Management Accounting Techniques and Planning Tools

B07544
Management
Accounting

INTRODUCTION...............................................................................................................1
TASK 2...............................................................................................................................2
L.0.2: Apply a range of management accounting techniques...........................................2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an
income statement using marginal and absorption costs................................................2
M2 Accurately apply a range of management accounting techniques and produce
appropriate financial reporting documents.....................................................................6
L.O.3: Explain the use of planning tools used in management accounting......................7
P4 Explain the Advantages and disadvantages of different types of planning tools
used for budgetary control:............................................................................................7
M3. Analyze the use of different planning tools and their application for forecasting
budgets...........................................................................................................................9
L.O.4: Compare ways in which organizations could use management accounting to
respond to financial problems..........................................................................................10
P5. Compare how organizations are adapting of management accounting systems to
respond to financial problems and sustainable success:............................................10
M4. Analyze how, in responding to financial problems, management accounting can
lead organizations to sustainable success:.................................................................14
CONCLUSION:................................................................................................................15
REFERENCES................................................................................................................16

INTRODUCTION
The objective of this report is introducing the management accounting fundamentals
which can be practice in the wider business environment. This project report will
investigate about uses of management accounting financial data to get planning
decisions and the monitoring and control of finance within organizations.
This project report consists of two types of Income statement; Income statement
through marginal costing and Income statement through absorption costing methods.
How to solve financial problems of the business is discussed in this report. To
understand how marginal and absorption costing methods work, calculations has been
done which shows treatment of direct and indirect costs. There are many financial
problems and issues like low credibility, less revenue, poor cost estimation,
mismatching of data’s in financial statement and high debts taken from the market.
These threats can weak Company’s wealth. To handle such threat there are some tools
and techniques of management accounting systems which help business to overcome
from these financial issues. How these tools solve firms problems are shown in the
project. Additional to solving threats, the concept of sustainable success also discussed
in respect with management accounting systems.
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TASK 2
L.0.2: Apply a range of management accounting techniques
P3 Calculate costs using appropriate techniques of cost analysis to prepare an
income statement using marginal and absorption costs.
Quarter 1 & 2
First we need to calculate product cost per unit:
Quarter 1 Quarter 2
Variable Cost
(78000 × 0.65) 50700 42900
+ Fixed Cost 16000 16000
= Total Product
Cost 66700 58900
÷ Total Units
Produced 78000 66000
= Product Cost
Per Unit 0.85 0.89
After that the product cost per unit used to create the absorption income statement. The
Units sold on the income statement (and not units produced) taken to determine sales,
cost of goods sold and any other variable period costs.
Income Statement (Absorption)
Quarter 1 Quarter 2
Sales (66000 × £1/ unit)
6600
0 Sales (74000 × £1/ unit)
7400
0
- COGS (66000 × 0.85)
5610
0 - COGS (74000 × 0.89)
6586
0
Gross Profit
990
0 Gross Profit
814
0
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