Management Accounting - Airdri Ltd Assignment Sample

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting and its different systems..........................................................1
P2. Explain different method of management accounting reporting. ....................................2
M1. Evaluation of benefits of various management accounting systems..............................3
D1 Management accounting system and management accounting reporting are integrated
with organisation process.......................................................................................................5
TASK 2............................................................................................................................................5
P3: Cost accounting techniques to prepare an income statement...........................................5
M2: Management accounting techniques and financial reporting documents.......................9
D2. Financial reports which applies to interpret many business activities.............................9
TASK 3............................................................................................................................................9
P4: Advantages and disadvantages of different kind of planning tools of budgetary control.9
M3: Evaluation of planning tools.........................................................................................11
D3: Critical analysis of financial issues...............................................................................11
TASK 4..........................................................................................................................................11
P5: Comparison of organisation to solve the financial problem with the help of management
accounting system................................................................................................................11
M4: Evaluation of financial issues.......................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting plays an important and valuable role in making strong financial
stability of an organisation by framing an effective strategies and plans on the basis of financial
information available under financial records. The accounting manager is responsible to analyse
the financial records of an organisation which includes P/L Account, Balance sheet, Cash flow
statement etc. and make decisions accordingly. It includes both monetary as well as non-
monetary transactions. The present assignment report is based on Airdri Ltd. Which is engaged
in manufacturing sector providing hand dryers at affordable prices. The report described the
various management accounting and reporting systems along with their benefits and
requirements within an organisation. The report also explains costing methods which includes
marginal and absorption and its applications on calculation of net profitability. In addition with
this, planning tools to control budget and usage of management accounting system to resolve
financial issues that are faced by an organisation.
TASK 1
P1: Management accounting and its different systems
Price optimization System- This is a mathematical approach used by the company to
determine the responsiveness of customers in relation with different prices for their product and
this technique helps in solving complex calculations. The Airdri can use this technique to
maximise their operating profit by assessing the wants of customer and coating prices according
to it. The company can use this technique through conducting survey and collection of data and
comparing it with cost of operations, inventories and previous prices of product (Arnaboldi,
Lapsley and Steccolini, 2015). This technique requires complex calculation and for that price
optimization software has been developed by the software companies to meet the need of B2C
company or any retail company producing large number of products in different currencies and
the complexity of permutation and combination is an example where company can form pricing
strategies which can applied over the company.
Cost Accounting System- Cost accounting is a system of recoding, classifying,
summarizing the activities and on the basis allocation of cost is divided so that cost can be
controlled. The Airdri can use this approach to ensure that the activities performed by
management and their business practices result in cost efficiency. As the cost accounting
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provides information related to the cost which is required to be allocated and it helps in
comparison of the actual cost that is incurred so that management of the company can take
decision regarding how to operate the activities of business (Cost accounting systems, 2013).
The manager is required to compare current and previous performance of the company but it
does not allow to compare the information with any other company. This information can be
used in the financial accounting but mainly this is used by manager to facilitate decision making.
Inventory management system- Inventory is the finished goods produced by the
company for the objective of sale. This is a method which specify the place where goods will be
placed. This method can be use by Airdri to place their stock at different locations or in many
locations for a planned and regular course of production. The concept which include work-in
progress, stock has extended to service sector from production sector as they are also concern
with the amount of service they provide. The inventory management is used by a retailing
company to maintain proper stock while ordering, shipping, handling and maintaining cost
related to it. This help Airdri in identifying inventory requirement, setting targets, provide
replenishment techniques and help in handling all the functions related to management of raw
material which help the company in maintaining their inventory level (Booth, 2018).
Job costing system- This is a accounting system in which number of job to be assigned
in individual item of their expenses and revenues. A job is a specified project which is performed
for a single customer and a single unit is produced or activities of same type are grouped
together. The method is used by the retailing company that is Airdri to set various job which has
same type of direct or indirect expenses such as direct labour or direct materials and overhead
cost such as indirect labour or quality control etc. This technique is beneficial to determine
profitability of the company as job costing statement is considered as overall statement of profit
and loss and specific to each number. This techniques helps in assessing the cost which is
involved in manufacturing of each job performed for each product.
P2. Explain different method of management accounting reporting.
Budget Report: It is a document contains information related with estimation of cost that
will be incurred in future business activities. It is prepared for one year in relation with financial
activities. This report includes planned expenses and expected revenues and which resource will
be utilised and their cost. The assets and liabilities of the one year is estimated which will be
required for the process of manufacturing. The budget includes the funds and summary of
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