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In this report, a brief discussion about the McDonald's management accounting system's importance and its benefits will be discussed. How management accounting and reporting are integrated is also defined. The advantages and disadvantages of planning tools in budgetary control will also discuss. How planning tools help in the forecasting and preparation of the budget will define. The management accounting helps in facing financial problems will define. How a successful response to financial problems leads to McDonald's Company growth and sustainable success will be discussed.
Management accounting is the systematic form of properly measuring the data which is identified and properly interpreting and analyzing and communicating the financial data to the manager of the company which helps them in properly formulating the long and short term decisions related to the finance of the company. McDonald's is also doing the management accounting of their business which helps them in properly managing their flow of cash during their operation.This helps them in taking their decisions effectively like deciding how much funds will be needed and used by the different departments (Ameen et al, 2018). Management accounting is the proper managing all the records of the financial transactions which take place at every department of McDonald's.
Management accounting different types:
Management of inventory: The inventory management plays a very vital role in the McDonald's company as they have many outlets in many countries and they have some special ingredients which they serve in their every restaurant and other raw material also they have to keep a proper stock so that a good balance can be maintained in their outlets which reduce their expenses and overhead cost of wastage.
Analysis of Cash flow: The cash flow in the McDonald's is very much that their daily outflow and inflow of the cash are very much and proper analysis of that help them in the proper management of their accounts of the company so that they maintain enough balance for their activities in the future. This helps them to know their financial position of the cash of their company.
Valuation of the product: The product valuation is also important for the proper management of the accounts of the company. As they have to keep proper records of all the costs of the manufacturing unit which they incurred at the time of the finished goods so that they can make their profit from it (Alborov et al, 2017).With the help of the valuation of the McDonald's company products, they can able to manage their funds for the future production of the products and this also helps them in deciding the profit margin for their company.
P 2. Different methods of reporting of management accounting and management accounting system
Costing methods: Through the help of the different costing method the McDonald's can do their reporting of the management accounting. As in the costing methods job and batch costing is includes which help the McDonald's in in properly recording and reporting of their accounts of the different departments in the proper way so that they can have a clear image of their financial position in relation to the cost of their product. Like through job and batch costing the cost related to the manufacturing of a total batch of the product will be able to identify and record and which help in reporting of it (Maas et al, 2016).
Inventory valuation method- Inventory valuation is another method of reporting of the management accounting and its systems. As in this method McDonald's manager will record all the inventory of the products or raw material of the company McDonald's in the form of the FIFO and LIFO and AVCO. This recording of the inventory help in making the good reporting of the management accounting like through FIFO which means first in first out where the manager will record about the inventory in the form of which come first need to go out first and so on other ways of the inventory valuation methods will help in the proper recording and managing and reporting of the management accounting.
Investment appraisal method- Through investment appraisal methods like payback, NAV, ARR and IRR the McDonald's Company can do their reporting of the management accounting in the proper way (Ostaev et al, 2019). Like through the payback period which will shows the time in which the McDonald's will be able to cover the amount of their investment. Through NAV their net asset value the McDonald's Company do the reporting of it. ARR accounting rate of return and internal rate of return this both also help in the reporting of the management accounting.
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M 1. Benefits of management accounting and their application for McDonald's:
Improve their efficiency: This helps the company McDonald's in improving their overall productivity and efficiency of the operations by all the departments. As when they have all records of the financial accounts of their company departments and activities or tasks performed by them. Then they will be able to control their unnecessary steps and improve their efficiency.
Proper Planning: With the help of the management accounting the manager of the McDonald's Company will be able to better plan for the future of the company operation. As when they have all the records and account of the financial statement of the company. They will be able to see where the waste and where they make a profit and according to that they will plan a better future for their business (Doorasamy, 2016).
Coordination: This will lead to better coordination between all the outlets of the McDonald's Company as they will be able to analyze the financial reports of their all outlets that which one doing good and which one is not and according to that they will plan better for their future.
Increase their profit: When the manager will be able to understand where their outlets lack in their operation. So according to that, they will make their new marketing strategy to promote their McDonald's outlets and this will help them to increase their sales and which in turn help in the profit increase of their every outlet.
Statements of finance will be easy: With the help of the management accounting and their application the McDonald's manager will be able to record and know all the accounts of the finances of their yearly bases properly and then they will be able to make their statements of the profit and loss of their outlets properly and this will help them to make their financial statement easy and fast (Alborov et al, 2017).
D 1. Evaluation of the management accounting system and reporting integration in McDonald's
It can be seen in the McDonald's Company that both of these are integrated and this helps the company in the proper managing and controlling their financial accounts. As when the McDonald's every outlet manager will record all the financial transactions properly then only they will be able to find out the all the accounts of all departments properly and according to that they will make the accounts and manage them.
