Management Accounting INTRODUCTION 1: Essential Needs of Different Kinds of Management Accounting Systems

Management accounting system is considered as the system that is applied through managers for analysing as well as monitoring financial data of organisation on time in order to develop decisions for regular activities. Fenner Plc utilise some of its types of management accounting system so that they can keep the information about actual performance of their business. All the types are mentioned below: Inventory management system: This kind of system are mostly utilised into manufacturing firm in order to keep inventory records that are used in production activities.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and essential needs of various kinds of management accounting
systems...................................................................................................................................1
P2. Several methods utilised for management accounting reporting.....................................3
TASK 2............................................................................................................................................4
P3. Calculation of cost with the help of cost analysis techniques..........................................4
TASK 3............................................................................................................................................7
P4. Advantage and disadvantage of several kinds of budgetary control planning tools........7
TASK 4............................................................................................................................................9
P5. Comparison of way through which firms are utilising management accounting system to
respond financial problems.....................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is considered as the systematised procedures of identifying,
gathering , measuring, interpreting preparing as well as communicating financial data. This is
utilised through management for formulating plans in order to organise and control firms
(Anessi-Pessina and et.al., 2016). For this report, the chosen company is Fenner Plc which is the
fastest growing British industrial belting as well as another polymer based products
manufacturer. Its headquarters is in Hessele, England, UK. The purpose of this report is to
describe management accounting and essential needs of various management accounting system
types. Several methods that are utilised for management accounting reporting as well as different
planning tools for budgetary control. Apart from this, calculation of cost with the help of cost
analysis techniques and how that aids to resolve financial problems are also mentioned in this
report.
TASK 1
P1. Management accounting and essential needs of various kinds of management accounting
systems.
Management accounting is refers as the methods of that is utilise through company for
managing, monitoring, controlling and analysing their whole operative as well as executional
activities effectively. Therefore, managers of the Fenner Plc utilise this for the intent to formulate
strategic decision for the effectiveness of their business. Management accounting system is
considered as the system that is applied through managers for analysing as well as monitoring
financial data of organisation on time in order to develop decisions for regular activities. Fenner
Plc utilise some of its types of management accounting system so that they can keep the
information about actual performance of their business. Moreover, with the assistance of these
their managers can maintain appropriate records so that can be utilise in future for effectiveness
of business. All the types are mentioned below:
 Inventory management system: This kind of system are mostly utilised into
manufacturing firm in order to keep inventory records that are used in production
activities. This aids manager for examining that stock of raw material are available in its
warehouse or not (Ashraf and Uddin, 2015). Fenner Plc can applied his particular system
so that they get to know that sufficient raw material are their to manufacture polymer
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products or not. Moreover, this is needed by respective company to observe actual status
of inventory.
 Price optimisation system: Price-optimisation is crucial for attaining competitive
advantages. This system is applied by management of organisation to set appropriate
price for whole products for accomplishing the requirements of customers. With the
assistance of this firms try to develop the goods pocket friendly for its target market place
(Ball, Grubnicand Birchall, 2014). Fenner Plc can applied this system for examining the
consumer response upon various prices that are set through them for its industrial belting
and other polymers based products. Moreover, this is also helpful to set effective
products price in order to accomplish organisational goals and clients needs. For it,
respective firm select the appropriate pricing strategy for the business success. Cost accounting system: This is considered as the system that is mostly utilise through
firms for estimating the cost of various goods that are manufactured by organisation. This
directs the them know about the approximation of accurate expenditure that are incurred
during manufacturing. Fenner Plc applied this to examine the cost that is related to all
manufacture polymer based product, belting etc. It is needed in respective company as
this aids their manager to find out actual manufacturing cost. Initially, they measure as
well as records overall expenses separately then compare the outcomes with exact output
so that their business performance can be measured.
 Job costing system: This is considered as the costing system that is applied for gathering
as well as assigning overall manufacturing costs that incurred during business activities
(Christ, urritt and Varsei, 2016). Fenner Plc can used this particular system for assessing
the cost of whole procedures that are performed as per the specification of customers.
