Management Accounting Report: Analysis for Crossroads Garage Ltd

This report delves into the realm of management accounting, focusing on its application within a business context, specifically using Crossroads Garage as a case study. The executive summary highlights the importance of internal cost management for decision-making related to investments, operations, and production within a competitive market. The report explores various management accounting systems, including decision-making processes, standard costing, and statistical representations. It explains the need for different management accounting systems like job costing, cost accounting systems, inventory management, and price optimization. The report also explains different methods used for management accounting reporting, such as performance reports, budget reports, debtor aging reports, job cost reports, and inventory reports. It also explains the differences between marginal and absorption costing methods. The report further discusses the merits and demerits of planning tools and methods used by organizations for resolving financial problems. The analysis includes financial statement comparisons, highlighting the impact of different costing techniques on financial outcomes.

Management Accounting

Executive summary
Accounting management mainly focuses on the function of the internal cost for any of the
organisational process, which helps in the business, individual or an organisation. This processes
helps in taking a proper decision which is connected to the investment, operation, and as well as
productions in the competitive market. All the organisation require accounting management to
know the ability of the budget of the organisation as well as the cost of the performance and then
allocating some of the funds as per the investment, sales as well as productions. In order to track
specific selected ratios on daily basis, the organisation has the capability to maintain a accurate
perception of the efficiency and effectiveness of its operations. Even though the industry related
to the hospitality is exciting and dynamic, it faces competitive challenges such as, reliance on
discretionary income, low profitability, capital intensive, and labor intensive and fluctuating
sales volume
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1 .........................................................................................................................................4
P1. Explanation of accounting management and need of various types of management
accounting systems...................................................................................................................4
P2. Explanation of various methods applied for management accounting reporting that can
apply for the chosen scenario....................................................................................................7
P3. Explanation the difference between the two management accounting techniques.............9
TASK 3........................................................................................................................................11
P4 Merits and demerits of planning tools...............................................................................11
P5 Methods used by organization for resolving financial problems.........................................14
CONCLUSION:............................................................................................................................17
REFERENCES ...........................................................................................................................18
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INTRODUCTION
Management accounting refers to the process where the accounting data are analysed as
well as interpreted through cost accounting. It helps a firm to take control over their decision
making and policies. Management accounting is solely based upon cost and financial
accounting. An organization like crossroads garage tries to adopt various tools for analyzing
their costs in order to assess financial risks. In UK, Crossroads Garage is a leading car
manufacturing company. The company is known for their luxurious collection of cars. This
study is going to deal with the types of management accounting procedures that assist an
management accounting officer to manage their costs. The study is also going to discuss about
the methods that are adopted by a manager while maintaining accounts. A number of tools as
well as techniques are used for taking control over the capital flow of a small organisation. It can
be said that an organisation like crossroad garage Ltd need to ensure success of their business by
relying upon an effective management accounting system. This study is trying to assess the
methods and tools for resolving financial problems.
TASK 1
P1. Explanation of accounting management and need of various types of management
accounting systems
There are various different methods of the accounting management.
Decision-making
The requirement for making a decision occurs in Green core because a manager suffered
with an issue and attentive study of action is present. In order to decide a particular option the
manager will require all the information, which is appropriate to his decision; and he needs to
have some ideas based on which he can choose the best plan. According to Renz (2016), some
important features that are, affecting the decision may not represent in economic value. Hence,
the manager needs to make standard judgments, a decision, which is ‘quantitative’. On the other
side, it is possible when the various relationships and factors, among them, maintained. .Brief
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distinction between fixed and variable cost is being determined with this approach as well as it
needs to have the capability of calculating the variable element of indirect cost.
Standard costing
This act therefore involves deciding and setting up about the standard cost that is proper
in various aspects of the activities that has been taken up by Harvey and Palmer. According to
Banerjee (2014), this also involves the actual conversion of the cost that taken by the
organisation with the standard cost that was pre determined. The appropriate actions are there to
solve them out of the current deviations.
Statistical and graphical representation
The performance of the accounting management helps in the information in different
types of representation as well as interpretations of data that are present in their hands. This
therefore helps in the organisation to understand the vital data in the firm. Different kind of
important data are been interacted applying the accounting management.
Lean accounting: this type of accounting system mainly applied in the lean
organizations and they are at the top of the main aspects of the organizations. This helps in
performing the nd capacity of the organizations in managing the constant stage of the
[performance in the work atmosphere.
Throughput accounting- This process of accounting system of cost accounting system
is been used in various organizations in order to gain different kind of utilities and advantages.
This system helps the management body to get different kind of important and relevant
information related to operation and performance that aid the managers and whole of the
management body to make different kind of important decisions.
Cash flow statement- The organization, specifically the Harvey and Palmer evaluates
the cash flow statement in order to learn about the presence of liquidity in the hands of the
organisation and the possibility of working capital. In the words of Bodie
(2014), from this, the company can easily take up different kind of decision.
Statistical and graphical representation- Management accounting helps in the
formation of various statistical representations and interpretation of the data that are available at
their hands. This helps the organization to understand any important data and take different kind
of steps in response to such kind of information.
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Figure 1: Accounting management
[Source: created by author]
From: Management accounting officer
To: GM
Subject: Enabling the appropriate implication of the management accounting techniques in
organization.
Sir,
In order to manage the internal operations as well as deciding the bets cost effective
decisions which will be helpful by implicating the reporting and costing techniques in the
industry. Thus, it can be said that there are various operations which will be beneficial such as
forecasting the requirements of various operations such as sales, purchase, production etc.
However, it will be recommend to you to implicate the use of management accounting methods
in the organization which will be beneficial as well as helpful for the growth of firm.
There are various management accounting system which will be helpful and beneficial for
the growth of the business as well as improving the business efficiency such as
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Job costing: This is the most fruitful costing technique which will be beneficial in terms
of making the analysis over the costs incurred in the operations or in performing the particular
tasks.
Cost accounting system: This technique helps in analyzing the costs incurred in the
various units of the organization. It consists of all the costs incurred in the business such direct,
indirect, variable. Fixed and overheads
Inventory management: This is the most helpful technique which enables in man aging
the inflows and outflows of the inventory. It records all the essential details regarding the
products such as quality, quantity, price, batch number, manufacturing date etc. it helps in
managing the perishable nature opf goods as well as also enable the firm to meet the demands in
the market.
Price optimization: This is the technique which will enables the professionals in making
the adequate increment in the profitability. Therefore, the prices is being set over the products on
which the consumers reacted. It implicates the different level of prices over the same categories
of the products. Thus, the maximum response towards the price will be treated as the price of the
product.
P2. Explanation of various methods applied for management accounting reporting that can apply
for the chosen scenario
According to Macintosh and Quattrone (2013), in order to take decision related to the
particular decision the manager will therefore require all the relevant information, which is
proper to the decision to have some innovative ideas, which based on the basic plan that they
use. According to Renz (2016), some vital feature is affecting the decision that may not display
in economic value. Hence, the manager requires making standard judgments, a decision that is
‘quantitative’, on the other side; it is possible when the various relationships and factors, among
them, maintain. .Brief distinction between fixed and variable cost is being determined with this
approach as well as it needs to have the capability of calculating the variable element of indirect
cost.
The main motive of the cost management of Crossroad Garage is to analyze the
fundamental analysis of the individual research. Cost management is therefore a method, which
fully explores the various approaches to a particular theme. Its main motive is to provide some of
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the guidance in order to enable the organisation to consider which accounting and costing tools
are proper for the manufacturers of Lean. The relationships between lean enterprise, business
excellence and Value chains along are most efficient in some of the case, with that calculating
the contribution of financial analysis to the excellent region. Performing the cost-benefit of the
standard throughout accounting by the analysis of waste and value analysis of the activity chain
is another aspect of it.
The major role of a traditional budget of Crossroad Garage is to indicate the value of the
monitory to allot during a period for some of the specialized obligations including insurance,
entertainment as well as rent. In the words of Wehrmeyer (2017), therefore the budget is
performing to support an individual to spend their money. At the end of the period, a traditional
budget begins with the income of the individual and the categories of the list on which the
expectation of the individual is to spend their money.
Performance reports: In relation with managing the performance and efforts made by
the firm and the professionals there is need to have better reporting tactics. Therefore, these are
the measurement tools which enables the managers in analyzing the performance and the targets
to be achieved by them.
