Strategic Management Accounting - 2595 Words

Tables of content Page No Introduction 03 Models and concepts affecting the pricing decision 03 Approaches to pricing 04 i. Cost–volume–profit analysis 05 ii. Cost plus mark-up pricing 07 iii. Target rate of return pricing 07 Standard costing and Variance analysis 08 The role of standard costing and variance analysis 12 Limitations of Standard Costing and variance analysis 12 Evaluation of Activity Based Costing system 13 Advantages of ABC system 17 Limitations of ABC system 17 References 18 Introduction This report is mainly focusing to understand and analyse the issues involved in Manac plc where by the company is not meeting target budgeted profit. This is a†¦show more content†¦Now let us look at some of the decision making models which affect the pricing decisions regarding our electrical goods made by us. At last, we should understand the mechanics of making pricing calculations of our standard electrical goods based on an appropriate model. Approaches to pricing There are many approaches to pricing and accounting information can be used for these approaches. They are; i. Cost–volume–profit analysis, ii. Cost-plus pricing, iii. Target rate of return pricing. i. Cost–volume–profit analysis This method known as CVP analysis is used to develop and understand the relationship between revenue, cost and sales volume. Thus, CVP is concerned with understanding of the relationship between changes in the number of units sold and changes in selling prices and costs. Typical issues that CVP answers are: * Effect on profits of changes in selling price or the volume of sales, * If we incur additional costs, changes that we should make to our selling price or to the volume that we need to sell (P.M. Collier 2003). CVP can be used as a sensitivity analysis which is an approach to understand as to how changes in one variable (e.g. selling price) affect to other variables (e.g. Sales Volume). Using this analysis which is illustrated bellow, we can have a better understanding of product’s selling price of Manac plc. Illustration 1 Target Budgeted profit of Manac plc is  £100,000 on sales of 20,000 units ofShow MoreRelatedStrategic Management Accounting13457 Words   |  54 Pagesof this journal is available at www.emeraldinsight.com/0951-3574.htm AAAJ 21,2 Strategic management accounting: how far have we come in 25 years? Kim Langï ¬ eld-Smith Monash University, Melbourne, Australia Abstract Purpose – The purpose of this paper is to provide a review of the origins of strategic management accounting and to assess the extent of adoption and â€Å"success† of strategic management accounting (SMA). 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