).
     
  • The variance of the financial statements of the company is mainly shows that the company is supporting the business activities of the company in terms of revenue generation and cost incurring activities. The management accountant of the company are generally make decision about the financial status of the company in terms of providing more benefits to the organization.
     
  • The management accounting tools and techniques are generally deciding whether the company is taking proper decision about the cost investment activities like AVN plc is planning to prepare some different assembling electronic device.
 

2. Different classification of costs namely on the basis of type, function, behavior and relevance and the implications of the cost classification for pricing

As per the cost clarification of the company is mainly based on the different process which is combining the cost of the organization as per the different features and the abilities of the expenses spent by the organization like function, behavior, relevance.

As per the function

The cost clarification as per their function in the company like AVN plc for assembling and manufacturing the semi assembled manufacturing goods which is like manufacturing cost, administration cost, selling and distribution cost and also the research and development cost of the organization (Horngren and Oliver, 2012).

  • The production cost of the organization is mainly based on the selling and distribution activities which can be satisfied their supplies of the raw material and the labour cost of the organization which is based on the primary packaging activities of the products produced by the organization at optimum cost.
     
  • The administration cost of the organization is basically based on the policies and practices of the organization to control and direct the operational activities of the organization which is excluded from the other cost of the manufacturing.
     
  • Selling and distribution cost of company is based on the total expenses spent by the promotion of the selling and distribution activities of the clients and customers of the organization to generated more profit for the organization.
     
  • The research and distribution cost of the organization is mainly based on the planning about the packaging strategies of the electronic semi assembled products manufacture by the company.
     
  • Research and development cost of the company is required to produce some newly invention and development in the technology of the semi assembled product of the factory which is based on the financial stability of the organization and for the implementation and decision making strategies for the finalized the financial abilities of the organization.
     
  • There are some other cost which is also retained by the company AVN plc to developed and start some new product line of the company in the coming future for that research and development required which need to be pre manufacturing cost of the organization in terms of the deferred revenue expenditure and the prime cost of the future production activities.

As per the behavior

According to the behavior the cost of the manufacturing is segmented into two parts which is direct and indirect cost of the organization. There are certain scenarios which is differentiating the different cost of the production. Direct cost of the organization is generally primary link of the products units produce in the organization whereas the indirect cost of the organization is spent by company to prepare their cost of the production within a particular period of time.

As per the relevance

According to the overall scenarios of the cost allocation of the different policies and practices followed by the AVN plc company to understand the cost allocating services as per the relevance the cost allocation of the organization is based on the different relevant costs, incremental cost, opportunity cost and some additional cost and some of the irrelevant cost like some considered cost and other sunk cost of the manufacturing of the organization for the production activities of the company within a particular period of time.

 

 3. Importance of the cost –volume profit in decision making activities of AVN plc

The cost volume profit of the company AVN plc is based on the decision making strategies to tackle the problematic situation of the organization to follow the breakeven situation for the organization to support the project manager of the organization to understand the actual requirement of the organization in the future period of time (Horngren and Horngren, 2012). There are some of production activities which are based on the breakeven analysis to understand the production activities effort by the organization to enhanced the profitability and decision making analysis of the organization. The cost volume analysis models is generally utilized by the organization for the decision making strategies of the organization by using different probability and statistical tools and techniques to get the target outcomes of the organization as per the previous setting goals.

The cost volume analysis is giving the detailed idea about the financial and operational situations of the different activities of the company (Horngren and Rajan, 2012). This analysis tool generally support the analysis about the different decision making planning for proper production activities of the company. The Cost volume analysis is mainly based on the variable cost set by the organization to assume the future performance of the organization. The manager of the company AVN plc can easily estimate the cost and the accurate time of the production within a given period of time.

 4. The benefits of preparing budgets for the company and suggest the types of budgets to be prepared, to forecast future performance of the company

According to the overall analysis the company is preparing budgets to do proper planning and controlling activities in the organization (Bhimani, 2012). The planning process of the organization is mostly based on the budgeting process and standards of procedures of the company AVN plc. As the company is initially get the benefits about to reduce the complexity of the project within given period of time. There are some benefits which are provided to the organization during the preparation of the budget for the organization.

  • The complexity of the decision making strategies of the business activities is about to be reduce by the organization by preparing different budget to manage the daily transactions of the organization so the managerial authorities of the company AVN plc can focus on the other manufacturing related problems of the organization (Doumpos and Pardalos, 2012).
     
