Management Accounting and Budgetary Control in Continental Clothing Limited

This document discusses the importance of management accounting and budgetary control in Continental Clothing Limited. It covers topics such as different accounting systems, cost estimation techniques, and the role of budgeting in financial planning and control. The document provides insights into the company's inventory management system, job order costing system, price optimization system, and cost accounting system. It also includes a comparison between marginal costing and absorption costing. Additionally, it explores the benefits and disadvantages of cost budgeting in the organization.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1.................................................................................................................................................3
P2.................................................................................................................................................5
TASK 2............................................................................................................................................6
P3.................................................................................................................................................6
TASK 3............................................................................................................................................7
P4.................................................................................................................................................7
TASK 4..........................................................................................................................................11
P5...............................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
APPENDIX....................................................................................................................................15

INTRODUCTION
Managerial Accounting is a wider array term or concept that must be understood by all
management workers so that they can also increase the performance of the organisation in which
they serve. It is a technique that helps the internal partners to determine whether the enterprise is
functioning well or not (Van der Stede, 2015). Both specifics pertaining to market practise is
published with the help of it. It is important for all members to maintain that in order to meet all
the objectives and objectives set, they allocate attention to this. The overarching aim of this
analysis is to explain the important parts of MA and its use within the Continental clothing
limited. The company manufactures a range of clothing items and located in United Kingdom.
The task covers a broad range of subjects, including processes and main documents, and
knowing accounting systems, evaluating different cost estimation techniques to assemble the
financial statements of a business. In addition to this, based on the application of management
accounting, the report further discusses various types of estimating approaches employed in cash
inflows and capital budgeting.
TASK 1
P1
In all organisations, administrators use a standard method to determine if the efforts they make to
enhance operational performance have a favourable or detrimental effect. It is known as business
accounting which facilitates the results assessment of the business by all internal stakeholders. In
Continental clothing, budgetary control is used to assist the management staff in determining the
real development of the business (Shields, 2015). With the assistance of it, workers also
determine that the business in which they work gives them prosperity in the near future or it
doesn't. It is really important for management teams to ensure that they use it while trying to
meet all long-term corporate strategies, so it will assist them in assessing and monitoring
organisation outcomes.
To insure that the planned activities are done in a structured manner or not often organisational
organisations use various types of MA programmes. This is helpful for management departments
to use all kinds of systems to better execute all operations. Continental clothing limited
management pays heed to different forms, such as expense financial statements, pricing

strategies, inventory system, and value of job costing. With the assistance of each of them,
leadership produces internal assessments that assess the personal achievement of organisations.
All of these are listed in detail in the sense of Continental clothing limitations as below:
Inventory management system: In most industries, it is used by managers to maintain correct
records about the good and services they use to deliver items marketed to end consumers (Otley,
2016). All items ordered by customers are made in Continental clothing limited by keeping all
the components according to their requirements. This helps managers to promise that they will
have all the supplies or resources they need to manufacture the end product. There are many
forms of methods to assessment procedure for the handling of stocks within businesses. These
are all mentioned as below:
AVCO (Average Cost Method): Average costs are calculated in this methodology to measure
that expense of stock closure.
FIFO (First in First Out): When under this, ending inventory costs are calculated on the basis of
the notion that the first purchased goods are sold first in a given chain.
LIFO (Last in First Out) When net income is priced under this strategy, based on the idea that a
recent acquired commodity is sold.
Essential requirement- In order to monitor the amounts of goods sold and acquired within a
given time period, this asset allocation is necessary for Continental clothing limited. As
described above the business deals with the sale of cloths, so it is important for them to monitor
stored inventory levels as well as to regulate the costs of different products using various
methodologies.
Job order costing system: This is one of the main principal structures used in various forms of
industries in all sectors. This is meant mainly to document data directly about all operations.
Within small Continental clothing, the specifications for all consumers are identifier in order to
meet all their requirements. The corporation is now able to achieve its long-term targets, such as
higher customer loyalty (Lavia López and Hiebl, 2015). This guides supervisors to promise that
all tasks will be conducted on a consumer framework. For Continental clothing limited, the
costing method for job ordering is a beneficial tool, since it requires all consumer specifications
to be fulfilled correctly. Furthermore, it is therefore advantageous to reach market objectives
such as higher profits and more happy customers.

Essential necessity- In needed to execute various kinds of activities, it is necessary for firms to
calculate the cost of employment or the number of workers working. This reporting method is
important for them to figure out the costs of each and each manufacturing unit in the small
Continental clothing above.
Price optimisation system: The key focus of this MA method for managing all goods offered by
a business is to determine the correct price. Managers assess that by selling all their offerings,
they will able to retain large numbers of customers. The business benefits from measuring the
responses of clients to the rates they expect to spend for all goods they deliver. This involves
small Continental clothing, since management can increase income by setting the right price on
any commodity they sell. This system will also aid the organisation in its appraisal by setting fair
rates on all the goods offered by the company in order to meet all of its goals.
Essential requirement- In necessary to prepare prices for their various bakery items at a standard
at which consumers will be pleased, Continental apparel is expected to be restricted. This is
achieved in line with the study of industry dynamics such as commodity change policy, makes
regarding of consumers and so many more.
Cost accounting system: This is just another critical managerial accounting technique used
specifically to measure the expenses of all provisions set by a company in order to meet all its
organisational goals (Messner, 2016). Inside minimal Continental clothing, managers need to
understand all the costs currently needed to achieve all the predetermined targets. Management is
aware of all costs of the operations by the execution. The cost accounting system is used by
Continental clothing limited as it would allow managers to determine the real costs of all
activities carried out throughout the entity.
Essential requirement- For Continental clothing, this reporting process is useful for retaining
costs of various kinds of operations and events at a pace at which they do not afford any loss. It'll
become necessary when the manufacturing expense is calculated and contrasted with the
expected amount of expenditure under such a volume of manufacturing.
P2
The basic method for generating internal records and reports, known as accounting applications,
is performed in most companies in the marketing segment. In order to measure the business
future positively or adversely, it is appropriate to focus. In above company, administrators are

often taken into account to ensure that they meet all business goals. To receive financial
information from the department, there are various methods used. All of them are mentioned
below:
Inventory management report: It is important to the documentation of all the items needed for an
agency to carry out all company processes. Management in Continental clothing creates a study
limited to deciding if they have sufficient goods to market different products to customers
according to their requirements. For the firm, this is beneficial because it can help to supply
goods on time in order to minimize the problem of disaffected customers.
Account receivable report: This is mainly related to the monitoring of these consumers' data that
will allow future transactions and purchasing credit goods (Quattrone, 2016). Management does
this in Continental apparel restricted to maintain specific information of the amount owed which
would be received by buyers on a deadline in the meanwhile. This is advantageous to the
Organization as it will assist with the determination of the particular exclusion to be given in the
future.
Budget report: This is specifically relevant to the reports made by corporations to allocate funds
to all branches according to their requirements so that administrators can execute all their
operations. This research also includes Continental limited clothing to insure that planned events
are rolled out in the same expenditure that has already been decided for them. It is beneficial for
the organisation because with the help of this method, the necessary funds would be allocated to
the departments to perform all their duties.
Performance report: In most organisations, this report is produced for the purpose of assessing
the total production of the whole enterprise and its workers. Continental clothing limited's leader
often establishes it in order to determine the entity's performance and analyse if employees are
making adequate efforts to contribute to business growth. This is positive for the company
because of its performance; it would encourage management to give staff bonuses and benefits.
Difference between marginal and absorption costing:
Basis Absorption costing Marginal costing
Consideration
of cost
Under this both fixed and variable
cost are considered as cost of
operations.
While in this only variable cost is
considered as cost of operation.

