Management Accounting Essay Example | Topics and Well Written Essays - 1500 words - 3

Management Accounting - Essay Example This report covers considerations for management accounting system like the suitable costing technique, pricing method and budget preparation. It also points out certain behavioural, organisational and management factors that need to be considered for design, implementation and functioning of a management accounting system for the company. Process costing is one of the best management accounting technique for Watson Circuits plc because this company manufactures products in a multi-stage process. Process costing is ideal for manufacturing concerns where there is a continuous production characterised by transfer of material from one process to another. This costing system is beneficial for Watson Circuits plc also because the company produces in batches and the cost structure of the production remains the same for years. Under process costing, cost is not assigned to individual units of production, rather it is calculated on the average basis i.e. all production costs are spread over the units produced. This costing technique requires establishment of process control accounts for each process allocation of direct and indirect costs to each process. Once a process of production ends, its costs are transferred to the next process and so forth. The calculation of cost, under this method, is thus cumulative i.e. the costs of previous process are added to the cost of current process. The cost accumulation process continues until the production ends. Watson Circuits plc needs such a costing technique because it will provide management accounting information in terms of different processes through which the production runs. This is the best suitable method calculating costs on the basis of processes and batches. Management’s need for unit production costs can be met as this costing technique provide s for calculation of unit costs as well as costs that are incurred in each process. It is very important for the