Management Accounting Techniques and Budgetary Control

B07929
MANAGEMENT
ACCOUNTING

Table of Contents
TASK 2...........................................................................................................................3
Introduction........................................................................................................................3
L.O.2: Apply a range of management accounting techniques..........................................3
P3. Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs................................................................3
M2. Accurately apply a range of management accounting techniques and produce
appropriate financial reporting documents........................................................................8
L.O.3: Explain the use of planning tools used in management accounting Using budgets
for planning and control:..................................................................................................11
P4. Explain the advantages and disadvantages of different types of planning tools used
for budgetary control........................................................................................................11
M3. Use of different planning tools and their application for preparing and forecasting
budgets:...........................................................................................................................13
L. O. 4: Compare ways in which organizations could use management accounting to
respond to financial problems..........................................................................................14
P5. Compare how organizations are adapting management accounting systems to
respond to financial problems..........................................................................................14
M4. Analyze how, in responding to financial problems, management accounting can
lead organizations to sustainable success......................................................................17
Conclusion.......................................................................................................................19
REFERENCES________________________________________............................20

TASK 2
Introduction
Management accounting evolved before the Industrial Revolution. It is important for
the organisational people; it introduces specific information even for non-accountants
anytime, and observes present firm’s finances and helps creating actual professional
way out. In my words, Management accounting is accounting for managers to set up
reports using financial information to achieve business objectives, planning, control and
decision making. It mixes accounting, finance and management with the business skills
and techniques (What Is a Management Accounting System?, 2020). The scope of it is:
Cost Accounting, Tools and technique of management control, Tax accounting and
Statistical and quantitative techniques.
Managerial accounting is carrying out by identifying, measuring, analyzing,
interpreting, and communicating financial information to line managers for chase of an
organizational goal (What Is a Management Accounting System?, 2020).
L.O.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
Costs: Costs are the expenses of business which is to be reduced from sales
revenue to get net profit earn by company during year.
Different costs and cost analysis:
There are mainly two types of costs; fixed and variable. Fixed costs are constant
over year and contains fixed amount paid by business for entire year; while on the

other hand, variable costs varies with sales revenue and calculated on per unit
basis (Types of cost/ classification of costs, 2019). Cost can be calculated based
on two methods:
Marginal costing: In this method cost is calculated based on sales revenue during
year. It only considers those expenses which occur at the time of selling and
distribution activities.
Absorption costing: This costing technique absorbs all expenses during production
process; so it also includes fixed production overhead on per unit basis.
Quarter 1 & 2
SALESPRICE PER UNIT=BUDGETED SALES /BUDGETED SALES
VOLUME=£80000/80000=£1
ABSORPTION COSTING UNIT COST=BUDGETED PRODUCTION COST/
BUDGETED SALES FOLUME= £68000/80000=£0.85
MARGINAL COSTING UNIT COST= BUDGETED VARIABLE COST/BUDGETED
SALES FOLUME= £52000/80000=£0.65
Income statement for the quarter 1
Marginal costing
Units
per unit
£ Total £ Total £
Sales (A) 66,000
Marginal cost of sales (B)
Variable cost
78,00
0 0.65 50,700
Less: Closing stock
12,00
0 0.65 7,800 42,900
Contribution Margin (A -B) 23,100
Less: Periodic costs
Fixed cost 16,000
Selling and administration 5,200
Net profit 1,900