Profitability Under this profitability is measured
by profit volume ratio.
In this inclusion of fixed cost, profitability
gets affected.
Focus Contribution per unit Net profit per unit
TASK 2
P3
Marginal costing: It can be defined as the costing approach used by enterprises to quantify costs
for each additional unit, along with the entity's specified units generated. In above company,
administrators measure the expenses of all other goods that they produce in accordance with
consumer specifications.
Absorption costing: This form of costing mainly requires the accumulation of costs from the
production of all products produced (Chenhall and Moers, 2015). The Continental clothing
limited managers ensure that certain costs involved in the production of different goods are
recovered from their revenues.
Data:
Waffles January February
Units Produced 10,000 10,000
Units Sold 10,000 5000
Selling Price per Unit £25 £25
Direct Material £50,000 £50,000
Direct Labour £30,000 £30,000
Variable Manufacturing Overhead £20,000 £20,000
Fixed Manufacturing Overhead £40,000 £40,000
Variable Selling Overhead £30,000 £30,000
Fixed Selling and Administrative Overhead £30,000 £30,000
Appendix

A benefit of 50000 for the period of Jan and a loss of 10,000 for the month of Feb were
determined on the basis of these estimates in the calculation of marginal revenue revenues.
Appendix
The above calculation of absorption expense shows that the gross absorbing amount in February
is around 51000 as used by the business and the net gain is equal to the marginal expenses.
TASK 3
P4
Budgetary monitoring is related to the mechanism by which companies arrange their expenditure
for the potential and equate it with the current output in order to assess the difference. The
company's management can quickly spot discrepancies and make urgent adjustments by
comparing the predicted forecasts with the real figures (Maas, Schaltegger and Crutzen, 2016).
This approach ensures that the expenditure caps are suitable for Continental clothing limited by
senior executives. This legislation is important because there is a negative effect on business
revenue from excessive spending. Cash related management is used within the enterprise as a
cost containment tool that includes fiscal expansion, coordination between different departments,
positions and tasks, comparing of performance with expenses and the results needed to achieve
the best financial losses. The main objective of Continental limited clothing is to use budgeting
process as an important tool that is essential for the success of the organisation. This adds to
rising efficiency and output of businesses. In planning and controlling, financial planning plays
an important role in promoting the allocation of resources which are available for the most
productive use thereby preserving competitiveness in the organisation. A successful framework
for budgetary management enables the planning of multiple activities and assures that the
company functions successfully and materially. In order to prepare the budget and facilitate
cooperation between various teams, it also integrates feedback from increasing management
levels.
The job capital and other instruments within the company must be adequate as an efficient
planning method for accounting system. Certain requirements are required for an effective

budgetary control scheme. This include upper-level managerial support, the creation of an
evaluation centre, the measurement of corporate goals, realistic agendas, operating plans,
employee participation, the breadth of all operational facets, a reliable financial accounting, etc.
In Continental clothing, different forms of planning tools are required for financial regulation.
Cost budget- With respect to defined business costs, it is a budgetary schedule for the next year.
It determines all the expenses operational level and events in industry (Tucker and Schaltegger,
2016). That is the projected possible expense that could be faced by a corporation in the
possibility. This is the most productive way to help control the collection and money evaporation
of minimal Continental clothing inside the organisation. The benefits and disadvantages of
expense are listed below:
Advantages-
This budget offers an outline of planned plans that will result in higher or lower costs. It allows
organisation administrators to take sufficient steps to prepare to reduce higher expenditures. As
in Continental clothing limited, the finance manager uses key cost data from this spending plan
and compares it with real cost.
Furthermore this budget allows firms to maintain running expenses lower than expected. This is
because it provides an outline of the expense strategy and administrators work on such
operations that will contribute to increased costs in the future. The manager of the above
business takes disciplinary steps to maintain the expense of essential activities.
Disadvantages-
This takes time in the course of determining the cost timetable, because it is time intensive.
Management often demands much from the expenditure and the manager would be responsible if
those conditions were not met. For certain events and processes that are tied to external
environmental conditions, this may become possible. For example, if the market for goods
changes, then companies will have to pay the expense of storing goods and this may make
budget forecasts inaccurate.
It is just a strategy that does not minimise or govern them. It is not possible to alter regulation, so
it must be reserved exclusively for the execution of management activities. This is right because
administrators may become conscious of extremely costly operations, but the expense budget

