Management Accounting Systems and Techniques

This document provides an overview of management accounting systems and techniques. It explains the different methods for management accounting reporting and discusses the benefits of using a management accounting system for businesses. The document also explores how management accounting system and management accounting are integrated for businesses.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
Management accounting systems:...............................................................................................3
Methods for management accounting reporting:.........................................................................1
Benefits of management accounting system & their applications for businesses:......................2
How management accounting system & management accounting integrated for businesses:....2
TASK 2............................................................................................................................................2
2.1.................................................................................................................................................2
2.2. Apply range of MA techniques and form financial reporting document:.............................4
2.3. Financial reports that accurately apply and interpret data for a range of business activities:
......................................................................................................................................................6
2.4.................................................................................................................................................9
3.1...............................................................................................................................................10
3.2...............................................................................................................................................12
4.1...............................................................................................................................................13
Apply range for management accounting techniques & produce appropriate financial
reporting:....................................................................................................................................14
Importance of variance analysis for businesses:........................................................................15
TASK 3..........................................................................................................................................15
Various planning tools, their advantages & disadvantages:......................................................15
TASK 4..........................................................................................................................................15
Various financial problems:.......................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The term management accounting can be defined as an accounting approach which
emphasis on financial and non-financial aspect of company during a specified period of time.
Such accounting is used to present data in form of reports which are used by management team
to take significant actions. The objective of report is to understand role of management
accounting in the context of companies’ day to day operations. The entire part of report is based
on a scenario of UCK furniture which produces different kinds of wooden items. The report
contains detailed information about various accounting techniques systems, reports etc. In
addition to this, planning tools of budgeting are also explained with rational to their importance
to deal with financial issues.
Management accounting systems:
Management accounting is about managing accounting reports which helps management
for generating their activities & helps for strategic decision making. Management includes
planning, organising, analysing, managing, budgeting data for managers for their decision
making.
Management accounting system is about which businesses use for knowing & evaluating
its activities for management for businesses. In context to UCK furniture this company using
management accounting system which helps it for knowing costs for its produce goods,
inventory management, customers demand. It gives views for business decisions for taking
corrective actions. It shows business has various departments because it shows basis for
production & functions for knowing business performance (Abdusalomova, 2019).
Cost accounting system: It is management accounting system which company use for
estimate its value for goods for knowing how much profitability business achieves. In context to
UCK furniture, this company uses this for setting its pricing strategy which helps it for analysing
profitability for business. It is about which helps for knowing where it spend its expenses &
where it which resource helps it for earning. It is about which helps to analyse & report for
improvement for its production costs control & efficiency.
Essential requirements: For this management accounting system, it needs for various
costs which are occur for different manufacture for producing goods. The information which
needs for managers which it gives for their strategic decisions.

Job costing system: Job costing is about analysing procedure for business where job is
different & performs according to customers demand. How changes for price has change in
demand for goods which is produce by business. In context to UCK furniture, company uses this
system for analysing company's activities which needs by customers which it controls. The
company use it for analysing its procedure according to customers wants.
Essential requirements: This management accounting system is for how customers
demand affects by change in demand. It is require by senior authority for managing company's
operations. It helps business for setting prices in that manner so that it satisfies customers for
fulfilling their needs & helps business for maintaining profitability (Järvinen, 2016).
Inventory management system: It is about for which business tracks its inventory level,
sales & its orders which it receives by client. Managers using various inventory management
methods which includes average inventory method, FIFO, LIFO etc. the company use it for
create work order & analysis for raw material needed by businesses. In context to UCK furniture,
this business use this management accounting system for knowing inventory performance which
helps its procedures for know about orders.
Essential requirements: This requires for company for knowing its inventory
management, its sales orders, storage costs etc. The managers are needs for this for maintaining
costs of production for setting prices. It helps for maintaining goods costs which gives higher
profitability.
Price optimisation system: This management accounting system which business using
for its mathematical process for knowing various prices for business goods which sales by
various sources. In context to UCK furniture, this company using this system for knowing costs
of each goods produce by it. It helps this business for setting optimum prices for its goods so that
it helps for achieve objectives & gives higher profitability.
Essential requirements: This needs for businesses for knowing information related for
costs which includes for its goods. Managers of business are needs for their strategic decision
making. It helps it for managing expenses & earns higher profitability which shows better
performance.
Methods for management accounting reporting:
Management accounting reporting is a tool which is used by financial managers to do
financial accounting for making decisions, controlling and planning all the operational activities.

