Management Accounting : Sample Assignment

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Q.1 Management accounting and its important to integrate management accounting system
within organisation......................................................................................................................1
Q.2 Various techniques and methods utilised for management accounting reporting................2
Q.3 Calculation of cost using appropriate techniques for cost evaluation with marginal and
absorption....................................................................................................................................3
TASK 2............................................................................................................................................5
Q.4 Explain the use of three planning tools in management accounting....................................5
Q.5 Case studies and comparison to management accounting applied to address financial
problems......................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting is recognised as managerial accounting it is an essential
management accounting technique that helps in consolidating the essential information for better
decision making and strategic planning process (Dekker, 2016). This report presents the meaning
of management accounting system and its integration with management reporting. Cost
calculation by using the appropriate cost analysis income statements. Jupiter plc is opted
organisation to execute the process of management accounting. Various type of planning tools
with advantages and disadvantages also elaborated in this report. Use of management accounting
in terms of resolving financial issues for preparing and forecasting budgets in organisations
illustrated with practical based examples.
TASK 1
Q.1 Management accounting and its important to integrate management accounting system
within organisation
Management accounting is a form of recording, arranging and consolidating accounting
information for better management and control. Managerial accounting directly integrated with
the senior management level and authorities.
Job Costing System: Job costing structure of accounting is a process of gathering
information subject to expenses of produce and cost of particular job benefit. It also record the
activity cost of all items that are produced in organization. This framework is utilized by Junior
accountants accountant of Jupiter PLC with the aim of creating objectivity for particular job
sections and furthermore, it helps to cite cost of item which is adequate to consolidated by
gathering data about direct material, overheads and direct labour.
Price Optimisation: Price optimisation is a system helps to determine the price of
products by evaluating perspective of customers and market position of organisation. Junior
accountant of Jupiter PLC utilize this accounting system to deal with marketing scenarios with
adequate benefit. This framework is utilized by organization which depends on their opposition's
market level, construct cost of items and generating order request.
Inventory Management System: Stock administration is an essential requirement of
manufacturing and retail organisations. This accounting framework of helps to manage the
inventory level within organisation (Wouters and Kirchberger, 2015). This will causes them to
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expand efficiency, sales and get higher profit for ventures. It additionally encourages accountant
of organization to register the raw materials stocks, advancement of aggregate costs incurred in
placing orders. There are following methods are used in organisation.
FIFO: This is an inventory technique in which inventories are sold on the basis of first
acquire and first sell out.
LIFO: This inventory technique remain centralised around sale of last acquiring units at
initial stage.
Cost System System: Cost accounting framework is the technique utilized by firm to
record item cost exercises through various generation process. It is critical accounting framework
connected by Junior administration accountant of Jupiter PLC to find out their expense and tasks
for better administration and control.
Integration of management accounting system with evaluating benefits of management
accounting system
It is analysed that various type of management accounting information remain crucial for
calculating and evaluating benefits for better management and control. The process of managing
the changes and valuations are considered with creating the effective decision making process.
Q.2 Various techniques and methods utilised for management accounting reporting
Performance Report:
Performance report is kept up to break down the entire organization execution including
workers. By utilizing this report Junior administration accountant of Jupiter PLC evaluate the
execution and work of their representatives also settle on strategical choices for organization
development. And furthermore by utilizing it association to set criteria to enhance execution
level, to show compliances and so on.
Inventory Management Report:
Stock Management report is made to keep up stock and make creation process more
powerful. Junior administration accountant of set up this answer to get all data about materials
and stocks (Abrahamsson, Englund and Gerdin, 2011). This report additionally give the precise
information of organization opening and shutting stock. A few systems which utilized by
association is turnover proportion and EOQ. For plan of this report utilizing techniques are LIFO
(Last in first out ) , FIFO ( First in first out ) and weighted normal cost strategy for legitimate
examination.
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Debtor's receivable report:
The record receivable report utilizing as a critical instrument for overseeing income when
client provides credit to clients. It remain essential to discover the quantity of unpaid solicitations
that are gathering to amid to particular period and furthermore discover to add up to quantities of
indebted individuals of the organization on account of Jupiter PLC. With the assistance of this
report get ready monetary articulation that are knowing genuine budgetary position of the
organization. In terms of financial management it contains asset report, benefit and losses
account. In this also including income proclamation, changes in value.