does not have an idea to resolve these operations. How well they avoid extra operational costs
depends on administrators.
Zero based budgeting- This is the financial plan where any new spending cycle can be clarified.
The approach begins on a zero premise and the conditions and expenses of which the function of
the organization is assessed (Hall, 2016). The key aim of this budgeting technique is to minimize
additional expenditures, considering conditions where it is possible to reduce spending. In order
for minimal Continental clothing to be handled, any bill must be justified before it is
incorporated into the realistic budget. There under, it is necessary to note that this expenditure
can be used by their for only those events which are recent and not including past fiscal year.
Any of the upsides and downsides of zero-based financial planning for Continental clothing
limited include the following:
Advantages-
Zero-based budgeting is an impressive sight organisations effectively allocate funds since it is
not directed at past budget estimates, instead of actual numbers. It is so that all operations are
covered under it on the grounds of proper reasoning. For instance, in Continental clothing
restricted, they will efficiently use this plan to allow the correct distribution of their financial
capital in multiple events.
Another advantage of this expenditure is that it provides consistency and transparency in context
of money assets which are established in various kinds of activities. It becomes feasible when, as
per the analytical need, each operation is extracted. Operations on account of previous
documents shall not be considered. They are using this plan, as in Continental clothing limited
above, for those items that are fresh or whose operations are not connected to previous budgets.
Disadvantages-
Under this plan, the only concern is that it takes so much resources and expenses that tiny firms
cannot afford. The primary explanation behind these higher expenditures is to personally explain
each operation. For instance, in the small Continental clothing above, this plan is expensive if
they do not even have sufficient financial means to pay the financing specialist.
Including the planning, it is often complicated for ordinary users to use this budget. This is that
because of the incorporation in the expenditure of a new trend and tasks. In the above business

for example, the employees may find it hard to understand because of new operations. As a
consequence, due to delays in the choice process the organisation could fail.
Capital budgeting: This is defined as the company's method of deciding which acquisitions of
fixed resources it would accept and reject (Sands and Gunarathne, 2015). Financial analysis is
used to create a rational structure for assessing and developing a detailed picture of any future
fixed cost transfer. This helps to determine potential major purchases or projects by managing.
Continental clothing limited. These planning methods are based on various forms of investment
valuation strategies, such as the method to net value, the payback date, and so many more. Under
these strategies, the financial strategy presented is reviewed and administrators are given advice
to make reasonable decisions. Some of the benefits and drawbacks of financial analysis for
enterprises are below:
Advantages-
In order to choose an investment alternative in an appropriate way, this budget benefits
businesses when various types of strategies are used under it. For example, their financial
manager reviews all alternative options in Continental clothing restricted by means of this plan
and then determine whether or not they can make investments.
Another advantageous aspect of this plan is that it helps corporate administrators to make critical
and nuanced choices. This is likely because it may become important for employers to select a
single investment plan without distinct investment valuation techniques. Yet they take effective
steps by way of this financial planning, while their supervisors get support from this strategy for
complicated tasks in the Continental clothing limited.
Disadvantages-
The biggest problem with this budget is that potential cash flows are forecast and the benefits of
the asset is measured based of this. However since the future is not predetermined and any
adjustment in the external world will make the final forecast inaccurate, it is not a reliable
method of calculating project performance. For example, if Continental clothing limited chooses
a project on the basis of expected cash flows, however if loan amount varies in the potential, then
that plan will not result in desirable outcomes.
In contrast to this, financial analysis approach yields distinct outcomes and decisions. For eg,
there are two projects A & B, so project A can be ideal under the discounted payback system

while project B can be good under another framework. Because of this, uncertainty has been
generated and administrators do not take reasonable decisions.
TASK 4
P5
In the current competitive global climate, businesses in the business environment age face
various rising financial challenges. Although running company is mentioned below, a few of the
major issues that Creams limited challenges are mentioned.
Bad inventory and cost management: It is defined as a money issue situation related to a lack of
influence over inventory or cost amounts. Due to poor regulation of different procurement
categories such as raw resources, packaged products, etc., this problem persists (Pavlatos and
Kostakis, 2015). In this issue, firms have no specifics about how much inventory stays in the
warehouses at the end of a month. Due to such a loss of oversight of a amount of sales volumes
available, they are dealing with this issue in Continental clothing limited. The administration of
the business appears to be struggling to maintain the amount of supplies remaining in the
warehouse. As a result, the cost of manufacturing materials is too high, resulting in higher prices
for other operating operations.
Decreased profits from sales: This financial dilemma is known to be one of the prevalent
problems that can occur in any form of company. However it's a recurrent problem, but the
repercussions are too important. There can be a range of variables, such as higher retail rates,
poor sales policy, relatively low efficiency, etc., of this category of financial issues. It depends
on the management of a company how well they struggle with the issue and fix it in less time. In
the case of Harvey Water Softeners, they experience this dilemma, which at the beginning of an
accrual accounting results in lower net income.
Benchmarking-It is the mechanism by which organisational success is measured to a certain
extent. The theory behind this approach is that a business's monetary success is correlated with
the output of another business under it so that regions of underperformance can be characterised.
Indicators of KPI- This can be defined as a type of strategy from which both financial as well as
non success metrics are defined in order to focus on certain areas where either exceptional or

disadvantaged corporate governance is present (Nitzl, 2016). The financial consequences are
protected by awareness of sales, loss, return on capital, etc. Data on the efficiency of staff, their
retention etc. was included in non-financial factors.
Financial Governance-This is the way an organisation gathers and collects market reports. The
company does it so that efficient data is used for the company's financial situation.
Comparison for the use of management accounting system:
Basis Continental clothing limited Harvey Water Softeners
Financial problem Leading to inadequate supply
quantity management, this enterprise
was met with the money problem of
high stock installation costs. Owing
to greater infrastructure costs, other
systems and operations are also
impacted. And the average expense
of operations and activities increased
above planned costs.
They faced the financial issue
with reduced profits from
purchases. This accounting
challenge changed a host of other
matters, such as poor net value
and net profits, by the end of the
fiscal year.
Technique to
identify issue
In order to find the source of the
error, the company would use a
benchmarking method (Cleary,
2015). They measured their own
financial results to another
company's.
They implemented main success
indicator approach to understand
those variables that lead to the
firm's earnings dilemma.
Management
accounting system to
solve the issue
To tackle their dilemma of increased
manufacturing prices, the business
manager was using the "inventory
control system". This is because
various types of strategies are used,
such as last in the first out, in first out
process, etc. The company managers
are able to comprehend how often
stock availability in the warehouse by
The administration of this
corporation has implemented the
"Price optimisation system".
Product rates are fixed at a point
in this financial accounting that
can satisfy and encourage
customers to buy products. The
managers of the organization
changed the quality of their items

implementing this plan and resulted
in a definitive decision to purchase
new goods. Thus the, their dilemma
became solved by this method.
as this accounting scheme was
introduced, and the consumer
proceeded to make purchases at
new cost costs. Thus, their
dilemma of lower net sales was
solved by this accounting
method.
CONCLUSION
From the above project paper, it was concluded that overall responsibility over all attempts to
increase productivity is used by most enterprises to keep track of the progress made. To
determine the actual market position, there are different types of transactions or underlying data
used for enterprises. Various cost analysis methods, including nominal and utilization, are
frequently used by organisations to ensure that gains or losses are generated. In order to
anticipate and control budgets for financial accounting companies, various forecasting methods
are still commonly used. Entities use methods such as benchmark tests, KPI and organisational
accountability to define and fix financial challenges.

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APPENDIX
Marginal costing-
Absorption costing-