Management Accounting - Airdri Assignment

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and requirement of its system...................................................1
P2. Different type of management accounting reports...........................................................3
M1. Importance of different management accounting system...............................................4
D1: Various reporting method and accounting system integration........................................5
TASK 2............................................................................................................................................6
P3. Techniques used to analyse cost with marginal and absorption costs..............................6
M2. Various type of Accounting tool and techniques............................................................8
D2. Financial report for the data of business activities..........................................................8
TASK3.............................................................................................................................................9
P4. Different planning tool used for budgetary control..........................................................9
M3 Analysis of various planning tool and its application for forecasting...........................10
P5: Financial issue and resolution........................................................................................11
M4 Analysis of planning tool to deal with financial issue...................................................12
CONCLUSION .............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Management accounting is a process of collecting business information and than record
that information in management reports. It is a system which is followed by the management of a
company to generate reports that may provide actual information of company's performance and
its position in market (Amidu, Effah and Abor, 2011). It helps the internal stakeholder of an
organisation to gather information of operational and executional activities of the business and
form crucial decision in context of the business. Managers monitor, control and analyse the
information and than make policies and strategies to attain organisational goals. It help the
managers in strategic decision making which is used to resolve possible issues that may occur.
The company chosen for this project report is Airdri, it is a manufacturing company of hand
Dryer. It is also a leading importer in UK.
This project reports consist detailed information of management accounting, its systems,
reports, their types, benefits of management accounting system, different costing techniques,
various planning tools that are used in budgetary control and how organisation is using
management accounting to respond financial problems that they are facing.
TASK 1
P1 Management accounting and requirement of its system
Management accounting refers to the examination of accounting data by the managers to
find the accuracy of the information which has been recorded in the books. It help the internal
stakeholders to analyse the performance of running business and its position in the market.
Management accounting system is used by various organisations to evaluate the transparency of
the data which has been recorded by the managers in the books of management (Bennett and
James, 2017). In Airdri it is used by the management to analyse various information such as cost,
inventory and performance. There are four different types of management accounting like cost
accounting, price optimisation, inventory management and job costing system. These systems are
explained below:
Cost accounting system: A cost accounting system is used by a company to analyse its
actual profitability by estimating actual cost of its products. It helps the managers and internal
stakeholder to assess the cost which is involved in the manufacturing process of the company. In
Airdri it is used to record all the production related activities that are performed by the company.
1

It help to examine the flow of inventory. It is very beneficial for the organisation because it helps
the managers to get the exact information of cost which is involved in manufacturing process.
There are three different type of cost accounting systems. Standard costing which is used to
analyse the difference between actual cost and budgeted cost, Marginal costing, it help to
identify the cost of additional units of production that are produced by the organisation and at
last absorption costing in which the manufacturing cost of units are absorbed from the sale of
same units.
Inventory management system: It is mainly used by manufacturing companies as it
may provide exact information of inventory. It helps the managers to track the inventory while it
is in transit, warehouse or in production (Bryer, 2013). The managers of Airdri use inventory
management system to record the activities that are related to inventory. It help the management
to keep an eye to their goods that are taken in and out of the organisation. There are three types
of this system. LIFO, FIFO, AVCO, In LIFO the recently received inventory will be used first by
the company for production. In FIFO the earlier received stock will be used first for
manufacturing process. In AVCO the inventory will be used on average basis for the production
process of products. It is very important for the company because it may facilitate managers
while analysing the inventory information.
Price optimisation system: This system is used by organisations to find the best prices
of their products that may lead the organisation toward its organisational goals that are profit
maximisation and customer satisfaction. In Airdri price optimisation system is used to examine
customer's reactions toward their price changing strategies. It help the managers while deciding
the right prices for their products by studying the behaviour of the customers and determining
their needs and wants. It also help to make effective pricing decisions which will lead the
organisation toward success. It is very advantageous for the company because it help to set
appropriate prices for the products by recording the reaction of customers toward price changing
strategies of the company.
Job costing system: It is concerned with the process of analysing the cost which is
involved in different activities of the company. Managers of company are responsible to record
cost of various production segments in management reports. In Airdri it is used to determine cost
of different jobs that are totally different form each other and performed according to the
specifications of customers (Carlsson-Wall, Kraus and Lind, 2015). It also separates the direct
2