Strategic management accounting Essay Example | Topics and Well Written Essays - 3000 words

Strategic management accounting - Essay Example The analysis of variance involves finding the difference between the budgeted figure and the actual figure. Whereby, a positive or a negative variance may be obtained. Whereby, a positive variance implies that the budgeted figures were higher than the actual amount. This means that management an over cast was made when preparing the budget (Codjia, 2013). On the other hand, a negative variance indicates that the budgeted amount was lower than the amount obtained. This means that there was an under cast during budget preparation. Therefore, strategic variance analysis may be categorized into two divisions namely; mutually exclusive strategic variance analysis and discretionally strategic variance analysis. Whereby, exclusive variance analysis focuses at determining the deviations in terms of budgeted and actual sales volumes. On the other hand, exclusive variance analysis focuses at determining deviations in terms of contribution margin and production cost (Codjia, 2013). Additionally , strategic management accounting helps in monitoring and control. Whereby, internal auditors conduct a thorough scrutiny of financial reporting mechanism. This helps auditors to exercise internal control of financial reports as well as prevent errors that could occur. ... Therefore, this study will provide an insight on the two major sections regarding strategic management accounting as discussed. Question 1 Advice on two entirely different businesses about the benefits and problems associated with what is termed the â€Å"traditional approach to budgeting and budgetary control†. The benefits that may accrue from an organisation that tend to adopt traditional approach of budgeting and budgetary control may vary between different organisations. This is because a budget that can be applied in one organisation may not be effective in another organisation. Additionally, external factors influencing a business may not be similar because different organisation might be operating under different business environments. Additionally, organisation differs in terms of goals, objectives and activities carried out (Bhattacharyya, 2006). For instance, a budget that may be utilized in a business that operates in a very stable and static market place may not b e suitable to a business that operate in a very dynamic, rapidly changing, innovative environment. This means that on out of the two organisations, one might obtain more benefits than the other as a result of adopting traditional approach of budgeting and budgetary control. Connectively, traditional approach of budgeting and budgetary control has the following feature; budgets are approved prior the onset of the budgetary year, secondly, plans, assumptions and factors that could affect the next year budget are made in advance. Thirdly, control to rectify deviations might be taken into consideration. Additionally, the budgeted figures are normally compared with actual figures on both cumulative and monthly basis (Bowhill, 2008). In above