Management Accounting and Systems

This report discusses the concept of management accounting and the requirement of various management accounting systems. It also explores different methods used in management reporting and the benefits of management accounting systems. The report further examines the integration of management accounting systems and management accounting in an organization. Additionally, it covers the preparation of marginal costing and absorption costing income statements and the application of management accounting techniques and appropriate financial reporting documents.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and requirement of various management accounting systems......3
P2 Different methods used in management reporting.................................................................4
M1 Benefits of management accounting system with their respective application ...................5
D1 Critically examine integration of management accounting systems and management
accounting in an organisation .....................................................................................................6
TASK 2............................................................................................................................................6
P3 Preparation of marginal costing and absorption costing income statements ........................6
M2 Application of management accounting techniques and appropriate financial reporting
documents...................................................................................................................................9
D2 Financial reports which interpret wide range of business operations.................................11
TASK 3..........................................................................................................................................11
P4 Advantages and disadvantages of various planning tools used for budgetary control........11
M3 Analysis of planning tools and their respective application for budgets and forecasts......12
TASK 4..........................................................................................................................................13
P5 Comparison of firms in order to identify their adaptation to management accounting
system .......................................................................................................................................13
M4 Response to management accounting problems leading to sustainable success................14
D3 Planning tools responsible for financial problem solving in order to attain organisational
success.......................................................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is considered as mostly used technique which helps managers to
use certain statements for the sake of decision making. This technique aid in proper evaluation of
performance of the company. Decision-making includes financial as well as non financial
decision making in order to regulate business based operations in the long term. This is guidance
which is being provided by management to the superiors to reflect appropriate and efficient
decision making as per the condition. This report comprises of various tools of management
accounting which will ultimately be responsible for decision-making. These tools and techniques
will include marginal costing, absorption costing and various variance analysis. This will
ultimately be helpful in efficient decision making on behalf of manager of a company. Also it
include interpretation and evaluation of different above stated systems of management
accounting as well as planning tools in relation to a company in specific time period.
TASK 1
P1 Management accounting and requirement of various management accounting systems
Management accounting is defined as a broad branch of finance where various significant
techniques are used in order to assist in ultimate decision-making by manager on behalf of
organisation (Hogle, 2019). This is used by finance department in order to promote healthy
business operations by rectification of any errors in them. Connect Catering Services has adopted
this technique to enhance company's overall productivity in relations to its operations in the long
term.
Various management accounting systems have established strong roots over company's
decision making by making them much effective and reliable. Adoption of such systems promote
growth and sustainability of its relevant operations. Connect catering services enables its
superiors to use various management accounts and statements in order to produce appropriate
decisions which will ultimately define company's progress. There are various management
accounting practices which can be discussed as follows:
Price-optimization: It refers to effective mathematical tools which signifies how demand
of a particular changes due to the variation in customer's behaviour. Through this approach,
customer's willingness to pay will be highlighted so that is will become easier for a company to
modify its policies as per customer's preferences in order to maintain profit-margins and costs so

that company's performance will not be harmed (Christ and Burritt, 2017). By analysing
consumer's behaviour, company can build strategic policies, forecasts demand, pricing policies
and so on in order to manage profitability level. Connect catering services have adopted this
system in order to enhance its production levels to avoid any extra costs which will reflect
sufficient profit-margin.
Inventory management system: Stock is said to be most important factor for company's
revenue earning capacity. It is something on which company's profitability is dependent through
effective sales turnover (Ylä-Kujala and et. al., 2018). In this regard inventory management
system has been adopted by Connect catering services as company is implementing effective
tools of management accounting in order to eliminate complexities in the respective supply chain
systems and processes of the company. It is necessary for a company to manage inventory
related shortcoming and errors so that appropriate productivity could be achieved by the
company. Basic functioning of inventory management system is suggested as forecast
anticipated demand in respect of goods being produced by the company as well as determine
level of operational efficiency and so on.
Cost accounting system: This system refers to accounting which has been introduced for
sake of manufacturers in order to trace flow of inventory as per the relevant stage of production
system (Stockenstrand and Nilsson, 2017). It is basically evaluation of material in raw form till
its conversion into finished products through various production stages. This is mostly
implemented by manufacturing houses in order to identify their actual performance of production
department. Connect catering services has implemented this technique to track record of its
significant activities in reference to production of goods as well as its transformation process in
order to maintain profitability by eliminating any sort of wastages.
P2 Different methods used in management reporting
Budget report: It is established in order to meet future based contingencies in reference
to expenses of an organisation. It is considered as a valuable practice which needs to be adopted
by organisations in order to eliminate unnecessary occurrence of cost in business operations. It is
also stated as identification of deviation in actual performance as compared to forecasted
performance. Factors responsible for such factors could be high prices of raw materials, extra
cost for operations, reduced market share, etc. Connect catering services has enabled usage of

this report as it is beneficial for an organisation in the long term as well as shatter extra cost
which is being affecting company's overall efficiency.
Performance report: It is somewhat similar to budget report, but its actual emphasizes is
over company's performance irrespective of budget is made or not. It is necessary for an
organisation to eliminate any kind of deviations in its performance as compared to set standards
by it (Hörisch and et. al., 2020). In this regard, Connect catering services is focusing over its
operations to increase its overall efficiency in the long term in order to survive in marketplace.
This is important for superiors to analyse its business from every aspect to eliminate any factor
which may affect profit generation capacity of a company.
M1 Benefits of management accounting system with their respective application
Systems Benefits Applicability
Price optimization It is beneficial for an
organisational growth through
analysing customer's behaviour in
respect to the sales made by the
company of their product and
services.
Such system is adopted by
each type of organisations so
that demand in reference to a
product could be modified by
modifying respective sales of a
product or service.
Inventory Management
System
It promotes accuracy in
transactions, reduction of
mismanagement and cost
effectiveness in an organisation in
relation to inventory.
It is used by business entities
in order to manage inventory
system being followed by it.
This way more efficiency
could be achieved.
Cost Accounting System This is useful being significant
factor for production segment of
an organisation as a whole. It
manages each tasks involved in
production of a products.
Business units are using this
technique to advance
production based activities so
that more profit-margin can be
drawn.

D1 Critically examine integration of management accounting systems and management
accounting in an organisation
Management accounting is a wide activity which is being adopted by various
organisations through implementation of effective management accounting systems.
Management accounting systems are integrated with management accounting being its ultimate
essence (Malik and et. al., 2021). Connect catering services have selected such techniques of
inventory management, cost management and so on in order to facilitate managers in production
of most efficient and effective decision-making in regard to company's ultimate success. As per
suitability of a company, its choose relevant management accounting systems which will be
helpful in progress and success of an organisation. Being a catering company, it must ensure
adoption of management accounting techniques which can produce most effective services and
products to its clients to survive in the market.
TASK 2
P3 Preparation of marginal costing and absorption costing income statements
1 Preparation of various income statements:
Calculation of Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Fixed Manufacturing Overhead per unit 6 5
10 9
Income statement as per absorption costing
Particulars April (£) May(£)
Sales 16000 16000
Less: Cost of sales (2000*10) (2000*9) 20000 18000
Fixed Manufacturing Overhead 15000 15000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
Closing stock (500*10) (1500*9) 5000 13500
Opening stock (500*9) 0 5000
Gross loss -4000 -2000
Less: Fixed Non-Manufacturing Cost -4000 -4000

Net loss(£) -8000 -6000
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Particulars April (£) May(£)
Sales 16000 16000
Less: Marginal cost of sales 8000 8000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
Closing stock (500*4) (1500*4) 2000 6000
Opening stock 0 2000
Contribution 8000 8000
Less: Fixed Manufacturing Overhead 15000 15000
Less: Fixed Non-Manufacturing Cost 4000 4000
Net loss -11000 -13500
Reconciliation statement:
Particulars April May
Net loss under absorption costing -8000 -6000
Less: Closing stock -3000 -7500
Net loss under marginal costing -11000 -13500
Working Notes
Marginal Cost of sales
Particulars April (£) may(£)
Opening Inventory 0 500
Add: Cost of production 10000 12000
Less: Closing inventory 2000 6000
8000 8000

2 a)
1. Fixed and variable costs
Fixed costs:
Activity Amount(£)
Manager’s Salary 5000
Rent 5000
Insurance 500
Advertising cost 1000
Utilities 500
Total(£) 12000
Variable costs:
Activities Amount(£)
Direct material cost per pizza 3.5
Direct overhead cost per pizza 0.5
Direct labour cost per pizza 1.5
Total(£) 5.5
2. Break even point used for break even graph
Break-even point( in units)= Fixed cost/ contribution per unit
Contribution per unit= Selling price- variable cost per unit= 9.50- 5.50= 4.00
Break-even point( in units)= 12000/4= 3000 units
Break-even point(in value)= Fixed cost/ PV ratio
PV ratio= contribution/ sale price* 100= 4/9.5* 100= 42.10%
Break-even point(in value)= 12000/ 42.10%= £ 28503
3. Margin of safety if organisation is selling 2500 pizzas

MOS= Sales (in units) – BEP (in units)= 2500 – 3000= -500 units
4. manager's respective salary increased to £6000, therefore its impact on BEP in units and
in sales value.
Manager's salary increase will affect fixed cost and revised fixed cost will be £ 13000.
Revised BEP(in units)= 13000/4= 3250 units
Revised BEP(in value)= 13000/ 42.10%= £30878

M2 Application of management accounting techniques and appropriate financial reporting
documents
There are considerably wide variety of management accounting techniques as well as
financial reporting statements which are said to be very important for company's overall
productivity and profitability in connection to its growth. Its techniques have been used by
Connect catering services in order to manage its events and services in appropriate manner. It is
important to adopt appropriate techniques which can be illustrated as follows:
 Marginal costing: In marginal costing, the effect of variable costs has been evaluated in
reference to production capacity of a company (Chiou and et. al., 2020). It is very
effective technique helpful in evaluation of performance of a company in its progress.
Connect catering services have been implementing such strategy in its competent
business in order to maintain reliable procedures for long lasting term. This is mostly
used for developing understanding of performance of a company.
 Variance analysis: It is a study of any kind of deviation between actual performance as
compared to forecasted estimates. Connect catering is devoted towards analysing its
operations to reflect utmost accuracy and reliable data in order to survive through the
competitive environment. It is considered as a most effective technique which is used by
each size of organisation across the globe.
 Management reporting: This is very effective approach towards assisting managers
through decision-making process. Management must prepare set of statements which are
responsible for companies performance evaluation, efficiency maintenance and cost
effective techniques. Connect catering services being serving in UK has to maintain
appropriate combination of management reporting structure in order to motivate its
workforce for production of effective results which will be responsible for managerial
decision-making.
 Budget Preparation: Budget is a sort of estimate of revenue as well as expenditure over
a given period of time on future grounds. A budget is also known as financial plan which
is used to attain maximum profit-margins through elimination of unnecessary costs in the
operations of a company (Lennon, 2020). Such practice helps in achieving optimum level
of profitability by organisation in order to expand over a large platform. Connect catering
services in this context has applied techniques like budget forecasts and planning in order

to manage its prevailing cost expectations to survive the competitive environment.
Budget is ultimately helpful for company's growth and success as well as survival by
elimination of losses.
D2 Financial reports which interpret wide range of business operations
Financial reporting has a huge impact over company's decision-making which hamper its
performance adversely or positively. Such reporting formats includes cash flow statements,
balance sheet, income statements and so on. Connect catering services has used wide range of
financial reporting which includes cash flow statements, income statements, etc. As such
reporting techniques aid in effective decision-making to an organisation for long term
sustainability. A company must adopt appropriate reporting strategy in order to perform easy
flow of operations.
TASK 3
P4 Advantages and disadvantages of various planning tools used for budgetary control
Planning tools are said to be important for company's overall success. These planning
tools are used in context to budgetary control technique so that adequate maintenance of cost will
be done (Rashid, 2020). These planning techniques are very much required for company's overall
growth and development of cost effectiveness. In reference to Connect catering services,
following given planning tools have been used:
Variance analysis: It deals with inherent deviation between forecasted as well as actual
performance of an organisation (Adler, 2018). Such deviations are reflected in order to identify
respective areas of improvisation within a company. Variance can be optimistic as well as
pessimistic which needs to be identified by organisation so that proper actions can be made in
such reference. Connect catering has adopted this technique in order to evaluate variables in
operations of a company as well corrective actions could be taken.
Advantages: Various advantages of this technique is that it indicates adjustments which
needs to be made in budget forecasts, examine performance, controls expenditure and so on.
Disadvantages: It requires participation of experts as it is regarded as a complex and time
consuming procedure which requires optimum contribution of specialised personnel.
Balanced scorecard: It is considered as strategic tool which is regarded as planning for a
set target which company is willing to achieve. It required day to day operations management,

prioritizing events, evaluate and monitor further progress of the target goals (Jiang and Chen,
2019). Key factor of using this technique is that it enables organisation to connect the puzzle in
the right manner. Connect catering services is using such tool in order to formulate beneficial
strategic policies for welfare of its organisation.
Advantages: This has wide range of benefits which includes facilitating activities in
aligned manner, effortless communication system, better format to business based strategy and
so on.
Disadvantages: Such technique required tons of data in order to conduct smoother flow of
activities which makes it complicated for companies to implement in appropriate manner.
Responsibility accounting: It is a system which includes determination of responsibility
units or centres for their respective jobs or objectives as well as development of performance in
reference to respective job centre (Mawejje and Odhiambo, 2020). It considers assembling and
reporting revenues as well as cost in respect of specific area. Its inherent advantages and
disadvantages can be given as follows:
Advantages: this approach delegates authority from top to down that means from
managers to lower divisional employees. It is also considered as technique of performance
evaluation which helps in identification of companies actual financial position.
Disadvantages: In this system, sometimes it become challenging to meet essentials of a
successful unit which could be harmful for company's image and profitability.
M3 Analysis of planning tools and their respective application for budgets and forecasts
Planning tools are concluded to be effective technique which helps in managing
company's tasks and operations in much efficient way (KUTSURI and et. al., 2018). Such
techniques are used for budget control which facilitate with appropriate planning and forecast
factors in long term growth of a company. Connect catering services has enabled this technique
which provides appropriate planning structure and forecasts in order to interpret future demands
and fluctuation which may incur at future date. Therefore, it must use effective techniques of
budgeting and forecasts so that healthy financial conditions could be maintained in an
organisation for the long term.

