Managerial Accounting Research and Review

This assignment involves a critical review of managerial accounting research, covering topics such as management accounting change, innovation, and sustainability. It includes analysis of articles and journals from reputable sources, providing an in-depth understanding of the current state of managerial accounting practice. The assignment aims to assess students' ability to critically evaluate research in management accounting and apply it to real-world scenarios.

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting is an approach used by companies to analyse their cost and
spending so that financial reports would be produce which would assist manager to take their
decision accordingly. For this report, manufacturing company Unilever is taken for discussion
which deals in food, households, personal care etc and co headquarter in United Kingdom and
Netherlands (UK’s Biggest Manufacturing Companies, 2019) Details analysis of Management
accounting will be done by considering its types, advantages, disadvantage, techniques etc.
Besides this, various approach would be explained in the latter part which assist companies to
save their profits and cost. At last, comparison will be done on different companies on the basis
of their management accounting systems.
LO1
P1: Management accounting and various type of its structure
Management accounting is way of presenting information regarding the accounting of the
company so that management would be able to plan their goals and objective accordingly. Main
role of it is to plan and organise the business operations according to company available funds so
that maximum utilisation of resources would be attain. For instance, if Unilever specific product
is not achieving its pre sales target then management accounting helps to identity the problems
product is making and then make strategies according to their strengths and weakness. Different
types of management accounting is given below,
 Job costing system: Job costing is a type of system in which manufacturing cost of each
product will be calculated instead of the whole process (Otley, 2016). But in JC system,
whole process cost is accumulated and then analyse it with each product cost with the
aim of finding the reason due to which more or less cost is incurred. It can assist Unilever
to reduce their cost as they have hundred of specific product which they sell in the
market. This costing system is necessary for Unilever to get exact estimation of their cost
composition in given point of time and also to adjust profit making in same context. Job
costing system is majorly calculated, when each and every items or level of product in
manufacturing on specific basis. Main aim of this system is to reduce the production cost
so that more profitability would be achieved by company.

 Inventory management system: It is a combination of technology and accounting in
which main role is to track the status of the products and services available in the
company so that demand analysis would be accomplished. Inventory management system
is basically taken into consideration, when any inventory has been bought from supplier's
and also which needs to be store area. In this, proper techniques of its management is
important. It would be helpful for Unilever as they are into manufacturing so that they
can track the record of inventory present in the company and how much is requires in the
future. Also, this will be choice for Unilever to manage their inventory on an optimised
basis along with suitability to save cost and expenses on acquisition of more inventory.
Aim of using this is to manage the inventory according to the goals so that inuring cost
would be reduced to a certain level thus increasing profitability of Unilever.
 Cost accounting system: Cost accounting system is a framework which is used by firms
to estimate cots of production & maintenance of their products or services to generate
adequate profitability. This cost system is generally prepared, when firm's are looking to
increase its business performance & enhance major productivity in return of cost incurred
in production of any defined goods or services. It will assist Unilever to identification of
the whole cost incur for making the product like fixed, variable cost etc. If all the cost
incurred is identified then it becomes easier for company to analyse their profits or loss
and how they could improved in the future. For instance, it would be easier for Unilever
at the time of doing cost benefit analysis or finding break even point.
 Price optimisation system: It is an approach which provides the cost to the company
which they should charge from the customer so that higher profits would be acquired by
providing highest value proposition. Price optimisation system is taken into care, when
Unilever will go in process of maximising their profit generation at an optimised level. It
will assist Unilever to find cost where company can earn the profit without disturbing the
demand of it. For instance, Unilever can set their product price with the help of price
optimisation so that their profitability would increase in the future.
Difference between financial & management accounting
Basis Financial accounting Management accounting
Meaning Financial accounting is a system that
majorly focuses on preparation of
This type of accounting provides
relevant information to a manager's to

