Management Accounting (performance indication, product and service Essay

Management Accounting (performance indication, product and service costing, budgeting) - Essay Example Product and service costing analysis will clear out the unnecessary costs that are being incurred by the institution thus taking corrective actions for the same. Through the estimation of the incremental budgeting we can assess as to the implementation of the same is required or not thereby suggesting other budgetary procedure which may or may not be implemented by the institution based on the present circumstances. The University of Newland has therefore adopted measures through the mode of financial tools like return on capital employed, incremental budgeting, standard costing and various other cost restricting tools in order to increase the profit margin of the organisation. These tools would also help them in setting a probable standard for themselves so that any deviation from the same could be anticipated beforehand. Dealing with Performance Indication From the given data related to the project of Management accounting we can observe that few performance tools have been used as in the separate subject department is considered to be an investment centre. Return on investment is one of the main tools for calculation of the various investment centres mentioned in the paper. The total income earned by the institution is 185mn pound which also gives us the estimation of the capital employed or to be employed by the organisation (Mowen, 2011, p.554). However, the targeted return of 7% on capital employed is the return to be generated from the operations of the institution. The assets here have to be forecasted in order to bring a change in the operating cost so much so that the target could be easily achieved. If higher productivity is achieved with lower manpower so that the cost of labour can be saved; this in turn will be the major factor behind building the base for the return of the capital employed. As the pay rates will rise over the time span, labour hour saving will help in the generation of positive return on capital employed. It is calculated as: ROC E= Net Operating income after tax (Morrell, 2001, p.131) Capital Employed Here investment centre means the responsibility that is designated to the manager for executing the responsibility of managing cost and revenue of the organisation. They are responsible for generating income and executing responsibility related to investment base (Drury, 2007, p.396). The responsibility centre has three sub heads namely, cost centre, profit centre and investment centre. The measurement of the performance in the cost centre depicts the efficiency of operation in quantitative terms of inputs used for the production of the given output. From the word profit we can understand the difference between the expenditure made of acquiring the input and the income generated from output of the organisation. Hence it is quite possible to derive both the effectiveness and the efficiency from the profit centre. On the other hand, the possibility or scope of a probable investment opportunity gives rise to an i nvestment cen