Application of Standard Costing in UCK Furniture

The assignment content discusses the application of standard costing and ratio analysis in management accounting, specifically in the context of UCK furniture. Standard costing is used to determine profitability, while variance analysis helps management identify variables between actual and expected costs. Ratio analysis is also applied to evaluate the liquidity, profitability, and solvency of the company. The report concludes that management accounting systems are essential for controlling costs, planning, and budgeting, ultimately leading to effective utilization of financial resources.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
ASSIGNEMENT 2..........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 & 1.3 Calculating the cost using appropriate techniques of cost analysis for preparing the
income statement using marginal and absorption costs...............................................................4
1.2 & 1.3 Applying a range of management accounting techniques and producing a financial
reporting document......................................................................................................................5
TASK 2............................................................................................................................................6
2.1 Advantages and disadvantages of different types of planning tools used for budgetary
control..........................................................................................................................................6
TASK 3............................................................................................................................................8
3.1 Comparing the performance of UCK woodwords and each division of UCK furniture.......8
3.2 Analyzing role of management account to improve the financial performance of both
companies to achieve the sustainable success.............................................................................9
3.3 Evaluating the planning tools used in management accounting to reduce the financial
problem .......................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is the important field of study as it contributes towards the
success of the business with the appropriate management of financial activities. It defines that
manner through which corporation integrate all its activities related to preparing the financial
accounting and allocating cost for each activities of the business. Present report is based on case
scenario of UCK furniture which is planning to start the training course for their new inters. For
this purpose, different methods used in the management accounting report has been explained.
Along with that, appropriate cost analysis techniques are applied in order to prepare the income
statement. In addition to this, planning tools applied in management accounting are also u
explained. Apart from this, different ways to compare ways through which organization could
use the management account to respond to financial problems.
ASSIGNEMENT 2
TASK 1
1.1 & 1.3 Calculating the cost using appropriate techniques of cost analysis for preparing the
income statement using marginal and absorption costs
A & B
The cost card has been prepared by using absorption costing and marginal one through
which corporation can effectively calculate the cost (Silvester and et. al., 2014). It would be
effective for corporation to get the scenario or budget related to business.
Particulars Absorption Marginal
January February January February
Sales unit 9000 11500 9000 11500
Unit produced 11000 9500 11000 9500
Sales @ 35/unit 315000 402500 315000 402500
Less: Direct material 132000 114000 -132000 -114000
Direct labour 88000 76000 -88000 -76000

Variable
production
overhead
55000 47500 -55000 -47500
Fixed
production
overhead
20000 20000
Add: opening
stock 0 -295000 53640 -311140
20000 91360 158800 165000
Less: Closing stock -53640 0
-33640 91360 158800 165000
Less: Variable selling
cost -9000 -11500
Fixed selling
cost -2000 -2000 -2000 -2000
Net profit/loss -44640 77860 156800 163000
The net profit of the UCK furniture reflects that 77860 in the month of February which
was very less in the month of January. It can be critically evaluated on the basis of absorption
costing, the performance of the company is better in the month of February. In addition to this,
marginal costing the ratio of net profit January 156800 whereas the 163000 was arrived in the
month of February. In addition to this, overall performance of the firm is going good in the
month of February as per the marginal cost.
1.2 & 1.3 Applying a range of management accounting techniques and producing a financial
reporting document
There are different types of management account techniques which are help for the
production of financial reporting document. These are explained as follows-

 Financial planning-It is considered as the effective accounting technique under which
corporation ensure to use the appropriate planning for management of finance. This
enables management to understand the requirement of finance and utilization of the same
for effective operation of the same (Mistry and et. al., 2014). Cost accounting-This is considered as the another important tool to assess the cost of
particular product, department or process. It proves to be effective to identify the reasons
behind the any kind of variation taking place in the costing. Budgetary control-This is another kind of technique under which corporation come to
know about the difference taking place in the income and expenses (Stenstrom and et. al.,
2014). It proves to be effective for corporation to record the data related to future
expenses and income for effective management of finance in the business. Marginal costing-Use of this costing method makes it possible for corporation to to fix
the selling price by focusing upon cost of production. It aids to utilize the available
resources effectively and ensure that business get benefit.
 Absorption costing-In order to get the absorption costing, it is important to finance the
cost in accordance with the processes of production. However, individual product is
considered at the time of getting the information related to varied products and services
and finding the cost of the same (Leszcynska, 2012).
TASK 2
2.1 Advantages and disadvantages of different types of planning tools used for budgetary control
Budgetary control is considered as the most effective aspect for appropriate management
of finance and utilizing the fund in a most profitable business activities. Ere, UCK furniture
follows planning tools in budgetary control such as capital budgeting, budget and ratio analysis.
These are explained as follows- Capital budgeting-The method of capital budgeting is applied by business in order to
assess the viability of project and select best one in accordance with cost and benefit. The
main advantages of capital budgeting is that it helps to consider the time value of money
and ensure the most appropriate investment in the project in accordance with higher
return and less risk (Sandalgrh and Bukh, 2014). However, disadvantages is that an

expert is required to apply such kind of tool otherwise methods such as payback period
and average rate of return consumes extensive time. Ratio analysis-The budgetary control procedure applied tool of ratio analysis also under
which firm get to know about the liquidity position. With the collection of data related to
financial position, it becomes easy to allocate all necessary resources for different
business activities accordingly get the appropriate working capital also. The advantages
of the ratio analysis is that trend and performance of UCK furniture can be easily
evaluated. On the other hand, disadvantages can be seen in term of its ignorance to
qualitative factors (Terrance, 2014).
 Budget-Under this budget is allocated for activities related to production, marketing and
finance etc by estimating the money required. Advantages of budget can be seen in order
to effective controlling and monitoring of operation. Also, it is effective for periodic
evaluation, establishment of managerial policies and goals. Furthermore, disadvantages is
inability of do the exact forecasting.

