Internal Verification of Assessment Decisions for BTEC (RQF) Management Accounting Unit 5

This article provides a checklist for internal verification of assessment decisions for BTEC (RQF) Management Accounting Unit 5. It includes a summary of the checklist, subject, course code, and college/university.

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Higher Nationals
Internal verification of assessment decisions – BTEC (RQF)
INTERNAL VERIFICATION – ASSESSMENT DECISIONS
Programme title Management Accounting
Assessor Sirini Punsara Internal Verifier Nilukshan Perera
Unit(s) Unit 5: Management Accounting
Assignment title Management Accounting
Student’sname Nilukshan Ravichandran
List which assessment
criteria the Assessor has
awarded.
Pass Merit Distinction
INTERNAL VERIFIER CHECKLIST
Do the assessment criteria awarded
match those shown in the assignment
brief?
Y/N
Is the Pass/Merit/Distinction grade awarded
justified by the assessor’s comments on the
student work?
Y/N
Has the work been assessed
accurately? Y/N
Is the feedback to the student:
Give details:
• Constructive?
• Linked to relevant
assessment criteria?
• Identifying opportunities
for improved performance?
• Agreeing actions?
Y/N
Y/N
Y/N
Y/N
Does the assessment decision need
amending? Y/N
Assessor signature Date
Internal Verifier signature Date

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Programme Leader signature(if
required) Date

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Confirm actioncompleted
Remedial actiontaken
Give details:
Assessor signature Date
Internal Verifier
signature Date
Programme Leader
signature(ifrequired) Date

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Higher Nationals - SummativeAssignment FeedbackForm
Student Name/ID Nilukshan Ravichandran WAT/B-004669
UnitTitle Unit 5: Management Accounting
Assignment Number Assessor
Submission Date 31.10.2020 Date Received 1st
submission
Re-submission Date Date Received 2nd
submission
Assessor Feedback:
LO1 Demonstrate an understanding of management accounting systems
Pass, Merit & Distinction P1 P2 M1 D1
Descripts
LO2 Apply a range of management accounting techniques.
Pass, Merit & Distinction P3 M2 D2
Descripts
LO3 Analyse the use of planning tools used in management accounting
Pass, Merit & Distinction P4 M3
Descripts
LO4 Evaluate ways in which organisations could use management accounting to respond to financial problems
Pass, Merit & Distinction P5 M4 D3
Descripts
Grade: Assessor Signature: Date:
ResubmissionFeedback:
Grade: Assessor Signature: [e-mail] Date:
Internal Verifier’s Comments:
Signature & Date:[e-mail]
* Please note that grade decisions are provisional. They are only confirmed once internal and external moderation has taken place and grades decisions have
been agreed at the assessment board.

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Assignment Feedback
Formative Feedback: Assessor to Student
Action Plan
Summative feedback
Feedback: Student to Assessor

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Assessor signature
[e-mail]
Date
31.10.2020
Student signature
[e-mail]
Date
31.10.2020
Pearson
Higher Nationals in
Business
Unit 5: Management Accounting
Assignment 01

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General Guidelines
1. A Cover page or title page – You should always attach a title page to your assignment. Use previous page as
your cover sheet and make sure all the details are accurately filled.
2. Attach this brief as the first section of your assignment.
3. All the assignments should be prepared using a word processing software.
4. All the assignments should be printed on A4 sized papers. Use single side printing.
5. Allow 1” for top, bottom, right margins and 1.25” for the left margin of each page.
Word Processing Rules
1. The font size should be 12 point, and should be in the style of Time New Roman.
2. Use 1.5 line spacing. Left justify all paragraphs.
3. Ensure that all the headings are consistent in terms of the font size and font style.
4. Use footer function in the word processor to insert Your Name, Subject, Assignment No, and Page Number
on each page. This is useful if individual sheets become detached for any reason.
5. Use word processing application spell check and grammar check function to help editing your assignment.
Important Points:
1. Carefully check the hand in date and the instructions given in the assignment. Late submissions will not be
accepted.
2. Ensure that you give yourself enough time to complete the assignment by the due date.
3. Excuses of any nature will not be accepted for failure to hand in the work on time.
4. You must take responsibility for managing your own time effectively.
5. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply
(in writing) for an extension.
6. Failure to achieve at least PASS criteria will result in a REFERRAL grade.
7. Non-submission of work without valid reasons will lead to an automatic RE FERRAL. You will then be asked to
complete an alternative assignment.
8. If you use other people’s work or ideas in your assignment, reference them properly using HARVARD
referencing system to avoid plagiarism. You have to provide both in-text citation and a reference list.
9. If you are proven to be guilty of plagiarism or any academic misconduct, your grade could be reduced to A
REFERRAL or at worst you could be expelled from the course

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Student Declaration
I hereby, declare that I know what plagiarism entails, namely to use another’s work and to present it as my own
without attributing the sources in the correct way. I further understand what it means to copy another’s work.
1. I know that plagiarism is a punishable offence because it constitutes theft.
2. I understand the plagiarism and copying policy of the Edexcel UK.
3. I know what the consequences will be if I plagiaries or copy another’s work in any of the assignments for this
program.
4. I declare therefore that all work presented by me for every aspects of my program, will be my own, and where
I have made use of another’s work, I will attribute the source in the correct way.
5. I acknowledge that the attachment of this document signed or not, constitutes a binding agreement
between myself and Edexcel UK.
6. I understand that my assignment will not be considered as submitted if this document is not attached to the
attached.
[e-mail]
Student’s Signature: Date:31.10.2020
(Provide E-mail ID) (Provide Submission Date)