financial statement of a business
entities to identification of its
financial position.
led making of policies, plans and
effective strategies for running
business operations effectively.
Time frame Financial statements are majorly
prepared at an end of an accounting
period which is minimum of one
year.
In this, reports are also prepared as
per the needs and requirements of a
business entities.
P2: Methods used for management accounting reporting
As mentioned above, management accounting role is to help management while
planning, organising, regulation so that effective decision making would be implement in the
company. If proper decision making process is taken by managers then chances of taking right
decision is also high which could leads to better performance in the market. Different types of
management accounting reports used by Unilever is explained below,
 Budget reports: It refers to a collection of different types of expenditure company is
going to spend on the making of products and services. This assist Unilever to identify
the profits and loss company is going to face if they work according to their potential.
Besides this, it also help Unilever to compare between the expected budget and real incur
so that gap would be fulfilled accordingly.
 Account Receivable Aging Reports: This report manages the whole transaction of
company which is done on the credit basis. Main aim of using this approach is to identify
the monetary value which company is likely to get in the future from creditors
(Quattrone, 2016). As Unilever is one of the largest company, there are many vendors
who bought product in a credit basis so it assist them to manage thousands of creditors. It
also brings transparency in the accounts due to which defraud would be avoided.
 Cost accounting reports: Main role of using this approach is to find out the profits or
loss of the company. Every expenses incurred in product making is calculated so that
profit after and before tax would be identified. It helps Unilever to determine the profit or
loss company is making from their product selling. Apart from it, all the extra cost which
does not contribute in final products also calculated like inventory cost, overhead cost

etc. It provides accurate and exact financial status of the company so that they can make
their future strategies accordingly. Performance reports: It is a report which consist of performance of each and every
employees and overall company performance so that it would be compare with the pre set
goals of the company (TYPES OF MANAGERIAL ACCOUNTING REPORTS, 2017).
Beside this, it also helps while assessing the performance of the employees so that
appraisal would be awarded accordingly. It assist Unilever managers to make their
decision regarding future plans according to the strengths and weakness of it.
Benefits of management accounting systems
Benefits of Cost accounting system
 It assist company to throw lights on the profits and losses of the company and how they
could improve their performance in the future.
 By using this approach, Unilever can set their price of product according to their
expenses and pre profit target.
Benefits of Inventory management system
 It helps company to make their financial reports accurately as all the information related
to inventory is measured and recorded.
 It is important to set the inventory of the company as high inventory leads to high
expenses thus lower profitability for company. So it prevents wastage of product and
stock outs.
Benefits of Price optimisation system
 This approach assist Unilever to set their prices in which they can earn the maximum
amount of profit while providing highest value to its customers (Maas, Schaltegger and
Crutzen, 2016).
 It helps organisation to make their strategies by changing the pricing accordingly.
Benefits of Job costing system
 Profits and losses from from every activities performed by the company can be identify
and modify accordingly.
 It also provides the information regarding the cost incurred in making the product from
the scratch.

LO2
P3: Appropriate techniques of cost analysis
Absorption cost: It refers to an approach in which every aspect of the manufacturing
cost would be calculated so that overall price of the product would be identified. Different cost
which includes in this approach is direct material, direct labour, variable cost and fix
manufacturing cost (Chenhall and Moers, 2015). This cost has been termed as relevant cost,
expenses and also which is majorly calculated on original pricing or structuring of a cost on an
optimised basis.
Marginal cost: It is the additional money which is incurred while making extra units of
the product and services. It consist of the cost spent on the labour while producing and variable
cost. This type of cost is a add-on to acquire one more change in level of outputs and units
produced to enhance cost benefits. This type of cost is majorly finds by minus one cost by one
more unit added in additional costs for ascertain relevant output based results.
Income statement by absorption costing method:
Working Notes*
Calculation of sales(25*10000) - 250000
Calculation of cost of good sold - 140000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Fixed manufacturing
overhead: 50000+30000+20000+40000)
Calculation of selling and manufacturing expenses - 60000

(Variable selling and manufacturing overhead+ Fixed selling and manufacturing overhead :
30000+30000)
Income statement by marginal costing method:
Working Notes*-
Calculation of marginal cost of sales - 130000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Variable selling and
administration expenses: 50000+30000+20000+30000)
Calculation of fixed cost - 70000
(Fixed manufacturing overhead+ Fixed selling and administration expenses: 40000+30000)
Interpretation- By using marginal and absorption costing method, the company get
income equally i.e. 50000.
Income statement by absorption costing method (When 5000 units sold)

