Types of management accounting techniques

BTEC HND in Business Module Booklet
RQF Unit 5

Management Accounting

Unit level

4

Unit code

H/508/0489

Unit type

Optional

Guided learning hours

60

Module Leader

Dalton Vincent

Table of Contents

1.1 Introduction 3 1.2 Learning Outcome 3 1.3 Essential Content 3 1.4 Teaching Ethos 8 1.5 Methods of Delivery 8 1.6 Plagiarism 9 1.7 Scheme of Work 9

1.1 Introduction
The overall aim of this unit is to introduce the fundamentals of management accounting which apply to the wider business environment and the organisations which operate within that environment. Students will explore how management accounting uses financial data to aid planning decisions, and the monitoring and control of finance within organisations.
On successful completion of this unit students will be in a position to present financial statements in a workplace context and be able to assist senior colleagues with financial business planning. In addition, students will have the fundamental knowledge and skills to progress onto a higher level of study.
1.2 Learning Outcome
By the end of this unit a student will;

1. Demonstrate an understanding of management accounting systems.
2. Apply a range of management accounting techniques.
3. Explain the use of planning tools used in management accounting.
4. Compare ways in which organisations could use management accounting to respond to financial problems.
1.3 Essential Content
LO1: Demonstrate an understanding of management accounting systems.

Introduction to management accounting:

What is management accounting? Definition of management accounting.

What is a management accounting system?

Why is it important to integrate these within an organisation?

Explore the origin, role and principles of management accounting.

The distinction between management and financial accounting.

Different types of management accounting systems:

Cost-accounting systems, inventory management systems, job-costing systems and price-optimising systems.

Benefits of different types of systems.

Presenting financial information:

Why information should be relevant to the user, reliable, up to date and accurate.

Why the way in which the information is presented must be understandable.

Different types of managerial accounting reports.

LO2: Apply a range of management accounting techniques.

Microeconomic techniques:

What is meant by cost? Different costs and cost analysis.

Cost-volume profit, flexible budgeting and cost variances.

Applying absorption and marginal costing.

Product costings:

Fixed and variable costs, cost allocation.

Normal and standard costing, activity-based costing and the role of costing in setting price.

Cost of inventory:

Definition and meaning of inventory costs and different types of inventory costs.

The benefits of reducing inventory costs to an organisation.

Valuation methods.

Cost variances.

Overhead costs.

LO3 Explain the use of planning tools used in management accounting

Using budgets for planning and control:

Preparing a budget.

Different types of budgets (e.g. capital and operating).

Alternative methods of budgeting.

Behavioural implications of budgets.

Pricing:

Pricing strategies.

How do competitors determine their prices?

Supply and demand considerations.

Common costing systems:

Actual costing, normal costing and standard costing systems.

How cost systems differ depending on the costing activity: job costing, process costing, batch costing and contract costing.

Strategic planning:

Applying PEST, SWOT, balance scorecard or Porter’s Five Forces analysis to the financial position of an organisation.

LO4 Compare ways in which organisations could use management accounting to respond to financial problems

Identifying financial problems:

Using benchmarks, key performance indicators (financial and non-financial) and budgetary targets to identify variances and problems.

Financial governance:

Definitions of financial governance, and how this can be used to pre-empt or prevent financial problems.

Using financial governance to monitor strategy.

Management accounting skill sets:

What are the characteristics of an effective management accountant?

How can these skills be used to prevent and/or deal with problems?

Effective strategies and systems:

The development of strategies and systems which require effective and timely reporting, full disclosure of financial positions and are responsibly owned and governed.

Pass

Merit

Distinction

LO1 Demonstrate an understanding of management accounting systems

D1 Critically evaluate how management accounting systems and management accounting reporting is integrated within organisational processes.

P1 Explain management accounting and give the essential requirements of different types of management accounting systems.

P2 Explain different methods used for management accounting reporting.

M1 Evaluate the benefits of management accounting systems and their application within an organisational context.

LO2 Apply a range of management accounting techniques

D2 Produce financial reports that accurately apply and interpret data for a range of business activities.

P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption costs.

M2 Accurately apply a range of management accounting techniques and produce appropriate financial reporting documents.

LO3 Explain the use of planning tools used in management accounting

LO3 & 4

D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organisations to sustainable success.

P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary control.

M3 Analyse the use of different planning tools and their application for preparing and forecasting budgets.

LO4 Compare ways in which organisations could use management accounting to respond to financial problems

P5 Compare how organisations are adapting management accounting systems to respond to financial problems.

M4 Analyse how, in responding to financial problems, management accounting can lead organisations to sustainable success.

Recommended Resources

DRURY, C. (2015) Management and Cost Accounting. 9th Ed. Cengage Learning.