TASK 3
3.1 Comparing the performance of UCK woodwords and each division of UCK furniture
The above mentioned table is reflects that performance measures of two companies
which aids to evaluate its performance and establish effective control procedure. The evaluation
of the ratio has been done as follows- Return on capital employed-The UCK Woodworkds has return on capital employed as
8.56% which as greater for each of the divisions of UCK furniture. At this juncture,
25.50% is the return on capital employed for design division and gear box division has
the return of 11.28%. This is indicating that performance of design division is very good
as shareholders are getting the appropriate rate of return.
 Operating profit margin-The operating profit margin for design division is 45.31%
which is very low for the Gear box division. This is indicating that one division of UCK
furniture and UCK Wood words are performing in a good manner through which
operating performance can be managed in a more effective manner.

The financial; performance of design division is very good as corporation is generating
appropriate profit and also generating higher rate of return for its shareholders. This proves to be
effective to manage its operation activities and meet the expectations of all related parties.
3.2 Analyzing role of management account to improve the financial performance of both
companies to achieve the sustainable success
3.3 Evaluating the planning tools used in management accounting to reduce the financial
problem
The organization like UCK furniture face several kind of issues related to finance. It can
affect the profitability and overall business. For this purpose, following mentioned planning tools
can be applied by the business- Budgeting-It is the considered as the most effective technique through forecasting is done
for the proposed expenses and income. It assists corporation to control the finance flow
from one to another activities and accordingly ensure that all business activities are
managed in an effectual manner (Vinal, Umesh and Mary, 2014). Project appraisal or evaluation-Project appraisal techniques is applied for assessing the
viability of project in accordance with specified criteria. This facilitates to allocate the
cost effectively and increase overall rate of return of the business. In this manner,
application of tools such as payback period method, internal rate of return and average
accounting rate of return support firm to get the period of recovery of initial investment. Standard costing and variance analysis -The standard costing method are also applied
for calculating the cost of each product or process. Here, application of standard costing
makes it more easier to find the ratio of profitability (Robson, 2008). Furthermore,
variance analysis is used by the firm for the purpose of knowing the variable between the
actual and expected cost. This in turn management can keep record related to cost and
benefit analysis and bring necessary changes in the performance of UCK furniture.
 Ratio analysis-Ratio analysis is the another effective method applied for reducing the
financial problem taking place in the business. It is effective because management can
effectively come to know about the liquidity, profitability and solvency of the company.
For example, in UCK furniture has less liquidity then it would become more effective to
access cost effective sources of finance (Tilanus, 2011).

CONCLUSION
The aforementioned report concludes that management accounting system are applied as
per the internal requirement and controlling the cost structure of the business so as to ensure
effective utilization of financial resources. It can also be said that appropriate application of
planning tools in management accounting system make it possible for corporation to effectively
integrate the related information. It leads to cater requirement of all related parties and ensure the
upward direction of the business in the marketplace. In addition to this, budgetary control tools
are applied by the corporation for allocation of money in most prominent activities along with
proper forecasting and application of suitable standards.

REFERENCES
Journals and books
Duffy, S., 2006. The Implications of Individual Budgets. Journal of Integrated Care.
14(2).pp .3-10.
Leszcynska, A., 2012. Towards shareholders' value: an analysis of sustainability reports.
Industrial Management & Data Systems. 112(6). pp.911-928.
Mistry, V. and et. al., 2014. Management accountants' perception of their role in accounting for
sustainable development: An exploratory study. Pacific Accounting Review. 26(2).
pp.112-133.
Robson, R., 2008. Costing, funding and budgetary control in UK hospitals: A historical
reflection. Journal of Accounting & Organizational Change. 4(3). pp.343 – 362.
Sandalgrh, N. and Bukh. N., 2014. Beyond Budgeting and change: a case study. Journal of
Accounting & Organizational Change. 10(3). pp. 409-423.
Silvester, K. and et. al., 2014. Does process flow make a difference to mortality and cost? An
observational study. International Journal of Health Care Quality Assurance.27(7).
pp.616-632.
Stenstrom, C. and et. al., 2014. Performance indicators and terminology for value driven
maintenance. Journal of Quality in Maintenance Engineering. 19(3). pp. 222-232.
Terrance, L. C., 2014. Strategic budgeting instead of strategic planning. The Bottom Line:
Managing Library Finances. 27(2). pp. 49-53.
Tilanus, C. B., 2011. Quantitative methods in budgeting. Springer US.
Vinal , M., Umesh, S. and Mary, L., 2014. Management accountants' perception of their role in
accounting for sustainable development: An exploratory study. Pacific Accounting Review.
26 (1/2). 2014.