Essay plans
1) Management Accounting
How does managerial accounting add value to organisations?
Intro:
- Managerial Accounting: concerned with information generated internally
- It is useful for managers and internal stakeholders
- The information of MAcc is derived from the organisations core accounting systems
- Process: identify, measure, analyse, interpret and communicate
SP1:
- The use of a cost management system
- Controlling of costs to increase value for customers and to improve performance for the
company
- Measures costs of consumed resources
- Eliminates NVA costs
- Determines efficiency of major activities
- Identifies and evaluates activities which could increase performance – innovation and redesign
- Such a system is likely to increase value of the company as it is reducing any unnecessary
expenditure and enables companies to take corrective action for any inefficient areas of the
organisation
- Assesses organisation’s competitive position and ensures long run competitiveness
SP2:
- MAcc is crucial when making decisions
- It helps organisations to systematise information
- Can determine both the long- and short-term health of a company
- Helps provide information and assists with planning
- Directing and controlling activities – adds value
- By creating organisational goals, managers and employees are likely to be more motivated
which will result in increased efficiency and reduced expenditure on potential redundancies
- Can implement value added strategies such as TQM and JIT
2) Cost concepts and classification
Explain how and why knowledge of cost behaviour is important to managers. Discuss how the least
squares regression method can be used to estimate cost behaviour patterns and consider why this type
of analysis is useful to managers
Intro:
- Cost behaviour refers to the relationships between activities and costs; how costs are affected
by changes in activity
, - Cost behaviour is vital for managers when making operational decisions concerning
production
- Variable, fixed and semi variable types of cost behaviour
SP1:
- Managers needs to consult cost behaviour in order to make decisions
- They must be aware of the impact of the costs when planning major activities including how
much to produce
- However, not all costs change with activity
- Necessary when creating the annual budgets
- E.G. If company is operating at full capacity, they must invest in production line more to fulfil
increased demand
- Cost volume profit analysis can be used when making decisions and setting prices
SP2:
- The least squares regression method is a statistical procedure which is used to predict the
behaviour of dependant variables
- It minimises the sum of the squared errors and determines the best fit line to data
- It can be used to predict future trends
- Easy to understand and calculate
- Sensitivity to outliers, may be unreliable
3) Decentralisation and responsibility centres
What are the advantages and disadvantages of decentralisation and how can it be achieved?
Intro:
- Decentralisation refers to the delegation of responsibility and decision-making authority to
employees and subordinates lower down the hierarchy
- Down the chain of command
- Transferring responsibility is often required when business operations grow, and management
are unable to undertake all decision-making processes
SP1:
- Advantages: Quick response, uses specialised knowledge and skills, development, better
supervision, motivating, growth and diversification, efficient communication
- Disadvantages: Goal congruency, duplication of roles, training costs, increased salaries, lack
of coordination
- Manager must have all relevant information for making decisions
- Performance measurement systems to establish control
- Should be a means of measuring the effectiveness of such trade-offs
SP2:
- Method of delegation: responsibility centres
- Specialist skills and individuals control different centres of the business
1) Management Accounting
How does managerial accounting add value to organisations?
Intro:
- Managerial Accounting: concerned with information generated internally
- It is useful for managers and internal stakeholders
- The information of MAcc is derived from the organisations core accounting systems
- Process: identify, measure, analyse, interpret and communicate
SP1:
- The use of a cost management system
- Controlling of costs to increase value for customers and to improve performance for the
company
- Measures costs of consumed resources
- Eliminates NVA costs
- Determines efficiency of major activities
- Identifies and evaluates activities which could increase performance – innovation and redesign
- Such a system is likely to increase value of the company as it is reducing any unnecessary
expenditure and enables companies to take corrective action for any inefficient areas of the
organisation
- Assesses organisation’s competitive position and ensures long run competitiveness
SP2:
- MAcc is crucial when making decisions
- It helps organisations to systematise information
- Can determine both the long- and short-term health of a company
- Helps provide information and assists with planning
- Directing and controlling activities – adds value
- By creating organisational goals, managers and employees are likely to be more motivated
which will result in increased efficiency and reduced expenditure on potential redundancies
- Can implement value added strategies such as TQM and JIT
2) Cost concepts and classification
Explain how and why knowledge of cost behaviour is important to managers. Discuss how the least
squares regression method can be used to estimate cost behaviour patterns and consider why this type
of analysis is useful to managers
Intro:
- Cost behaviour refers to the relationships between activities and costs; how costs are affected
by changes in activity
, - Cost behaviour is vital for managers when making operational decisions concerning
production
- Variable, fixed and semi variable types of cost behaviour
SP1:
- Managers needs to consult cost behaviour in order to make decisions
- They must be aware of the impact of the costs when planning major activities including how
much to produce
- However, not all costs change with activity
- Necessary when creating the annual budgets
- E.G. If company is operating at full capacity, they must invest in production line more to fulfil
increased demand
- Cost volume profit analysis can be used when making decisions and setting prices
SP2:
- The least squares regression method is a statistical procedure which is used to predict the
behaviour of dependant variables
- It minimises the sum of the squared errors and determines the best fit line to data
- It can be used to predict future trends
- Easy to understand and calculate
- Sensitivity to outliers, may be unreliable
3) Decentralisation and responsibility centres
What are the advantages and disadvantages of decentralisation and how can it be achieved?
Intro:
- Decentralisation refers to the delegation of responsibility and decision-making authority to
employees and subordinates lower down the hierarchy
- Down the chain of command
- Transferring responsibility is often required when business operations grow, and management
are unable to undertake all decision-making processes
SP1:
- Advantages: Quick response, uses specialised knowledge and skills, development, better
supervision, motivating, growth and diversification, efficient communication
- Disadvantages: Goal congruency, duplication of roles, training costs, increased salaries, lack
of coordination
- Manager must have all relevant information for making decisions
- Performance measurement systems to establish control
- Should be a means of measuring the effectiveness of such trade-offs
SP2:
- Method of delegation: responsibility centres
- Specialist skills and individuals control different centres of the business