EDMONDS, T. and OLDS, P. (2013) Fundamental Managerial Accounting Concepts. 7th Ed. Maidenhead: McGraw-Hill.

HORNGREN, C., SUNDEN, G., STRATTON, W., BURGSTALHER, D. and SCHATZBERG, J. (2013) Introduction to Management Accounting. Global Ed. Harlow: Pearson. (This text is available electronically and is supported by access to an online course)

SEAL, W. et al (2014) Management Accounting. 5th Ed. Maidenhead: McGraw-Hill.

Links

This unit links to the following related units:

Unit 29: Managing and Running a Small Business

1.4 Teaching Ethos
The college’s approach towards teaching and learning is simple and effective. The main aim of UKCBC is to assist learners in maximising their potential by ensuring that they are taught clearly and effectively. This will enable students to engage in the learning environment and promote success in both their academic studies and subsequent career.

The module tutor(s) will aim to combine lectures, workshops and tutorial activities. This environment will provide opportunities for the student to understand the course material through case study and text and to apply it in a practical way. The intent is to facilitate interactive class activities, and discussion about the significant role of research in a global and local business environment.

1.5 Methods of Delivery
LECTURES:

These will be developed around the key concepts as mentioned in the indicative course content and will use a range of live examples and cases from business practice to demonstrate the application of theoretical concepts. This method is primarily used to identify and explain key aspects of the subject so that learners can utilise their private study time more effectively.

SEMINARS:

These are in addition to the lectures. The seminars are designed to give learners the opportunity to test their understanding of the material covered in the lectures and private study with the help of reference books. This methodology usually carries a set of questions identified in advance. Seminars are interactive sessions led by the learners. This method of study gives the learner an excellent opportunity to clarify any points of difficulty with the tutor and simultaneously develop their oral communication skills.

CASE STUDIES:

An important learning methodology is the extensive use of case studies. They enable learners to apply the concepts that they learn in their subjects. The learners have to study the case, analyse the facts presented and arrive at conclusions and recommendations. This assists in the assessment of the learner’s ability to apply to the real world the tools and techniques of analysis which they have learnt. The case study serves as a supplement to the theoretical knowledge imparted through the course work.

1.6 Plagiarism
Any act of plagiarism will be seriously dealt with according to the colleges and awarding bodies’ regulations. In this context the definition and scope of plagiarism are presented below:

Plagiarism is presenting someone’s work as your own. It includes copying information directly from the web or books without referencing the material; submitting joint coursework as an individual effort; copying another student’s coursework; stealing coursework from another student and submitting it as your own work. Suspected plagiarism will be investigated and if found to have occurred will be dealt with according to the college procedure. (For further details please refer to the plagiarism policy and the student code of conduct.)

1.7 Scheme of Work
Week

Sessions

Learning Outcomes

Session Activities

1

S 1

LO1

Topic: Introduction to Management Accounting

• Introduction to the unit’s content.

• Introduction to the unit assessment.

• Issue Assignment brief.

• Provide information and guidance related to the unit content and assessment.

Sample activities:

• Small group activity – define management accounting.

• Compare and contrast the role of financial accounting and management accounting.

• Small group activity – list the reasons for integrating a management accounting system.

S 2

LO1

Topic: Explore a range of Management Accounting techniques

• Different types of management accounting systems

• Benefits of the different types of management accounting systems

Sample activities:

• Group activity - Identify different applications of the range of management accounting systems.

• Question and answer activity – evaluate the advantages and potential disadvantages of each management accounting system.

• Research real examples of at least two different management accounting systems.

2

S 3

LO1

Topic: Presenting financial information

• Methods used for presenting financial information.

• Different types of managerial accounting reports.

Sample activities:

• Brainstorm the relevance of good and reliable data, and identify the features of quality financial information.

• Small group activity – list the possible effects of poor quality financial information on an organisation.

• Apply different methods of presenting financial information and evaluate each method using examples.

S 4

LO2

Topic: Microeconomic techniques

• Introduce cost analysis, cost variances and how to apply absorption and marginal costings.

Sample activities:

• Identify a range of different cost types from a given list.

• Complete costings to apply flexible budgeting techniques and state the benefit over fixed budgeting.

• Individual note-taking and contribution to discussion about different techniques. Practice worksheets from given data, calculate cost variances

3

S 5

LO2

Topic: Product costings

• Introduce product costings and how to apply different costings in financial statements.

Sample activities:

• Identify cost behaviour from a given list.

• Small group activity – discuss the role of costing and present findings.

• Research real examples of where activity based costing (ABC) has been used.

• Complete worksheets for calculations and review costings.