UCK furniture uses this mechanism which is useful for making any financial decision regarding
production of product to delivering the final produce to consumers. Following are different
management accounting reports.
Budgetary report
Budgetary report is prepared by accountants and other operational or production
managers of UCK. This report is processed to know about the available funds company have to
spend on the operational and production activities. Cost of producing a new or existing product
needs funds and budgetary report shows available funds.
Inventory management report
Inventory means industrial goods which are used to manufacture goods to be sold or the
goods which are to be sale to the customers. Inventory management report shows how much
industrial goods we have in stock to manufacture consumer goods. Also how many consumers
goods are available for the sales. All and all this report calculates the available inventory of the
company which is used by sales managers of UCK furniture.
Performance management report
UCK furniture uses performance management report to measure the performance of
whole organization or individual employees. This tool is useful to evaluate the progress or
performance of a employee and whole organisation. On the basis of report company decides
what are the major changes should be done to improve the performance (Pedroso and Gomes,
2020).
Accounting receivable report
UCK Furniture have a wide customer range so accounting managers prepare accounting
receivable report to keep a check on financial receivables of the firm. This report is very useful
to evaluate the financial position of the country. A periodic report is prepared to record all the
financial receivable of the firm.
Benefits of management accounting system & their applications for businesses:
It is process which gives financial data for managers for their strategic decision making.
It basically use by internal employees, for statical better decisions. In context to UCK furniture,
this system helps for increase business performance by managing its resources which gives it
competitive advantage, cash flow management, profitability management. Management

accounting system helps business for maintaining better performance for businesses (Pervan and
Dropulić, 2019).
How management accounting system & management accounting integrated for businesses:
Management accounting system & methods are integrated as both are suing for keep
tracking financial performance for business. In context to UCK furniture, it gives insight for
managers which increases their decision making & better performance for business activities.
TASK 2
2.1
Cost Card Using Absorption costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) Units
produced 11000 9500
b) Direct
Material (4kg*3pound/kg*11000) 132000 (4kg*3pound/kg*9500) 114000
c) Direct Labor (4 hrs* 2pound/hr*11000) 88000 (4 hrs* 2pound/hr*9500) 76000
d) Variable
Overhead (5pounds/desk*11000) 55000 (5pounds/desk*9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000

g) Cost of goods
produced 295000 257500
h) Variable sales
cost (1pound/desk*11000) 11000 (1pound/desk*9500) 9500
i) fixed selling
cost 2000 2000
j) Cost of
Goods sold 308000 269000
k) Profit= l-j 77000 63500
l) Sales (35 pounds/desk*11000) 385000 (35 pounds/desk*9500) 332500
Cost Card Using Marginal costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) units
produced 11000 9500
b) Sales price
per desk 35 35
c) Variable cost
per desk:
Direct
material (4kg*3pound/desk) 12 (4kg*3pound/desk) 12
Direct Labour (4 hrs* 2pound/hr 8 (4 hrs* 2pound/hr 8
Variable 5 5

overhead
Variable sales
overhead 1 1
d) Contribution 9 9
Total
contribution 99000 85500
e) Fixed costs
Production
overhead NOTE1 22000 19000
Sales
overhead 2000 2000
Profit (d-e) 75000 64500
NOTE1
Production overheads here are regarded by considering average productions per month = 10000
units. Thus, for Jan. month, overheads amount = (20000/10000) *11000. While, for Feb.,
overheads amount = (20000/10000) *9500
2.2. Apply range of MA techniques and form financial reporting document:
Financial reporting
For the period ending February
Revenue
Sales for January 385000
Sales for February 332500

Total revenue (A) 717500
Cost of goods sold
Cost for January 308000
Cost for February 269000
Total Cost of goods sold (B) 577000
Net income(C= A-B) 140500
Financial reporting
For the period ending February
Revenue
Sales for
January 385000
Sales for
February 332500
Total revenue
(A) 717500

Cost of goods
sold
Cost for
January 308000
Cost for
February 269000
Total Cost of
goods sold (B) 577000
Net
income(C= A-
B)
140500
Working
Notes- Cost of
Goods sold
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) Units produced 11000 9500
b) Direct Material (4kg*3pound/
kg*11000) 132000 (4kg*3pound/kg*9500) 114000
c) Direct Labor (4 hrs*
2pound/hr*11
88000 (4 hrs* 76000