With the help of the reporting, the manager will be able to know about the company revenue and expenditure and how much they have wastage in the form of inventory and overproduction of their products. After knowing all this they will be able to make and manage their accounts of finance properly (Maas et al, 2016). In this way, the management accounting system is directly linked with their reporting. Without reporting the manager will not be able to know about all the accounts of finance of all departments and will not be able to manage all the things properly.
With the reporting by each outlet of McDonald's the company will be able to know the clear picture about their business growth and position in the market and then they will be able to manage the accounts of their business. The better the management of the accounting the better the position of the company McDonald's financially will be strong (Wu, 2018).
LO2
Exercise 1
Store Ledger Card (FIFO)
Receipt
Issue
Balance
Date
Quantity
Unit
Amount
Quantity
Unit
Amount
Quantity
Unit
Amount
1-Aug
Opening Balance
20
2.5
50
2-Aug
80
2.7
216
20
2.5
50
80
2.7
216
3-Aug
20
2.5
50
30
2.7
81
50
2.7
135
4-Aug
60
2.8
168
50
2.7
135
60
2.8
168
5-Aug
50
2.7
135
30
2.8
84
30
2.8
84
Store Ledger Card (LIFO)
Receipt
Issue
Balance
Date
Quantity
Unit
Amount
Quantity
Unit
Amount
Quantity
Unit
Amount
1-Aug
Opening Balance
20
2.5
50
2-Aug
80
2.7
216
20
2.5
50
80
2.7
216
3-Aug
50
2.7
135
20
2.5
50
30
2.7
81
4-Aug
60
2.8
168
20
2.5
50
30
2.7
81
60
2.8
168
5-Aug
60
2.8
168
20
2.7
54
20
2.5
50
10
2.7
27
Store Ledger Card (Weighted Average capital)
Receipt
Issue
Balance
Date
Quantity
Unit
Amount
Quantity
Unit
Amount
Quantity
Unit
Amount
1-Aug
Opening Balance
20
2.5
50
2-Aug
80
2.7
216
100
2.66
266
3-Aug
50
2.66
133
50
2.66
133
4-Aug
60
2.8
168
110
2.73
300.3
5-Aug
80
2.73
218.4
30
2.73
81.9
Exercise 2
Absorption labor cost+ Direct material cost+ Variable production overhead+ Fixed production overhead/ No. of unit produced
August
Sales
50000
Less:
Cost of goods sold
Direct labor
15000
Direct material
19500
Variable production overhead
10500
Fixed production overhead
20000
Net operating income
-15000
October
Sales
100000
Less:
Cost of goods sold
Direct labor
22000
Direct material
28600
Variable production overhead
15400
Fixed production overhead
20000
Net operating income
14000
Marginal Costing (August)
Sales
50000
Less:
Variable cost :
Direct labour
10000
Direct Material
13000
Variable production overhead
7000
Contribution
20000
Less:
Fixed Cost
10000
Profit
10000
Marginal Cost (October)
Sales
100000
Less:
Variable cost :
Direct labour
20000
Direct Material
26000
Variable production overhead
14000
Contribution
40000
Less:
Fixed Cost
20000
Profit
20000
Exercise 3
Break even cost/Contribution margin
Contribution per unit - variable cost per unit
Contribution:>
Less: variable cost:
Variable Production>
Variable Selling>>
Fixed production cost+ Fixed selling cost
Fixed>
Break even (3-2.6)
even>
Desired>
cost+ Desired Profit/P/V Ratio
Variable Production cost is increase by £0.5
Variable product cost per = 2.5
Total Variable>> even>>
PV>
> expense+ Desired Profit/ PV ratio
Sales>
Less: Variable cost>>
Less: Fixed>
Net>
LO3
Planning Tools Analysis
Sales Budget- The sales budget is that type of the budget which help in the proper analyzing the budget of the sales.
Advantage- With the help of this budget the company McDonald's will help in the proper planning and forecasting of their sales budget in the perfect way. So that the company can estimate the amount of the money they needed to do their sales perfectly. This will help in the proper deciding their money for the raw material and other all departments which they needed to complete their sales budget. The sales budget is very effective tool for the McDonald's in seeing their future sales of the product and can plan their future activity which they needed to be undertaken for the betterment of their business success and growth.
Disadvantage- The sales budget helps in forecasting the future sales for the company McDonald's but this is not effective all the time. As it is not sure that this estimation will work effectively all the time perfectly. Due to this budget sometimes the preparation of the budget will not be done properly (Mazikana, 2019).
Production Budget- The production budget help in setting budget for the production of the products of the company McDonald's. It is very important to set the budget for the production so that they will not produce the over production of the products. This will also help in the proper managing and controlling the budget of the production.
Advantage- With the help of the production budget of the company McDonald's, they will be able to control the production of the company products. With the help of the budget they will be able to find out that how much units they have to produce and which product they have to produce more so that they can increase their sale of the product.
Disadvantage- This production budget help in setting the budget for the production, but as future is uncertain so all the time this production budget don't work properly. Sometimes over production and low production of the product also happen which reduce their effectiveness of the McDonald's Company (Olaniyan & Efuntade, 2020).