  • The budget statement is always a blue print for a business activity and production activity. The standard budget which is prepared by the managerial authorities of the organization which need to be revise and control by the organization to make backup plan for the organization.
     
  • The budget preparations activities are mostly support the coordination activities to support the manufacturing activities of the company in the certain extent of the company for the providing the better services for production activities of the company.
     
  • The managerial authorities of the company AVN plc can easily identify the performance of the company in the recent market scenarios and the compare that situation with the previous situation of the company (Drury, 2012). There are certain activities which are based on the restructure the overall activities of the organization to follow and reorganize the goal of the organization.
 

The company AVN plc can prepare different kind of budget which can be maintained the financial and operational status of the company in the certain extent.

  • The fixed budget contains all those cost of the production which cannot be change in any circumstances of the organization. There are some of the changes also happen in the fixed budget cost of the organization which cannot be give impact on administration cost of the organization (Baum, 2013).
     
  • The Variable budget contains all the variable expenses of the organization which is based on the revenue generation activities of the organization to achieve the goal of the organization.
     
  • Operating budget of the organization is generally based on the different cost of the organization to promote the supply and the quality control of the organization.
     
  • There are some other budgets which are following by the organization in terms of the understanding the different structure and scenarios of the organization (Epstein and Lee, 2012).
     
  • Sales budget, production budget, direct material and direct labour budget and the other pro forma of the income statement of the company.
     
  • The master budget of the organization is generally based on the capital expenditure and the standard budget of the organization to maintained and estimated the cost of manufacturing electronic semi assemble part produce by the AVN plc within particular period of time (Gil Aluja and Terceño, 2012).
     
  • The analysis is on the budget preparation activities of the organization which is based on the production planning and costing activities of the organization. The company structure by using cost and volume analysis showing the different benefits of the financial budgeting to support the decision making activities of the organization.

Conclusion

The overall project report is based on the financial status and the managerial planning controlling activities of the company AVN plc. In the overall report the discussion is on benefits and application of the managerial activities of the organization which is based on the tools of the financial accounting applications. The report is showing that how company need to select the different costing method to acquire the huge number of profit from the organization. As per the overall analysis, if the company AVN plc will be following the managerial accounting format and tools in their financial accounting process of the company to make perfect decision about the company.

 

Reference

Baum, M. (2013). Service business costing. Wiesbaden: Springer Gabler.

Bhimani, A. (2012). Introduction to management accounting. Harlow: Financial Times Prentice Hall.

Doumpos, M., Zopounidis, C. and Pardalos, P. (2012). Financial decision making using computational intelligence. New York: Springer.

Drury, C. (2012). Management and cost accounting. Andover: Cengage Learning.

Epstein, M. and Lee, J. (2012). Advances in management accounting. Bingley: Emerald.

Epstein, M. and Lee, J. (2012). Advances in management accounting. Bingley: Emerald.

Gil Aluja, J. and Terceño, A. (2012). Methods for decision making in an uncertain environment. Singapore: World Scientific.

Horngren, C. and Horngren, C. (2012). Management accounting. Toronto: Pearson Canada.

Horngren, C., Datar, S. and Rajan, M. (2012). Cost accounting. Upper Saddle River, N.J.: Pearson/Prentice Hall.

Horngren, C., Harrison, W. and Oliver, M. (2012). Accounting. Upper Saddle River, N.J.: Pearson Prentice Hall.

Ingram, T. (2012). Sales management. Armonk, NY: M.E. Sharpe.

John Y. Lee., (2012). Advances in Management Accounting. Emerald Group Pub.

Kaarbo, J. (2012). Coalition politics and cabinet decision making. Ann Arbor: University of Michigan Press.

Seal, W., Garrison, R. and Noreen, E. (2012). Management accounting. London: McGraw-Hill Higher Education.

Tavana, M. (2012). Decision making theories and practices from analysis to strategy. Hershey, PA: Business Science Reference.

Yoe, C. (2012). Primer on risk analysis. Boca Raton, FL: CRC Press.

Yoe, C. (2012). Principles of risk analysis. Boca Raton, FL: CRC Press.

Zaeh, M. (n.d.). Enabling manufacturing competitiveness and economic sustainability.

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