Assignment

On
“Impact of cost accounting on business decision making in manufacturing
industries of Bangladesh’’
Course: Cost Accounting
Course Code: ACT441

Section: 02

Semester: FALL2020

Submitted to:
Md Rashidul Islam

Assistant Professor

Department of Business Administration

East West University

Submitted by:
Name: Umma Salma Pinkey

ID No: 2017-1-10-050

Department of Business Administration

East West University

Date of Submission: 14 December, 2020

Introduction
The data framework that gives both monetary and non-monetary data identifying with the
expense of gaining or utilizing the assets of the association is a long standing and unavoidable a
vital part of each business. Directors utilize cost bookkeeping data to settle on choices
identified with technique detailing, innovative work, planning, creation arranging, and valuing,
among others. The approach of the industrialization time denoted the improvement of most
cost bookkeeping methods. The business cycle saw another transformative stage in the time as
assembling exercises turned into the thing to take care of and dislodged horticultural
organizations.

This proposal endeavors to analyze the status of utilization of the executives bookkeeping
strategies practice in Bangladesh. A rundown of customary and current administration
bookkeeping apparatuses was distinguished and the degree of their utilization was assessed. It
is found that cutting edge strategies like Activity-Based Costing, Target Costing, Just-in-Time,
Total Quality Management, Process Reengineering and The Theory of Constraints, are not
utilized out in the open and private area producing endeavors yet a couple of Multinational
Corporations, are utilizing some of methods like JIT and TQM. Notwithstanding, customary
procedures like Financial Statement Analysis, Standard Costing, and Cash Flow Analysis are
found broadly utilized followed by CVP Analysis, Marginal Costing, and Fund Flow Analysis and
so forth Respondents undertakings utilize the administration bookkeeping methods in
Bangladesh is either moderate (30%) or inadmissible (45%). 15% of the respondents think of it
as agreeable and another 15% think of it as not in the least acceptable. All respondents
consider the utilization of the board bookkeeping methods is fundamental yet called attention
to various reasons of its restricted utilize, for example, absence of mindfulness by top
administration, more accentuation on monetary data, inclusion of additional expense and so on
In any case, they proposed a few measures to improve the circumstance like taking measures to
make mindfulness among top administration, coordinating class, discussion, guaranteeing
prepared work force and so forth In the current worldwide serious market endeavors should be
expense and quality cognizant where the function of the executives bookkeeping can't be over
accentuated. Subsequently the degree of utilization of the board bookkeeping methods
extraordinarily the new ones be accentuated and all concerned specialists require to
concentrate on this issue. This postulation looks to acquire a review of the administration
bookkeeping rehearses in the organizations of Bangladesh. Information has been accumulated
by a poll review from eight areas. The investigation has uncovered that however there is
contrast in degree of practices among the areas, all areas neglect to rehearse some recently
created procedures. On the off chance that this pattern proceeds, Bangladeshi associations will
fall behind in the race of worldwide seriousness and near favorable circumstances. It is hence,
some approach proposal has been made to improve and attach the administration bookkeeping
rehearses. This proposal clarifies the utilization of target costing as an essential benefit
arranging and cost the board apparatus. This will recognize its key standards, balance it with
conventional cost the executive’s apparatuses, show the basic strides simultaneously, and
exhibit its working by and by.

Objectives of the Report

The main objectives of the study are to see whether the business enterprises in Bangladesh are using
cost (management) accounting technique in order to assist the managers with information relevant to
decision making and day-to-day operational activities and the extent or degree of such use. In broader
sense the objectives to be covered under the study are:

 To find out the using status of Cost Accounting Techniques.

 To evaluate the conception of managers as to importance of use and problems, if any, they face
in using the techniques.
 To identify the Management Accounting information structure and
 To highlight suggestive measures to the users of management accounting information for its
extensive use.

Research question:
1. How cost accounting helps manufacturing?

