Management Accounting Principles & Practices

This assignment delves into fundamental management accounting concepts such as cost-volume-profit analysis and budgetary control. It examines relevant academic literature and provides insights into the motivations, barriers, and incentives associated with adopting environmental management (cost) accounting. The document also explores the role of management accounting in organizational decision-making and highlights the impact of new technologies like ERP systems on its practice.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1 Concept of management accounting and essential requirements of management accounting
system..........................................................................................................................................4
P2 Different methods for the management accounting reporting which can be used by Azio...6
M1...............................................................................................................................................7
D1................................................................................................................................................8
TASK 2............................................................................................................................................8
P3 & M2 Calculation of cost using different tools and techniques.............................................8
D2..............................................................................................................................................11
TASK 3..........................................................................................................................................12
P4 Different planning tools which are included in budgetary control and its advantages and
disadvantages............................................................................................................................12
M3.............................................................................................................................................13
P6 How organisation should adapt the management accounting system which assist in
responding to the financial problems........................................................................................13
M4.............................................................................................................................................14
D3..............................................................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Managerial accounting processes which helps in attaining the economic information
which is to be used by the supervising to make the appropriate and relevant decisions.
Management accounting put a greater focus on the cost accounting, financial planning as well as
management issues. Along with this employees of the business entity have to fulfil the
responsibility (Baldvinsdottir, Mitchell and Nørreklit, 2010). Management accounting helps the
staff members to do best planning as well as organising by collecting the information related to
the finance and operations of a business. Managerial accounting having the different functions
which includes the marginal analysis, break even analysis, target costing, inventory valuation etc.
They have to warn the managers for the impending issues as well as they have to put their proper
attention so that they can gain the opportunities so that they can earn maximum profits (Cost-
Volume Profit Analysis, 2017). They have to record the appropriate data so that workers can do
accounting transactions in a good manner which helps in attaining the goals and objectives. The
main objective of management accounting is that this assist the supervising and also aid in
making the quality decision so that they can control the business activities in a effective manner.
The present report is focused on Azio which is manufacturer or producer of keyboards, mice etc.
along with the mobile accessories in the style of gaming and vision (Marginal cost, 2017). In the
below assignment, discussion based upon the concept of management accounting and the
different system of management accounting. Along with this determination of absorption and
marginal costing.
TASK 1
P1 Concept of management accounting and essential requirements of management accounting
system
Management accounting is a combination of accounting, finance as well as
administration with the leading edge technique so that they become the successful business.
Management accounting is a profession which involves the partnering in the management
decision making, devise the planning so that they can manage their performance. Along with this
they have to take advice from the experts so that they can manage the data in the financial
reporting and they have to do proper control in the formulation and implementation of the
strategy of Azio which the employees are following (Bennett, Schaltegger and Zvezdov, 2013).

Management accounting have to do best designing and they are intended which is used by the
managers within the organisation and they are intended to use for shareholders, creditors as well
as public regulators. It also helps in monitoring the spending along with the financial control and
also have to conduct the business audits. Along with this management accounting having a
impact on the competitive advantage. Management accounting includes the different systems
which helps the employees of Azio in attaining the targets as well as goals and objectives (What
is Budgetary control?, 2017).
Different system Description
Cost accounting system The employees of Azio have to adopt the system so that they
can manage the cost of the product while producing the
products and services as it aid in increasing productivity as well
as performance of the company in the market. Cost accounting
system is divided into two parts that is job order costing and the
process costing (Busco and Scapens, 2011). This also helps in
doing the appropriate measurement and the improvement of
efficiency and fixation of prices. It provides the detail
information for the cost data that needs the management to
control its current operations along with the plans for the future.
Job costing system It is a form of specific order which helps in analysing and
identifying the cost which are associated while completing the
order so that they can record them in a proper manner. It
includes the cost of material, labour along with the overheads
which is used to manage the job. It is used in the different type
of business where the merchandise should be produce in a
unique nature for each individual consumer.
Inventory management system It is a part of the management accounting system as it helps in
managing as well as analysing the inventory of Azio. It
combines the different use of desktop software, printer as well
as barcode scanner which assist in supervising the inventory
(Christ and Burritt, 2013). The staff members of Azio have to

