Detailed Management Accounting Report: Egine Energy Company Analysis

This report provides a comprehensive analysis of management accounting practices within Egine, a UK-based energy and service company. It begins with an introduction to management accounting, differentiating it from financial accounting and highlighting its role in internal decision-making. The report explores various management accounting systems, including cost accounting, job costing, price optimization, and inventory management systems, detailing their functions and applications within Egine. It also examines different management accounting reporting methods such as budget reports, accounts receivable reports, cost reports, and performance reports. Activity 1 delves into the specifics of management accounting, including its systems, reporting methods, and advantages, with a focus on how Egine can use these tools. Activity 2 focuses on planning tools, such as budgetary control, and their role in forecasting and pricing strategies. The report concludes by comparing how businesses adapt to management accounting to address financial issues and achieve sustainable success, emphasizing the importance of planning tools in solving financial problems. The report provides practical insights into how management accounting supports organizational efficiency and financial stability.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
ACTIVITY 1....................................................................................................................................3
PART A...........................................................................................................................................3
Explaining management accounting............................................................................................3
Different types of management accounting systems...................................................................5
Different method of management accounting reporting..............................................................7
Advantages of different management accounting system and their application within the
organisation..................................................................................................................................7
Critical evaluation of integration of management accounting system and reporting in the
process of organization................................................................................................................9
PART B............................................................................................................................................9
Production of portfolio of complete calculation..........................................................................9
ACTIVITY 2..................................................................................................................................15
PART A.........................................................................................................................................15
Advantages and Disadvantages of various kinds of planning tools used for budgetary control
....................................................................................................................................................15
Application of planning tools in forecasting of budgets............................................................17
Pricing Strategies.......................................................................................................................18
PART B..........................................................................................................................................20
Comparison in relation to how business enterprises are adapting to management accounting
for responding financial issues...................................................................................................20
Managerial accounting leads organizations towards sustainable success..................................22
Planning tools for accounting for solving financial issues........................................................22
CONCLUSION..............................................................................................................................23
REFERENCES..............................................................................................................................24

INTRODUCTION
Accounting is said to the language of the business through which its present the
performance and financial position of the internal and external stakeholders of the business. The
accounting have mainly two parts that financial and management accounting. The financial
accounting considers monetary transaction to prepare and present reports over it rather
management accounting have a wider scope which takes into account both financial and
statistical information for the business in order to preset wider level performance of organization.
The present report is being prepared engineering company Egine which is a leading energy and
service company operating in United Kingdom.
In the report the role and functions of the management accounting are explained to
management accounting department of Egine defining the management accounting operations
and techniques used by this system, in this the understating will be given over management
accounting, its different system, the benefits and application each system is explained and with
this the types of management accounting reporting are also presented which are used by the
business. A portfolio of calculation is presented where different calculations falling used the
ambit of management accounting is done. For the activity 2, use and application of planning
tools in business is defined with presenting their advantages and disadvantages. The use of
management accounting system and planning tools by the business Egine is defines in order to
solve the financial problems and attain a sustainable success for the business.
ACTIVITY 1
PART A
Explaining management accounting
Management accounting is the process of analysing and the cost of business operation
where preparation of internal financial report, recoding and accounting is done in order to assist
the manager in the decision-making process (Kaplanand Atkinson, 2017 ). It can be explained as
a process of identification, measurement, analysis, interpretation and communication of
significant and important information to management. Apart form this, it directly assist the
managers in taking decisions for the business regarding the allocation of the resources,

determined the need of resources as per demand and production needs and also in perspective of
providing business performance and financial position to outside world which the external
stakeholders of Egine.