Income statement by marginal costing method( When 5000 units sold)
Interpretation- It is interpreted from the above calculation that the company in facing
loss from both costing methods. While using absorption costing method, the company faces
75000 as loss whereas using marginal costing the company faces 75000 in loss.
Financial reporting document with labour and material variances:

All the data taken in the above report is on Lump sum basis.
Range of management accounting techniques
As mentioned above, management accounting techniques and financial reports are inter
connected with each other as without it financial report can not generated by the company. For
instance, balance sheet, profit and loss account, financial ratio etc. (Shields, 2015). Apart from
this, prices of the product is set with the help of accounting techniques so that Unilever wont face
any losses. So it can be summarise that techniques assist company to make their financial reports
more credible and authenticate so that decision making would be done accordingly.
Produce financial reports
Financial reports consist of all the activities while conducting their business operations. It
includes income statements, P&L account, balance sheet etc. (Wagenhofer, 2016). Main motto
of making report is to provide proper tax to the authority and invest according to the demand of

the external environment. Moreover, these reports are given to the every shareholder of the
Unilever so that they can make their decision of investing in the company accordingly. Apart
from this, auditors are appointed by the external party or government so that no forgery is
committed with the reports as it is the only way through which company performance can be
analysed and monitor.
LO3
P4: Advantages and disadvantage of various types of budgetary planing tools
Budgetary control refers to an approach in which budget is prepared by the company and
then compare with the actual performance company have performed over a period of time. For
instance, Unilever budget is prepared before the work started and when it completed, actual cost
incurred in the operations will be compare and try to find out the gap between them. Main motto
is to find out the performance Unilever have performed in the past and how it would be
improved in the future so that maximum profitability would be attain by them. Different types of
budgetary tools is given below with their advantages and disadvantage,
Master Budget: It is a type of budget in which entire financial plan of the company is
made in the starting only so that activities or business operations would be designed accordingly
(van Helden and Uddin, 2016). It also includes materials cost, labour cost, variable cost etc.
Advantage
 It assist Unilever to set their working operations according to the plan so that higher
potential would be achieved in future.
 It would be easier for company to find out the gap between the expected and actual
results so that they can enhance their performance by reducing the gap between them.
Disadvantage
 To implement this approach, high cost and time is incur, moreover, master budget is
made on the past analysis and environment. So it is hard for them to implement it due to
change in environment.
Flexible Budget: In this approach, budget are modified according to the circumstances
company is facing (Dekker, 2016). Current revenue and expenses of an organisation is taken for
consideration while predicting the variable budget.
Advantage

 It assist Unilever to modify their plan according to the external environment as in static
budget, company can not change their strategies irrespective of changing in environment.
 It is easier for Unilever to make profits from the products and services they offered as
they can change their strategies accordingly. For instance, if company sales is not
according to their pre set goals then company can also change their fixed cost so that less
loss would be incur by them.
Disadvantage
 It is hard to predict expenses of the future due to which credibility of it reduces to a
certain level.
 It is hard for companies to comply with flexible budget as it is hard for them to modify
their business operations more regularly. As fast changes in an organisation affect their
performance in a negative way.
Zero based budget: It is a method in which budget of the company is make from the
scratch and all the expenses which would be incur in the future, be based on the demand of the
external environment (Van der Stede, 2015). All the items in the cash flow statement is re-
evaluated by justifying all the expenses.
Advantage
 It saves some amount of money of the organisation as all the activities which are not
contributing in the final products is removed.
 Main objective of this approach is to attain maximum utilisation of resources by allotting
it according to the demand.
Disadvantage
 It is difficult for company to maintain the expenses which will incur in the future as it
solely depends on the external environment only.
Use of different planning tools for budgeting control
There are different tools which are determined as under:
Variance Analysis: Variance analysis introduces as a quantitative investigation of the difference
between planned and actual behaviour. This analysis is applied to keep control over an
organisation.
 Advantages: This tool supports managers in making detailed, forward looking and
efficient budgetary decisions.