Budget reports: This is the most effective and essential report which helps in analyzing
the estimated performances with the actual outcomes. The variance between such outcomes will
be helpful in decision making as the professionals will have enough information about costs and
the revenue obtained in such tasks.
Debtor aging reports: This technique will be useful in demonstrating the recovery of
credits grant to the debtors in the required period. Therefore, it will make the fruitful analyses
over the recovery period of the firm as well as the making debts. Thus, Crossroad Garage will
have better fund management in the premises.
Job cost reports: This is the reporting which enables a professional in evaluating the
costs incurred by the business in manufacturing or performing a job in the required period. It
ascertains the direct expenses such as costs, material, labor etc involved in the manufacturing the
products on which the revenue is generated.
Inventory reports: To manage the imports and exports of the inventory as per the
demand of consumers in the premises. It helps in recording the total imports of the inventory
with their time, quantity, price etc. conversely the exports will be recorded. It helps the
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professionals in analyzing the demands in the market as well as the requirements of
manufacturing the more units.
P3. Explanation the difference between the two management accounting techniques
Income statement as per Marginal costing method:
Income statement as per Absorption costing method:
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There are some of the specific points of the differences between the two of the major
techniques of the management accounting. According to Nandan (2013), firstly, it can be
determined that there are various distinction related to the various different expenses as well as
cost in all the head cost. Secondly it can be said that with the help of the fixed cost or the fixed
volume It can also evaluate that sometimes if the marginal costing the determination of the
profits mainly done by using the margin of the distribution. In addition to, it can easily said that
somehow in case of the marginal costing that all the entire profit which is therefore earned by the
measurement of the association, which is measured in the terms of the volume ratio. However, in
case of some of the techniques related to marginal cost as though the fixed cost is considered, the
entire points is therefore earned by the association which is affected as well as gets decreased at
a high rate.
Financials Year
Revenue 2319
Gross Margin % 27.0
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Operating Income 43
Operating Margin % 1.8
Net Income 12
Earnings Per Share 0.01
Dividends 0.03
Payout Ratio % 73.4
Shares 655
Book Value Per Share 1.38
Operating Cash Flow 118
Cap Spending -123
Free Cash Flow -5
Free Cash Flow Per Share -0.01
Working Capital -122
Table3: Financial report
(Source: created by author)
TASK 3
P4 Merits and demerits of planning tools
Budgets are an essential aspect of a firm’s control system. It is often used by the accounting
managers for identifying components that need to be addressed for taking control over finances
for a firm. Budget serves as an effective way for measuring performances of an organisation and
many organisations are trying to associate importance with budgetary control techniques (Arora
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and Soral, 2017, p.88). Budgets are controlled with the help of different tools and techniques.
The tools that are adopted by an organisation for controlling budgets are as follows:
 Non-Monetary Budgets
 Financial Budgets
 Operating Budgets
Figure 2: Types of budgetary tools
Source: Webb, J. and Chaffer, 2014, p.360)
Budgets help in ensuring complete control over financial assets. Managers are able to
supervise business operations by the use of budgetary control tools. The budgets are a way to
keep a check over organisational performance. As opined by Brender and Markov, (2013,
p.730), some managers are unable to understand the significance of this method and it leads to
financial issues. A management accounting officer need to identify importance of budgeting
tools for taking appropriate decisions regarding management of resources and financial assets.
However, it is to be noted that budgeting might take large amount of time. It is to be addressed
by a management accounting officer to plan a budget as the needs of their organisation. Small
business like Crossroads Garage is able to allocate their resources as per the requirements and
presence of asset. It is often found that those organisations who tried to implement a better tool
for controlling budgets have failed to innovate their products or services. It can be analysed that
although budgets are useful in maintaining funds but it slows down rate of innovation in any
organisation. Operating budgets makes it difficult for an organisation to use as an opportunity
that is quite unexpected (Chen, 2014, p.120). Budgets seem to be an inseparable part of an
organisation's system.
Advantages:
❏ Budgetary control tools are an effective way to maximise profit margins and provide
framework for reducing coats. A well defined budgetary control tool could help an
organisation to set a proper goal.
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