Cash Budget- The cash budget defines the flow of the cash in the organization. It is very important to control over the inflow and outflow of the cash of the McDonald's Company, so that the misuse of the cash will not be happen in the company McDonald's.
Advantage- The cash budget helps in the proper control of the cash flow in the McDonald's company of their different departments. This will help them to control their cash and make the cash available to all their departments properly. With the help of this they will be able to coordinate all the activities of all the departments who need the cash for their operation (Kaluzi, 2017).
Disadvantage- Sometimes it happens that the most of the departments of the McDonald's face the shortage of the cash for their operation even having the proper cash budget. As sometime the old budget is not that much effective for their operation of the new budget of the cash and this brings down the operation of the company in the effective manner.
M 3. Uses of different planning tools and their application in forecasting and planning of McDonald's budget
The sales budget helps in the proper planning and forecasting of the McDonald's budget for the year. As through the help of the sales budget they will be able to find out all the necessary budget of all the departments and easily relate and coordinate all their activities and perform their work according to that.
Operating budget will also help in forecasting and planning their budget, as when the company will see their old budget and find out the amount of money they use in the operation of their McDonald's Company then they will be able to see if they need to add more money in this operation budget or not (Mirgorodskaya et la,2017).
The cash budget also help in proper planning of the budget and its forecasting like with the help of this they will be able to make the good decisions related to the preparation of their budget in the form of cash that how much cash they need for their future and how much control they have to put for their cash budget so reduce the McDonald's misuse of cash.
Factory overhead budget will help in controlling the expenses of the McDonald's Company daily operation. With the help of this factory overhead budget they will reduce their overhead expenses and this will help in proper forecasting and planning of their budget (Blackwell, 2017).
LO4
P 5. Adopting a management accounting system will help in responding to McDonald's financial problems
Benchmarking-With the help of this benchmarking the company McDonald's will be able to measure their performance with the performance of the other company and this will help in the end to the company McDonald's in deciding their activities which can help them in controlling their financial problems of the business. As when they know their performance where they stand then they will be able to control their financial problems.
Key performance indicators-With the help of this the company McDonald's will be able to know the performance of the employees and the company. This will help in finding out the actual performance of the company in terms of their employees and the company both. This will help in reducing the excessive cost of the company on the human resource and will help in facing the financial problems effectively (Saukkonen et al, 2018).
Balance score card- With the help of this the company McDonald's will be able to perform their work more perfectly as in this the manager will be able to identify all the problems related to finance in the company and improve their issues related to finance on time and in the end they will be able to control all the activities of the finance properly so that they will not face any issues in future.
Activity based costing- Through this the company McDonald's will identify all the cost of all the activities of the company and they will find out if there will be any chances of the financial problems and find out all the cost related to each activity and then properly planning the finance for all the activities and then solving the problems of the McDonald's(Phornlaphatrachakorn & Khajit,2020).
Financial governance-The financial governance is the way in which the McDonald's manager will be able to collect all the data of the finance of the company properly and properly manage and controlling and monitoring of all the financial information. By this the company will keep a proper records of all the transactions of the finance and helps in the proper managing the all their activities of the finance. By doing this they will be able to solve their financial problems which can arise now and in the future. By this financial governance the company will be able to get their data related to finance with the help of this single platform of the finance. There will be no extra cost will be related and no extra need of the employees will be needed in this.
M4.Management accounting can lead to McDonald's sustainable growth while responding to financial problems:
With the help of the financial governance the McDonald's Company will be able to manage all their account of the finance properly and this will lead in the proper growth of the company as in this a single platform is used in this and all the related information of the finance will be solved.
The Benchmarking will also help in the sustainable growth as when the company will be able to measure their performance with the performance of the other company then they will able to find out how financially they are strong and weak and what they need to improve (Uyar & Kuzey, 2016).
D 3. How planning tool of accounting respond to solving the financial problem and lead to McDonald's sustainable success:
The Sales budget and production budget of the McDonald's Company will help in the proper solving of the financial problems of the business, as they will be able to know how much money they have to manage for their sales and production and reduce the chances of financial problem and this will lead to their success of the business (TALEBI & BAHRI, 2018).
The Cash budget will help in the proper solving of their future and current financial problems of the McDonald's Company. As through this budget they will be able to make the control and monitor on the cash inflow and outflow of the company and can find out if there will be any issues in the future related to cash will occur or not and by this they will manage their problem of finance and lead to success of the McDonald's(Hariyati et al, 2019).
Conclusion
From the above report, it can be concluded that for McDonald's Company the proper management accounting system is very important. As with the help of this, they will be able to record all the financial transactions of their all outlets. By this, they will be able to know about the performance of their business and can make decisions for their better growth. The Budgetary control helps the company in better working of their business. The planning tools of management accounting help in the proper growth and sustainable success of McDonald's. Management accounting also helps in facing financial problems.
References
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