 Disadvantage: In this, Budgeting exercise may be loosely completed which is bound to
deviate from the real numbers.
Standard Costing: It is an accounting system followed by few numbers of manufacturers to
determine the variances or differences between the actual costs of the products that were
produced and the costs that should have happen for the real goods produced.
 Advantages: There are different advantages of standard costing such valuation of stocks,
provides incentives, management by exception, for effective cost control, measure
efficiency and fix price and formulate policies.
 Disadvantage: There are different limitation of standard costing such as; it is difficult in
setting standards, not suitable for all industry and small business, technological changes,
difficult to fix responsibility etc.
Forecasting: A planning tool that supports administration in its attempts to cope with the risk or
uncertainty of the future, depending mainly on information from the present and past and
investigate of trends. Forecasting starts with few assumptions based on the administration's
experience, knowledge, and judgement.
 Advantages: Forecasting is completed by a salespeople who are nearest to the market.
 Disadvantage: Sales forecast are often pessimistic or optimistic.
Budgeting: It introduces as an effective process of developing a plan to spend money. This
spending plan is named a budget. Developing this spending plan allows an organisation to find
out in advance whether they will have sufficient money to do the things. Budgeting is simply
balancing expenses and income of an organisation.
 Advantages: It supports management and gives benchmarks against which performance
can be measured.
 Disadvantage: It may lead to excessive reliance on extrapolation of actual trends.
Contingency Tool: In this approach, some amount of funds is set aside by the company
so that it would be use at the time of urgency. Main motto of using this approach by Unilever is
to protect the future of the company from any kind of threats which they might face in the future.
Beside this, it also assist them at the time of risk management (Salterio, 2015).
Scenario Tool: It is a type of approach in which scenario is made in the starting and then
budget is made accordingly. This approach is less reliable in nature as it is impossible to change

the external environment according to their strengths and weakness. Besides this, it also
consumes cost and time which hampers their performance and profitability.
LO4
P5: Comparison of organisation adapting management accounting systems (450)
Financial problem refers to the obstacle or hurdles faced by the company related with the
money or finance of the business. Its the responsibility of the company to scan the financial
situations on a regular basis so that it would be removed before it affects company's performance
in a negative way. Various problems which are faced by Unilever is explained below,
 Cash flow: It refers to a total amount of money which is been exchanged with the outside
party with the aim of sustaining its business for a longer period of time. It arises within
the company when they does not have proper amount of money to pay their bills or due
amount. Main reason behind this financial problem is low sales of the existing product
due to which incoming money frequency becomes slower (Alsharari, Dixon and Youssef,
2015). Other is poor financial planning which means that company does not able to
utilise their resources to its fullest. This problem is usually faced by Unilever as they
have vast number of product and services which they offer and it become complex for
them to manage their cash accordingly.
 Money management: It is essential for company to manage and track their money
according to the requirement of the environment as then only it would be able to attain
optimum utilisation of resources. For instance, if Unilever spend their half of the
marketing budget on a marketing of specific product then it would create problem for
them as in future they does not have money to spend on other products marketing. So it is
essential for companies like Unilever to set their spending according to demand of the
customer as then only they can perform with their highest potential.
 Working capital: It refers to those money which requires by company to perform their
day to day activities. It is essential to maintain specific amount of working capital every
time as it assist them in smoothing the working operations of the company. Working
capital problem arises when liabilities of the company exceeds its assets (Gibassier and
Schwarzenegger, 2015). Company like Unilever can face this type of situations in the