000) 2pound/hr*9500)
d) Variable Overhead (5pounds/
desk*11000) 55000 (5pounds/desk*9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000
g) Cost of goods
produced 295000 257500
h) Variable sales cost (1pound/
desk*11000) 11000 (1pound/desk*9500) 9500
i) fixed selling cost 2000 2000
j) Cost of Goods sold 308000 269000
2.3. Financial reports that accurately apply and interpret data for a range of business activities:
(a)
Month Hours
Spent Expenses
January 630 7960
February 505 7410
Mar 705 8285
April 555 7535
May 780 9110
June 795 9820

Highest number of hours = June = 795
Lowest number of hours = February =
505
Variable cost= (9820-7410)/(795-505)
Variable cost= 8.310345 pounds per
unit
fixed cost= 9820 - (795*8.31)
fixed cost= 3213.55 pounds
expenses for july= 3213.55 +
(650*8.31)
expenses for july= 8615.05 pounds
expenses for august= 3213.55 +
(750*8.31)
expenses for august= 9446.05 pounds
(b)
Date Purchases Purchase Cost
Cost per
unit
Opening 50
15-May 100 1000 10
18-Aug 200 2200 11

19-Sep 130 1800 13.84615
FIFO
Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 150*10 + 200*11 3700
19-Sep 130
480 3700 + 130 *13.84615 5500
Cost of Goods Sold
LIFO
Opening 50
Purchases
19-Sep 130
180 13.84615 2492.308
18-Aug 200
380 2492.308 +200*11 4692.308
15-May 100
480 4692.308 + 100*10 5692.308
Cost of Goods Sold

FIFO
Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 350*[(10+11)/2] 3675
19-Sep 130
480 (3675/350 + 13.84615)* 480 11686.15
Cost of Goods Sold
2.4
Selling price £300 per unit
variable cost of manufacturing per unit £200
Fixed cost £2,000,000
a) BEP in units Fixed cost/Contribution per unit
Contribution per unit Selling price-Variable cost per unit
= 300 – 200 = 100
BEP in units = 2000000 / 100 = 20000
BEP in pounds Fixed cost/PV ratio
PV ratio Contribution per unit/selling price*100
= 100 / 300 *100 = 33.33

BEP in pounds = 2000000 / 33.33% = 6,000,600
b) Number of units to sell Fixed cost + desired profit/contribution per unit
= (2000000 + 1000000)/100
= 30000
c) Profit calculation
Sales (50000*300) 15000000
Less: Variable cost (200*50000) 10000000
Contribution 5000000
Less: Fixed cost 2000000
Profit 3000000
3.1
1) schedule of expected cash collections
for September
Details September
(pounds)
Cash Sale 39000
Collection for sales on account:
July 392
August 4416
September 840

Total collections 44648
2) schedule of expended cash
disbursements for merchandise inventory
purchases in September
Details September
(pounds)
Payment for inventory purchased in
September 4800
(24000*.2)
Payment for inventory purchased in August 15000
Total disbursement for inventory
purchase 19800
3) Cash Budget
Details September
(pounds)

opening balance (A) 9000
Collections
Cash Sale 39000
Collection for sales on account:
July 392
August 4416
September 840
Total collections (B) 44648
Disbursements
Payment for inventory purchased in
September 4800
(24000*.2)
Payment for inventory purchased in August 15000
Selling and administration expenses 9000
(excluding depreciation of 4000)
Purchase of equipment 18000

Dividend to be paid 3000
Total disbursements (C) 49800
Balance (A+B-
C) 3848
Financing Activity:
Loan Taken 1152
Closing Balance 5000
3.2
Flexible Budget:
Level 100% 60% 80% 110%
Variable Expenses
Direct material 800000 480000 384000 422400
Direct labour 600000 360000 288000 316800
Electricity 120000 72000 57600 63360
Indirect labour 30000 18000 14400 15840
Rates 40000 24000 19200 21120
Total 1590000 954000 763200 839520
Fixed Expenses
Rent 200000 200000 200000 200000

Insurance cost 20000 20000 20000 20000
Total 220000 220000 220000 220000
Total Cost 1810000
Indirect Labour has been considered as variable expense.
4.1
i) Return on capital employed(ROCE)
Return on capital employed = Operating Profit/ Capital
employed * 100
UCK Furniture Design Division
ROCE= 25.49784 %
UCK Furniture GearBox Division
ROCE= 11.27466 %
UCK Woodworks
ROCE= 8.562108 %
ii) Assets Turnover
due to absence of information relating to net assets, capital

employed has been assumed as net assets
Assets turnover = Sales/Total assets
UCK Furniture Design Division
Assets turnover = 0.562771
UCK Furniture GearBox Division
Assets turnover = 0.779831
UCK Woodworks
Assets turnover = 0.191801
iii) Operating profit margin
Operating profit margin = Operating Profit/ Total sales *
100
UCK Furniture Design Division
Operating profit margin= 45.30769 %
UCK Furniture GearBox Division

