Management Accounting: A Comprehensive Guide for Zylla Company

This report delves into the intricacies of management accounting systems, exploring their application within Zylla Company, a multinational organization facing challenges related to market expansion and restructuring. It examines various management accounting techniques, including cost analysis, marginal and absorption costing, and planning tools like ABC analysis and variance analysis. The report critically evaluates the integration of management accounting systems and reporting within organizational processes, highlighting their role in responding to financial problems and achieving sustainable success.

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Management accounting

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Contents
Introduction:...............................................................................................................................4
LO1: Demonstrate an understanding of management accounting systems...............................5
P1. Explain management accounting and give the essential requirements for different types
of management accounting....................................................................................................5
P2 Explain different methods used for management accounting reporting...........................8
M1 Management accounting systems and their benefit in the context of Zylla Company:.10
D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes..................................12
LO2: Apply a range of management accounting techniques...................................................13
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing................................................................13
D2 produce financial reports that accurately apply and interpret data for a range of business
activities...............................................................................................................................16
LO3: the explanation of the application of planning tools in management accounting:.........17
[P4.] Advantages and disadvantages of planning tools for budgetary control: -.................17
[M3]. Analyse the use of different planning tools and their application for preparing and
forecasting budgets...............................................................................................................20
LO4: Compare ways in which organisations could use management accounting to respond to
financial problems....................................................................................................................22
P5, Compare how organisations are adapting management accounting systems to respond
to financial problems............................................................................................................22
M4, you should analyse how, in responding to financial problems, management accounting
can lead organisations to sustainable success......................................................................24

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D3, you should critically evaluate how planning tools for accounting respond appropriately
to solving financial problems to lead organisations to sustainable success.........................25
Conclusion:..............................................................................................................................26
References:...............................................................................................................................27

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Introduction:
Zylla Company is the largest multinational company. An organisation wants to make analysis
and proper observation of the number of changes occurred in the internal and external
environment of the company due to market expansion and restructuring in management.
Company's director is concerned and asked management accountant to consider uses of
management accounting systems within the organisation to respond such changes and
financial issues and making responses to sustainable growth and progress. This report will be
made by management accountant to Finance Director of the company on an implication of
management accounting systems and review the research on development in management
accounting as a profession. This report will also explain such comprehensive changes with
the use of management accounting system. Proper management accounting technique, costing
methods, financial analysis to determine cost will be analysed in order to recommend
comprehensive changes that will cover the significance of management accounting tools and
budgetary planning tools related to the concern of managerial and financial matters to deal
with. It will acknowledge the management of Zylla Company to examine and evaluate the
successive growth of an organisation in terms of changes in the external market.

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LO1: Demonstrate an understanding of management accounting systems
P1. Explain management accounting and give the essential requirements for
different types of management accounting.
Management accounting is quite different from regular accounting. It includes regular
managerial thinking and helps in the interpretation of budgetary behaviour in the
organisation. It is the concept that refers to taking righty steps and decisions in relation to
expenditure and policies of investments.
Definition:
Management accounting is a concept of identification, measurement, organisation,
accumulation and interpretation of accounting information utilised by a financial department
to plan, control and implement within the organisation. It is the process of assuring accurate
and appropriate sources of accountability and comprises the management report and financial
statements. It gives an opportunity to the stakeholders, creditors, regulatory bodies to
evaluate financial changes in the performance of the company in order to save their interests
(Fisher and Krumwiede, 2015).
Characteristics:
 It is simple and easy to understand while managing and correlating with its core and
explore the reality associated with accounting principles and convention.
 Management accounting uses various kinds of managerial tools such as cost
accounting systems, price optimising systems, inventory behaviour systems to
obscure accounting data in order to make valid accounting and financial plan to get
long-term achievements.
Types of management accounting systems:
1. Cost Accounting systems:
Costing accounting systems is also known as product costing system which is utilised by
firms and companies to create a framework to estimate the cost through analysing