This is essential for firms to apply this as it aids them to ascertain actual cost of each job
that is done through company. This system is mostly utilised through organisations that
performs their business operations as per particular clients orders.
From the above mentioned management accounting system are applied by the Fenner Plc
manager so that they can analyses their organisational performance as well as develop strategic
decisions for the effectiveness of business.
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P2. Several methods utilised for management accounting reporting.
Within all firms, management is divided into various levels so that all the things can be
managed in effective manner but communication is considered as the essential aspects which
ascertain the management chain appropriately. In order to communicate the financial
information, firm used the several types of management accounting reports. Management
accounting reporting is considered as the procedures where carious reports are formulated for
assessing the organisation's performance (Cooper, 2017). This is very crucial for managers to
utilise effective methods for it in order to get the accurate as well as detailed information about
company's internal performance. This reports are prepared by Fenner Plc on yearly basis to keep
the records of whole operative as well as executional activities which are performed by them.
There are several methods that are utilise by respective firm are explained below:
 Performance report: This is considered as the report which is prepared by organisation
to keep performance records of business and staff. This is utilised by various firms in
order to provides bonus, incentives and many more to their employees as per its efforts
that are done by them to accomplish their goals. Fenner Plc managers can prepare this
report for monitoring the activities of staff whether they are performing in positive or
negative manner. This is advantageous for business as it aids to keep workers encouraged
because they obtain some rewards for its better performance. Moreover, it directs their
managers to make fast as well as strategic decisions when firm or employees do not
perform effectively.
 Inventory management report: For keeping the records of goods that are utilised
through business enterprises to perform manufacturing activities, managers prepare the
inventory management report. Moreover, this aids them to examine that sufficient funds
are available for performing the activities (Evans, Burritt and Guthrie, 2013). Fenner Plc
manager's can prepare this [articular rep[rot so that they can able to know about the
inventory availability that are utilise to manufacture belting and other polymers products.
This advantageous for respective firm as this assists them to order inventory before it
goes out of stock. In case firm is not capable to record exact data then this will become
tough for them to implement operative activities in effectual way.
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 Accounting receivables reports: This is considered as the report that is prepared though
managers of the firm to keep records of whole sales that are done on credit basis on
specified time. This reports are mostly formulate by those firm whose customer
purchases their products on credit (Goodman and et.al., 2013). This assists them to list
out overall activities unused credit memos as well as unpaid consumer invoices as per the
due date. Fenner Plc manager's can prepare this particular report in order to examine the
amount that is purchase y consumers on credit. The main aim of account receivable
report is to trace data of that clients who buy the products on credit and promise to pay
that amount on specified time. This report is advantageous for respective company as
through it they can able to ascertain the outstanding amount of various customers with
date and time.
From the above mentioned management accounting reporting help Fenner Plc manager to
keep all the data regarding staff and company performance, availability and usages of inventory
and many more.
TASK 2
P3. Calculation of cost with the help of cost analysis techniques.
Cost is includes the price that is obtained through individuals for generating,
accomplishing as well as selling something. It is considered as the monetary valuation of
resources, materials, efforts as well as opportunity into manufacturing as well as delivering
products or services.
Marginal costing:
Marginal costing is considered as the most essential technique that is required to prepare
income statements or profits and loss statements. Herein, accountants focused upon systematic
classification of expenditure into variable and fixed (Grossi and Steccolini, 2014). Fixed costs
are consider as the period cost. Where as overall variables manufacturing expenditure are allotted
to specific units. This ascertains the impact of variable expenses upon net income or per unit
product cost.
Absorption costing:
This is refers as the costing techniques which consider both fixed and variable cost as
product costs. The main aim of it is to provide the report as well as compute accurate
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profitability into firm. Moreover, this is the collection of direct material, labour, and so on for
setting the final products or services costs.
