Management Accounting Expenses Analysis

Question: Describe about the Management Accounting for Expenses Analysis. Answer: Introduction The preparation of financial statements and cost statements is very much important for an organization in order to determine and analyse its expenses, revenue and profit generated during a period of time. The main problem faced by the managers and owners of Seafarer Kayaks was to get the accounting back on the track (Holton, 2012). The preparation of financial statements should include appropriate costing system which will help to sum up all the revenues, cash flows and net profit earned by the company. The adoption of standard costing will be much beneficial for the company that will help the managers to make a better plan and control the operations. Main Context Analysis of Standard Costing system Standard costing is a part of cost accounting that helps to manage all the costs of the company incurred during the income year. Standard costs are associated with the manufacturing costs of the company which includes direct material cost, direct labour costs and manufacturing overhead. It is an accounting tool that provides appropriate cost evaluation and minimizes wastage by suggesting corrective actions and detecting variance. The managers of Seafarer Kayaks should adopt standard costing system that also helps to establish cost centres and responsibilities are assigned to concerned departments that increase the efficient delegation of authority (Horngren, 2013). The preparation of cost accounts such as cost of goods manufactures and the schedule of the cost of goods sold. A developed and effective standard costing system encourages reappraisals techniques, methods and materials that help to minimize unfavourable variances. The managers will be able to determine and evaluate those products that are not proceeding as per the plan. It simplifies and procedure of cost control and provides a platform to control all their operations and managing their expenses. Therefore, it is considered as an effective tool to make business plan, budgeting, inventory evaluation and marginal costing. Standard costing system is much more efficient than normal costing. The calculation of cost will include all the expenses related to the production (Kew and Watson, 2012). The management of revenue and expense is very much important to analyse the operation of the company. It is the system which involves calculating the required production process cost. The cost account of Seafarer Kayaks can estimated that will include overate rate based on the budgeted labour hours, direct materials cost, raw material, payment to the suppliers, payroll etc. should be managed as per the standard costing system (Wolf, 2008). The cost of goods manufactured, cost of goods sold and other cost associated with the operations are to be calculated. At the end of the accounting year, cost of direct materials, direct labour costs and actual amounts are compared to previously set standards. The comparison of actual costs to standard costs as well as examining the variance differences allows the managers to improve their cost control, operational efficiency and cost management (Kieso, Weygandt and Warfield, 2010). The difference between the set standard and the actual cost amount helps to determine and analyse the operational efficiency of the company. Therefore, the managers and owners of Seafarer Kayaks should adopt standard costing in order to manage their costs and expenses appropriately. The overall budget includes standard costs and it is not possible to include the exact cost of the products. Therefore, the standard costing system helps to compare the set standard with the actual results. It would be very ea sy to print the report showing the period of the inventory balances (Libby, Libby and Short, 2014). The standard costing system is used to calculate the cost incurred during the production process as well as comparing the results. The management should plan for economic and efficient operations for standard cost to be effective. The inefficiencies in the operation can be determined with the help of the system that can be done by thorough investigation and taking remedial action. The establishment of standards helps to coordinate all the functions of the organization such as marketing, accounting, research and manufacturing. Control of cost has always been the main objective of production and effective control of cost requires detailed standards (Smart, Megginson and Gitman, 2007). It enables the management department to make compare actual costs with the standard costs and taking actions to control the costs. The predetermined cost of the products helps to make decision in the produ ction process and determining appropriate pricing policies. The operations of Seafarer Kayaks can be managed and controlled with the help of standard costing system. It provides guidance to the managers to formulate production and pricing policies as well planning future plans, production of new products, estimating costs and overall budgeting. The valuation of the inventory becomes easier as because the inventories are valued at the predetermined costs (Spiceland, 2009). An effective standard costing system enables managers to perform main functions such as planning, organisation, motivation, coordination and control. The management of financial accounts is very much important for an organization in order to manage their expenses, revenues, assets and liabilities in an accounting period. Conclusion The adoption of standard costing system will help the owners and managers to manage all their operations and costs of the items. The standard costing system is considered as one of the most effective tool for managing and controlling cost, planning budget and evaluating the performance of cost management. The production costs can be effectively and appropriately managed with the help of standard costing system. Therefore, the managers and owners of Seafarer Kayaks should adopt standard costing system. References Holton, R., 2012.Global finance. Abingdon, Oxon: Routledge. Horngren, C., 2013.Financial accounting. Frenchs Forest, N.S.W.: Pearson Australia Group. Kew, J. and Watson, A., 2012.Financial accounting. Cape Town: Oxford University Press. Kieso, D., Weygandt, J. and Warfield, T., 2010.Intermediate accounting. Hoboken (NJ): J. Wiley. Libby, R., Libby, P. and Short, D., 2014.Financial accounting. Maidenhead: McGraw-Hill Education. Smart, S., Megginson, W. and Gitman, L., 2007.Corporate finance. Mason, OH: Thomson/South-Western. Spiceland, J., 2009.Intermediate accounting. Boston: McGraw-Hill/Irwin. Wolf, M., 2008.Fixing global finance. Baltimore, Md.: Johns Hopkins University Press.