Report on Strategic Management Accounting of Manac Plc. 1

Topics: Cost accounting, Management accounting, Cost Pages: 13 (3575 words) Published: April 28, 2012
Report on Strategic Management Accounting of Manac plc.1
Pricing Decision Analysis1
1.Cost-Plus Pricing2
2.Demand – Estimate Pricing3
3.Product-Mix Decision4
4.Pricing Using Target Costing5
Standard Costing and Variance Analysis6
1.Standard Costing Performance7
2.Variable Elements Analysis8
3 Value and Limitations of Standard Costing and Variance Analysis9 Discussion of Replacing Absorption Costing System with Activity Based Costing System11 Advantages of Activity Based Costing12

Disadvantages of Activity Based Costing14

3156 Words in total.

Report on Strategic Management Accounting of Manac plc.


Data of the 3rd season shows that, with the output sustains matching manufacturing capacity, sales of company products increases steadily. In the meanwhile, data of the seasonal profit doesn’t seem to reach company budget target. It was said that the increase of sales would have brought in handsome profit. Standard costing and absorption costing are executed in the company, but more details of strategies are to be carried out. (3 Drury, C. 2009) This report aims to clarify the models and concepts of accounting management, analyzes the effectiveness pricing decisions, standard costing and variance analysis, the advantages and between Activity Based Costing system and Absorption Costing system, and come out with a conclusion of proposing a correct strategy to reach company budgeted profit.

Pricing Decision Analysis

Problem lies on the deviation between target profits and selling price, it varies as the increase of sales and decrease of sales volume. Thus, carrying out correct pricing decisions are of vital importance. For Manac operates product manufacturing and sales, it is as a character of a price setter. Common factors such as cost information, product quantity, and period of terms, customer demand, and company expectation should be taken into consideration when pricing. (3 Drury, C. 2009) A series of pricing decision models could help allocate resource accurately and maximize sales which lead to profit.

Cost-Plus Pricing

Cost-Plus Pricing has been widely used in most of the enterprises, for it calculates a full cost added with a proper mark-up to determine the selling price, and it’s easy to capture costs of the individual product thus obtain unit profit. (Dan Swenson and Douglas Barney, 2001) It is useful when company is manufacturing customized product or non-customized products with large volumes. Also, for a company reaches its targeted profit, a proper mark-up should be made. Material cost, required sales revenues, expenses should be taken into account when calculating mark-up. (Drucker Peter F. 1999) It could be used as guidance when company is setting the price, counted from basic cost; company computes mark-ups and profits clearly. But also, other factors need to involve in when pricing. (Nagle Thomas and Holden Reed. 2002) It’s not the easy for company with many product lines to execute, though.

Demand – Estimate Pricing

Other than paying attention to seller’s Cost – Pricing, Demand – Estimate pricing model draws price setter’s attention on the demand which customers have on products. This model sets up product price according to consumers’ demand and expectation; price setter obtains cost using potential selling price multiplied with estimate sales volume and minuses estimate profit. When applying Demand – Estimate Pricing Model into company management, it can be directed in different ways. First, estimate potential price by boosting potential customers’ demand of the product. Take the refrigerator as an example, buyer learnt about the price of $899, but we could be selling at the price of $959 by catching customers’ attention with detailed product function instruction and better...

References: Drucker Peter F. (1999) Management Challenges of the 21st Century. New York: Harper Business
Drury, C
Horngren , C.Y., Foster, G., and Datar, S.M. (1999). Cost Accounting, 10th edition, Prentice Hall, Upper Saddle River, NJ
Horngren C, Datar S, and Foster G (2005), Cost Accounting, A Managerial Emphasis, 12th Edition Prentice Hall International
Jack, L (2009) The Adoption of Strategic Management Accounting Tools in Agricultural Post Subsidy Reform: A Comparative Study of Practices in the UK the US, Australia and New Zealand, London CIMA.
Kalish, S. (1983). Monopolist Pricing and Dynamic Demand and Production Cost. Marketing Scencei. 2, 138-150
Kaplan, R.S
Fayek, A. R. (2000). An Activity-Based Data Acquisition and Job Costing Modeling. Walsh, K.D.(editor), ASCE, Orlando,
Nagle Thomas and Holden Reed
Proctor, R. (2009) Management Accounting for Business Decisions, (3rd Edition), Financial Times Press
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