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Assignment Brief
Student Name /ID Number
Unit Number and Title Unit 5: Management Accounting
Academic Year
Unit Tutor
Assignment Title Create Financial Reports using Management Accounting Techniques
Issue Date
Submission Date
IV Name & Date
Submission Format:
The submission should be in the form of an individual written report. This should be written in a concise,
formal business style using single spacing and font size 12. You are required to make use of headings,
paragraphs and subsections as appropriate, and all work must be supported with research and
referenced using Harvard referencing system. Please also provide a bibliography using Harvard
referencing system.
Unit Learning Outcomes:
LO1 Demonstrate an understanding of management accounting systems
LO2 Apply a range of management accounting techniques
LO3 Analyze the use of planning tools used in management accounting
LO4 Evaluate ways in which organizations could use management accounting to respond to financial
problems

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Assignment Brief and Guidance:
Scenario of Penguin Sportswear Ltd
Penguin sportswear (Hereafter referred as Penguin) is a medium scale enterprise which manufactures
sportswear. It has been registered as a private limited company in 2010. It manufactures and sells its own brand
of sportswear under following categories.
 Premium – High end brand for quality conscious customers
 Vantage – Good quality brands with medium price range; and
 Regular – Average quality brand with low price range
The company has 3 branches in main locations of Colombo besides having a head office to control all the
activities. The main competitor is Lanka sportswears and they have 5 branches and 3 of them are very close to
the existing branches of Penguin.
The Penguin has its manufacturing set up near Biyagama where they produce number of sportswear that they
sell under their brand names mentioned above. This manufacturing set up was started in January 2011 with a
small manufacturing plant but over the years the production has increased by many folds. There is no proper
management accounting system and Mr. Roy Perera is the manufacturing manager who is in charge of the
accounting department of the manufacturing unit, who does not have any background of management
accounting. He prepares all management accounting reports on MS excel. The reports that have been prepared
do not reflect the correct cost of the products manufactured since it varies significantly every month. The
variation ranges from 10% to 20%, which is beyond the understanding of the manufacturing manager.
All the shares of Penguin are owned by the family members. In the recent board meeting, the directors decided
to recruit a junior management accountant to streamline these calculations and correct the reporting. Assume
that you have been selected as the “Junior Management Accountant” on probation basis for Penguin.

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In the first meeting held with Mr. Roy Perera, you have been given the information about products and costs
relevant to May/ June months of the current year 2017.
Following is the income statement of Penguin sportswear, prepared by the company and provided to you for
further information.
Penguin sportswear
Income Statement
For the end of First month
The loss created a serious problem in the company. Some other relevant data is given below:
 Units produced during the first month: 50,000 units
 Units sold during the first month: 40,000 units
Variable costs:
 Direct materials: $2.00 per unit
 Direct labor: $1.60 per unit
 Variable manufacturing overhead: $0.40 per unit
 Variable selling and administrative expenses: $1.50 per unit
Other information
 Fixed manufacturing expenditure and Fixed Selling/Admin Expenditure will be applicable in same
amounts for the first quarter.
 Budgeted number of production units are expected to be 50,000 per each month.
$
Sales (40000 units x $10) 400,000
(Less) Variable Cost of goods sold (160,000)
Gross Contribution margin 240,000
(Less) Variable Selling & admin expenditure (60,000)
Contribution margin 180,000
(Less) Fixed expenditure
Fixed manufacturing expenditure 150,000
Fixed Selling & Admin Expenditure 40,000 (190,000)
(10,000)

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Mr. Roy Perera, the manufacturing manager, has asked you to prepare a report explaining the role and function
of the management accounting department, covering the management accounting systems operating in the
organization as well as the range of techniques used.
Being a Junior Management Accountant (on Probation), you need to submit a formal report to the board of
directors. Your report should address following findings as supportive information.
Activity 01.
 Explain principles of management accounting in context of Penguin Sportswear Ltd.
 Explain different types of management accounting systems in context of Penguin Sportswear Ltd.
 Explain the different methods that can be used for management accounting reporting by Penguin
Sportswear with their implications.
Activity 02.
 Prepare company’s income statement using marginal and absorption cost techniques, for the second
month. Consider 50,000 units were produced & 60,000 units were sold in the second month and there
were no closing inventories
 With the help of available data, prepare reconciliation & discuss about the cost method used by the
company.
 Use Management reporting techniques to reconcile the second month’s net operating income under both
the costing approaches by interpreting the data available.
Activity 03.
Assume that the report that you presented in task 1 was much appreciated by the directors and you have
been recruited on permanent basis at Penguin as a “Junior Management Accountant”. Mr. Aravinda Rodrigo,
who is a director at Penguin and who looks after accounting and finance related matters of the organization
said that, he is interested to know how different planning tools will help the organizations in achieving its goals
and objectives. Furthermore, how management accounting systems help to respond to different financial
systems respond to different financial problems within Penguin.
You need to prepare a report covering the following tasks. These tasks should be linked to the given scenario
of Penguin.
 What are the most important planning tools for budgetary control that you recommend to be used at
Penguin? Explain the advantages and disadvantages to Penguin of applying the said tools.

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Activity 04.
Compare any other organization which operates with the similar business activities and explain how organizations
are adapting management accounting systems to respond to financial problem.
 How planning tools for accounting as discussed in above task respond appropriately to solve financial
problems in order to lead organizations for a sustainable success?