use the proper and appropriate technology so that they can
provide the qualitative products so that managers can control
the inventory and for that they have to follow or adopt the two
function that is receiving and shipping. It helps in managing the
inventory level in Azio.
Price optimising system It is a strategy which assist in allowing the employees of the
business entity so that they can get all the information that how
they can provide the sensitive products to their clients and on
the basis of that product price should be required which helps in
improving the profitability level. This model is used by the
employees of Azio so that they can set the price for the different
consumer segments and on the basis of that how they provide
the respond on the basis of changes for the different price
scenario which will help them in attaining the goals and
objectives as well as success.
P2 Different methods for the management accounting reporting which can be used by Azio
The reports which are related to the management accounting help in managing all the
operational activities so that they can make appropriate decisions for doing the best operations in
the business entity. These reports helps in providing all the information as well as data to the
managers which includes the different aspects of the business organisation. These reports helps
in collecting the data whether it is financial as well as non financial and present then in making
appropriate and correct decisions. This system helps in capturing the sort of data which is
required by the manager of Azio so that they can run the successful business. The employees of
the business entity have to share the ideas so that they can make the improvements in the
business and attain the success. Along with this financial reports of the firm help the stakeholders
as well as investors in making the correct decision for doing the investment or not. There are
several methods for managing or supervising the reporting system which includes:
Job cost reports: This report shows or determines the cost which is incurred for a specific
project. This report helps in matching or evaluating with the estimation of revenue so that
employees of Azio can evaluate the job profitability as well as productivity (Cinquini and

Tenucci, 2010). Along with this it helps in identifying the areas which are included in the high
earning of the business so that employees of the firm can focus on that and put more efforts to
improve those areas rather than wasting time along with the money on the jobs which having the
low profit margins. Moreover, this report helps in analysing or identifying the various costs
which are putting in the progress or improvements of the products and services which assist in
reducing the waste.
Inventory management report: This report helps in managing the inventory of the
business so that they can do the proper operations which helps the business entity in attaining the
success as well as goals and objectives. It assist in determining the levels which they have to
maintain or when the stock should be replenished.
Operating budget report: This report helps the business entity in analysing as well as
identifying the performance in the market as well as in the company also. In each and every
department they have to enable monitor as well as they have to control the cost while doing the
operations. Management of Azio have to use or adopt operating budget which helps in providing
the incentives to the employees (Contrafatto and Burns, 2013).
Accounts receivable aging report: It is a tool which enables the management of Azio so
that they can manage its cash flow in providing the proper credit to their consumers. Along with
this it helps in break down the consumer balance that how they can manage the business as well
as operational activities which helps in attaining the targets.
Performance report: This report help the staff members of Azio in identifying the
performance of them that is how much products and services they are producing. They have to
do proper segments of the market so that they can do proper operations. It aid in attaining the
success as well as generating profitability and improving the productivity. Moreover, for
controlling the cost they have to take corrective measures so that they can manage all the work of
the staff members as well as it helps in bring out the efficiency in a effective manner (Dillard
and Roslender, 2011).
M1
There are different type of management accounting system and they have their benefits.
Cost accounting system helps in determining the cost of the merchandise as well as helps in
making the marketing decisions. They have to determine the selling price of the product and
meet the competition so that they can analyse the profitability. Inventory management system

helps in making the changes in the demand for the finished products. Another system is job
costing system and it helps in gathering the data so that they can find actual cost for the job. In
addition to this price optimisation system which having a advantage that is can be organisation to
tailor its pricing for the different consumer segments which is based on the changes of the price
scenario.
D1
The employees and managers of Azio have to use proper management accounting system
along with the reporting so that they can not face any issues in managing all the operational
activities and by that they can attain the goals and objectives (Fullerton, Kennedy and Widener,
2014). Along with this it helps the stakeholders and investors to make the appropriate judgement
for doing the investment in the business entity so that they can accomplish the targets. They have
to present the information in a specified time and also it should be up to date so that investors
can not face any obstacles and by that they can maintain their brand image in the market as well
as assist in reaping the success in the marketplace at the time of high competition.
TASK 2
P3 & M2 Calculation of cost using different tools and techniques
There are different tools and techniques which can be used by the employees of Azio so
that they can calculate the cost along with the profit and they includes:
Absorption Costing: This method helps in calculating the cost of the product whether it is direct
or indirect which will aid in generating the maximum profit. This method of costing assist in
identifying the centre which is related to the individual cost so that indirect cost can be identified
easily. It is a principle which succour in allocating the cost on the basis of production cost so that
employees of the company can do proper functioning and by that they can attain their targets
(Håkansson, Kraus and Lind, 2010).
Income statement on the basis of Absorption costing method:
Selling Price £35
Unit costs
Direct materials £6
Direct Labour £5

