Contribution of Lean Management Accounting †MyAssignmenthelp.com

Question: Discuss about the Contribution of Lean Management Accounting. Answer: Introduction: The five crucial findings that have been extracted from comparing the actual performance with the Budgeted result of Helpful Legal for the year 2018 have been discussed below in brief. Firstly, as per as the consolidated budget of 2018, it can be found that in the year 2017 the forecasted amount of expenses incurred on Salaries and Employee Benefit Expenses in 2018 had increased to $72,566,000. Thus there is an increase in such expenses by $17,510,000 which equals to 31.80%. Thus through this observation it can be concluded the operating expenses of the firm is increased due to increase in expenditure related to salary and employee benefit (Dudin et al. 2015). The company should take appropriate steps to reduces the high escalation of expenses as this will increase cost and reduce the competitive advantage of the company. In addition to this, the increase in expenditure will reduce the profit of the organization. In the law firm the cost related to the employment is the main component of cost so increase in expenditure over the inflation rate can cause significant decline in profit. Second of all in the year 2017 calculated revenues was nearly about $6,173,000 for the advertisement and promotion expenses which forecasted as per as consolidated budget of 2018 but now in the year 2018 there is a huge increase in such expenses which amounts to $11,888,000 which is nearly about the double of the previous amount of expenses. Thus from this observation it can be clearly stated that as far as the effective advertisement is concerned there is an increase in 92.58% in amount of expenses. Thus this a positive sign as it increases the revenues due to its important and effective advertisement. Thirdly, in Contrast to the projected revenue of 2017 the budgeted profits in the year 2018 has been increased by nearly 37% that is from the amount $106,906,000 in the year 2017 to $146,348,000.00 in the year 2018 (Callaghan et al. 2014). As the price increases which in turn leads to increase in the inflation factor is about 3% this indicated huge increase in revenue considering this factors. Thus from the above observation it is clearly evident that the organization has done much better performance in the year 2018 as compared to that of the year 2017. Fourthly, as far as the consolidated budget of 2018 is concerned there is a decreased in expenses in bad debt of the organization. As per the forecasted budget of 2017 was $4,086,000 which has been decreased to $2,256,000 in the year 2018 which is a positive sign. As the amount of expenses is decreased by $1,830,000 it clearly gives a progressive impact on the organization (Fullerton et al. 2014). Moreover, from this observation it can be concluded that there is about 45% decreased in the amount of bad debt which suggests that the management in able to collect its fees proficiently in the year 2018 than compared to that of the year 2017. Lastly, associated to the forecast revenues of 2017 the budget of the net profit amount to $17,915,000 which leads to the amount of $30,065,000 in the year 2018. As there is the increased in the amount of net profit by $12,150,000 which is approximately equal to 67.82% which is a good sign for the organization as it has been benefited in the year 2018 than from the year 2017. It generally shows that the ability of the law firm of using its resources in a positive manner that in turn leads to increase in the amount of net profit for the firm (Bhimani et al. 2013). Computation of Labour Rate Variance Budgeted rate 160 Actual Rate 157 Actual Working Hours 200640 Labour Rate Variance = (Standard Rate - Actual Rate) x Actual Hours 601920 (160 - 157) x 200640 Computation of labour cost variance Computation of Labour Cost Variance Budgeted Labour Cost Actual Labour Cost 1758240 1780000 Labour Cost Variance = Budgeted Cost - Actual Cost -21760 Computation of Fixed Overhead Expenditure Variance Overhead Fixed Overhead Expenditure Variance Overhead Actual Fixed Overhead Budgeted Fixed Overhead $530,000 $550,000 Actual Fixed Overhead - Budgeted Fixed Overhead -20000 Computation of Sales Value Variance Computation of Sales Value Variance Budgeted Sales Actual Sales $29,304,000 $31,500,480 Budgeted sales - Actual Sales -2196480 Computation of Total Sales Margin Variance Budgeted Profit Actual Profit 74,59,760 82,14,480 Budgeted Profit - Actual Profit -754720 The analysis performed above there are three key reasons for the performance of the Brisbane office performance of 2017 are as follows; The revenue that has been derived for the year 2017 stands 31,500,480 while the budgeted revenue for the same year has been forecasted to be 29,304,000. The actual revenue derived by the Helpful Legal Brisbane Office represents a favourable budgeting situation (Drury 2013). Another performance metrics that has been measured in this regard is the actual gross margin generated by the Helpful Legal with the budgeted gross margin. The actual gross margin stood 8,777,480 while the projected gross margin represented an amount of 8,009,760. An assertion can be bought forward that the gross margin represented a favourable budgeting scenario (Deegan 2013). Additionally, the third parameter that has been considered to measure the performance of Helpful Legal for the year 2017 is the net profit generated by it. The net profit for the budgeted period represented a sum of 7,459,760 while the actual performance represented a favourable scenario with net profit standing approximately 8,214,480. Reference List: Bhimani, A., Horngren, C.T., Sundem, G.L., Stratton, W.O. and Schatzberg, J., 2013.Introduction to management accounting. Pearson Higher Ed. Callaghan, S., Hawke, K. and Mignerey, C., 2014. Five myths (and realities) about zero-based budgeting.McKinsey Company, p.2. Deegan, C., 2013.Financial accounting theory. McGraw-Hill Education Australia. DRURY, C.M., 2013.Management and cost accounting. Springer. Dudin, M.N., Kucuri, G.N., Fedorova, I.J.E., Dzusova, S.S. and Namitulina, A.Z., 2015. The innovative business model canvas in the system of effective budgeting. Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices.Journal of Operations Management,32(7), pp.414-428.