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    Accounting

    MANAGERIAL ACCOUNTING

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    MANAGERIAL ACCOUNTING


     # Managerial Accounting #

    INTRODUCTION

     Managerial accounting is the method to classify, calculate, assess, evaluate, and convey financial reports to management to accomplish the objective of an entity. It differs throughout financial accounting since this is related to support internal manager in making well educated business judgement within the organisation. Management accounting data analysis could be customised to meet the particular needs of all its end-user (Argade, 2020). It mainly covers many aspects of accounting, such as cost accounting of products, budgeting, forecasting, as well as numerous financial reporting. In this report, to better understand the importance of managerial accounting Job Costing system have been selected and various aspect of report are discussed.  In part A, features of Job Costing, 2 specific Australian organisations using costing system are discussed. In addition, with help of journal article a real-life organisation using same costing system is also elaborated. 

    PART A

    Features of Job costing system

    The expenditures are accrued individually for each work, since the goods are manufactured mostly against the request of the consumer and also not to keep stock through selling.

    The work costing approach comes into the unique order costing type, since each work is distinct from the other. The explanation for this was that one consumer's requirement varies from another.

    The expenses involved for a position are documented and recorded individually, because not all the employees are transferred through several functional areas.

    Working in advance at any given time dependent on the amount of workers who worked. For each position a different work record is kept in advance.

    Whenever a job requires amount of finishing procedures, work bookings may be given to know the status of completing the task.

    The key aim of actual costs is to determine benefit or loss individually for each job.

    The cost of jobs can be split into two groups such as costing of factory workers as well as the costing of agreements. When a job is completed in a limited scale, the costing approach for the factory work is adopted (Argade, 2020). When a big work is completed, the contract-costing process is adopted. 

    Two particular Australian companies using Job system

    Incitec Pivot: It is one of the largest chemical manufacturing companies in Australia which use to implement job costing system within their accounting process. This system helps such company to implement cost of work orders as a way of managing the use of raw materials, manufacturing facilities and operating hours. This firm consider each client to be buying a different job for the price of work orders. Additionally, manager of Inditec pivot can group ventures of lower values underneath a specific employer running together so that easy decision are made at the end of the financial year or period. 

    CPB Contractors: It is consider being one of the leading construction companies in Australia with the total worth of $700 Million. Internal management used to adopt the concept of job order system which helps in arranging a variety of inputs, from labour to different materials and instruments. It is sometimes rewarding to pinpoint the specific expense of almost all of the components for particular jobs. Costing techniques in managing construction generate different employees mostly on job as well as solid bookkeeping.in addition  job costing could be particularly useful in keeping record of about their total work expenses.

    Potential uses of the cost information

    The cost information system is geared towards delivering comprehensive high-level information that facilitates planning, monitoring, and strategic thinking, based on the expense of goods, operations and functions. The decision-making process is an activity conducted at all stages in organisations, representing of both long and short - term viewpoints. The proposals are triggered by the judgement, so that a monetary or analytic research is necessary for a vast series of decisions in order to reach reasonable conclusions (Heaton, and et.al, 2019). For these purposes, the financial management profession is highly engaged in decision-making process. The management answer will depend on costs incurred which are recognised by about their predicting features which contain extra costs, social costs, as well as associated expenses within the specific operations of both businesses (Incitec Pivot, CPB Contractors). In general, the management decisions are based on the expense information which is deemed appropriate. In certain words, having accurate, thorough, meaningful details and in correct form is an essential decision-making factor. 

    PART B

    Article: “Job-costing systems are difficult to implement but well worth the effort”