Variable Production overhead £2
Variable sales overhead £1
Budgeted production for the period is 600 units
Fixed cost for a month:
Production overhead: In this budgeted cost is £1,800 and Actual cost is £2,000
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
0
11200
(1600)
21000
(9600)

Closing stock
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
600
700
600
(100)
11400
(1800)
9600
Marginal Costing: It is also includes in the accounting system which helps in determine the cost
of the product by including the fixed cost of merchandise which helps in doing the proper and
appropriate contribution in minimising the cost as it helps in making the appropriate judgements.
This cost should be calculated in a proper and efficient manner as it assist in increasing or
decreasing the cost of manufacturing and on the basis of that they have to give the payment to
their staff members which aid in attaining the targets as well as generating the maximum revenue
(Herbert and Seal, 2012).
Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales 21000

Less Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
600
2000
700
600
(7800)
13200
3900
9300
Cost Volume profit analysis: It is also a instrument which helps in making the changes along
with this it helps in determining the changes which is to be done in the cost and volume which
having a adverse affect in the operating as well as net income of Azio (Hiebl, 2014). The
employees along with the company have to give their best performance in the market place so
that they can not face any issue in making the assumptions in the basis of sales price of the
product, variable cost per unit along with the total fixed cost and it should be constant in nature.
For this analysis should be done properly and by using the appropriate formula that is
contribution is to be divided with the sales and multiplicate by 100. This formula helps in
analysing the cost as well as profit so that they can attain the targets.
= contribution /sales x 100
= 10800/21000 x 100
= 51.42%
Absorption costing is the apportionment of the total cost to the cost centre which helps in
determining the cost of manufacturing. Where as marginal costing is a technique which helps in
making the correct judgement related to the total cost of production.
Absorption costing includes the fixed as well as variable cost but marginal costing
includes the both variable and fixed but variable is to be considered as product cost and fixed is
to be considered as period cost.

D2
The employees as well as manager of Azio have to provide the financial report in a
attractive way as it helps the investors in making the correct judgement. If the employees of the
business entity is using absorption costing then they get net profit is 6700 and if they are using
marginal costing then they are getting 7500 that means by using both techniques net profit of the
business entity is different and by that they can improve the performance in the market.
TASK 3
P4 Different planning tools which are included in budgetary control and its advantages and
disadvantages
There are different tools which help in doing planning which helps in doing the budgetary
control and they have to do the formal statement of the different resources which are related to
finance so that they carry out the different activities in a specific period of time. The employees
of Azio have to coordinate the different activities so that they can monitor the organisational
functions which are distinctive in nature. They have to maintain the standard by using the
appropriate control system (Jansen, 2011). There are different type of planning tools which can
be used by the company which includes:
Cash budget: It is also a type of budget which helps in doing the estimation of the inflow
and outflow of the cash for a business in a specific time. They have to analyse the different
things and they have to check that whether Azio have the sufficient cash or not to do all the
business operations. The main advantage of this budget is to identify or analyse the amount of
cash as they require to fulfil the needs and wants without the utilisation of the overdraft
protection. The employees of the business entity have to make the plans for the optimum
utilisation of the cash.
Capital Expenditure budget: This budget helps in maintaining the expenditure and also
they have to use the appropriate funds and resources which are used by the business entity so that
they acquire and upgrade the physical assets such as property, industrial buildings and
equipments. They have to use the appropriate budgets so that they can make the investments.
The employees have to do the appropriate calculations which help in doing the determination so
that they can make the correct investment decisions. This method helps in saving the time as well
as money so that every staff members can not face any issues (Kaplan and Atkinson, 2015).

