Management Accounting - Focusrite Plc Assignment

Management
Accounting

INTRODUCTION
Management accounting is most considerable kind of accounting which provide help to
business officials to establish a core structure that provide information for monetary decision-
making. It assists employees to manage and control fiscal data to analyse them for effectively
achievement of business and trade objectives. Aim of adopting it is to facilitate and bring new
changes within business entity to attain easiness in complex trade functions (Laudon and
Laudon, 2015). This particular report exhibits about management accounting and its reporting
methods that are helpful for analysing financial information in effective manner in context of
Focusrite Plc. It is UK's one of the leading engineering company which is engaged in
engineering and design of audio electronics, synthesizers, MIDI controllers and keyboards for
music recording and creation. Report also contains other aspects of management accounting such
as planning tools, techniques and responding to financial problems.
ACTIVITY 1
Management Accounting Systems:
Management accounting is crucial process that facilitates information’s to provide
effectiveness in decisions of management. In present time, managerial officials of every business
entity tries to implement an effective system of accounting to record all its fiscal transaction and
manage activities. Management accounting is one and only way to combine both aspect
accounting and management, because it includes systems that combines all financial and
nonfinancial elements (Plumb and et.al. 2017). Focusrite Plc also adopted management
accounting systems to enhance its operating capabilities and efficiencies. Management in
company monitors the compliances of system. Company's policies and procedures are also
compatible with such systems. Following management accounting systems like cost accounting,
job costing , inventory management etc. help to increase the performance of company in short
and long run. There is explanation about systems of management accounting using respective
company, as follows:
Cost Accounting System: Focus of this system is on evaluation and analysis of costs.
Mangers under it develop processes that assist in controlling cost of processes and functions. For
engineering firms like Focusrite Plc this system is helpful in assessing the cost of different
designing, finishing and other process. It determines the cost of each product and profit margin

on it. At the time of launching of new product company take decisions of viability of such
launching by evaluating cost incurred through cost accounting system. It provides to fix a cost
structure and cost policies while considering objectives and goals. These systems also help in
making of annual financial budget. Cost accounting system help to define cost related objectives
and strategies. Any specific area of operation that leads to increase in cost, can be easily
identified by applying cost accounting system. Company can also assess the viability of any
potential project.
Inventory Management System: At the time of assessment of profitability, value of
opening and closing inventories play as significant role, as it directly influences the amount of
net income. These systems are concerned with effective supervision and control over real time
movement of inventories like raw material, finished goods, work in progress etc. Focusrite Plc
manage its wide range of inventories related to engineering of audio equipment and other its
products. It emphasises on effectively recording of inventories and organising them in effective
manner to minimise inventory costs (Hilton and Platt, 2013). Some company incurs excessive
cost of stock handling and storage, it can be easily controlled by using this system. Following are
the methods of recording inventories, as follows:
Last in First out: LIFO method focus on a rule for recording inventories that last
purchased inventories are sold or issued first. This method is is widely applied method.
First in First out: FIFO method focus on a rule for recording inventories that first
bought inventories or stocks are issued or sold first.
Average Cost Method: It emphasises on taking average cost as basis for valuing cost of
inventories.
Job-costing systems: This system is specifically used by enterprise having diversified
product range or products which are entirely different. This system focuses on assigning costs to
classified jobs and batches. It help to analyse different processes and activities of entity to
improve process efficiencies (Hopper and Bui, 2016). In Focusrite Plc, there are numerous
products so sometime it is difficult for company to assess each product cost so some products are
classified as jobs for better assessment and accountability. Following are the methods used by
company under job costing, as follows:

Batch Costing: Under this method batch or lot are created by managers to assign cost
and assess the cost of each unit. Identical units are aggregated for creation of batch or lot.
Normally very small and large quantity of similar units are classified in batch.
Process Costing: In this method costs are assigned to any particular process instated of
creation of batch. This method provides assessment of overall process costs.
Price-optimisation System: Price optimisation is essential for achieving competitive
benefits. This system focuses towards analysis of prices to analysis manner of reduction of prices
while controlling existing profit margin. Focusrite Plc facing competition in engineering
industry, so main motive of company is to minimise price of products. Managers and other
company officials try to minimise product prices to minimise competition. This system evaluates
processes to identify factors that is leading to increase in price of product. It begins from creation
of segments of clients or customers (Stein and et.al., 2015). Company than project how
customers belongs to different segment will respond at various prices. It is long term approach
which focus towards maximisation of net income by systematic increase in prices.
Management Accounting reports:
In every organisation management is divided in different levels to manage things
effectively but communication is main factors that determine effectiveness of management chain.
For communicating information one of the method is reporting under which all kind of
information is circulated in management chain. Reporting is formal method under which various
reports are prepared by heads of different department and send these report to top management
for effective decision-making (Turban, Volonino and Wood, 2015). In Focusrite Plc, reporting is
key process through it numerous type of information is transferred to higher level managers for
taking business related decisions. In this regard following are portentous reports, as discussed
below:
Performance Report: The key concept for making this kind of report is evaluation of
aggregate performance of labours, workers and employees along with other major operations of
business entity. Manager apply this report to setup significant measurements, standards and
targets and make an analytical comparison with real or existing performance of personnel’s
within organisation to avoid problem by improving efficiency of employees. In Focusrite Plc,
officials apply this report to formulate strategy and assess total performance with regards to
employees engaged in different processes. Major changes are marked in policies regarding