Assessment Criteria -Pass
Outcome(s)/ Criteria Achieved Feedback
Learning Outcome 1: Demonstrate understanding of Management Accounting systems
P1 Explain management accounting and give the essential
requirements of different types of management
accounting systems.
P2 Explain different methods used for management
accounting reporting.
Learning Outcome 2: Apply range of Management Accounting techniques
P3 Calculate costs using appropriate techniques of
cost analysis to prepare an income statement using marginal
and absorption costs.
Learning Outcome 3: Analyze the use of planning tools used in Management Accounting
P4 Explain the advantages and disadvantages of different types
of planning tools used for budgetary control.
Learning Outcome 4: Evaluate ways in which organizations could use management accounting to respond to financial problems
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P5 Compare how organizations are adapting management
accounting systems to respond to
financial problems.
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Assessment Criteria -Merit
Outcome(s)/ Criteria Achieved Feedback
M1 Evaluate the benefits of management
accounting systems and their application
within an organizational context
M2 Accurately apply a range of
management accounting techniques and
produce appropriate
financial reporting documents.
M3 Analyze the use of different planning
tools
and their application for preparing and
forecasting budgets.
M4 Analyse how, in responding to financial
problems, management accounting can lead
organizations to sustainable success.
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Assessment Criteria -Distinction
Outcome(s)/ Criteria Achieved Feedback
D1 Critically evaluate how management
ac0counting systems and management
accounting reporting is integrated
within organizational processes
D2 Produce financial reports that
accurately apply and interpret data for a
range of business activities.
D3 Evaluate how planning tools for
accounting respond appropriately to
solving financial problems to lead
organizations to sustainable success.
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Acknowledgment
I am using this opportunity to express my gratitude to everyone who supported me throughout
this management course. I am thankful for their aspiring guidance, invaluably constructive
criticism and friendly advice during the assignment work. I am sincerely grateful to them for
sharing their truthful and illuminating views on a number of issues related to this
assignment.I express my warm thanks to Ms. Sirini Punsara for her unconditional support and
guidance throughout this assignment.
I would also like to thank the entire Management of Esoft for having given me the
opportunity to complete a valuable assignment by gaining a precious knowledge regarding
Management Accounts
Executive Summery
In this assignment Author have discussed about the Management Accounting systems and its
types. Cost accounting, Inventory management prize optimization system and job costing
system meanings and advantages and disadvantages was discussed. Secondly discussed about
the Management reports and use of management reports and use of it. All the management
accounting system and management reports are discussed within the organization context
using the Penguin Company.
Preparing the income statement under the abortion cost and marginal cost as well as
reconciliation the income statement. Providing details and definition about the budget,
budgetary control and how budgetary control will help to planning within the company
contest. Discussed about the planning tools in the assignment and there are included the
advantages, disadvantages and how to help preparing the forecasting budget. Identify the
financial problems of the penguin and how is the finding of solutions for the financial
problems and finally how will the planning tool help to the solving problems in the company.

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Table of Contents
Introduction..............................................................................................................................20
Activity 01................................................................................................................................21
1.1. Communication provides insight that is influential......................................................22
1.2. Information is relevant..................................................................................................23
1.3. Impact on value is analyzed – through scenario analysis and models..........................25
1.4. Stewardship builds trust................................................................................................26
2.explain different types of management accounting systems in context of penguin sportswear
ltd..............................................................................................................................................28
2.1. Job costing system.........................................................................................................28
2.2. Price optimizing system................................................................................................28
2.3. Cost accounting system.................................................................................................29
2.4. Inventory management system......................................................................................29
3.explain different types used for management accounting reporting? Explain different types
of management accounting reports..........................................................................................30
Budget reports......................................................................................................................30
Accounts receivable aging report.........................................................................................30
Inventory and manufacturing reports...................................................................................31
Performance reports.............................................................................................................31
A business situation or opportunity reports..........................................................................31
System advantages job costing system.................................................................................31
Activity 02................................................................................................................................32
Activity 03................................................................................................................................35
3.1. What are the most important planning tools for budgetary control that you recommend
to be used at penguin? Explain the advantages and disadvantages to penguin of applying
the said tools.........................................................................................................................35
3.2. The different types of common costing systems that can be used for budget control,
and how costing systems can differ depending on the costing activity...............................37
3.3. Budgets can be used for planning and control, from budget preparation to different
types of budgets and the behavioral implications of budgets for budget control.................38
Activity 04................................................................................................................................40
Compare any other organization which operates with the similar business activities and
explain how organizations are adapting management accounting systems to respond to
financial problem and Conclusion.......................................................................................40
References................................................................................................................................42

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Introduction
The overall aim of this assignment is to introduce the fundamentals of management
accounting which apply to the wider business environment and the penguin sportswear
organizations which operate within that environment. Students will explore how management
accounting uses financial data to aid planning decisions, and the monitoring and control of
finance within organizations. On successful completion of this unit students will be in a
position to present financial statements in a workplace context and be able to assist senior
colleagues with financial business planning.

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Activity 01.
01.Explain principles of management accounting in context of penguin sportswear ltd.
Penguin sportswear's accounting principles are the extraction, analysis, communication and
use of financial and non-financial information relevant to the decision to generate and
maintain value for the organization.
Penguin management accounting requires a deep understanding of the business. Its operating
environment so that organizational risks and opportunities are known. Finance and
management provide structured solutions to unstructured problems, translating complexity
into simple and making simple attractive. Combining financial and non-financial aspects, it is
a discipline that must be used to guide the organization, control and improve performance.
Since management accounting in penguin sportswear requires a thorough understanding of
the business model, as well as the organization's market and the macroeconomic
environment, it contributes to sustained success.

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1.1. Communication provides insight that is influential
Objective – to drive better decisions about strategy and its execution at all levels.
Management accounting begins and ends with a communication in penguin sportswear. It can
improve decision making by communicating insightful information at all stages of decision
making. Good communication of critical information allows management accounting to
facilitate integrated thinking. The consequences of actions of one area of the company in
another area can be better understood.
In penguin sportswear, management accounting influences information-based decision
making. Developing and implementing a strategy is a conversation. Strategy implementation
discussions take place at all levels of the penguin sportswear and should involve all
employees, eliminating single actions and thoughts. This allows for a clear line of sight
between your primary goals and the individual goals of the organization. Management
accounting gives supports to these discussions, Identify the solutions and justifying
judgments about the future. Communication is personalized the level of detail and methods of
communication are personalized for the users of the information.