2. The cost accounting is helpful for business decision in Bangladesh?

3. The companies are satisfied with this method?

5. This is necessary for all the company?

6. Without cost accounting they can survive in market?

7. How cost accounting works?

8. The use of management accounting techniques in our manufacturing business firms as very much
unsatisfactory?

Methodology
For smooth and accurate study everyone have to follow some rules & regulation. The study impute
were collected from two sources:

Primary Sources:

Face to face conversation with officers was not possible because covid-19 pandemic situation.
Secondary Sources:

 Annual report of companies

 Various publications of companies
 Websites

Data processing:

Data collected from secondary sources have been processed manually and qualitative approach in
general and quantitative approach in some cases has been used throughout the study.

HISTORY OF COST ACCOUNTING

Administrative bookkeeping has its underlying foundations in the mechanical unrest of the nineteenth
century. During this early period, most firms were firmly constrained by a couple of proprietor directors
who obtained dependent on close to home connections and their own resources. Since there were no
outside investors and minimal debt without collateral, there was little requirement for expand monetary
reports. Conversely, administrative bookkeeping was moderately refined and given the basic data
expected to deal with the early huge scope creation of material, steel, and different items. After the turn
of the century, monetary bookkeeping necessities blossomed due to new weights set on organizations
by capital business sectors, leasers, administrative bodies, and government tax collection from pay.
Numerous organizations expected to raise assets from progressively far and wide and disengaged
providers of capital. To tap these huge stores of outside capital, firms' directors needed to supply
inspected monetary reports. Furthermore, on the grounds that external providers of capital depended
on evaluated fiscal summaries, free bookkeepers had an unmistakable fascination for building up very
much characterized methods for corporate monetary detailing. The stock costing strategy received by
open bookkeepers after the turn of the century profoundly affected administration bookkeeping. As a
result, for a long time, the board bookkeepers progressively centered their endeavors around
guaranteeing that monetary bookkeeping necessities were met and monetary reports were delivered on
schedule. The act of the executives bookkeeping deteriorated. In the early piece of the century, as
product offering extended tasks turned out to be more unpredictable, forward looking organizations
saw a recharged need for the executives arranged reports that was discrete from monetary reports. In
any case, in many organizations, the board bookkeeping rehearses up through the mid-1980s were to a
great extent unclear from rehearses that were basic before World War I. Lately, notwithstanding, new
financial powers have prompted numerous significant developments in administration bookkeeping.

OVERVIEW OF COST ACCOUNTING TECHNIQUE

The board bookkeeping is worried about the arrangements and utilization of bookkeeping data
to chiefs inside associations, to give them the premise in creation educated business choices
that would permit them to be better prepared in their administration and control capacities. In
contrast to monetary bookkeeping data, the executives bookkeeping data is utilized inside an
association "ordinarily for dynamic" and is typically private and its entrance accessible just to a
chosen handful. As per The Chartered Institute of Management Accountants (CIMA) -
Management Accounting is the cycle of recognizable proof, estimation, gathering, investigation,
arrangement, understanding and correspondence of data utilized by the board to design, assess
and control inside a substance and to guarantee suitable utilization of and responsibility for its
assets. The board bookkeeping likewise includes the arrangement of monetary reports for non-
administration gatherings, for example, investors, leasers, administrative organizations and
assessment specialists. The American Institute of Certified Public Accountants (AICPA) states
that administration bookkeeping practice reaches out to the accompanying three zones:

 Strategic Management— advancing the role of the management accountant as a strategic

partner in the organization.
 Performance Management— developing the practice of business decision making and managing
the performance of the organization.
 Variable costing— contributing to frameworks and practices for identifying, measuring,
managing and reporting risks to the achievement of the objectives of the organization.

The Institute of Certified Management Accountants (ICMA) states - "A management accountant applies
his or her professional knowledge and skill in the preparation and presentation of financial and other
decision oriented information in such a way as to assist management in the formulation of policies and
in the planning and control of the operation of the undertaking." Management Accountants therefore
are seen as the - "value-creators" amongst the accountants. Management accounting knowledge and
experience can therefore be obtained from varied fields and functions within an organization, such as
information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc.