    1. Summarising the costing mechanism designed and its implementation:

    According to Warren, Reeve and Duchac, (2013), it has been seen that few contractors tends to have a specific ideas regarding the job cost effectively that are incurred in the manufacturing sectors. The industries engaged in the business in large operations have the reasons for its struggle that are plentiful, as they start with a simple process of job costing. The manufacturing industries have several branches in different cities of different countries with motive of enjoying globalisation along with controlling costs. The management of such entities are capable for implementing changes within working and operational system with the motive of enjoying the competitive advantage in dynamic business environment. The purpose of costing mechanism and its techniques like Job costing is to ascertain the profitability of business entity by controlling and minimising the costs of operations. The mechanism of costing system pertain several techniques like job costing which are used by different kinds of organisation accordance with their market analysis, operational work and product line. The article intend to implies the goal is track the flow of costs that are incurred by an organization to produce large quantities of product and services to its customers. The emerging of systematised managerial costing systems leads to ascertainment of the efficiency of production and supporting the implementation of costing techniques. For the proper implementation of techniques there are several sub-divisions of costing methodology in the managerial system of business entity for managing and controlling the costs of different operational works of entity with appropriate costing technique. 

    For example, sub-division or departmentalisation under business entity like Coca Cola depends on differentiation accordance with the job responsibilitities and accountability. Operational works consists of several kinds of costs incurred while the completion of several tasks of manufacturing and the categorisation of such costs are also the part of costing. The multiple costing techniques are used by the organisation for pricing the products and services, estimating future cash inflows as well as controlling advertisements, packaging and distribution costs. Furthermore, techniques of using costing system might helps in reducing pay-back period and ascertaining rate of return. While breaking the prudence and consistency concepts of accounting, means changing of accounting policies or costing techniques the efficiency of business entity get affected. Therefore, for managing different kinds of activity of the business operations the costing technique like job order costing. 

    In the wordsof  Balakrishnan, Labro and Soderstrom, (2014), it tends to be considered helpful in controlling the costs and manages the influential affects of changes under the organisation. Under the job order costing technique the cost sheet and income statement distinguish the cost in several parts like direct, indirect and fixed or variable etc.  This all helps in finding out the profit before indirect costs as well as after deducting the indirect costs the final profit also identifiable. This all helps the management in managing different sections of operations in cost and time effective manner. Therefore, nothing is wrong in saying that" The effective costing mechanism leads to profitability and goals accomplishments". In the context to keep data collection at manageable level, the task that is assign by management must be 80% of more for the standards level. These are only activities employees should be aligning so that chances of profitability could be increased within the limited cost estimation.

    2. Satisfy the costing system with the features

    In the viewpoint of Tuccillo, (2016), description regarding the features and aspects of costing mechanism which are described above along with the critical review of article, it is concluded that costing system is emerged with an aim of control and managing costs along with the requirements of business firm. Costing mechanism applied under the managerial workings of the manufacturing firms give maximum focus on tracking the cost for a particular batch. It is beneficial for managing the risk that is allocated to the cost. In management accounting of the organisation, the job costing system and its evaluation is crucial for ascertaining the profit for the particular period. In case of small firms, it is acceptable that costing mechanism and techniques like job order costing and operational costing helps the mangers in focusing overall management of the costs involved in direct material, labour, raw material, etc. Job costing system is helpful for various companies in order to track and evaluate the daily usage of expenses. It has been seen that an employees oIn f an organization must be responsible for recoding all time and materials that are incurred for the period. 

    the words of Maher, Stickney and Weil, (2012) costs are identified or classified according to job orders organized by an organization. This includes managing job costing and analysing the costing methods that tend to give each worker a pocket sized spiral knowledge regarding the flow of costs. In this industry, different type of cost is present which is associated with direct material, labour etc. and these have to be properly managed so that chances of future accountability and success could be attained effectively. Indirect as well as direct costs are also classified under the process of job costing. There are certain companies in which these costs are associated when managing the operational activities. These costs are related to the production of products and managing them helps company to enhance the profit level. This all helps in classifying the direct and indirect costs along with the classification of fixed and variable costs along with the identification of overheads occurs in different assigned job or work. Some of the important aspects that are aligning to the use of job costing is been mentioned below:

    Stock supply according to demand- This is known as the method that helps companies to manage their operations effectively. This will help in analysing the amount of product units and batches produced in order to complete the targets. This all helps in effective supply of goods in market and maintaining the stable rate of product in market. Supply must be according to demand in context of perfect market equilibrium.

    Helps in managing the perfect inventory system: With the help of prominent managerial activities and costing techniques helps in managing the suitable storage amount of inventory. It also suggests for FIFO method of inventory management. War house costs and loading costs are also analysed under the costing mechanism and its techniques.

