Accounting

Topics: Cost accounting, Costs, Management accounting Pages: 12 (3588 words) Published: January 7, 2014
Content

Content1
Introduction1
1.Task one2
The models and concepts affecting the pricing decisions taken by organisations, critically reflecting upon their usefulness2 2, Task two6
The role of standard costing and variance analysis in management accounting and a critically discussion of the value and limitations of variance analysis as a means of identifying key areas which have contributed to the overall profit figure.6 3, The advantages and disadvantages of introducing an Activity Based Costing system to replace the current Absorption Costing system.8 Conclusion12

Reference lists13
Bibliography14

Introduction

Manac plc is a large, fictitious company which produces and sells a range of standard electrical goods. Also Manac plc is a transnational enterprise. The company uses standard costing and absorption costing. Due to the actual profits may be not satisfied with the budgeted profits. The board of directors has decided to find, analyze the potential reasons and may find a proper method to replace the existing costing system. There is a report from financial director and to explain the situation and find potential reasons. Therefore, it is vital to analyze the existing costing methods which include standard costing and absorption costing. The report will identify the values and limitations of those two costing methods and find the potential reasons from this point. Moreover, the report will find a way out to fix the issues and help organization to achieve its budgeted profits. Due to analyze the costing method, company could change its pricing method or costing method to improve profits. Thus, there may be a chance to transfer Absorption Costing system to Activity Based Costing system. It is important to understand this new system and find the strength and weakness from changing the system. From the structure of the report, it will be divided into explanation of the models of concepts which could affect the pricing decisions, an understanding of existing costing systems including standard costing system and absorption costing system and variance analysis, and finally there is a discussion of advantages and disadvantages of replacement from Absorption Costing to Activity Based Costing system and critically. The information is collected from academic books which are related to management accounting, other reports and networks. The limitation of this report is that the time limits and limited second hand resources for collecting information. 1. Task one

The models and concepts affecting the pricing decisions taken by organisations, critically reflecting upon their usefulness

The main productions and services of Manac plc are a range of standard electrical goods which will be transported and sold across countries. However, recently the board of director worried about the real profits might not achieve the budgeted target profit. Therefore, there is a review about identifying the real reasons of this situation. First of all, the company uses standard costing and absorption costing as its strategic management accounting method to affect its pricing decision making. It is potential reasons that may affect the profits.

Standard costing is based on an assessment of the value of cost elements. It is designed to provide basic understanding and standards for performance measurement, control by exception reporting, valuing stock and deciding selling prices. It is made up by production methods and layouts, work studies and work measurement, material specifications and wage and material price projections. (Drury C, 2009) Standard costing is a method to decide prices in advance and assess the costs of products and services. Standard costing could also compare expected costs with real costs and the difference between them is a variance. The variance analysis is that break down the difference between actual cost and standard cost into different element. (Weygandt, Jerry J, 2008)...

Bibliography: Batty J (1970) Managerial standard costing. London: Macdonald & Evans.
Drury C (1999) Costing: an introduction, 4th edition. London: International Thomson Business.
Don T. et al. (1982) Management accounting: a decision emphasis, 3rd edition. New York: Wiley.
Glad E and Becker H (1996) Activity-based costing and management. Chichester: Wiley.
Norman B. et al. (2010) Management accounting and control systems: an organizational and sociological approach, 2nd edition. Chichester: John Wiley.
Pizzey A (1989) Cost and management accounting: an introduction for students, 3rd edition. London: Paul Chapman.
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