Operating profit margin= 14.45783 %
UCK Woodworks
Operating profit margin= 44.64056 %
Apply range for management accounting techniques & produce appropriate financial reporting:
Planning tools business use for knowing its financial performance for achieving
sustainable success. It uses for management accounting for reducing financial issues. Budget
helps employees for knowing how much expenses & profit it has to generate. Business using for
knowing expenditure which it is fixed assets for plant & machinery etc.
Importance of variance analysis for businesses:
It is about variance analysis using by managers for budget smarter & more accurately. It
assists for more control management for departments & budgeting. It helps for knowing business
success. It helps for managing business performance if there is any variation which can be
identified by the management of businesses by comparison with set standards. Businesses use
this for managing its performance which helps for better performance which helps for higher
profitability for businesses (Phan, Baird and Su, 2017).
TASK 3
Various planning tools, their advantages & disadvantages:
Planning tools is about which helps businesses for knowing its expenses & income which
helps it for earns profits (Quattrone, 2016).
Cash budget: It shows various cash activities for business from where it needs for funds.
Advantages: It helps for managing funds for business activities.
Disadvantages: The data which is budgeted is estimated it can be wrong.

Capital budget: It is about when business needs for acquire assets, expenditure for
purchasing assets which needs for managing business activities.
Advantage: It helps for knowing which assets gives higher profits for business.
Disadvantage: It is not necessary that estimated costs will be actual costs.
TASK 4
Various financial problems:
Cash flow management: Business facing cash flow management issue for which it has
to manage its cash flows which are needs for business for running its activities (Šiška, 2016).
Inventory management: Inventory management problem which is about how business
using its inventory cycle for fulfilling customers demand (Uyar and Kuzey, 2016).
KPIs- These refer to the Key Performance Indicators. The use of KPIs can be made by
the various types of business organizations so that they can ensure that the performance is
according to the standards. Its use can be made by UCK Furniture so that it is able to solve the
problem of cash flow as its use will be helpful in identifying the gaps in cash flow and ensuring
that the rectification steps can be taken in an appropriate manner.
Benchmarking- It refers to the use of benchmarks and standards so that the performance
of an organization can be monitored in the right way. Its use can be made by the managers of
UCK Furniture so that they can make sure that the management of inventory can be done in an
appropriate way which will be helpful in reducing the problems in the stock effectively and
efficiently.
CONCLUSION
From the above report it has been concluded that management accounting is about
managing accounting information for strategic decision making. Management accounting helps
business for planning, organising, analysing, managing, budgeting. Such accounting is used to
present data in form of reports which are used by management team to take significant actions.
Business using various management accounting systems which includes cost accounting system,
job costing system, inventory management system & price optimisation system. Budgeting is
about knowing expenses & income which is for business activities. Management accounting
helps for managing business accounting information which managers use for strategic decisions.

REFERENCES
Books & journals:
Abdusalomova, N. B., 2019. DIRECTIONS FOR DEVELOPMENT AND IMPROVEMENT
OF A MANAGEMENT ACCOUNTING SYSTEM. Economics and Innovative
Technologies. 2019(3). p.6.
Järvinen, J. T., 2016. Role of management accounting in applying new institutional logics.
Accounting, Auditing & Accountability Journal.
Pedroso, E. and Gomes, C. F., 2020. The effectiveness of management accounting systems in
SMEs: a multidimensional measurement approach. Journal of Applied Accounting
Research.
Pervan, I. and Dropulić, I., 2019. The impact of integrated information systems on management
accounting: Case of Croatia. Management: Journal of Contemporary Management
Issues. 24(1). pp.21-38.
Phan, T. N., Baird, K. and Su, S., 2017. The use and effectiveness of environmental management
accounting. Australasian Journal of Environmental Management. 24(4). pp.355-374.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research. 31. pp.118-122.
Šiška, L., 2016. The contingency factors affecting management accounting in Czech companies.
Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis. 64(4). pp.1383-
1392.
Uyar, A. and Kuzey, C., 2016. Does management accounting mediate the relationship between
cost system design and performance?. Advances in accounting. 35. pp.170-176.

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