Management Accounting: Information for Creating Value and Managing Resources - Accounting & Finance Assignment Help

Assignment Task

ANSWERS TO REVIEW QUESTIONS
1.1 Management accounting is defined as ‘processes and techniques that are focused on the effective and efficient use of organisational resources to support managers in their task of enhancing both customer value and shareholder value’. Value creation is a central focus for contemporary managers. Customer value refers to the value that a customer places on particular features of a good or service (and which is what leads to them purchase the product). Shareholder value is the value that shareholders, or owners, place on a business, usually expressed in the form of increased profitability, increased share prices or increased dividends.

1.2 (|Important) The important differences between management accounting and financial accounting are listed below.
(a) Management accounting information is provided to managers and employees within the organisation, whereas financial accounting information is provided to interested parties outside the organisation.
(b) Management accounting reports are unregulated, whereas financial accounting reports are legally required and must conform to Australian accounting standards and corporations law.
(c) The primary source of data for management accounting information is the organisation’s basic accounting system, plus data from many other sources. These sources will yield data such as rates of defective products manufactured, physical quantities of material and labour used in production, occupancy rates in hotels and hospitals and average take-off delays in airlines. The primary source of data for financial accounting information is almost exclusively the organisation’s basic accounting system, which accumulates financial information.
(d) Management accounting reports often focus on sub-units within the organisation, such as departments, divisions, geographical regions or product lines. These reports are based on a combination of historical data, estimates and projections of future costs. The data may be subjective and there is a strong emphasis on reporting information that is relevant and timely. Financial accounting reports tend to focus on the enterprise in its entirety. These reports are based almost exclusively on verifiable transaction data. The focus is often on reliability rather than relevance and the reports are not timely.

EXERCISE

1 Estimates of how long it would take to clean the store, how much it would cost to outsource this task and the cost of employing cleaning staff would be relevant to this decision.
2 The cost of extra collections and the cost of providing the special bins. Forecasts of the popularity of this service may help estimate the amount likely to be collected and therefore the frequency of collection, which would help with the cost estimations. Some value judgments may need to be made about the views of residents (will they separate their waste and will they be unhappy if this service is not provided?).
3 Whether the earlier matches would clash with the summer season for other sports and how this would impact on availability of players, attendance of crowds and appeal to television viewers, if appropriate, and the impact this could have on revenue; the availability of sports arenas if they are shared with other sports codes, and the cost of using a different arena if necessary; the difference in running costs, such as more watering if the pitch has greater usage during drier months, and more or less use of lights in early evening (if used); if the football season has an extra month in warmer weather there may be a change in refreshment consumption, such as more cold drinks being sold in the warmer month.
4 A forecast of future trends such as whether the increase in patient numbers is likely to be permanent or temporary, the cost to employ additional permanent staff and the cost to hire agency staff would all be relevant.

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