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profitability, inventory valuation and controlling cost, It is used for estimating the flexible
and accurate cost of items from beneficial operations.
Essential requirements of Costing accounting systems:
 It is an estimating behaviour of the accurate cost of the product that operates
whole profitable projects related to ascertainment of cost.
 In cost accounting systems. Job order costing methods are used to accumulate
production cost separately for each project job orders.
 Process costing methods is used in the cost accounting systems to ascertain each
job cost by involving different procedure and various cost flow from operation.
For example; uses of cost accounting systems in process costing v\by oil
refineries, cement manufacturing companies etc.
 It helps Zylla company to calculate contribution margin by re-evaluating cost
measurement activity and revalue relevant gross profit.
2. Pricing Optimising systems:
Pricing Optimising Systems is the concept in which proper mathematical analysis and
evaluation by an organisation would be done to re-evaluate customer’s responses and
determine prices of different products according to market survey and customers’ choices.
In pricing optimising systems, various costing channels are used to determine best prices
of company’s products to meet requirements to the extent of maximising profit. It sets
max-to-max prices that people are willing to pay. Zylla can use and apply this system in
their company to ensure and regulate quality and efficiency of their products with price
value association (Briefly, 2017).
Essential requirements of pricing Optimising systems:
 It is used to make analyses of big data to evaluate and forecast the behaviour of
potential customers at different prices.
 Price optimising systems are used to evaluate pricing structure and buying
structure of initial pricing strategies, promotional buying strategies and
discounting methods.

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 Zylla can make the proper evaluation and monitor its pricing value of products
based on demands of different segments by examining how targeted audiences
and the market could be responded to price fluctuation.
3. Inventory Management systems:
Inventory management systems are referred to the procedure of carrying, ordering and
handling company’s inventory and stock valuation process. It is a major element of supply
chain process that includes the factors of controlling, monitoring and evaluating the aspects
related to overseeing inventory management activity.
The essential requirement of Inventory management systems:
 Evaluating right amount and value of inventory for valuation of stock becomes quite
crucial in order to avoid the risk becomes obsolete.
 Inventory management systems help the business owners to decide how to reordering
inventory.
 It supervises of non-capitalised assets as stock and inventory items to manage supply
chain management, a flow of products from producers and their facilities of scale.

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P2 Explain different methods used for management accounting reporting.
Preparation of Management accounting reports is essential in the management of the
organisation in order to observe necessity and accuracy of financial outcomes. Management
accounting reports are prepared by managers to evaluate and monitor the financial
performance of the company. Financial reports help the company to measure accuracy,
transparency and flexibility in the business operations.
Management report
(Source: Author)
Types of management reports:
1. Budget report: Budget reports are prepared according to the company's financial plans
and budgetary obligations. Budget is prepared to allow the company to regulate and control
audit and financial requirements through successful implementation of financial plans.
Budgets reports are prepared with the help of sales, purchase and production report
(Horngren, et. al., 2014).
Budget report
Sales report
inventory report
Investment report

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2. Sales report: Sales reports are produced by any company to track each task related to sales
and promotion activity. Sales reports are basically based on production and operation
activities of the company. This report provides effective managerial knowledge related to
related to sales and revenue objectives relation in the company.
3. Inventory report: Inventory reports are prepared through inventory management systems.
Through inventory management systems companies are allowed to make the profitable
decision related to storing inventory. Inventory reports give effective and reliable knowledge
regarding inventory supervision and managing good and effective flows of the inventory
(Paul Singh and Hahn Winther, 2017).
4. Investment report: investment decision is made by regulating sales and capital procedure
of an organisation. A company is allowed to make investment report based on understanding
and effectiveness. Investment appraisal report is created to optimise and gather knowledge
related to investment proposal and to understand the market demand and investor choices.

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M1 Management accounting systems and their benefit in the context of Zylla
Company:
Financial Forecasting:
 Financial forecasting is the process that includes managerial planning, evaluating
and interpreting various facts to take financial decisions.
 Management accounting systems are useful in collecting relative facts, organise
them and implement financial plans in order to make forecasting process more
flexible and feasible to convert long-term target into reality.
Cost measurement:
 Cost measurement means analysis of managerial and financial facts in order to make
long-term forecasting decision effectively and correctly.
 MIS uses cost management systems to analyse and measure the accuracy of cost-
revenue relationship and effectiveness to optimise actual and estimated variables to
make company's objective target oriented.
Financial Forecasting
Cost measurement
Investment appraisal

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Investment and profitability decisions:
 MIS is used by the organisation in relation to determining prices and investment
strategies.
 MIS allows the company to make profitable decisions through managerial information
and financial facts so that company could attain long-term opportunity of increasing
productivity (Otley and Emmanuel, 2013).

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D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes
Management accounting systems are those systems which give a platform to the company to
observe, evaluate changes and interpret cost and funds analysis behaviour in order to
maximise profit and reduce the cost of wastages project. Zylla Company should apply
management accounting systems in order to balance between internal and external business
environment to expand their business and acquisition activities in an accurate and flexible
manner. A company could use cost management accounting system as the decision-making
tool to measure cost accuracy and effectiveness. Investment management systems help to
make effective and reliable policies related to funding and additional spending to avoid
business risk. Inventory management systems are made to monitor each job task and direct
employees to examine the managerial performance of the company (Soin and Collier, 2013).

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LO2: 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 costing.
Zylla Company is the company which wants to make effective observation and analysis
related to use of managerial and financial strategies by maintaining records, control
budgetary facts and auditory reports. MIS helps the company to arrange management
information and use them to take financial decision related to future forecasting. Applying
costing technique as decision-making tool will be useful for cast analysis and measurement
activity. Application of management accounting tools is comprised of financial performance
and needs of the company to the wide range (Novas, et. al., 2017).
Zylla Company adopts absorption and marginal and other various costing tools to manage
relevancy, reliability and flexibility of management reports to get desired profits. Marginal
costing is the costing in which company adopt ascertainment of cost theory with contribution
policy (Novas, et. al., 2017). In marginal costing variables, cost is deducted from sales to get
contribution margin. In another side, to get gross profit total production including variables
and fixed both costs are deducted from total sales. Following costing techniques are given
below:
Marginal costing technique:

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Absorption costing technique:

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M2 apply a range of management accounting techniques and produce appropriate
financial reporting documents
Application of appropriate costing technique would be useful in order to attain long-term
desired profit by reducing wastage of cost. Costing technique is useful in optimising cost
measurement of each cost and reduces additional cost through cost-effective analysis.
1. Marginal costing:
Marginal costing technique is referred to that technique in which cost is determined from
each variable cost out of total sales. In the ascertainment of cost-effectiveness, the total
variable cost would be declined from total sales in order to optimise contribution margin.
Fixed cost is also deducted from total contribution element to attain net profit (Horngren, et.
al., 2014)
2. Absorption costing:
Absorption costing is the costing in which total gross margin would be attained when total
production cost would be reduced from total sales of the company. Variable and fixed both
costs are included production cost to get gross margin. Selling, advertisement and distribution
expenses are deducted from gross margin to get net profit.

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D2 produce financial reports that accurately apply and interpret data for a range
of business activities
Costing and financial technique are used to prepare the financial report in order to measure
and identify accuracy and reliability in management decided to get long-term profit and
achievements. Usage of managerial and costing technique such as marginal costing, standard
costing, and variable costing allows the company ascertain cost related to administration and
managerial and production activities of the company. In valuation technique of marginal and
absorption, both vary different criteria to ascertain cost. Closing inventory in the marginal
costing would be less than closing inventory computed from absorption costing method
(Mohamed, et. al., 2016).

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LO3: the explanation of the application of planning tools in management
accounting:
[P4.] Advantages and disadvantages of planning tools for budgetary control: -
MIS and planning tools are used in helping and managing whole data, facts and information
to get desired results. Planning tools are used meet companies’ requirements and obligation
related to financial, taxation and economic changes in trends. Advantages and disadvantages
of planning tools are given below:
Planning tools Advantages Disadvantages
ABC analysis ABC analysis is used for
inventory optimisation in
making the crucial analysis
of inventories more flexible.
This methodology is applied
in the management to keep
costs ascertainment under
control within whole supply
chain management.
ABC is activity-based
costing methods in which
company is allowed to
review and monitor inventory
progress level and directs
their employee to get work
done effectively.
ABC analysis is based
Quantitative process an
assumption. ABC process is
not able to give proper results
related to qualitative
measurement.
Variance analysis Variance analysis is the
analysis in which financial
reports are prepared based on
Variance analysis is unable
to provide non-financial data
such as employee’s thoughts

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a comparison between a
budgeted plan and actual
financial outcome.
It allows the company to
understand the changes and
fluctuation in financial plans
according to customer’s
choices and market trends by
providing flexible and
accurate information (Otley
and Emmanuel, 2013).
It provides financial
information based on
previous transactions and
knowledge that reduce the
chances of mistakes.
etc.
It provides information
based on previous analysis
and observation which may
reduce the innovation and
creativity in a decision-
making process.
Budgeting Budget process allows the
company to make plans and
blueprint for financial
strategies to make money.
It is beneficial for the
company to determine in
advance financial ability of
the company to spend on the
new project in order to get
desired objectives (Brown,
A company can make the
effective decision through
budget report and statement
when making investment
decisions. But due to lack of
accuracy and based ion
assumption procedure
decision cannot be made in
an effective and flexible
manner (Brown, et. al.,
2016).

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et. al., 2016).
It gives the knowledge of
financial capacity and
flexibility of company in
order to make the new budget
plan and balancing their
income and expenses through
financial information.