As per the London council of Commerce management accounting can be defined as a
way in which mention is being assisted in creation of policy and the set a path for conducting day
to day operations of Egine. This techniques and procedures are used by the business management
in order to seek assistance collectively for managing the activity of business. The objective of
management accounting includes planing and policy formation for the organization,
interpretation of the data which is present into different reports and financial documents. Along
with this it has objective of assisting management in decision-making process and taking
controlling measure where lag in actual and performance is seen.
Different types of management accounting systems
Management accounting system consists of various systems, implications and integration
of which can provide great efficiency within the business operations. Below are some managerial
accounting systems :
Cost accounting system: It is that framework which is used by the organization Egine to
estimate the cost of each of its products falling under its product line. In this the cost and
expenses incurred on over production is determined and after adding the profit margin the selfing
price of the products are set (Otley, 2016). The essential requirement of this system is to
estimate accurate cost and expenses incurred on production in order to critically determine the
profits margin and then set the sales price for each of the product. The necessity for this is that all
the relevant information over cash and bank expense done over each and very activity of
business is required under this management accounting ssytem. The data related with expense
allocation for common expenses and all direct and indirect expenses is required under this
system for correct estimation of the cost.
Job costing system: It is the one which determines the cost required to compete each of
the job or activity of the business In this system each cost incurred on each element and activity
under a particular job is identified and then over cost increment is determined in order to
estimate the resource requirement and the need of cost-cutting, if there is a necessity of such cost
cutting. (Maas, Schaltegger, and Crutzen, 2016). The requirement of this system under Egine is
defines as this assist the management in determining the cost related with each of the job where
it can easily identify the expenses done specifically job. This guide the decision of the
management over how must resources are required to be allocated and on which job controlling
and monitoring is required in order to inure lesser expenses.

Price optimization system: It is an arithmetical program where calculation related with
demand variations are done for different levels of the prices for a same product. This system
determined the prices that are a consumer is willing to pay for a product at different level of the
demand. With an increase in demand the organisation Egine can increase the price and at lower
dead prices are required to lower but at both level the price is required to kept such where
company can meet its expenses over production along with getting its profit margins (Chenhall,
and Moers, 2015). The acquirement of this system is to identify the prices changes as per change
in demand as this required proper and complete information regrading the fluctuation in demand
and the level to which prices can be raised and reduces with minimum profit margins and
maximum sales price.
Inventory management system: This is one of the management accounting system that
tracks two major functions within Egine which are the production and warehouses. This system
looks into the matter over how much inventory is required to be maintained to operate at
estimated level of production. Also this determines the level of goods tat can be hold in the
warehouse in order to incur the least holding expenses as a part of the cost of production of
goods with in the organization Egnie (Weetman, 2017). The essential information that this
system is required to have the estimated level of production and changes in this over time also,
the proportion holding is contributing to the over all cost of production of each of the unit so if it
high the inventory holding cost must be reduced. There are different kinds of inventory
management system such as :
 LIFO is a last in first out method of managing and valuing the inventory in which the
goods which are purchased recently are removed from inventory than the goods which
were purchased at older date.
 FIFO: It is first in first out method wherein goods which are purchased at older date are
removed from inventory first than the goods which were purchased recently.
 Economic Reorder Quantity: It refers to the ideal or otpimum order quantity an
organization shall buy for its inventory at a given set production cost, a certain demand
rate, and other variables.

Different method of management accounting reporting
Management accounting report is a comprehensive overview of all the financial
information of a business for a particular time period. It is prepared for helping out the managers
in their decision-making process.
Budget report: Budgeting reports are prepared by the organisation Egine in order to critically
measure the performance of the company and are generated for whole of the business. The
budgets are prepared by the organisation for estimating the revenues form over all operation of
the business and to estimate the cost increment that will be required to generate those revenues.
A budgets list out all the earnings and expenditures where business tries to achieve the targets
profits under the allocated resources and restricted limit of cost.
Account receivable report: These are are those reports which are prepared by the
management of Egine where it can determined the dues to be paid to the creditors and suppliers
and in how much time they are required to be paid (Granlund and Lukka, 2017). This report
assist the business in determining that how much due are there no the company and how much
time it has to pay of the credits. This will assist the managers in determination of liquidity
amount are required for upcoming payment in advance so that it can arrange the funds
accordingly as per requirements.
Cost report: Cost reportare prepared by Egine in order not determine the overall cost of
the company. This includes cost incurred on each activity and over non productive activities of
the also. By this company can discontinue the activities which not generating any revenues or
on income at all. Apart form this controlling measures can be taken to cut the cost on different
activities.
Performance report: These are the reprots which are prepared by Egine on overall
performance of the company. In this report the effectiveness in organisation as well as individual
report is seen where actual and budgeted reports are compared and other controlling measures
are taken variance seen. The variances are measured on diffrnet parameter which are designed in
the perforce report as set targets and then compared with actual performance.
Advantages of different management accounting system and their application within the
organisation
Cost accounting system:

The advantages of this system can be outlined as the system assist in collection of all the
revenues and costs with a cost objective including distribution channels and product line. With
this system the cost incurred are easily traced over the trend line and discussed all expenses
which indicates the long term trends. The application of this in Egnie organization can be stated
as it is applied in the organisation to identify the cost incurred on production and this is used by
the organization to determined exact cost incurred and limit in which it wants to remain so cost
controlling measures can be taken.
Job costing system:
Job costing system have advantages for organisation Egine which mainly includes
calculation of the profits earned on the individual jobs which assist the management in
ascertainment that which jobs can be continues and which are required to be discontinued in the
future. This assist the managers in keeping a track that individual jobs along with team
performances in order to control the cost efficiency can productivity (Schaltegger and Burritt,
2017). The application of this system can be seen in the organisation in order to determine the
cost incurred on specific activity within organisation and as keeping track of the for each cost so
accordingly allocation of resources can be done along with tracking cost controlling measures if
required.
Price optimization system:
Under the price optimization system the advantages gained by the company Egine are
that its a assist the management in determination of the initial prices of the products which it is
launching and to determine the level of prices that can be paid by the consumer without any
hesitation. This assist the management in determination of the promotional prices to attract the
consumers to purchase its product. This is applied in the organization to determines different set
of price such as launching, promotion prices and sales prices at different level of demand which
according to the profit margin and according to the acceptability factor of consumers.
Inventory management system:
The inventory management system benefits the Egnie company in activating the
efficiency level of the business its productivity and operations. This assist the management in
ascertaining the requirement of material for estimated production and identification of the
expenses done over the holding the inventory in the warehouse. Its application in organisation is

done to estimate the stock to be kept in inventory and how must must be kept so that inventory
carrying cost is not high and cannot become major part of the cost of the product.
Critical evaluation of integration of management accounting system and reporting in the process
of organization
The management accounting system are the one which focus on the inside information of
the business is received and on the other hand the management accounting reporting are used for
planning, regulating and decision-making with measuring the performance of the business. The
systems of management accounting are integrated with the other processes of the company to
analyse the information it get through the reports prepare for accounting period and assist the
management in decision-making process (Quattrone, 2016).Thus, it can be stated that
management accounting reports and systems are integrated with each other one depend on toner
for effective performance of business. So the company Egine uses both of them at the same time.
The reports and systems of management accounting fall under the ambit of management
accounting and this makes the business more effective in its performance as it is presented with
all relevant and significant data and information for deciding it future course of action.
PART B
Production of portfolio of complete calculation
Cost can be defined as a monetary value which has been spent by the business
organisation for the purpose of manufacturing a product. There are different kinds of costs such
as :
 Fixed cost which does not changes with the variation in the activity level.
 Variable cost which varies with the change in production level.
Marginal costing :
Marginal costing is a method of costing the products and services wherein only variable
costs of manufacturing the goods and services are taken into considered by the company for
ascertaining the per unit of cost of production.
Absorption costing :
This is one of the technique of costing in which fixed and variable costs of manufacturing
a product is considered by the company for the purpose of ascertaining the per unit cost of
production.

Annex A:
Question 1:
Calculation of the cost of table as per marginal costing method:
Particulars Workings Amount (£) Cost per unit (£)
Direct Material 215
Direct Labour 90
Variable O/H 25
Marginal cost per unit 330
Selling price 590
-Marginal cost per unit -330
Contribution per unit 260
Particulars Workings Amount (£)
Net Profit / (Loss) for
Period 1
Sales (4350*590) 2566500
Cost of sales:
Opening inventory 0
Material (5000*215) 1075000
Labour (5000*90) 450000
Variable o/h (5000*25) 125000
1650000
-Closing inventory (650*330) -214500
-1435500
1131000
Contribution 1131000
-Fixed costs -307500
Actual Net profit/(Net
Loss) 823500
Particulars Workings Amount (£)
Net Profit / (Loss) for
Period 2
Sales (1700*590) 1003000
Cost of sales:
Opening inventory (650*330) 214500
Material (5200*215) 1118000
Labour (5200*90) 468000
Variable o/h (5200*25) 130000
1930500
-Closing inventory (4150*330) -1369500
-561000
442000
Contribution 442000
-Fixed costs -361500

Actual Net profit/(Net
Loss) 80500
Calculation of the cost of table under absorption costing method: