Management Accounting Managerial Accounting Assignment

Running Head: Management Accounting 1
Project Report: Management Accounting

Management Accounting
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Contents
Introduction.......................................................................................................................3
Business overview............................................................................................................3
Statement of cost card.......................................................................................................3
Statement of profit............................................................................................................4
Statement of selling price.................................................................................................5
Budgets.............................................................................................................................5
Sales budget..................................................................................................................5
Production budget.........................................................................................................6
Direct material budget..................................................................................................6
Direct Labor Budget:....................................................................................................7
Variable OH budget......................................................................................................7
Fixed OH budget...........................................................................................................8
Operational Budget.......................................................................................................8
Variance analysis..............................................................................................................9
Management accounting benefits.....................................................................................9
Conclusion......................................................................................................................10
References.......................................................................................................................11

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Introduction:
Management accounting is required for every comapny to manage the performance
and the position of the comapny. These reports are prepared by every organization to manage
and maintain the stability of the company. Various statements and reports are prepared for
this report to manage the activities and the functions of the company (Gitman and Zutter,
2012). Managerial accounting is used by the managers to use the accounting information and
the provisions of the comapny in order to analyze the performance of the comapny and make
a better decision. Management accounting is the provision of non financial and financial
decision making knowledge to the top level management of the company.
Business overview:
In this report, a manufacturing comapny has been taken into consideration which
mainly operates its business into labelling the products. This business contracts with the
manufacturing comapny and attach the label on their product. Basically, the companies
outsource some manufacturing work to this comapny. This company is operating its business
into the market of the Australia. And it labels the products according got the requirement of
its clients. This company is performing well in the market and it would grab the more market
share in future.
In this report, manufacturing accounting statements has been prepared over the
comapny to analyze the total cost, total profit, selling price, budgeting reports etc of the
company. These reports would help the management accountant to make a better decision
about the performance and the further decision about the stability, changes etc in the
comapny.
Statement of cost card:
Cost card is a Performa which depict the comapny and the management about the
total cost of a comapny. Cost card is useful for every organization to identify the total cost
and make a better decision on the basis of that. This cost card helps the organization to
analyze the cost and make better decision about the reduction of the cost (Kaplan and
Atkinson, 2015).
The statement of cost card of the company is as follows:
Statement of cost card

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Direct Material £ 3.00
Direct Labour £ 5.00
Prime cost £ 8.00
Variable production OH £ 2.50
Marginal production cost £ 10.50
Fixed production OH £ 5.00
Total production cost £ 15.50
Total cost £ 15.50
Through this statement, it has been analyzed that the direct material cost of the
comapny is £ 3 per unit, direct labour of the comapny is £ 5 per unit. Thus the prime cost of
the comapny is £ 8 per unit. At the same time, the variable and fixed production OH of the
comapny is £ 2.5 and £ 5 per unit and thus the total production cost is £ 15.5 (Lafond and
Roychowdhury, 2008).
Direct material and direct labour cost is the direct cost which incurs while preparing
the labels and attaching them. These costs are variable in the nature. Further the production
cost could be variable and fixed cost these depend over the production process of a comapny.
Statement of profit:
Further, the profitability position of a comapny depict about the total net profit which
could be earned by a comapny after analyzing and evaluating the entire cost. This
profitability statement depicts that if one unit would be sale than how much the total profit of
the comapny would be (Nobes and Parker, 2008).
The profitability position of this company has been analyzed. The statement of profit
is as follows:
Calculation of Total profit
Total cost
£
15.50
Add: Profit @ 20%
£
3.10

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The total cost of the comapny is £ 15.50 and according to the case 20% of total cost
would be the profit of the comapny and thus the total profit of the comapny per units is £
3.10. This report briefs that the profitability position of a comapny helps the management of
the comapny to make better decision about the performance and the position of the comapny.
Statement of selling price:
Further, the selling price per unit of a comapny depict about the total price which
would be charged by a comapny to its clients against the products and the services. This
statement of analyzing the selling price depicts that what would be the price of each unit of
the comapny.
The selling price of this company has been analyzed. The statement of selling price is
as follows:
calculation of selling price
per unit
Total cost
£
15.50
Add: Profit @ 20%
£
3.10
Sales
£
18.60
The total cost of the comapny is £ 15.50 and according to the case 20% of total cost
would be the profit of the comapny and thus the total profit of the comapny per units is £
3.10. And thus the total selling price of the comapny is £ 18.60.
Budgets:
Budgets are a blue print which is prepared by the companies to analyze and evaluate
the predictions regarding the sales, production level, price, profitability, labour etc. Budgets
report are mainly prepared and presented by the accountants to analyze and evaluate the
performance, sales, profit, stability etc of a company (Brown, Beekes and Verhoeven, 2011).
The study and calculation over sales budget of a comapny is as follows:
Sales budget:
Sales budget of the comapny is as follows:

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Sales Budget
Jan Feb Mar Apr May Jun
Sales Units 2000 2100 2200 3000 3300 4000
Selling
Price
£
18.60
£
18.60
£
18.60
£
18.60
£
18.60
£
18.60
Sales
£
37,200
£
39,060
£
40,920
£
55,800
£
61,380
£
74,400
This depict that the sales of the comapny would exceed from January to June. The
comapny would perform better in the future.
Production budget:
Production budget of the comapny is as follows:
Production Budget
Jan Feb Mar Apr May Jun
Sales Units 2000 2100 2200 3000 3300 4000
Less: opening
stock
£
-
£
-
£
-
£
-
£
-
£
-
Add: Closing
stock
£
-
£
-
£
-
£
-
£
-
£
-
Production units 2000 2100 2200 3000 3300 4000
Production cost
£
15.50
£
15.50
£
15.50
£
15.50
£
15.50
£
15.50
Production cost
£
31,000
£
32,550
£
34,100
£
46,500
£
51,150
£
62,000
This depict that the production cost of the comapny would exceed from January to
June. The enhancement in the production cost has been done due to the increment in the sales
level of the comapny (David, 2011).
Direct material budget:
Direct material budget of the comapny is as follows:
Direct Material Budget
Jan Feb Mar Apr May Jun

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Production
units 2000 2100 2200 3000 3300 4000
Less: opening
stock
£
-
£
-
£
-
£
-
£
-
£
-
Add: Closing
stock
£
-
£
-
£
-
£
-
£
-
£
-
Material units 2000 2100 2200 3000 3300 4000
Material cost
£
3
£
3
£
3
£
3
£
3
£
3
Direct material
cost
£
6,000
£
6,300
£
6,600
£
9,000
£
9,900
£
12,000
This depict that the direct material cost of the comapny would exceed from January to
June. The enhancement in the material cost has been done due to the increment in the
production level of the comapny.
Direct Labor Budget:
Direct labour budget of the comapny is as follows:
Direct Labour Budget
Jan Feb Mar Apr May Jun
Production units 2000 2100 2200 3000 3300 4000
Labour hour per
unit 1 1 1 1 1 1
Labour cost
£
5
£
5
£
5
£
5
£
5
£
5
Direct labour cost
£
10,000
£
10,500
£
11,000
£
15,000
£
16,500
£
20,000
This depict that the direct labour cost of the comapny would exceed from January to
June (FIRRER et al, 2012). The enhancement in the labour cost has been done due to the
increment in the production level of the comapny.
Variable OH budget:
Variable production overhead of the comapny is as follows:
Variable OH Budget

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Jan Feb Mar Apr May Jun
Production units 2000 2100 2200 3000 3300 4000
Variable cost per
unit
£
3
£
3
£
3
£
3
£
3
£
3
Variable cost
£
5,000
£
5,250
£
5,500
£
7,500
£
8,250
£
10,000
This depict that the variable OH cost of the comapny would exceed from January to
June. The enhancement in the variable OH cost has been done due to the increment in the
production level of the comapny (Davies and Crawford, 2011).
Fixed OH budget:
Fixed OH budget of the comapny is as follows:
Fixed OH Budget
Jan Feb Mar Apr May Jun
Production
units 2000 2100 2200 3000 3300 4000
Fixed cost per
unit
£
5
£
5
£
5
£
5
£
5
£
5
Fixed cost
£
10,000
£
10,500
£
11,000
£
15,000
£
16,500
£
20,000
Operational Budget:
Operational budget of the comapny is as follows:
Operational Budget
Jan Feb Mar Apr May Jun
Sales Units 2000 2100 2200 3000 3300 4000
Selling Price
£
18.60
£
18.60
£
18.60
£
18.60
£
18.60
£
18.60
Sales
£
37,200
£
39,060
£
40,920
£
55,800
£
61,380
£
74,400
Less:

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Direct Material
£
6,000
£
6,300
£
6,600
£
9,000
£
9,900
£
12,000
Direct Labour
£
10,000
£
10,500
£
11,000
£
15,000
£
16,500
£
20,000
Variable
production OH
£
5,000
£
5,250
£
5,500
£
7,500
£
8,250
£
10,000
Fixed production
OH
£
10,000
£
10,500
£
11,000
£
15,000
£
16,500
£
20,000
Total cost
£
31,000
£
32,550
£
34,100
£
46,500
£
51,150
£
62,000
Profit
£
6,200
£
6,510
£
6,820
£
9,300
£
10,230
£
12,400
(CORREIA et al, 2013)
This depict that the total profit of the comapny would exceed from January to June.
The enhancement in the profit level has been done due to the increment in the sales level of
the comapny (Deegan, 2013).
Variance analysis:
Variance analysis is the study which depict about the differences in the expected and
actual result of a comapny, this study helps the comapny to make better decision and analyze
the changes which must be concerned while preparing the next budgets. The importance of
the variance analysis is as follows:
1. Performance management:
2. Management of exemption:
3. Responsibility accounting (Du and Girma, 2009)
4. Decision making:
5. Accurate result:
6. Future changes:
7. Better evaluation:
8. Efficient budgets:
9. Control
10. Better strategies plan (Garrison et al, 2010)

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Above is few importance of the variance analysis which would help the organization
into managing the activities and functions in a better way.
Management accounting benefits:
Managerial accounting is used by the managers to use the accounting information and
the provisions of the comapny in order to analyze the performance of the comapny and make
a better decision. Management accounting is the provision of non financial and financial
decision making knowledge to the top level management of the company. The benefits of the
management accounting are as follows:
1. Improve cash flows
2. Reduce expenses
3. Control (Van der Stede, 2001)
4. Increase financial returns
5. Better evaluation
6. Business decisions
7. Continuity and participation
8. Evolutionary state (Brealey, Myers and Marcus, 2007)
Above is the few importance of the management accounting which would help the
organization into managing the activities and functions in a better way.
Conclusion:
In this report, various studies of management accounting has been done to analyze the
various statements which has been prepared over the comapny to analyze the total cost, total
profit, selling price, budgeting reports etc of the company. These statements have been
prepared by the organization to help the management accountant to make a better decision
about the performance and the further decision about the stability, changes etc in the
comapny.
To conclude, management accounting plays a crucial role in the life of an
organization. It helps the comapny to make various better decisions for the betterment of the
business and its activities. Further, the various tools of the management accounting are very

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efficient to make a better decision about the performance, stability and future prediction
about the comapny.

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References:
Atrill, P. and McLaney, E.J., 2006. Accounting and Finance for Non-specialists. Pearson
Education.
Brealey, R., Myers, S.C. and Marcus, A.J., 2007. FundamentalsofCorporate Finance. Mc
Graw Hill, New York.
Brown, P., Beekes, W. and Verhoeven, P., 2011. Corporate governance, accounting and
finance: A review. Accounting & finance, 51(1), pp.96-172.
CORREIA, C. et al. 2013. Financial Management. 7th Edition. Cape Town: Juta
andCompany Ltd.2.
David, F.R., 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Du, J. and Girma, S., 2009. Source of finance, growth and firm size: evidence from
China (No. 2009.03). Research paper/UNU-WIDER.
FIRER, C. et al. 2012. Fundamentals of Corporate Finance. 5th Edition.Berkshire.McGraw-
Hill Companies, Inc.
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A., 2010. Managerial
accounting. Issues in Accounting Education, (25(4), pp.79(2-793.
Gitman, L.J. and Zutter, C.J., 2012. Principles of managerial finance. Prentice Hall.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Lafond, R. and Roychowdhury, S. 2008. Managerial ownership and accounting
conservatism. Journal of accounting research, 46(1), pp.101-135.
Nobes, C. and Parker, R.H. 2008. Comparative international accounting. Pearson Education.