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

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Unit 5 Management Accounting - Assignment 2 guidance notes

Report 1:

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.

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

 

Introduction

• What is budgetary control
• Importance of budgeting and planning tools.
• Objectives and benefits of budgetary control
• Relate to Bamford (and brief statements on implications for them re Covid and Brexit)

 

Budgeting and Planning Tools

What are the main budgeting and planning tools?

Describe the following tools (for Pass grade – simple explanations are sufficient. For Merit grade – analysis is required – see yellow sections):

• PRICING STRATEGIES
• COMMON COSTING SYSTEMS - Actual costing, normal costing and standard costing systems.
• OPERATIONAL BUDGETS (sales budget, production budget (inc. material and labour budgets)
• CASH BUDGETS
  • Explain purpose
  • List advantages and disadvantages
  • Brief explanation of how this can help Bamford
  • Analyse what Bamford can do with a cash budget, what will it help them to plan? etc. Relate to Covid and Brexit
• STRATEGIC PLANNING TOOLS– Describe the following planning tools: SWOT, PESTLE, PORTER’S FIVE FORCES, BALANCED SCORECARD

• SWOT analysis
  • Explain purpose
  • List advantages and disadvantages
  • Relate how preparing a SWOT analysis would be useful for Bamford. Relate to Covid and Brexit
  • Carry out a brief SWOT analysis for Bamford. Factor in Covid and Brexit.

• PESTLE analysis
  • Explain purpose
  • List advantages and disadvantages
  • Relate how preparing a PESTLE analysis would be useful for Bamford.
  • Carry out a brief PESTLE Analysis for Bamford. Factor in Covid and Brexit.

 

• PORTER’S FIVE FORCES – describe briefly
• BALANCED SCORECARD – describe briefly

 

CALCULATIONS

• Appendix A:
• Create:
• Sales Budget
• Production budget
• Direct materials costs budget
• Direct labour costs budget

 

Analyse the budgets once complete (briefly for Pass, more detail for Merit) 

Appendix B:

Create:

Cash Budget

Analyse the cash budget and give possible reasons for predicted deficits and any cash flow issues throughout that period (briefly for Pass, more detail for Merit) 

Report 2:

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.

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

 

Introduction

a)    Identifying financial issues

Explain how organisations identify financial issues and compare the tools used: Variance analysis & KPIs

VARIANCE ANALYSIS

• Explain purpose and types of variances that would typically be analysed
• List advantages and disadvantages
• Brief explanation of how this can help Bamford
• Analysis of what Bamford can do with variance information, how will it help them regarding decision making. Relate to Covid and Brexit

Carry out calculations on Appendix C:

Variance Analysis

• Sales Price Variance
• Sales Volume Variance
• Material Price Variance
• Material Usage Variance
• Labour Rate Variance
• Labour Efficiency variance

Analyse the variances and give possible reasons for variances (briefly for Pass, more detail for Merit) 

KPIs – why do organisations set these and why are they useful?

Benchmarking – what does this mean? What can they benchmark against?

(Description of these tools is required for Pass grade, more analysis for Merit grade)

b)    Financial governance:

What is financial governance? How does it help management accountants monitor the business operations to prevent or pre-empt financial problems?

https://www.governancetoday.com/GT/Material/The_keys_to_effective_financial_governance.aspx?WebsiteKey=0cf4306a-f91b-45d7-9ced-a97b5d6f6966

c)     Managerial accounting skill sets:

What would be the features of an efficient and effective managerial accountant? How would these skills be applied to deal with or prevent the problems such as misappropriation of resources meant to grow the business (Vanderbeck and Mitchell, 2016). 

https://www.brightnetwork.co.uk/career-path-guides/accounting-audit-tax/10-key-skills-you-need-become-good-accountant/

d)    Effective strategies and systems:

Describe/analyse/evaluate how there needs to be the development of systems and strategies that need timely and effective reporting, full disclosure financial statements, and how these systems are responsibly governed and owned by the organisation.

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

• Achieved by thorough analysis of planning and budgeting concepts throughout

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

• Achieved by thorough evaluation of concepts throughout
• Recommendations for achievement of sustainable success
• Detailed reference to all tools and calculation in relation to Bamford and the issues they have recently faced