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Analysis of the Management Accounting System in Walmart

Examine the Walmart's accounting and finance practices. This should be a formal business report that provides both specific processes and strategies involving budgeting, costing, capital decision making, capital acquisition, and cost of capital structure. These processes and strategies are to be supported with management accounting concepts.

1. For the budgeting process and procedures, describe the existing practices and assessments (i.e., offering opinions on the strengths and weaknesses of the existing practices in reference to management accounting concept as well as supported by references). Link budgeting to the performance measurement system.

2. For the Management Accounting System (MAS), analyze how management accounting information was collected, stored and prepared, and most important, analyze how the information is disseminated to various parties. Discuss the advantages and disadvantages of the accounting software currently used by the company. Also focus on the pricing aspect to illustrate how the company's MAS works.

3. Identifying the costing system being used (e.g., ABC), provide an evaluation of the system. The strengths and weaknesses of the system should be reflected upon in reference relating to management and financial accounting concepts.

4. The capital decision making process is related to the type and evaluation of investment appraisal techniques currently used by the organization. Provide an example on a specific major project of the company to give clarity.

5. Look at the credit rating as well as several factors that could have possibly influenced the company's decision on capital structure. Analyse the capital structure of Walmart and provide some rationale why Walmart has been operating at the existing debt/equity ratio.

Highlight relevant concepts for budgeting. Link each of the above aspects to the company's profit maximisation objective.

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Budgeting Process:
WalMart follows needed considerations in its budgeting process and procedures. The company implements a flexible budget in its business that identifies overhead cost drivers and allocates capital to those over head costs properly. Through this way, the company is able to make a budget for different levels of activity. Budgeting processes are also helpful to measure the performance of different departments. It enables the company to control costs by comparison of actual costs with the budgeted amount for different levels of activity (Plunkett, Attner & Allen, 2011).
The company takes corrective action to control those costs in order to make this closer to the flexible budget prepared in advance. Its budgeting procedures help the company to be cost competitive and to use the resources in an economic manner that improve profitability of the enterprise. In contrast to this, in this procedure, prediction is difficult for the manager because he believes on a range of estimates of what to expect financially. In addition, this process also depends on various variables that effect each other. It is very complicated to prepare and difficult to understand for other employees of the company (Axson, 2010).

Management Accounting System:
Management accounting information are collected, stored and prepared through use of well designed accounting information systems. It simplifies getting information to people outside of the organization when necessary. Through use of MAS, the company determines its initial purchase price of raw material including subsequent operating and maintenance costs. MAS help to analyze the effectiveness of the company's pricing structure by showing cost data, sales data and revenue. It gives ideas to the company to decide the price of ...

Solution Summary

The solution provides an analysis of the management accounting system in Wal-Mart.