Cost plus pricing method: It is also a cost method which helps in identifying the cost and
that is related to the direct material, direct labour as well as overheads of that product and
according to that they can determine the price of the product. It helps in finding out the exact
amount the expenditure as it helps in accomplishing the desired revenue. But this method having
a disadvantage also that is they have to take into account for the future demand of the products
and services and also have to decide the price of the product accordingly (Setthasakko, 2010).
Target cost pricing method: This approach helps in determining the cost and that is
determined in the product life cycle. Along with this it is sufficient to develop the functions of
the business entity along with the quality so that they can generate the maximum profits. They
have to target the cost by subtracting the desired profit margin so that they can get the
competitive price of the product which helps in attaining the success at the time of high
competition. It helps in creating the management which helps in identifying the desires and on
the basis of that they can make design along with the manufacturing products so that they can
meet the price and on the basis of that they can attain the success (Lee, 2011).
Market led pricing method: The employees of Azio have to use the appropriate marketing
strategy so that they can determine the price of the product. If the price of the merchandise is
high then consumer shift to the other and move to the another. They have to do the proper market
research so that they can provide the best products to their consumers. The employees of Azio
have to maintain the standards in the industry as well as they have to set the price which is
related to their life cycle (Sánchez-Rodríguez and Spraakman, 2012). The employees have to
manage the price so that they can attain the success in the market but this having a disadvantage
also that is based on pricing which is based on the price of the merchandise of the business
entity.
M3
There are different planning tools which can be used by the employees of Azio so that
they can put the proper control on their budgets as it helps in doing the expenditure for
purchasing the material which are used for them and on the basis of that they can provide the
best services and by that they can attain the goals and objectives as well as targets (Luft and
Shields, 2010). Along with this to maintain these budgets they have to manage all the data as it
succour in improving the performance along with the productivity of the company in the market
when they are facing high competition.

P6 How organisation should adapt the management accounting system which assist in
responding to the financial problems
The employees as well as managers of Azio have to analyse or identify the management
accounting system so that they have to resolve the problems which helps in attaining the goals
and objectives. They have to use the relevant and appropriate data for managing the accounting
system that should be adopted by manager of the business entity (Lukka and Modell, 2010). The
manager of Azio can include the different methods or approaches that is key performance
indicator, budgetary targeting, benchmarking along with the financial governance. These are the
tools and techniques which helps in improving the performance of the business entity in the
competitive market by providing the best services to their consumers. The manager of the
company have to adopt the best method which succour in improving the productivity and
proficiency. Benchmarking is the method which assist in setting the data and also have to use the
ethical laws which are introduced by the regulatory bodies and that is related to the finance
(Macintosh and Quattrone, 2010). Another method is budgetary targeting method which is adopt
by the company so that they can make proper plans and on the basis of that employees can make
appropriate budgets which assist in reaping the success. In addition to this key performance
indicator method which helps in analysing the success of the company in the market as well as
managers of Azio have to conduct the meetings and on the basis of that they can accomplish the
goals and objectives so that they can improve the performance. They have to provide the best
and qualitative services so that they can give the proper delivery on the particular time which are
decided by them to attain the objectives. They have to fulfil the targets so that they can attain the
liquidity level along with the return on investment which help the investors in making the
appropriate decisions so that they can not face any issues and attain the goals and objectives.
This also helps in reaping the success so that they become sustainable in the market at the time of
high competition (Nandan, 2010).
M4
Managing accounting helps in gathering the data as well as information which are useful
for the company so that the employees can not face any problem in managing the different
operational activities so that they can attain the success and remain sustainable in the market
(Pipan and Czarniawska, 2010). The manager of Azio have to provide the proper attention to
their employees which help them in providing the best services as well as fulfilling the needs and

wants of the consumers. in attaining the success they provide the proper contribution as well as
they have to use appropriate elements in attaining the targets.
D3
The employees as well as managers of Azio have to use the different planning tools and
techniques which assist in making the proper as well as appropriate control on the budgets. It
assist in attaining the sustainable success in the marketplace (Quinn, 2011). The employees and
managers of Azio have to use the appropriate budgets so that they can manage all the work and
by that they can remove the obstacles which are facing by the employees. Along with this it
helps in providing the best products and services which assist in attaining the success and also
remain sustainable in the competitive market as it helps in improving the productivity in the
efficient manner (Renz, 2016).
CONCLUSION
In the report, it has been analysed that management accounting helps in doing planning,
organising as well as collecting the appropriate data and by that they have to use that data which
helps in fulfilling the needs and wants of the consumer. They have to use appropriate system to
manage the data of Azio. Along with this all the information which denotes the financial
condition of the business entity should be present in a attractive manner so that investors get
attract and do the more investments in the company. Along with this it helps in increasing the
productivity as well as performance of the company.

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