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1.2. Information is relevant
Objective – to help organizations plan for and source the information needed for
creating strategy and tactics for execution.
The main role of management accounting is to provide relevant information to decision
makers in time. According to the communication principle, the decision made and the needs
of the decision maker are known and understood. It’s covers the identification, collection,
validation, preparation and storage of information. Requires achieving the right balance
between, information about the past, present and future, internal and external information and
financial, environmental and social issues.
The consequences of decisions are implemented in the future. Therefore, to be relevant to the
decision, the information should have a predictive element and will take into account
considerations that will have a significant impact on the results in penguin sports ware.
Irrelevant information usually includes things like sunk costs or declared costs, but not all
historical information is inapplicable. Continuous improvement depends on information
about what worked or didn't work well in previous situations, so penguin sportswear can
repeat good decisions and avoid bad ones. Management accounting analyzes the best
available resources in search of information that is relevant to the decisions to be made, the
decision makers and the style or process used.
By understanding the needs of stakeholders of penguin sportswear- according to the principle
of communication - the most important information for decision making is identified,
collected and prepared for analysis. Information is reliable and available information relevant
to decisions is reliable. To prepare the data for analysis, it is cleaned, sorted and filtered. Its
value is determined by quality, accuracy, consistency and timeliness. It is updated for
decisions that have been or will be made in a given period. The data is protected to avoid the
risk of corruption and loss. If incomplete or unverified data has to be presented, it is always
marked as such, so that policy makers can assess the level of confidence they want to have in
the data.

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Management accounting in penguin sportswear can provide a retrospective view to determine
a performance award. It can provide information about the present in real time, monitor the
implementation of strategies and plans, and align them with goals. Using scenario planning,
forecasting, and other predictive tools, management accounting also could provide
forecasting that facilitates strategy development. The type of information used can be
financial or non- financial, and can include internal and external issues, including
environmental and social issues. Once the relevant information has been prepared, it can be
used for modeling and value creation analysis.

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1.3. Impact on value is analyzed – through scenario analysis and models
Objective – to simulate different scenarios that demonstrate the cause-and-effect
relationships between inputs and outcomes.
This principle focuses on the interaction between management accounting and the business
model in penguin sportswear. Management accounting uses material information, in line with
the 'information is wealth' principle, to develop scenario models. The effort involved in
evaluating the scenarios should be proportionate to the importance of the decision made.
Some scenario models will be simple and take very little time, while others will need to be
sophisticated and take into account more complex factors.
This principle requires a thorough understanding of the business model and the broader
penguin sportwear’s macro environment. It should include analyzing information along the
path of creating value, evaluating opportunities and focusing on risk, cost and potential for
creating value. Simulations provide options analysis of the scenario provides a rigorous
assessment of organizational decisions. When running scenario models to assess the impact
of individual opportunities and risks, penguin organizations make better decisions about how
to use or mitigate them. The models allow organizations to quantify the probability of success
of an opportunity or risk and the value to be generated or weakened. The scenario analysis
takes into account the external environment in which organizations operate - in particular the
competitive, regulatory and macroeconomic environment.
The analysis also covers behavioral issues, such as knowledge of the drivers of cost, risk and
value. After providing information on the long-term availability of the necessary resources,
the business model can be assessed for suitability and resilience to the market. Activities are
prioritized based on their impact on performance. Management accounting transforms
information into insight by analyzing the impact on the results of the considered scenarios.
These options have different impacts on the organization's cost, risk and value. The scenarios
illustrate the trade-offs between one option and the other, so that opportunity costs are taken
into account in decisions. Management accounting prioritizes actions using solid scenario
model logic to justify the actions taken. An in-depth understanding of the organization's
strategic objectives, stakeholder needs and agreed objectives means that the priority of
actions is value, not cost.

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1.4. Stewardship builds trust
Objective: to actively manage relationships and resources so that the financial and non-
financial assets, reputation and value of the organisation are protected.
As previously stated, an effective management accounting function is one where competent
people apply principles to their practice areas. People who consistently adhere to good values
and best practice become trusted guardians of an organisation’s value.
Improving decisions and building successful organizations, responsible planning and
managing resources ensure their availability for future generations. Relationships give
organizations access to resources. Trust is the foundation of good relationships, be it between
colleagues or between organizations and customers, investors, suppliers and the general
public. Management accounting professionals are considered to be ethical, responsible and
aware of the organization's values, corporate governance and social responsibility
requirements. This principle includes being alert to potential conflicts of interest and not
placing short-term personal or commercial considerations over the long-term interests of the
organization or its stakeholders. This requires management accounting professionals to be
honest and objective (and encourage colleagues to do so) and to constructively challenge any
decisions that do not align with corporate values. Accountability and credibility management
accounting professionals are accountable to their direct customers and other stakeholders for
decisions related to their making.
Accountability for decisions reduces the risk of rash or inappropriate decisions. Management
accounting professionals are required to balance the needs of the various stakeholders
involved in the decision-making process and to address the issues of any individual or group
that may or may not be influenced by the decision.

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Awareness of conflicting interests improves stakeholder management and is an important
aspect of setting stakeholder group priorities. The proactive search for feedback and the
clarification of doubts or complaints facilitate the work of those interested in the
organization's results. This increases the organization's trust, credibility and legitimacy and
has a positive impact on improving processes and reputation. Sustainable development
sustainable organizations achieve long-term economic results, generating positive value for
society and minimizing their environmental impact. Management accounting aligns
sustainability activities with strategy, linking them to business drivers and the business
model. It provides decision makers with information on sustainability factors to integrate
them into business planning and reporting. Economic, environmental and social risks are
identified systematically. Long-term resilience requires organizations to adapt to the
impending depletion of scarce resources. It must reduce its dependence on fossil fuels,
develop the appropriate skills, recognize and seek to minimize the negative social and
environmental effects of its activities.

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2.explain different types of management accounting systems in context of
penguin sportswear ltd.
The various types of management accounting systems and their role in integration with
various organizational processes related to penguin sportswear ltd. Are discussed. Further last
two systems of management accounting are elaborated and discussed with their essential
requirements as below:
2.1. Job costing system
This is a system to assign manufacturing cost to each individual product while keeping track
on expense monitoring. Penguin sportswear can use this system when the products are
identical to keep track of order expenses. Job costing accounting procedure consists,
receiving enquiries from the customer is concerned about the quality of the material. Price of
material and time took to complete the order. Estimating price of job, when the job costing is
done by the accountant keeping in mind customers tastes and preferences. Order receiving,
the order will be placed if the customer is assured of the price. Production order, the
production order is placed for beginning the production process. Cost recording, every aspect
of the cost in the production process is recorded. Completion of job on completion, a report is
given to accounts department for final costing of the job. Finally, the comparison is made
with reference to estimated cost.
2.2. Price optimizing system
Price optimizing system is used to take control of the prices of resources. Price optimizing
system can be used in deciding the prices of the multiple products at a time. The system helps
in determining how demand will fluctuate at different price levels. The company penguin
sportswear can use this system for tailoring the prices for customer segments by simulating
their responses to different price levels (weygandt, et. Al., 2015).
Penguin sportswear will use this type of management accounting system as it will help the
organisation in determining pricing structures for promotional pricing, initial pricing, and
discount pricing. Price optimizing system considers factors such as product life cycle,
category goals, and competitors pricing strategies before deciding the prices of the product
within the organisation.

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2.3. Cost accounting system
The system helps the organisation to estimate the cost of the product while analysis can be
made of organisational profitability, inventory and cost control. The two basic cost
accounting systems are job order costing and process costing. The two essentials for good
cost accounting system are. Cooperation and participation of executives required by various
departments – this will ensure appropriate cooperation and participation in the building
process of cost accounting system which can help the management in correct ascertainment
of the cost of products. Flexible and simple, the cost accounting system developed should be
flexible and easy to understand and execute. It should also meet the requirements of various
users and adapt according to company’s requirement.
2.4. Inventory management system
This type of management accounting system is concerned with supervision and management
of stock and non-capitalized assets of the enterprise. Organisational processes in penguin
sportswear. Can be integrated with this type of system to achieve efficient and effective flow
of inventory within the organisation and at the point of sale. The two essentials are,
forecasting and replenishing strategies–this helps the organisation in advance management
and planning of cost requirements of the company. Management of inventory both physically
and monetarily
– various benefits like cost reduction and appropriate inventory management is achieved with
this.

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3.explain different types used for management accounting reporting? Explain different
types of management accounting reports.
Various management accounting reports assist management in preparing relevant
management reports that rely on their forecasts to make critical business decisions. They
provide managers with accurate and reliable statistical and financial information. The various
reports prepared by management and their benefits are discussed.
Budget reports - budget reports define a plan for analyzing the company's performance as
you evaluate the department's performance and control costs. Actual expenses incurred in
previous periods are used to prepare the budget. These budget reports are used as incentives
for employees to motivate them to achieve their goals. Forecasting the future budget based on
these reports helps the organization to integrate the efforts of different departments to achieve
the overall objective of the company.
Accounts receivable aging report - this type of report deals with the management of
accounts receivable in accounts of companies dedicated to credit to their customers. Invoices
are properly segregated to reflect the customer's balance of how long they are due. Indicates
problems related to the company's debt collection process. An analysis can be made in
relation to the company's credit policy and the need to tighten the credit policy. This ensures
that you reduce past-due debts and keep your business liquid.
Job cost reports - labor cost reports are about identifying costs, expenses and profitability
for each specific task. The profitable aspect of projects can be assessed so that the company
can focus its efforts on interested parties, while limiting its efforts to less profitable business
activities. These reports also include an assessment of costs during project implementation so
that waste areas can be addressed and the project is profitable and viable.

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Inventory and manufacturing reports - companies involved in production processes
prepare these types of reports to make the production and inventory process more efficient.
These reports include labor costs, unit overhead, and inventory losses, which allows
managers to compare different assembly lines and improvement opportunities that can be
used by different departments and their employees.
Performance reports - differences calculated by comparing actual results with budgeted
results are analyzed and reported in performance reports. They are usually prepared annually,
but can also be prepared monthly or quarterly. Purchasing information report - purchasing
information report helps management to track trends in their operations efficiently and
effectively. The different types of reports produced in this type of report help to integrate
management activities in order to obtain low costs for placing and managing orders.
A business situation or opportunity reports - reports are prepared for the management so
that it is well informed about the occurrence of a certain event. Preparing a well-prepared
situation or opportunity report helps management make important business decisions
regarding events and their understanding. The benefits of management accounting systems in
the context of penguin sportswear.
System advantages job costing system
Penguin sportswear will help. Estimating all types of costs throughout the production process.
This will avoid duplication of efforts, as the same work will be reflected. Helps to assess the
quality of the work performed. Penguin sports wear's price optimization system can
determine the customer's mindset based on different prices. Helps maximize operating profit
at the best prices. Help with customer segmentation.
Penguin sports wear's cost accounting system can measure the performance of your processes
and then help you make improvements to help your company consolidate and reduce prices.
Provides information needed for planning. Inventory management system. With this system,
penguin sportswear can improve the accuracy of warehouse orders. It will improve efficiency
and effectiveness and help you save

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Activity 02
1.prepare company’s income statement using marginal and absorption cost techniques, for the
second month. Consider 50,000 units were produced & 60,000 units were sold in the second
month and there were no closing inventories
Absorption costing
Sales 600,000.00
Less-cost of sales
Opening inventory 70,000.00
Variable product cost (4x50000) 200,000.00
Fixed manufacturing 150,000.00 (420,000.00)
Gross profit 180,000.00
Les-non-production cost
Variable product cost (1.5x60000) 90,000.00
Fixed cost 40,000.00 (130,000.00)
Profit 50,000.00
Marginal costing
Sales 600,000.00
Less-cost of sales
Opening inventory (4x10000) 40,000.00
Variable product cost (4x50000) 200,000.00
Closing inventory - 240,000.00
Gross contribution 360,000.00
Les-variable selling cost (90,000.00)
Less-fixed exp
270,000.00
Manufacturing 150,000.00
Non-production 40,000.00 (190,000.00)
Profit 80,000.00