May June
Selling Price 50 15000 25000
Less: Marginal Costs
Direct materials per
unit 8 2400 3040
Direct labour per unit 5 2500 1900
Variable production
overheads per unit 3 1500 1140
Total 6400 6080
Less: Opening
inventory - 3200
Add: Closing Inventory 3200 1280
Gross Profit 11800 17000
Less: Fixed Costs
Fixed selling expenses 4000 4000
Fixed admin expenses 2000 2000
Fixed Production cost 4000 4000
Less: Sales commission 750 1250
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Net Profit 1050 5750
Absorption Costing:
May June
Selling Price 50 15000 25000
Less: Absorption Costs
Direct materials per
unit 8 4000 3040
Direct labour per unit 5 2500 1900
Variable production
overheads per unit 3 1500 1140
Fixed Production cost 10 3000 3800
Total 11000 9880
Less: Opening
inventory - 5200
Add: Closing Inventory 5200 2080
Gross Profit 9200 12000
Less: Fixed Costs
Fixed selling expenses 4000 4000
Fixed admin expenses 2000 2000
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Less: Sales commission 750 1250
Net Profit 2450 4750
Budgeted and actual cost of metal used in
producing Product A
Budgeted material cost
per unit of the product 2kg at £10/kg
Actual output 1000 units
Actual material
purchased and used 2200kg
Actual material cost £20,900
Actual material cost 10450
01/05/01
Opening
Inventory of 40
units @£3 each 120 10570
01/05/12
Bought 20 units
@ £3.60 each 72 10642
01/05/15 Issued 36 units 118.8 10523.2
01/05/20
Bought 20 units
@3.75 each 75 10598.2
01/05/23 Issued 10 units 34.5 10563.7
01/05/27 Issued 25 units 86.25 10477.45
01/05/30 Issued 5 units 17.25 10460.2
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TASK 3
P4. Advantage and disadvantage of several kinds of budgetary control planning tools.
Budget is considered as the written document that shows the financial plan in business
enterprises. This is essential for firms for preparing budget to attain the objectives. In simple
terms, budget is the rough framework of income and expenses that is required to set objectives
and develop plans consequently (Harrison and Lock, 2017). This aids Fenner Plc to to examine
the requirements as well as arranging funds for attaining objectives.
Budgetary control is considered as the systematized procedures that assists managers to
decide performance and monetary objectives with approximation as well as compare it with
actual expenditures for gaining profitability. Moreover, this means that how accountant or
managers utilise budget for observing as well as controlling operations and business cost within
accounting period. So, the managers of Fenner Plc set objective and compare it with exact
budget which aids them to control their performance of enterprises. Also, it assists them to
enhance productivity as well as profit through concentrating upon approximated and actual
budget. This includes several kinds of planning tools that are used by for controlling budget are
mentioned below:
Master Budget: This is considered as the superior business document which includes sales,
production level, capital investment and many more for determining the profit (Hutton, Lee and
Shu, 2012). Moreover, this involves several transactions data in enterprise which assists to
maintain enterprises. Fenner Plc can utilise this particular budget as this aids them to maintain
transaction in order to gain more profit as well as productivity. Advantages: This aids in maximising profit as well as productivity as this involves
overall data that is relate to the transaction of business. So, with the assistance of this
Fenner Plc can concentrate upon objectives as all the transactions are recorded
maintained properly.
 Disadvantages: This particular budget is time taking as it includes various number of
transactions. It can not provide accurate outcomes as result profitability margin is low
because of having more chances fraud or errors.
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Operating budget: This is considered as the financial planning that is prepared through
accountant to know about the debt obligation of the firm as well as aids to maintain growth over
stipulated time period (Jack, 2015). It is mostly utilised for getting knowledge about how
organisation spends money as well as needs of money in company for attaining goals.
Accountant of Fenner Plc formulate this particular budget as it aids them to maintain appropriate
records of money through concentrating upon operative activities. Also, it is utilise for
examining the organisational demands and develop plans consequently. Advantages: This budget assists Fenner Plc to allocate funds into shorter term and future
duration. Moreover, it facilitates more monetary freedom which develops new
opportunities for organisation.
 Disadvantages: The main disadvantage of this budget is, it is time taking tools as this
involves various monetary data. Also, this do not represent exact financial plan as an
outcomes profit an productivity are low.