Budget report
These reports presents a forecasted information that helps in determining the measurable
aspects for better forecasting and strategic planning. It is identified with genuine incomes and
misfortunes for the benefit of earlier years (Yeshmin and Hossan, 2011). Budget plans reports are
set up based on a years ago costs and earnings since it comprehends where to business spend and
where acquire. So it will gauge of future Budget plans may need to raise to a more unwavering
dimension. Yet, in the report can not make reference to motivating forces gives to organizations.
Q.3 Calculation of cost using appropriate techniques for cost evaluation with marginal and
absorption
Marginal costing
Marginal costing is the determination of total variable cost and the effect on profit of
changes in volume or kind of yield by isolating between and variable cost and fixed costs
(Contrafatto and Burns, 2013). It is a standard whereby variable costs are charged to cost units
and the fixed costs attributable to the critical period is made off in full against the dedication for
that period. In marginal costing, costs are conceiver into fixed and variable costs.\
Income Statement (Marginal Costing)
PARTICULARS PRODUCT X
PRODUCT
Y
Production (Units) (A) 5000 3500
Sales (Units) (B) 4600 3200
Selling Price per unit (in ￡) (C) 180 150
Sales in value (in ￡) (B*C) (D) 828000 480000
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Unit cost :
Direct Material 30 24
Direct Labour 36 24
Variable Production Overhead 24 16
Variable Selling Overhead 2 2
Total (in ￡) (E) 92 66
Total variable cost of production (A*E) (in ￡)
(F) 460000 231000
Opening stock of finished goods (in ￡) (G) 0 0
Closing stock of finished goods (in ￡) (H) 36800 19800
Total variable cost of goods sold (in ￡) (F+G-H)
(I) 423200 211200
Contribution in value (in ￡) (D-I) (J) 404800 268800
Total contribution (in ￡) (K) 673600
Fixed Cost:Production Cost (in ￡) (L) 210000
Administration cost(in £) (M) 54000
Profit (in ￡) (K-L) 409600
As per the above calculation it is analysed that profit from marginal costing was
calculated as £128800 for products X and the profit for the product Y was calculated as £140800.
total variable expenses are considered in this costing method for analysing profitability.
Absorption costing
It is a method of calculating cost and profitability of products by consolidating fixed
production overheads and overall variable cost. These costs are not seen as expenses in the month
when a substance pays for them. Absorption costing gives an extensively more broad and exact
view on the sum it genuinely costs to make stock then the variable costing system. Products may
adjust a wide extent of settled and variable costs (Zainun Tuanmat and Smith, 2011). It not
simply clarify the cost of materials and work, yet furthermore both variable and settled gathering
overhead costs.
Income Statement (Absorption Costing)
PARTICULARS PRODUCT X PRODUCT
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Y
Production (Units) (A) 5000 3500
Sales (Units) (B) 4600 3200
Selling Price per unit (in ￡) (C) 180 150
Sales in value (in ￡) (B*C) (D) 828000 480000
Total of sale (E) 1308000
Cost of sale :
Direct Material 138000 76800
Direct Labour 165600 76800
Variable Production Overhead 110400 51200
Fixed Production Overhead 300000 140000
Variable Selling Overhead 9200 6400
Total of above cost (in ￡) (F) 723200 351200
Total of (F) (in ￡) (G) 1074400
Gross Profit (in ￡) (E-G) (H) 233600
Administration Cost (in ￡) (I) 54000
Net Profit (in ￡) (H-I) 179600
The above information shows the calculation of profit and loss of products by
implementing absorption costing. Calculations are made by considering total variable cost as well
as fixed production overheads. There is a loss calculated of -£26892 for product X and £110030
profit for product Y.
TASK 2
Q.4 Explain the use of three planning tools in management accounting
Planning tools are reckoned as a supporting methods that helps in decision making,
strategic management, planning, forecasting and controlling process. There is a vital use of
planning tools found in budgetary control. There are different types of budget which is essential
to prepare in order to execute business activities in an effective and efficient manner. Such kinds
of budget includes:
Production budget: It includes the cost and expenses which are incurred during
producing products and services depends on the market demand. For example, direct material,
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direct labour etc. which is used to manufacture products. It can also be classified as direct or
indirect cost as to a factory department. Jupiter Plc is engaging in manufacturing sector due to
which it is important for management to prepare such budget to facilitate production team to
produce products without facing any interruptions.
Cash budget – It is defined as an estimation of inflow or outflow of cash with in an
organisation, it is estimated for a particular time period. With the help of this, Management of
Jupiter Plc can know about their financial efficiency for doing a particular operation.