 Formulating strategies;
 Planning and constructing business activities;
 Helps in making decision & Optimal use of resources;
 Supporting financial reports preparation; and Safeguarding asset

Management accounting is concerned with the provisions and use of cost accounting information to
managers within organizations, to provide them with the basis to make informed business decisions that
will allow them to be better equipped in their management and control functions. From different
significance - management accounting information is used within an organization, typically for decision-
making. In contrast to financial accountancy information, management accounting information is:

 Designed and intended for use by managers within the organization, whereas financial
accounting information is designed for use by shareholders and creditors.
 Usually confidential and used by management, instead of publicly reported;
 Forward-looking, instead of historical;
 Computed by reference to the needs of managers, often using management information
systems, instead of by reference to financial accounting standards.
 The qualification among 'customary' and 'inventive' the executives bookkeeping practices can be
shown by reference to cost control procedures. Cost bookkeeping is a focal strategy in
administration bookkeeping, and customarily, the board bookkeepers' primary procedure was
change investigation, which is an efficient way to deal with the examination of the genuine and
planned expenses of the crude materials and work utilized during a creation period. While some
type of change investigation is as yet utilized by most assembling firms, it these days will in general
be utilized related to inventive procedures, for example, life cycle cost examination and action
based costing, which are planned with explicit parts of the advanced business climate as a main
priority. Life-cycle costing perceives that supervisors' capacity to impact the expense of assembling
an item is at its most noteworthy when the item is still at the plan phase of its item lifecycle, since
little changes to the item configuration may prompt critical investment funds in the expense of
assembling the item. Movement based costing perceives that, in current plants, most assembling
costs are controlled by the measure of 'exercises' and that the way to successful cost control is
accordingly upgrading the productivity of these exercises. Movement based bookkeeping is
otherwise called Cause and Effect bookkeeping. Both lifecycle costing and movement based costing
perceive that, in the common present day manufacturing plant, the shirking of troublesome
occasions lessening the expenses of crude materials. Movement based costing likewise
deemphasizes direct work as a cost driver and focuses rather on exercises that drive costs, for
example, the arrangement of an assistance or the creation of an item part.

FINDINGS OF THIS STUDY

Findings:

The board choices are essentially founded on certain measures/methods customarily planned
dependent on quantitative information. Nonetheless, in late past to adapt to worldwide business
climate, change in business, increment in rivalry and intricacy of dynamic some high level quantitative
procedures like Activity – based Costing and Target Costing and some improved projects like Just-in-
Time (JIT), Total Quality Management (TQM), Process Reengineering and Theory of Constraints (TOC)
have been presented for application.

Against the foundation of ID of by and large utilized administration bookkeeping methods the
accompanying table shows the utilization of the board bookkeeping strategies in the example producing
business firms in Bangladesh. A rundown of methods was given to the respondents and they were
approached to point the strategies they use and which they don't utilize. The reactions have been
classified and the summed up picture is appeared in the table. The table shows the degree of utilization
of various administration bookkeeping methods in example firms. It is seen that the customary
procedures like fiscal summary examination, income investigation, budgetary control and the executives
revealing are by and large broadly utilized (100%) by a wide range of firms observed by standard costing
and retention costing (80% openly, 90% in private and 100% in MNC). Negligible costing and cost-
volume-benefit examination are utilized somewhat by the half in open area undertakings, 60% by
private area and 70% by worldwide partnerships (MNC). A few ventures of public (30%) and private
(20%) areas use store stream proclamation examination however it has now been nearly supplanted
with income articulation investigation. Current strategies yet to be presented by Bangladeshi firm – both
in broad daylight and private area. Hardly any MNC utilizes JIT (40%) and TQM (20%). None of public or
private Bangladeshi undertakings or MNC found to utilize some conventional strategy. The Theory of
Constraints (TOC) target costing, measure reengineering and the TOC. Consequently it is seen that
administration bookkeeping methods yet to get a firm balance in Bangladeshi firms and in this way
denying these organizations in better dynamic.

Techniques PB (N = 15) PV (N = 15) MNC (N = 5)

Financial
Statement 100% 100% 100%
Analysis

Cash Flow 100% 100% 100%

Analysis

Budgetary 100% 80% 80%

Control
Management

Reporting 100% 50% 50%

Standard
Costing

Absorption 80% 50% 50%

Costing

Marginal 50% 30% 30%

Costing

Cost Volume-Profit 50% --- ---

Analysis

Fund Flow 30% --- ---

Analysis

Just-in-Time --- --- ---

(JIT)

Total Quality --- --- ---

Management
(TQM)

Differential --- --- ---

Costing
Opportunity --- --- ---
Costing

Inter-firm --- --- ---

Comparison

Activity Based Costing --- --- ---

Target --- ---

Costing

Process
Reengineering

The Theory of
Constraints
(TOC)
No sample (PL = Public enterprises, PV= Private enterprises, MNC = Multinational Enterprise)

The above findings reveal that some traditional techniques are being used by sample enterprises.
Modern techniques are yet to be introduced. In the use of management techniques MNCs rank high
followed by private sector and public sector enterprises. Due to utmost importance of use of modern
techniques, concerned authorities need to pay attention to this. Against the backdrop of the extent of
use of management accounting techniques, means status of management accounting practice in
Bangladesh, now an attempt is made below to show the attitude of concerned management personnel,
the reasons for low use and prospect of improving the situation in the following:

Extent of Use of Management Accounting Information by the Sample Enterprises for Various Decision
Making

Decision areas MAI (%) FAI (%) OI (%

Production 10 30 60
Purchase 5 30 65
Sales 10 25 65
Control 30 20 50
Direction 20 10 70
Motivation 10 15 75
(MAI=Management accounting Information, FAI=Financial accounting Information, OI= Other
Information)

Online research found to Use Status of Management Accounting Information Techniques in Sample
Firms

Quite Satisfactory Satisfactory Moderate Unsatisfactory

15 (14.28%) 30 (28.57%) 45 (42.57%)
The table above clearly depicts that the respondents consider the use of management accounting
techniques in our manufacturing business firms as very much unsatisfactory. Only 14.28% of them
consider it satisfactory and 28.57% considers it moderately satisfactory and seemingly most of them
belong to MNC group. The majority (42.85%) considers it unsatisfactory and 14.28% considers the
position as precarious/worse. They put forwarded some reasons for low use of management accounting
techniques.

Conclusion
Each association needs to start a bookkeeping framework and systems for successful choice on infer
benefit by keep up the association's capacity, strength and intensity. The sensational changes and
advances in interchanges and data innovation encouraged the route towards a continued advancement
in the worldwide business and money climate. The ease and the proficiency just as the allure of leading
and entering any undertaking – nearby or worldwide in nature were made accessible by these
innovative advances which describe the worldwide commercial center. Today, more noteworthy
difficulties are looked by bookkeepers as open doors for development just as potential outcomes of
dangers increment in the current and more alluring business world. The board bookkeeping produces
the best possible progression of bookkeeping data that are collected, examined, and introduced in the
association. Besides, this data are utilized in settling on basic choices, filled in as reason for anticipating
and tackling explicit issues, and used in the everyday activities in business the board. The executives
bookkeeping is more arranged toward inside dynamic and purposively channels pertinent and ideal data
to interior administrators. Concerning its relationship with monetary administration, both are creation
cycles of various bookkeeping information for various critical thinking circumstances. The board
bookkeeping, nonetheless, mirrors the utilization of strategies from various orders, including
bookkeeping, for inside critical thinking. Consequently, the executives bookkeeping strategies may
contrast from Generally Accepted Accounting Principles methods and starting with one firm then onto
the next. They don't adjust to any arrangement of recommended rules, and much might be left to the
chief's methods of reasoning. The board bookkeeping should go past cost bookkeeping and incorporate
different materials from association hypothesis, conduct sciences, data hypothesis, etc, in a
multidisciplinary approach pointed toward confronting challenge and encouraging the creation of data
for inner dynamic.

References:
1. http://www.icmab.org.bd/
2. https://www.allbusiness.com/
3. https://www.accountingweb.co.uk/
4. file:///C:/Users/pc/Downloads/97822222-Cost-Accounting-Practice-in-BD.pdf
5. file:///C:/Users/pc/Downloads/121-360-1-PB.pdf