Capital Budget: This is considered as the planning procedures which can be utilised to describe
the long term investment of organisation such as goods, plants and machinery, replacement of
machinery and many more for enhancing profit. Also, this is methods to allocate resources for
investment, capital and expenses (Järvenpää and Länsiluoto, 2016). It is utilise for setting plans
or longer term as well as develops value of business enterprises to shareholders. With the
assistance of this particular budget Fenner Plc make their long term plans in order to accomplish
organisational objectives. Advantages: This aids Fenner Plc to know about the risk that may raise in firm because of
developing investment plan as well as facilitate solution. This is advantageous to
formulate strategic investment plans for long term so that wealth of the respective
company get enhanced.
 Disadvantages: The disadvantage of this particular budget is, it is irreversible in nature as
it is involved into long term plans. This do not permit Fenner Plc to perform any changes
so it may be tough for them to obtain accurate profitability.
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TASK 4
P5. Comparison of way through which firms are utilising management accounting system to
respond financial problems.
Financial problems is considered as the issues that may occurs because of lack of
financial resources for the operative and executional activities of company (Kastberg and
Siverbo, 2016). Fenner Plc is facing few issues which are impacting their capability to
implement business operation in effectual way that are explained below:
 Improper fund management system: When firm's managers do not have knowledge
about accounting principle, regulation and many more then its ability to record
information into books get effected as well as issues of improper funds management
system occurs. Fenner Plc perform few mistake in records because of lack of knowledge.
Due to this, financial crisis occurs as well as impact respective firm's performance.
 Late payment of buyers: Many company sale their products to customer on credit as
well as permit them to pay amount after specified period of time. Fenner Plc permits
purchaser to buy goods on credit but many times they do not make payment on give time
that develop financial problems because of lack of funds.
For resolving the above mentioned financial problems Fenner Plc used few techniques
that are explained below:
 Key performance indicators: This is considered as the techniques that is utilise to
examine the success as well as failure of the business operations. It includes financial and
non financial (Kober, Subraamanniam. and Watson, 2012). Financial KPI is utilise to
ascertain mistake into firm's capability for managing and utilising financial resources and
finding unexpected expenditures. Non financial, observe problems into several activities
like supply chain management and many more. Fenner Plc applied the financial KPI
which is utilised through managers to find out issues in funds management system in
respective company.
 Benchmarking: It is considered as the techniques that is mostly utilise to compare
various strategies as well as policies on one company with another one. This is applied by
Fenner Plc to find out the issues of late payment through consumers by comparing this
with another one performing into similar industry so that changes can be performed into
their strategies.
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Comparison:
Various firms are utilising management accounting system for many purpose like
responding towards monetary challenges.
Fenner Plc Intralox
Managers utilise price-optimisation system to
set effective price for their products as well as
solve the issues of late payment through
consumers (Mancini, Vaassen and Dameri,
2013). When clients will receive products at
appropriate cost with standard quality then they
get satisfied and make payments on stipulated
time.
Inventory management system is utilised
through managers within firm in order to deal
with inventory related problems.
Cost accounting system is applied for dealing
with the issues of improper fund management
system as with the assistance of this relevant
information will be recorded into books as well
as problems get solved.
Job order costing is applied by managers in
order to get detailed data of whole activities
which are performed as per the customers
demands so that issues like late payment can be
examined as well as they can asked to pay
owned money quickly.
CONCLUSION
As per the above report it has been concluded that management accounting plays crucial
role within organisation as it aids them to maintain the transaction records as well as develop
effective decisions. Managers formulate various kinds of management accounting reports such as
performance, inventory etc. to understand the financial position of firm. Price optimisation
system, cost accounting system and many more are few system that are utilise to maintain the
profit and productivity of company. The main benefits of this is to reduce the risk as well as
enhance productivity. There are some planning tools for budgetary control that assists
organisation to conduct the activities of business function in effectual way and maximise
sustainable success. Apart from this, company utilise various kinds of management accounting
system which aids them to handle stock etc.
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REFERENCES
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