TASK 4
P5 Comparison of firms in order to identify their adaptation to management accounting system
It is important to deal with financial issues being faced by enterprise in order to manage
smooth operations. Tools for coping with financial issue can be discussed as follows:
 Benchmarking: As various kind of problems are faced by management accounting it is
necessary to implement effective management techniques (Ryu, 2017). Benchmarking is
considered as most widely used technique which helps in attainment of set standard in
order to meet business objectives. Connect catering must emphasise over its usage in
order to manage its sustainability in the marketplace.
 KPIs: It is considered as tool which shows a company's power of meeting organisational
goals in more effective manner (Patz and Goetz, 2019). It is widely used by companies to
evaluate their performance through adoption of considerable factors in its profit-margins.
Connect Catering must ensure its implementation in order to justify its performance
outcomes in more adequate manner.
 Cash flow management: It is a technique where cash inflows and outflows are managed
to maximise profit earning capacity of an organisation. Cash is a key factor on which
operations are being dependent so it is required to trace cash flows in relation to a
company to promote healthy environment and profitability. Connect catering services
must ensure reliable flow of cash in order to survive in relevant industry in the long term.
 Scarcity of resources management: In the times of shortage in resources, a company is
required to adopt most effective and strategic policy in order to reflect most adequate
outcomes in its available resources (Feng and et. al., 2019). It must meet the customer's
demand so that its respective customer base is not affected in that specified time period.
Connect catering services is coping with its available resources through effective
strategies implementation for its long term survival in the market place. A company is
tested in its hard times and shortage of resources must be handled in a professional
manner to avoid any inconveniences which a company could face for such period.
Basis of Comparison Connect Catering Services Zafferano
Financial Problem It is unable to management This is being prestigious

appropriate flow of operations
which is resulting in financial
losses.
catering services is not
emphasising over cost
effectiveness which leads to
lower profit-margin.
Approach This enterprise has being
following benchmarking
strategy where it is required to
follow set standard in order to
be successful and sustain
intense competition.
It has approached to Key
performance indicator in order
to examine its respective
performance efficiency and
determination of factors which
may harm easy flow of
operations.
Methods that are used in
financial problem
Connect catering is using
various effective methods of
management accounting
among which most
emphasized one is inventory
management which is
important in order to manage
stock smoothly.
Zafferano has adopted price
optimisation scheme which
will be helpful in managing
respective demand and sales in
effective manner to avoid any
wastages that may result in
low profitability.
M4 Response to management accounting problems leading to sustainable success
A company must ensure its long term sustainability by responding to financial problems
in effective manner. In this reference Connect catering is approaching at implementation of most
impactful management accounting techniques which will be helpful in ultimate success of a
company. Such systems includes management of inventory system, appropriate utilization of
available resources, price-optimization and increased revenue. Also it is required to balance
variable costs and overheads in a company which are mainly responsible for lower profit-
margins. Therefore more emphasize should be given over improvisation of such costs in order to
increase profit earning capacity of a company in the long term.

D3 Planning tools responsible for financial problem solving in order to attain organisational
success
There is a huge requirement of financial planning in order to attain organisational success
(Pellerin and Perrier, 2019). Planning is inherent factor of each activity so that optimum results
can be drawn by the company. With reference to Connect Catering services, following planning
tools have been utilised in order to promote healthy business environment.
Marginal costing: It is effective technique which assist in adequate decision-making in
regard to fixation of sales rate, appropriate usage of limited resources and formulation of best
sales mix so that managed operations can produce advanced profits in company's lifespan. Its
various factors can be profit volume ratio, break even analysis, margin of safety and so on. It is
ultimately beneficial for proper generation of profitability through adoption of adequate
techniques.
Financial Planning: It refers to meeting company's ultimate objective through adoption
of most significant practices in management accounting (Sadeghi and et. al., 2018). It is basically
financial guide which shows reliable path to an organisation which will render ultimate success.
Connect catering services has been using structure of most appropriate financial planning with
help of finance experts to reflect ultimate achievement. Such practice helps in increased savings,
better living standard, preparation to meet contingencies and so on. Also such planning helps in
managing economic crisis so that company can survive through hard times.
CONCLUSION
In this above prepared report, it is discovered that there are significant uses of
management accounting and its respective systems. A company must adopt such techniques
which will enhance reliability of operations, manageable cash flows, fixation of sales amount in
order to make feasible decisions for company's overall growth and profitability. In respect of
Connect Catering services, preparation of marginal costing income statement, absorption costing
statements, break even analysis and their respective graph presentation is provided in order to
facilitate managers of respective company to provide appropriate decision which will benefit
company to survive in immense competition level in the market. Through interpretation of
various techniques it is thus concluded that managerial accounting practices are very significant
for organisational growth and profitability.

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