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[M3]. Analyse the use of different planning tools and their application for
preparing and forecasting budgets.
Planning tools: Application of planning
tools
Evaluation and
effectiveness of forecasting
budgets
ABC analysis Activity-based costing
analysis in applied in top-
level management in making
of decision-making policies.
It is also used by mid-level
management to execute these
plans.
ABC analysis is utilised in
the company to manage
financial processes such as
audit reporting, cost analysis
and evaluation of variances
flexibility.
Variance Analysis Variance analysis is used in
middle-level management to
make the comparison
between planned behaviour
and actual outcomes after
executing financial strategies
at managerial level.
(Horngren, et. al., 2013).
Variance analysis is the
useful technique from Zylla
in order to observe and
revalue whole financial
activities through accurate
and exact information.
Variance analysis allows the
company to convert
estimated variables into
actual budgetary outcomes
by an allocation of financial
resources effectively.
Budgeting The higher level of the
management use budgeting
process. The budgeting
process is the financial
Budgeting gives accurate
knowledge of financial
activity so that company so
analysis their monthly budget

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blueprint of management
plans that allow the company
to convert their oriented
targets into reality to execute
the plan successfully (Fisher
and Krumwiede, 2015).
and flexibility to reach their
desired goals (Adebayo, et’
al., 2014).

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LO4: Compare ways in which organisations could use management
accounting to respond to financial problems.
P5 Compare how organisations are adapting management accounting systems to
respond to financial problems.
(Source: Author, 2018)
• Financial goals: Setting financial goals is the major objective of using management
accounting tools. Zylla Company could use MIS for setting financial goal and plans in
order to figure out responsibilities and duties of the company to avoid risk in time and
financial hurdles to get achievements.
• Benchmarking: MIS is useful in the management. It allows the company to set
benchmarks, KPIs' and setting target oriented plans to reduce financial issues. Setting
benchmark means determining a code of ethics and standards which is based on
companies' objectives and motive. Zylla can set conceptual framework related to
management objectives based on analytical and logical interpretation of the financial
situation to make feasible decisions.
Financial goals
Benchmarking
managment Accounting
skill set
effective strategies

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• Management accounting skill set: Zylla use management accounting systems as
decision-making tools to work on company’s objectives using knowledge, behaviour
and skills approaches with the help of management accounting tool. MIS allows the
company to figure out managerial threats; obstacles and hurdles to avoid them in the
near future make better and effective control over cost and revenue relationship.
• Effective strategies: Usage of managerial strategies such as variance analysis, cost
analysis and so on in relation to Increase Company’s productivity and profitability by
enhancing the opportunity level of the company related to budget and inventory
control. A company can make the effective decision related to inventory, sales volume
by comparing budgeted plans and actual outcomes. It will allow the company to take
the beneficial decision and forecasting process (Drury, 2015).

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M4 you should analyse how, in responding to financial problems, management
accounting can lead organisations to sustainable success.
Management accounting systems are used in the company to avoid wastage and make
transparent and reliable decision with perfection. MIS is used to optimising pricing strategies,
increasing sales volume profit, making decision-related to recognising managerial threats and
an optimising situation in order to get long-term achievements.
 MIS is useful in attaining managerial facts, observing flexibility and manages records
and implements strong ideas and strategies for successful execution of financial plans.
 MIS allows the company to understand the market changes and make effective plans
retain long-term potential customers and investors.
 These tools are majorly adopted for taking flexible and feasible decision in order to
respond financial problem.

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D3 you should critically evaluate how planning tools for accounting respond
appropriately to solving financial problems to lead organisations to sustainable
success.
Management accounting tools are used as decision-making tools to measure cost and control
budgetary process with accuracy and transparency through keeping documentation and
records policies and making corrective steps through observation.
Usage of MIS:
1. Management accounting tools are those tools are adopted universally as decision-making
technique.
2. MIS is also the effective tool which is used for collecting data and compares it with
previous transactions to avoid previous mistakes and financial threats.
3. It determines cost-revenue relationship by measuring cost-effectiveness and defines the
accuracy of additional spending through cost analysis and inventory systems.
4. It is utilised for allocating cost-based financial resources in order to examine budgetary
control to make effective forecasting policies to get desired profit (Briefly, 2017).

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Conclusion:
Management accounting systems are those systems which are used by management to get
successive and outstanding results related to financial decision making procedure. This
reading has been explained about management accounting systems in the context of Zylla
Company. Management accounting systems are recommended in this reading, to observe and
get actual results at the time of taking management decisions. This report has been given as
effective knowledge of cost technique and managerial effects to reduce cost and maximise
profitability in the context of Zylla Company.

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