Financial budget – This kind of budget provide prediction of income and expenditure to
the organisation for short time or long time period. It also gave assistance to the Jupiter Plc in
handling the cash flows through which, they can achieve their targets in allotted time period.
Various type of planning tools are used in planning process, some of are as follows;
Scenario tool
It is a method of creating different type of images and framework of tasks and projects.
This tool presents wide range of scenarios and alternate options regarding planning. There is a
qualitative perspective and quantitative data is used for creating scenarios. These sections not
only helps in determining the required changes and variations but also helps in managing the
complex business scenarios for better forecasting and planning process (Arjaliès and Mundy,
2013). It produced basic idea and approach to set up future planning and maintain possibilities for
better evaluation and process in order to determine relevant sources and variations. There is a
vital use of this planning tools in multinational organisation. For instance Jupiter plc utilise
scenario tool to predict future feasibility and products sale graph in more effective way.
Advantages
 It is essential to analyse the particular scenario for specific task and projects
 Possible risk and conflicts can be easily determined through implementing
scenario tool.
Disadvantages
 It is difficult to determine best option among various alternatives.
 Contingent decisions can not clearly determined by evaluating the futuristic aim
and objective of organisation.
Forecasting tool
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It is a tool that presents the forecasted results on the basis of past and current trends.
Various type of electronic tools such as computers, AIS system and graphical representations of
information (Chang, 2013). It is a process of estimating future activities and fluctuations of work.
The process mainly helps in analysing these project for facilitating changes in organisation.
Internal and external communication channels with in organisational time limits are evaluated on
the basis of effective forecasting process. The changes in various transactional changes and
valuation mainly affect the process for better change and development of business. Retail
organisations such as Tesco uses forecasting tools to evaluate the forecasted sales records for
upcoming time span.
Advantages
 This helps in analysing the predictions for better estimation and changes.
 It is beneficial for retail and manufacturing organisations deals in consumer
products.
Disadvantages
 Lack of consistency and management is one of the main negative point that crate
complexity.
 Results are not considered completely reliable due to uncertain conditions and
situations.
Contingency tool
Contingency is a state of unidentified scenarios or position. Contingency tools are use to
ascertain the accurate aspects and position among different alternatives (DRURY, 2015). There is
a situation specific evaluation is done for clarifying expected results for better change and
development. Contingency tool also helps to determine the viability of various situational tools
for managing the case scenarios and management decisions.
Advantages
 A fixed analysis and control is used for better evaluation and control of business
operations.
 Various type of contingent situations can be easily sorted out through this scenario
tool.
Disadvantages
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 Accountants various type of challenges in order to determine particular scenario
and challenges.
 There is no any specific change determined with creative management and
operational change with in organisation.
Q.5 Case studies and comparison to management accounting applied to address financial
problems
Financial issues and challenges are the part of business operations and management.
Management accounting system is formed to absorbed these challenges for better forecasting and
analysing process. Management Accounting plays vital Role in overcoming the financial
challenges in better and effective way (SEAL and et al, 2014). Various type of financial issues
like lack of financial resources, inappropriate use and authorisation of financial instruments and
channels occur in normal day to day business operations. These issues are rectified and managed
by implementing management accounting system with in organisation.
Management accounting and the Calvin Company: a case study
As per the case study of Calvin company there was a financial issue regarding the
recognition of historical cost was occurred with in organisation. Accountants were unable to
consolidate the contingency of accounting practice for non monetary funds and elements. The
environmental factors was also analysed for better change and development with in organisation
(Management accounting and the Calvin Company: a case study, 2018). It is clearly mentioned
that there is direct relation found between the Canadian firm market and introduction to
management accounting information. Management accounting provided new dimensions and the
changes for better management and experience for evaluating better and possible outcomes.
Benchmarking accounting measures was implemented to overcome these financial issues.
Jupiter plc faced financial issues regarding managing the product line and increasing the
profitability of organisation. An effective management accounting practice enabled the process of
completing the process for better staff engagement and enforcement process. Proper record
formation process helped to maintain the good flow of accounting information with in
organisation.
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CONCLUSION
From the above discussion, it is concluded that management accounting one of the major
element adopted by every organisation. Management accounting system as well as managing
reports are important part that are describes performance of the company and and helping for
preparing strategies. Marginal costing and absorption costing techniques are helping to know
actual profit and loss that are acquire by company that are helping to taking effective decision.
Planning tools are helping to prepare and allocation of budgetary control that are recognise of
standard and actual result and comparison between them. Financial issues are inner problem that
are effected to growth of the company so solving this using KPIs and benchmarking and also
comparison with other organisation.
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