Accounting For Decision Making Assignment Sample

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Introduction

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Accounting is a way of analyzing, measuring the information collected about the specific entity which is used for decision making. The Learning Space Plc is a company that manufactures toys for the children such as creative art and craft kits and various other toys to enhance the knowledge of the children. The project will highlight the importance of accounting for the management control. Apart from this the project will also mention the ways by which the financial consequences can be reduced. Moreover, the project will examine the budgeting process made by the Learning Space Plc. the budgeting process such as the profit and loss account and the breakeven point.

The importance of management accounting for management control

The company needs to apply management accounting as it has many important aspects in promoting control over the new project in a large way. The company will follow the management accounting as it is relevant to cost and increases the profit for the company. It helps to make better future decisions and can also come up with the ups and downs during the hard times. Moreover, the management is also important as it helps in targeting the customers. It helps to analyze the company to produce the goods according to the demands of the customers. It helps analyze the better advertisement process to attract the customers. Furthermore, it will help the company to design the budgeting process and will integrate to know that the products are used efficiently. As cited by Malmmose et al. (2021), it helps to analyze that the toys being produced by the Learning Space Plc are not wasted, insufficient or are not allocated properly. Apart from that, the management accounting is also helpful in implementing the controlling and planning operation to run the organization smoothly. The control helps to have good control on the data and the planning helps to manage the accounts though the information. It also helps in analyzing whether the accounting is time consuming or not.

Evaluating the financial consequences of the proposals

The financial consequences of the proposal as stated by the manager is effective as it will help the company to increase sustainability. The product which is of £24 per unit will be decreased by £4. It will help to attract more customers that will lead to an increase in the profit of the company. As mentioned by Gardi (2021), the extra monthly expenses will be reduced by £100,000 which shows that it will be effective as the company will save a huge amount of money. The amount that has been saved will be used to make more products and will provide the employees with a bonus. This will give a 20% increase in profit. The cost of the raw materials will drop to £2 which will help to increase the profit by a few percent. Other than this, the budgeted accounting like the profit and loss and the breakeven analysis to provide a better budget proposal that will help to boost up the company. The cost of the raw materials is being reduced and Learning Space Plc banned using the plastic which is eco-friendly in nature and will help the company to sustain in the market. The reduction of the cost and all other reduction will make the company to attract more customers and gain more profit.

Proposal to replace sustainable wood with plastic as a raw material

The Learning Space Plc should replace the plastic in the woods to provide an eco-friendly nature to the environment. This is because the plastic is non-biodegradable in nature. This affects the environment brutally. The toys made of plastics should be converted to wood as it ecofriendly and can easily dumb into the soil. It is not harmful to the child. The plastics take 500 years to decompose. As prescribed by Gaillet et al. (2021), the cost can be a bit high for the wooden toys but it will be better for the children also. The wooden toys can be less long lasting as compared to the plastic but are not ecofriendly in nature which causes a huge damage to nature.

Evaluation of the company objectives risk

The company faces a lot of risk in the competitive market. The risk of sustaining in the market as there are various competitors of the Learning Space Plc, which can generate risk. The competitors if produced the unique toys, more customers will be attracted to towers that good which will create difficulty to sustain in the market. The Learning Space Plc should produce such goods that are unique and should create a barrier to the new enterer in the market. The company will not face any risk and can generate various goods which will increase the sales and generate profit for the company. As opined by Monteiro et al. (2021), the toy industry is likely to decrease the price of per goods by £2 which will give the opportunity to the company to seitan in the market. The company was going to launch in the year 2019 but due to the pandemic the company did not come up to the market as launching that time had more chances to generate loss as the people were not having the money to buy foods. So, the people will not buy the toys in any situation. The uncertainties of the market are the major problem the business will have to face.

Learning Space plc’s cash budget

The cash budget examines the inflow and outflow of the cash. The direct material from the month of January to May is 1200000. The direct labor from the cash budget has been integrated at 800000. The overall variable overhead is examined as 400000 from the month of January to May. As opined by Lutfi et al. (2021), the fixed cost determined was 4800000 and the depreciation was 20%. The profit generated for the month of December is -120000. For the month of January, it is -2400000. From February to May the profit generated is 2400000. This shows that the cost per-unit is more consistent. The company is likely to generate profit.

Profit and loss account

The profit and loss show the revenues, costs and expenses that have been generated by the Learning Space Plc. The sales generated for the year was 19200000 where the direct material was 600000 and the direct labor was 480000. The variable overhead cost was 240000. The contribution was 600000. The profit made as per the year is 600000. As mentioned by Karasio?lu (2021), the profit and loss account are important as it gives actual information about the profit generated from the loss incurred by the company. The profit generated by the company is favorable.

Break-even analysis

The breakeven points generated by the Learning Space Plc is 50 where the contribution is 2400000 and the fixed cost is 4800000. The break-even point generated is favorable for the company as it analyzes the sales which are made by the company by selling the toys to the customers.

Conclusion

The overall project deals with using the management accounting in the Learning Space Plc. The project highlighted the importance of management accounting that should be implemented by the company to increase the efficiency of the business. Moreover, the project has highlighted the consequences of the actions taken in favor of the company which is positive in nature. The use of the wood will be better than the plastic as it is ecofriendly in nature and can decompose easily. That is the reason the company produced the wooden goods. Furthermore, the budget has also been determined with the help of the profit and loss accounts and the breakeven analysis.

Reference

Gaillet, G., Asselin, A.C. and Wermeille, A., 2022. Sustainable fisheries: Towards operationalization of decision-making accounting for biodiversity. Journal of Cleaner Production, p.132103.

Gardi, B., Abdalla Hamza, P., Sabir, B.Y., Mahmood Aziz, H., Sorguli, S., Abdullah, N.N. and Al-Kake, F., 2021. Investigating the effects of financial accounting reports on managerial decision making in small and medium-sized enterprises. Bawan Yassin and Mahmood Aziz, Hassan and Sorguli, Sarhang and Abdullah, Nabaz Nawzad and Al-Kake, farhad, Investigating the Effects of Financial Accounting Reports on Managerial Decision Making in Small and Medium-sized Enterprises (April 28, 2021).

Karasio?lu, F., Humta, H. and Göktürk, I.E., 2021. Investigation of Accounting Ethics Effects on Financial Report Quality & Decision Making: Evidence from Kabul-based Logistic Corporations. International Journal of Management, Accounting and Economics, 8(3), pp.122-142.

Lutfi, A., Al-Okaily, M., Alsyouf, A. and Alrawad, M., 2022. Evaluating the D&M IS Success Model in the Context of Accounting Information System and Sustainable Decision Making. Sustainability, 14(13), p.8120.

Malmmose, M. and Lydersen, J.P., 2021. From centralized DRG costing to decentralized TDABC-assessing the feasibility of hospital cost accounting for decision-making in Denmark. BMC health services research, 21(1), pp.1-15.

Monteiro, A., Cepêda, C., Silva, A., Leite, E. and Camacho, É., 2021. The role of accounting information in decision-making and companies’ sustainability development: the Portuguese accountants’ perspective. Entrepreneurship and Sustainability Issues, 9(1), p.486.