• Peer review of calculations and students demonstrate how to complete calculations.

S 6

LO2

Topic: Cost of inventory

• Introduce the concept of inventory and different methods of inventory management, and effects on financial statements.

Sample activities:

• Categorise a range of examples of inventory (work in progress (WIP), part-finished, completed).

• Apply the main inventory valuation methods of LIFO, FIFO and AVCO.

• Students complete inventory valuation exercises.

4

S 7

LO1 & 2

Topic: Assignment workshop

• Recap and review unit content

• Split group session and individual assignment support session.

Sample activities:

• Students to highlight key areas that need to be recapped.

• Group activity – work on follow-up exercises.

• Individual session – present assignment draft work to be reviewed and receive formative feedback.

S 8

LO1 & 2

Topic: Assignment workshop

• Formative Submission.

Scheduled presentation time allocated for each student (this could apply to two sessions).

5

S 9

LO3

Topic: Use of budgets for planning and control

• Introduction to different types of budgets and methods.

• How to prepare a budget.

Sample activities:

• Present solutions to exercises on last week’s topic.

• Small group activity – discuss and present common problems with budgets.

• List and define different types of budgets.

• Small group activity – evaluate a range of budgeting methods.

• Carry out a budgeting exercise.

S 10

LO3

Topic: Pricing

• Introduction to different pricing strategies and factors of supply and demand.

Sample activities:

• Small group activity – discuss and present the importance of an effective pricing strategy.

• Discussion activity – list a range of factors which influence a pricing strategy, including elasticity.

• Present solutions to exercises set.

• Research the pricing strategy of a chosen organisation.

6

S 11

LO3

Topic: Common costing Systems

• Applying different cost systems and different types of costing activities.

Sample activities:

• Small group activity – brainstorm types of costing systems, and discuss and evaluate a range of costing systems.

• Compare and contrast three different costing systems and feedback findings.

• Small group activity – research real examples of the use of costing systems in organisations and feedback findings.

S 12

LO3

Topic: Strategic planning

• Introduce the concept of strategic planning and the different techniques e.g. PESTLE/SWOT/Porter’s Five Forces and how they apply to the financial position of an organisation.

Sample activities:

• Pair work – watch a short video on a strategic planning technique and deliver a short presentation, justifying its effectiveness in strategic planning.

• Use one of the techniques discussed to complete a strategic planning analysis of the organisation chosen for the assignment.

7

S 13

LO4

Topic: Identifying financial problems

• Introduction on how to identify financial problems and how management accounting can respond to financial problems.

Sample activities:

• Pair work – brainstorm the value of a range of methods in highlighting financial problems.

• Discuss examples of financial problems experienced by organisations and identity if any of the methods presented might have helped that organisation to overcome them.

• Small group activity – research examples from the media and financial press of financial problems experienced by organisations, and identify methods which might have help them to avoid them.

S 14

LO4

Topic: Financial governance

• What is financial governance and how can it be used to predict and prevent financial problems?

Sample activities:

• Pair work – list as many examples as possible where financial governance has been lacking in organisations.

• Pair work – explain how effective financial governance could have helped to overcome financial problems.

• Small group activity – research and explain two examples of financial governance models in feedback session.

8

S 15

Topic: Assignment workshop

• Individual appointments to review draft reports and provide feedback.

Question and answer session.

S 16

LO4

Topic: Management accounting skill sets

• What is it that makes an effective management accountant?

Sample activities:

• Identify as many competences as possible of a management accountant (skills, qualities, behaviour, experience etc).

• Explain, based on the competences above, how they can be used effectively to prevent or tackle financial problems.

• Pair work – find two job vacancies in different sectors for management accountants and explain the skill sets required.

9

S 17

LO4

Topic: Effective strategies and systems

• Development of strategies and systems for effective management accounting reporting.

Sample activities:

• Pair work – discuss the types of financial reporting which might be required of an organisation.

• Pair work – discuss and present a rationale for timely reporting and the importance of accountability and governance.

Individual research and preparation time for a topic on any aspect of financial reporting for individual practice presentations next week.

S 18

LO3 & 4

Topic: Assignment workshop

• Recap and review unit content.

• Split group session and individual assignment support session.

Sample activities:

• Students to highlight key areas that need to be recapped.

• Group activity – work on follow-up exercises.

• Individual session – present assignment draft work to be reviewed and receive formative feedback.

10

S 19

LO3 - 4

• Revision lecture for LO3 & 4 to support Assignment.

Sample activities:

● Brief tutor-led overview of assignment requirements.

● Open question and answer activity to address general questions and concerns.

● Review of academic requirements and submission format.

● Individual student queries and questions.

S 20

LO3 - 4

• Final submission for Assignment