critical time so to tackle it, some amount of should be mandatory for them to contain
every time so that lack of capital problem would be tackle.
In order to solving above discussed all issues, different techniques will be suggested to Unilever.
Some are determined as under:
KPI: It is mostly essential tool adopted by an organisations due to giving more beneficial
outcomes in return. KPI tool principally emphasis on examine the performance level of workers
by comparing its standard performance with existent. It creates easy for administrators to
analysis hurdles which control their workers to provide their best. In the context of Unilever, KPI
tool can be applied to resolve financial problems by enhancing performance as well as
productivity level of their workers.
Benchmarking: It is technique which can also be adopted by Unilever in order to give
accurate direction to their workers towards desired objectives and goals. The administration of
Unilever can apply such tool via setting pre-determined goals which must be accomplished by its
workers within given time period. Benchmark will be fix on the basis of competitor's strategies
which promote the management of Unilever to update their actual policies as well as plans in
order to attain competitive benefits in complex business environment.
Financial Governance: It introduces to the way an organisation collects, handle,
monitors and manges financial information or data effectively. It includes how an organisation
track financial transactions, handle performance as well as control data, operations, disclosures
and compliance,.
Comparison between Unilever and Mondelez International company is given below,
Unilever Mondelez International
As Unilever is many countries, the
common problem which they faced while
operating their business is cash flow of the
organisation. It creates a negative impact
on the working as working capital becomes
lower which is not a sign of growth in the
future. To tackle it, Unilever can opt for
cost control system in which every cost is
identify and reported after incurring it. It
The main problem which Mondelez faced is high
number of inventory due to which profitability of
the company is reducing. It is important to manage
the inventory as high inventory time leads to
higher cost thus low profits. To manage it,
inventory management system would be
implement in which stock information is recorded
every time raw materials arrives and alert company

leads to reduce in expense of the company
which persuade to better profitability in the
future.
if they have high number of inventory.
Analysis of management accounting leads to sustainability
Main role of management accounting is to manage the funds available in the company so
that maximum utilisation of resources would be attain by them. As if approaches like price
optimization or cost budget is implemented by Unilever then it would be easier for them to make
their strategies accordingly thus better profitability in the future (Wouters and Kirchberger,
2015). If all the strategies work with the planning then it would be able for Unilever to perform
with highest potential which will assist them to attain sustainability in the future.
Evaluation of planning tools
Planning is essential for every organisation as it helps them to make their strategies
accordingly so that maximum utilisation of resources would be attain in the future (Messner,
2016). To cope up with that, Unilever can use approaches like flexible budget, zero based
budgeting etc so that accurate prediction would be made by them with the aim of getting higher
profitability.

CONCLUSION
As from the above report, it can be concluded that management accounting assist
company to manage their funds according to their aim and objective so that competitive
advantage would be attain. Besides this, it also assist them to reduce their cost by removing all
the extra cost due to which profitability of the company is affected in a positive way. Cost
analysis must be implement by organisation in their working operation as it helps them to find
out the cost which they are incurring and how it could reduced so that better profit would be earn
by them. At last, to remove the financial problems, various budgetary controls must be use so
that their performance wont get affected from it.

REFERENCES
Books and Journals
Alsharari, N. M., Dixon, R. and Youssef, M.A.E. A., 2015. Management accounting change:
critical review and a new contextual framework. Journal of Accounting &
Organizational Change. 11(4). pp.476-502.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, organizations and
society. 47. pp.1-13.
Dekker, H. C., 2016. On the boundaries between intrafirm and interfirm management accounting
research. Management Accounting Research. 31. pp.86-99.
Gibassier, D. and Schaltegger, S., 2015. Carbon management accounting and reporting in
practice: a case study on converging emergent approaches. Sustainability Accounting,
Management and Policy Journal. 6(3). pp.340-365.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production. 136.
pp.237-248.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research. 31. pp.45-62.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research. 31. pp.118-122.
Salterio, S. E., 2015. Barriers to knowledge creation in management accounting research. Journal
of Management Accounting Research. 27(1). pp.151-170.
Shields, M. D., 2015. Established management accounting knowledge. Journal of Management
Accounting Research. 27(1). pp.123-132.
Van der Stede, W. A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research. 27(1). pp.171-176.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting. 41. pp.34-62.
Wagenhofer, A., 2016. Exploiting regulatory changes for research in management accounting.
Management Accounting Research. 31. pp.112-117.
Wouters, M. and Kirchberger, M. A., 2015. Customer value propositions as interorganizational
management accounting to support customer collaboration. Industrial Marketing
Management. 46. pp.54-67.
Online
TYPES OF MANAGERIAL ACCOUNTING REPORTS. 2017. [Online]. Available Through:
<https://www.completecontroller.com/types-of-managerial-accounting-reports/>
UK’s Biggest Manufacturing Companies. 2019. [Online]. Available Through:
<https://www.rhnuttall.co.uk/blog/the-uks-biggest-manufacturing-companies/>