    Usefulness of cost information to the internal users

    According to Pagare, (2020), for any business organization, it is important to have complete cost information before moving to the production process. In this article, it has been seen that small payment maintenance contractor’s job costing system would be developed to track the labor productivity. The overall time is determined to which every worker are taking to accomplish their desire goals. In this costing, there are various cost compiled for a job or work order. There will be production against the orders of customers and not for stock. This will help the company in order to manage the cost of inventory and provide the required amount of units and line of batches to the customers. In this way, additional cost for stock can be minimised and it will help in increasing the profit earned. This can be explained with an example that if the cost for job is to produce 500 units then it could be essential to organized to task accordingly. It can further be useful to minimize the production costs that tend to increase the additional burden on the firm. The different elements of cost within organization include direct material common direct labour and direct expense. These are charged directly from the concerned job and an overhead charge to the job becomes portion of departmental overhead. Perhaps, there is implementation of job costing in the business that tends to be also considered during the process. First target is on production order that is demanded by the customers from the company. The production department has to produce specific quantity of job orders that will constitute the job. Cost sheet will be introduced that is kept as a separate record and it is combined with production order itself. There are other documents which are used as control mechanism in a firm by dispatching function (Kaplan, and Sadosty,  2019). These include time tickets, tool orders material depositions and inspection order. An organization can use job costing in order to evaluate the profitability of each job. This is helpful in estimating cost of similar jobs that can be used within the company in future. Moreover, it provides detailed analysis of material cost and overheads which are required for each job within company. It also includes plant efficiency which can be controlled by associating it with individual job. In the case of a predetermined overhead rates are adopted within job costing then budgetary control can be planned effectively. It is known as cost plus contract in which prices determined on direct basis 

    Santos, Souza, and Vidal, (2019) argues that cost information will be easy for internal management to estimate cost of job on the basis of previous records. Actual cost of previous job is compared when actually job is executed. There is overhead recovery rates which are free determined on the basis of budget given by financial managers of the company. From the respective article, it has been evaluated Job costing is really a popular issue for employers as well, since they can't say if they really earning profit on their work,  or are getting into financial difficulty. The downside of losing jobs is that manager of company will spend plenty of time gathering information from workers which turns out to have been useless. They must embrace the linked with problematic with gathering and examining job-cost information to operate a company which generates a guaranteed profit. 

    Based on your literature findings, state two key lessons 

    Throughout the entire evaluation, it has been determined that Job order costing system provides help the company in order to have advantages in different field. Cost variants help in getting accurate profitability reports of different operations conducted in the organisation. It is also helpful in managing employee performance benchmarks. Costs are also monitored in effective manner within manufacturing processes (Baines and Lightfoot, 2014). A job order costing system helps to firm in delivering efficient method which can be used for calculating the expenses which are needed by the company. This costing system is helpful for this company to get relevant information about manufacturing cost for stop it enables to make good decisions about whether to produce the particular product or not. It also provides help in assigning costs separately two different operations of company. It enhances calculation of profit margin which can be used in getting exact evaluation of every operation. It is helpful in managing the production of items and products which can be handled buy custom orders and getting statistics regarding manufacturing operations. A job order costing system provides help the firm in assessing performance of employees. This system also provides techniques to assess various expenses which are incurred by the company while conducting different jobs (Otieno, Bwisa and Kihoro, 2012). There can be e development of various strategies and plants which can be used for controlling costs and conducting good operations in future. Here are certain key lessons that are learned from the entire reports analysis is mentioned below: 

    Cost estimation:

    It is always been the key responsibility of an organization to have a proper estimation of cost. The primary purpose of cost projection is to easy the flow of operational activities. It can help them to determine the total actual and standards costs that are going to incur in the production process. Furthermore, to calculate labour productivity one must know total work which is performed by crew members in the project. 

    Detail analysis of the cost:

    Another important thing that is learned from the project is to make a detail evaluation of the material, labour, and overhead costs that are going to be involved in the manufacturing process for each job. It can further be useful for the firm to control additional costs that something leads to increase expenditure to the firm.

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