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The cost method used by the company in marginal costing approach
Reconciliation - for the first year
Absorption costing profit (40,000.00)
(closing - opening) x OAR
(0-10000) x OAR 30,000.00
Marginal costing profit (10,000.00)
If the company uses the marginal costing approach it would result in the loss of 10000, if the
absorption costing is used it would result the worth of 40000.
Penguin Sportswear used the marginal cost approval method it has both the advantages and
disadvantages. Variable costs can change time to time but the marginal cost is mostly stable it
remains the same. Even the volume increase or decrease there won’t be any changes in
marginal cost. Also, its divided cost into fixed and variable so the management of penguin
sportswear can control the marginal cost effectively. This helps to determine the selling price
of the products of sportswear’s. Using the marginal costing penguin can identify the floor
price, any price above the floor price can increase the total contribution.
In marginal costing, semi variable and semi fixed costs are not considered, when new
equipment’s or assets are introduced fixed costs and variable cost can change, they may
change and give unrealistic results.

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Reconciliation - for the 2nd month
Absorption costing profit 50,000.00
(closing - opening) x oar
(0-10000) x oar 30,000.00
Marginal costing profit 80,000.00
Variable costing and absorption costing often produce different figures for net operating
income. The reason is that fixed manufacturing overhead costs are not treated the same in
two costing methods. To understand how the difference in the treatment of fixed
manufacturing overhead changes the figures for net operating profit for two cost systems,
we need to prepare two income statements, one low variable cost and the other low
absorption cost. In variable cost, fixed manufacturing overhead costs are not included in the
cost of the product, but are charged to the income statement for the corresponding period in
their entirety. Therefore, the ending inventory does not absorb any part of the fixed cost.
While using absorption cost for Penguin's financial statements, penguin management uses
variable costs for decision making. The company made decisions about marginal cost. With
absorption cost, fixed overhead costs, such as marketing, were allocated to inventory. The
absorption cost considers all fixed overhead costs as part of the cost of a product and
allocates it to the product. This treatment means that as inventories increase and possibly
carry over from the production year to the actual sales of the units in the next year, the
company allocates a portion of the fixed manufacturing overhead from the current period to
future periods.
The transfer of inventories and general expenses is reflected in the final inventories at the
end of the production period, which become the initial inventories at the beginning of the
following period. The transferred units are expected to be sold in the next period. If the units
are not sold, costs will continue to be included in the cost of the units until they are sold.
Finally, when a sale occurs, when this occurs, deferred production costs, such as fixed
overheads, become part of the cost of products sold and are included in the profit and loss
account during the same period. This approach is based on the principle of cost recognition,
which is one of the pillars of accrual accounting and, therefore, the absorption method is
compatible. The standard determines that expenses must be recognized in the period in
which the revenues are generated. Including fixed mark-up as a product cost ensures that
fixed mark- up is included in costs (as part of the cost of sales) when a sale is reported.

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Activity 03
3.1. What are the most important planning tools for budgetary control that you
recommend to be used at penguin? Explain the advantages and disadvantages to
penguin of applying the said tools.
Budget planning tools are used in companies to manage, plan and forecast a company's
budget, which must then be implemented and managed to achieve the desired goals and
results. Today, companies are becoming more advanced in planning their strategies, penguin
sportswear also has to follow the same techniques, which has shifted trends from traditional
budgeting tools to cloud-based budgeting tools and software. Online budgeting tools are also
an excellent option for companies to manage their budgets in an organized and agile manner.
Planning tools require minimal supervision and training and are very easy to implement. The
types of planning tools and their application to budget preparation and forecasting are pestle
and swot.
Pestle- this type of planning tool helps in combining several budget functions with penguin
sportswear company-wide management tool provides an integrated plan for the company as a
whole. Provides the ability to manage the various expenses and resources available in the
company while managing project budgets. The main features of these tools are budget
planning and forecasting are the main features of this tool, reports and financial analyzes help
in assessing budgetary goals and actual results. There are no limits to project budgets, billing
and automation of professional services, provides an automatic invoice revenue stream that
helps with better forecasting and planning.
Swot- this means that the tool includes many smaller tools for managing resources available
in the company and planning budgets by identifying the streaghnths weaknesses opportunities
and threats. Several features of this tool are, help with planning, forecasting and management.
Relevant financial, regulatory and management reports that help you make better decisions
and evaluate performance.

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Planning tools applications
Pestle provides penguin sportswear with multiple budgets key factors by environment
analysis and instead of using different tools to manage finances, construction and clients, it
acts like a unique budget control solution. It also combines budgeting and online project
management, which in turn helps you manage your entire business in one solution and access
the entire financial database in one place.
The swot tool will provide penguin sportswear with an integral product that constantly
updates with strength, weakness, opportunity and threats. It can scale as the company grows,
and forecasting becomes much easier thanks to the flexibility and adaptability of the tool. It
will be better to prepare budgets and the allocation of resources can be assessed and analyzed
to ensure the company's operational efficiency.

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3.2. The different types of common costing systems that can be used for budget control,
and how costing systems can differ depending on the costing activity.
Costing system overview application of the system in budget control diversification the actual
costing system this is a costing system that records the cost of a product based on the actual
cost of material, labor and indirect costs incurred per product, is allocated based on the actual
amount of the allocation base observed in the reporting period. It is a simple costing system
that requires no prior planning of standard costs. A cost estimate based on a real costing
system helps management prepare budgets and set standards to achieve company goals that
are practical to achieve. It does not take into account any budget values or standards, instead
it uses actual cost data. Normal cost system normal cost system uses the budgeted overhead
amount to calculate product cost. This results in much less fluctuation as it is based on the
expected overhead for long term fluctuations. It uses an estimated long-term overhead rate,
which provides costing where sudden spikes in costs are not expected. Estimating the
production overhead helps you calculate costs related to the long-term aspect.
This will assist in preparing budgets for the future aspect of the project. Normal costing uses
the actual cost of materials and labor, but uses budget overheads. If you get any difference
between standard overhead and actual overhead, you can charge for products sold. Standard
costing refers to cost accounting in which the expected cost is replaced by the actual cost in
the books and then the standard costs allocated to the production units help to control the
associated costs. Budgetary cost of activities related to

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3.3. Budgets can be used for planning and control, from budget preparation to different
types of budgets and the behavioral implications of budgets for budget control.
As a planning resource, budgets help the organization to develop a financial plan that
includes a demonstration of how the organization will acquire the necessary resources and
use them in various activities over a period of time.
They represent expected values, as opposed to historical financial performance data. Budgets
also create a controlled environment in the company because they have an efficient and
effective set of internal controls that guarantee compliance with the management policies and
procedures built to achieve the goals. Budget deviations are derived from performance
reports that are then quickly identified and managers are aware of the significant issues
surrounding the causes of performance deviations. The different types of budget include:
capital budget - capital budget includes receipts and payments of capital. It refers to a budget
that allocates money for the issue and maintenance of fixed or long-term assets, such as land,
buildings, machinery, etc. It helps penguin sportswear to control expenses that can influence
the company's long-term decisions and provides strategic direction to the company.
The preparation of a capital budget involves several steps. Prepare a statement of the
company's objectives. Cash flow analysis to determine costs and revenues. Estimate the
expected cost of expenses and estimate the resources needed for this investment. Create a
spreadsheet based on the information collected and make decisions on your behalf. Operating
budget - prepare an operating budget showing your company's expenses, projected costs and
expected revenue for a specified period of time. In the case of penguin sportswear.

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Various planning tools assist management in identifying financial problems using
management accounting techniques and tools. The information obtained by using these
planning tools helps to define strategic directions and make financial decisions that can
contribute to the financial success of the organization. The tools will help in implementing
controls and making investment decisions. The analysis and interpretation of financial data
will help in the preparation of external reports, which in turn will ensure the company's
sustainable development. The project will have a significant impact on sustainability issues
by implementing planning tools.

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Activity 04.
4.Compare any other organization which operates with the similar business activities
and explain how organizations are adapting management accounting systems to
respond to financial problem and Conclusion
In recent years, business conditions have developed in which information has been identified
as the most important source of measuring the company's performance, identifying financial
problems related to variations in a standardized set of performance indicators. This has led to
the use of various management accounting techniques that set benchmarks, use financial and
non-financial key performance indicators (KPI) analyze a company's performance with
another company which uses the similar business activities.
When comparing both organizations KPI, its focuses on the long-term sustainability aspect.
The use of budgetary control in the planning and conduct of penguin sportswear. It will help
the organization to focus on the fulfillment of the standards defined for the intended results,
aiming to achieve the assumed objectives of the company KPIs are financial and non-
financial measures that most companies use to reveal their success in achieving long-term
goals.
If penguin sportswear finds dissatisfaction and loss in future sales. Therefore, it must be
compared with competition and customer satisfaction. Combine the results in these related
dimensions to reflect the big picture. Brand awareness and company profile measuring a
company's brand and profile can reflect its future growth and development. This should
include dimensions such as high loyalty, name recognition, perceived quality and other
characteristics, such as patents or trademarks.

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The role of management accounting in the sustained success of a business, comparing to
other companies’ managers of penguin need to support more on strategic and sustainable
objectives with the strategies and policies to be developed, management accounting tools and
techniques, such as marginal costing, standard costing, profitability analysis, etc. It will help
to integrate persistent considerations into different decision-making processes. Penguin’s
management accounting helps generate sustainability impact reports to help understand
pricing and budgeting decisions and strategic planning. Helps the managers to develop a
reporting strategy that takes sustainability considerations into account, which in turn allows
you to report financial and non-financial information.
Strategic planning is about making strategic corporate decisions about the types of markets
and businesses in which a company operates and involves competitive decisions about how to
compete in the market. Strategic planning, therefore, uses management accounting
information from various management systems, such as costing, budgeting and performance
measurement systems, as well as from internal and external sources within the organization.
Penguin sportswear's administrative accountants, using a variety of techniques, can assist in
implementing these strategies using the planning and control systems described as, budget
systems - long-term plans must be linked to these systems to create budgets that can support
organizational strategies. Performance measurement systems can be used to compare current
performance with the performance of related budgets and several other objectives that focus
on organizational strategies

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5.Advantages and Disadvantages of different types of planning tools to control budget
5.1. Budget
A Budget is an estimate of revenue and expenditure over a specific future period, its compiled
and reevaluated on a regular basis.
5.1.1. Budget control
Administrative control system in which the actual income and expenditures are compared with
the projected income and expenses so that can see whether that plans are being followed and
whether those plans need to be changed to make profit.
5.2. Different types of budget
5.2.1 Capital Budget
Capital budgeting’s is the process by which a business terminus and evaluates potential cost or
investments that are large in nature. these costs and investments include plans such as building a
new plant or investing in long term endeavor. Often the lifetime cash inflows and outflows of a
future plans are evaluated, also known as an “investment Estimate” To determine if the potential
income generated will meet the target.
5.2.2. Operating Budget
A Compressive plan of all revenues and expenses estimated based of forecast sales revenue over a
specific period (Usually one year) It usually one year ) It Usually has several sub- Budgets , the
most important being the sales budget, which is pretend frost , since the operating budget is a
short term budget , capital expenditures are excluded because they are long term expenses
5.2.3. Primary Budget
A Primary Budget is the sum of company’s Personal Budget, which is designed to present a
complete picture of its financial performance and health. The primary budget allows companies to
set goals and evaluate their overall performance by integrating factors such as sales, operating
expenses assets and revenue streams, as well as the performance of the individuals spending
centers within the organization, master budget are often used in large companies to streamline all
personal managers.

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5.2.4. Cash flow Budget
A cash flow budget is a way of figuring out how and when money comes in and out of a business
over a period of time. This can be helpful in helping a company determinate it managing its
money wisely. Cash flows budget consider factors such as accounts payable and accounts
receivable, whether a company has enough money to continue to operate, how much money its
produces and the potential for making money int the future. a construction company for example
can use this cash flow budget to determine if it can start a new building project before it is paid
for the work is doing.
5.2.5. Financial Project
A financial project presents a copanys stratergy for the managing its resources, cash flows,
income and expenses. The Financial Budget is use to establish an image of a company’s financial
health and to present a comprehensive overview od its expenditures compared to determine its
value in the context of a public offering ir merger

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5.3. Advantages of Budgeting
5.3.1. Forecasting
A Business Budget not only helps plan annual expenses, But also allows to see the costs
as they occur, For example, Averaging Insurance premiums per month hemps set the
monthly income targets, Budgeting the right amount of money to pay their premiums in
the coming months helps to manage cash flows to make sure that the Money to pay the
bills each months. Budgets also allow to predict annua baseline using more than one
revenue scenario.
5.3.2. Pricing
Market conditions such as the prices of companies sure not only parameters that set fees, rates
and prices. need to know the production and overhead cost before setting prices. A Budget allows
to plan utility, health care, marketing, rent wages credit services and other expenses so can know
the actual cost of per unit of making products or providing services. Once know this. Set of prices
to make the profit wants. If This price is too high for the compete in market, can use budget to
identify the areas where can rescue cost.
5.3.3. Capital and Credit Procurement
Some Venture capitalists, banks, supplies or other lenders will lend money or loans, If not have
assets that can use as a network will need to show financial statements providing that are stable.
If are a new business or expanding. A budget will show how the participation of potential
shareholders will affect sales and profits.
5.3.4. Flexibility
A budget allows monitoring the performance of the business throughout the year, allowing to
make the necessary changes to control costs or maximize cost to use growth opportunities the
budget will let know if marketing is effective and id have the funds to increase advertising to
grow the sales if sales are slow, the budget identifies areas where can reduce costs to make more
competitive or to wander around in slower seasons.

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5.4. Disadvantages of Budgeting
5.4.1. Consider only the financial consequences
The Nature of the budgeting is number. So it tends to focus management on the size aspects of a
business. This is usually aimed at improving or maintain profitability. in fact, customers do not
worry about the profitability of a business they buy only from the company until they receive
good service and well structures products at a reasonable price. Unfortunately, these ideas very
difficult to create on a budget because they are standard in nature. Therefore, the budget concept
does not need to support the needs of the customers
5.4.2. Blame for outcomes
If a department does not achieve its budget results, the department manager may blame any other
department that provides services for not adequately supporting his department.
5.4.3. Cost Allocation
The Budget may suggest that a certain amount of overhead costs be allocated to different
department and managers pf those departments may take issue with the allocation methods used
this is a particular issue when departments do not allow services provided within the company as
an alternative to low cost servies available elsewhere.
5.4.4. Use it or lose it
If a Certain amount of expenditure is allowed for a department, the department manager may
approve the last-minute expenditure on the basis that his or her budget manager approve the
expenditure if the department does not know that all the funds will be spent during the budget
period. His Budget tends to convince managers of that.
5.4.5. Time Required
It can Take long time to create a budget, especially in a poorly organized environment, which
may improve several revisions of the budget. If there is a well-designed budget procedure and
employees become accustomed to his process the company will use budget software. If business
conditions continue to change, the tasks required will be more comprehensive, which calls for a
series of revisions to the budget model

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5.5. Alternative methods of budgeting
5.5.1. Budget based on Zero
In a Dynamic Business it makes more sense to start fresh when creating a budget than to rely too
heavily on ideas about the past performance. this a appropriate for kraft because the system is
constantly seeking innovations. so every budget is built without mentioning much about the
previous budget. In this way. Change is structures in budget thinking.
5.5.2. Strategic Budget
This Includes Identifying new, emerging opportunities and then developing plans to make full use
of them this is closely related to zero – based budget and allows kraft to focus on gaining
competitive advantages.
5.5.3. Strategic Budget
Considering the speed of change and the general uncertainty in the external environment,
shareholder seek quick results. Company typically reports to stakeholders every three months,
compared to six months, rolling Budget include evaluating the performance of the previous
twelve months on a current basis and forecasting the performance for the next three months.
5.5.4. Activity based Budget
It explains individual activities and evaluates the strength of their contribution to the success of
the company. then can be ranked and prioritized and appropriate budgets allocated,
5.6 Approaches Budgets
5.6.1. Zero Bases Budget
Zero based budget for any activities is set to zero. All cost, including justification or recuring
cost, must be justified in the basis of cost or benefit.
5.6.2. Top-Down Approach
This is called the top- down approach because the budgets are made by the top executives and
then the money is sent to different departments this approach is used in the cost – effective
percentage of sales, the competitive equilibrium system and the investment in the budgets
revenue.

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5.6.3. Bottom – Up Budgeting
Promotion adjectives are set up to tasks in this manner. All necessary steps are planned to achieve
the goals. the cost of these activities is the curtain and the budget. The total advertising budget in
then approved by the top management. It is also about knowing the approach to the structure of
the budget
5.6.4. Basic Budget
Continues funding is provided to a sector at the beginning of each budget period the basis budget
is used to keep the department functioning. and this is derived from changes such as expenditures
and inflation in the previous year. It is not designing to finance special projects. See also – non
basis budget/

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