Introduction to Management Accounting INTRODUCTION

Management Accounting

Table of Contents
INTRODUCTION................................................................................................................................3
P 1 Explaining and evaluating management accounting systems and its essential requirements
within business.................................................................................................................................3
P 2 Presenting different methods which can be used for management accounting reporting ........5
P 3 Calculating cost using absorption and marginal costing system ..............................................6
P 4 Explaining advantages and disadvantages of different types of planning tools which can
be used for budgetary control........................................................................................................10
P 5 Comparing ways in which organization is using management accounting system for
dealing with financial problems.....................................................................................................15
CONCLUSION..................................................................................................................................17
REFERENCES...................................................................................................................................18

INTRODUCTION
Management accounting may be served as a process which in turn plays emphasis on
preparing managerial reports that aid in short term decision making. In the recent times, fore
taking profitable business decisions companies make focus on the adoption of management
accounting tools and techniques. The present report is based on Unicorn which provides
customers with wide range of choices in groceries. In this, the present report will provide deeper
insight about the requirements of management accounting tools in the context of business
organization. Along with this, it also depicts how managerial report helps in developing
competent and strategic policy framework for the near future. This report will also shed light on
the appropriateness of costing system which can be used for cost and profit assessment. In
addition to this, planning tools which can be used by Unicorn for better financial decisions will
also be discussed. Further, report also entails MA techniques which assist in responding
monetary problems effectually.
P 1 Explaining and evaluating management accounting systems and its essential requirements
within business
Management accounting is the process of identification, measurement, analysis,
interpretation and communication pertaining to information which manager undertakes for the
pursuit of an organizational goals (Management Accounting, 2019). With regards to Unicorn,
management accounting is highly significant which helps manager in making profitable
decisions. By using management accounting system business unit can manage its operations
more effectually and thereby enhances profitability aspect.
Job costing
In Unicorn, Operation costing means collecting all the cost such as material, labour and
specific overheads related to the one operation.
Advantages Disadvantages
 Assists in determining profitability
aspect of each task
 Offers basis for estimating cost of
similar jobs
 Provides with detailed assessment
regarding material, labour and overhead
 Needs more clerical work
 Lack of operation standardization
under this costing system
Highly expensive over others

cost
Expenditure accounting
Each business unit produces and sells product with the motive to generate high profit
margin. In this, it is required for the company to make assessment of per unit expenditure.
Hence, by assessing direct and indirect expenses associated with product Unicorn can determine
per unit cost. By dividing total cost from number of units produced cost per unit can be
calculated (Chenhall and Moers, 2015). Hence, by adding profit margin into per unit
consumption price can be calculated by Unicorn.
Advantages Disadvantages
 Helps in controlling financial
performance as it gives input for
standard costing
 Facilitates ascertainment of unit
production cost
 Helps in setting prices of the products
or services
 Complex in nature
 Expensive and time intensive in nature
Inventory system
Inventory system is the ongoing process of moving goods into and out of a company's
location. With regards to Unicorn effective management of inventory is highly required because
it place direct impact on cost aspect. Hence, for managing both cost and profit firm should focus
on undertaking LIFO, FIFO, EOQ etc method. Moreover, economic order quantity method
clearly presents units which need to be maintained within an organization (Elliot and et.al.,
2018). This in turn exerts control on both holding as well as ordering and thereby increases profit
margin.
Advantages Disadvantages
 Tracking of inventory level becomes
easier
 Control cost and maximizes profit
 Time consuming profit
 Need highly skilled personnel

Price optimization system
In the competitive business arena, Unicorn can attain success only when it offers products
or services at suitable cost. Moreover, now customers are looking for the retailer which offers
products or services to the customers at affordable prices. Thus, by undertaking price
optimization system business unit can assess price on which product needs to offered for
influencing customer decision making and gaining competitive edge (Kaplan and Atkinson,
2015).
Advantages Disadvantages
 Helps in setting pricing policies
 Assists in building strong customer
base
 Employees need training for operating
such software
 Expensive
P 2 Presenting different methods which can be used for management accounting reporting
Management Reports means the reports needed by different departments in order to take
the decisions for the company. As per MA, several methods are available which can be
undertaken by the firm for reporting and decision making purpose. Hence, by taking into account
below mentioned reports Unicorn can assess departmental performance and thereby would
become able to appropriate business decisions.
Budget report
This report enables manager to analyse business performance, in the context of all
departments and thereby control cost. Budget report clearly presents variances take place in the
income and expense level of firm over standards. Hence, considering the causes of variance firm
can set suitable monetary budget for upcoming time period (Kylili, Fokaides and Jimenez, 2016).
In addition to this, budget report also enables firm to measure as well as evaluate employee’s
performance and provide them with incentives.
Job cost report
It presents expenditure which associated with different project within business unit. Job
cost report is used by the firm to evaluate the figure of revenue in against to estimation with the
motive to determine profitability aspect. Job cost report provides assistance in high performing
areas so that better efforts can be made.
Accounts receivable ageing

In the context of business unit, accounts receivable ageing report is highly significant
which helps in managing cash flow to a great extent. As, it clearly exhibits time period for which
credit is taken by the customers. For instance: By undertaking this report, manager of Unicorn
would become able to assess customers or creditors who making payments within the period of
30, 60 and 90 days. Hence, using this report manager can assess problems which take place in
collection process of firm. In this way, such report helps in identifying customers who unable to
pay their balances. Considering all such aspects Unicorn can tighten its credit policies and
thereby reduce the level of defaults.
Inventory and manufacturing report
Unicorn can make manufacturing process more effective and efficient by using stock
report. Moreover, stock report contains information about physical inventory or products,
wastage level, hourly labour or per unit overhead cost. Thus, different assembly lines within
business unit can be compared easily through the means of inventory report (Van der Stede,
2015). This in turn gives clear indication about best performing departments and areas which still
require improvement.
P 3 Calculating cost using absorption and marginal costing system
Cost means the amount which is charged for any particular good by the customers. In
marginal costing system, the losing inventory is calculated by taking only variable expenses in
the account. Under absorption costing system, fixed and variable both the expenses are taken into
account while calculating closing inventory.
In the following P&L (profit and loss statements) the figures in green have been calculated
properly. Instead the figures in yellow, have not been correctly estimated or are calculations
which are not part of the P&L statement. For instance, the production cost per unit concepts must
not be included in the P&L statement. The conciliation of accounts is right
Marginal costing system
Particulars Cost per unit (in £)
Direct Material 8
Direct Labour 5
Variable O/H 3
Marginal cost per unit 16