Management Accounting and Reporting in Iceland Manufacturing Ltd

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Table of Contents
INTRODUCTION.......................................................................................................................................3
PART 1.......................................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1) Discuss management accounting along with the essential requirements of different methods of
management accounting system..............................................................................................................3
P2) Methods used for management accounting reporting........................................................................5
M1) Discuss advantages and applications of different management accounting system.........................7
TASK 2.......................................................................................................................................................8
P3) Calculate cost with appropriate techniques of cost analysis and also prepare an income statement
by using marginal and absorption costing................................................................................................8
M2) Apply different techniques of management accounting also produce appropriate financial
reporting document................................................................................................................................10
PART 2......................................................................................................................................................11
TASK 3.....................................................................................................................................................11
P4) Discuss advantages and disadvantages for different types of tools used for budgetary planning....11
M3) Analyze different tools along with their application for making budgets.......................................12
TASK 4.....................................................................................................................................................13
P5)Compare how company adopts management accounting systems to offer response related to
financial problems.................................................................................................................................13
M4) Discuss the way in which dealing with financial problems using management accounting can lead
organization towards sustainable success..............................................................................................15
CONCLUSION.........................................................................................................................................16
REFERNCES............................................................................................................................................17
REFERNCES............................................................................................................................................20

INTRODUCTION
Management accounting is a process by which financial information of organization is
communicated to managers so that they can take effective business decisions in order to achieve
predefined goals. Under this, reports related to business operations are prepared so that managers
can take effective short terms as well as long term decisions. By this, a business entity is able to
achieve its predefined goals by analyzing, interpreting as well as communicating necessary
information to managers (Quattrone, 2016). It is analyzed that management accounting is helpful
in business forecast, and taking make or buy decisions for enhancing business growth and
success in an efficient manner. The present report is based on Iceland manufacturing ltd which is
a well known retailer of UK. It is a part of Iceland Food Group and works in food production.
The report includes various system of management accounting which are used by company for
running business efficiently. Apart from this, different methods which can be used for reporting
purpose in the field of management accounting have also included in the present report along
with appropriate technique of cost analysis which are used to prepare a detailed income
statement. It also includes merits and drawbacks of different budgetary planning tools along with
the way in which management accounting system is used by organization for dealing with
financial problems.
PART 1
TASK 1
P1) Discuss management accounting along with the essentials of requirements of different
methods of management accounting system
Management Accounting:
It is a method which is often used in accounting in order to prepare reports so that
managers are able to take appropriate business decisions in significant manner (Maas,
Schaltegger and Crutzen, 2016). Main aim of management accounting is to present the fact in
such a manner that managers can easily take appropriate short term as well as long term decision
for business success. Management accounting is used for making forecast about future

requirements and availability of liquidity within company. It helps to take decisions for
maximizing wealth of organization for the benefit of company and its stakeholders.
Management Accounting System:
Management accounting is a crucial activity of managing finance within organization.
Here, a lot of accounting system are used in management accounting for meeting with different
purpose. In context of Iceland manufacturing ltd, these systems are described as under:
Inventory administration system: This system is related to track the availability of
inventory and maintain a predefined level of inventory in order to maintain consistency in
production process. It is vital for an organization to have sufficient stock of raw material and
other resources so that production process can be undertake in consistent manner. Here, a
particular level has been determined by manager which known as the reorder level. If, the
inventory is at reorder level then they place an order for getting required inventory. In this, main
aim of organization is to meet with market requirements in significant manner (Alsharari and
Youssef, 2017). In context of respective organization, managers use appropriate techniques for
tracking the level of inventory on regular basis for determining needs to inventory in future
period of time. This system is really crucial in terms of fulfilling the market demand in timely
manner. By this way, company can also avoid the situation of deficit and surplus of stock which
is essential for controlling the cost effectively. There are some approaches used to keep control
over stock which are mentioned as under:
LIFO: According to this, the units which are entered in stock last need to used first during
production process.
FIFO: It is based on the concept of first in and first out under which units which are first
included in stock need to use on priority during production.
Cost accounting system: It assists in keeping proper control over cots which incur during
production of product and services. While producing goods, there are ample of direct as well as
indirect expenses incurred. Here, direct expenses are directly related with production. On other
side, indirect expenses do not have direct association with manufacturing process but play a
crucial role in production of product and services (Collis and Hussey, 2017). It is stated that