Management Accounting

Management Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Management accounting and MAS..................................................................................3
P2 Explaining various methods of MA reporting...................................................................4
TASK 2............................................................................................................................................5
P3. Calculation of costs using best method of cost analysis to make an income statement...5
TASK 3............................................................................................................................................8
P4. Explanation of the different planning techniques used with appropriate benefits and
limitations for budgetary management...................................................................................8
TASK 4..........................................................................................................................................10
P5. Comparison of organisations for adapting MAS to defect to financial problems.........10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is the documentation, review, selection and processing process
efficient analysis of company documents by which managers settle about the best solution for
company. The middle-sized company Innocent Drinks which produces juice and smoothies is
selected to recognise the MA idea. MA also learned business accounting administration or
operations. The rate, inventory and work expense accounting framework where described in this
paper. This article includes the ways in which business reports are structured and how expenses
are measured using fixed and termination rates. It takes into account the advantage and downside
of forecasting methods through the use of MA techniques to solve the financial market challenge
to accomplish targets and to deliver cash flow efficiently to ensure long-term viability in the
economy.
TASK 1
P1. Management accounting and MAS
Management accounting activities include business goals such as recognising the financial
implications of organisational decision making, monitoring investment and optimising profit.
MA concept concerns the nature of financial data processing, records and expectations,
management inadequacy, incremental absorption costs and accounting methodology comparison
(Epstein and Lee, 2015). Innocent Drinks uses valuable MA method for making the correct
decision is mentioned below:
Inventory management system: The IAS plays a significant role in the regulation of
keeping expenses and sales of the company of Innocent Beverages. Manager will create
stockpiles and inventory of goods using a centralised supply chain management system.
Corporate goods are generally the household products that are difficult to put on sale, even
though they are distributed in shops and delivered from the manufacturer on request. This
association helps in reducing the cost of maintaining and promoting products quickly and
efficiently.
Job costing system: This MA method is software that discusses the costs of each operation
undertaken by an organisation (Drury, 2013). To track and control the spending of the company,
each expenditure collection is then analysed to assess the volume of expenditures generated
within it. This MA system is required for Innocent products, which helps this management team

to watch the costs of jobs such as wrapping and distributing. In able to identify its spending, the
company utilizes cost-per-take methodologies.
Cost accounting system: This system is necessary which businesses use to quantify the
costs related to the manufacture and selling of their products. This accounting metric is useful for
Innocent product management since it can assess which products are more price-involved, and
then it can decide whether they are actually worth spending a large portion or if they can gain a
considerable market share. This approach is often used by the business to calculate the value of
its products and to choose the range of products that is more efficient and competitive on the
marketplace.
Price costing system: This model of communication relies on a technique based more on
economic principles than on research and machinery (Hiebl and Richter, 2018). Innocent drinks
would need this initiative because even if, management set the standards on all their products in
a really way as to result in increased profits on the business which could also be a product with
the top importance for its efficiency, such that customer satisfaction can also be achieved.
P2 Explaining various methods of MA reporting
MA records seem to be the documents produced by the collection of accounting information
within these documents so that managers can explain their proposals and actions as evidence of
policy growth. Different documents are published within MA of innocent drinks which serve as
financial management techniques since these papers are the method to help implement the
accrual accounting. These are discussed below:
Cost accounting report: This cost financial analysis process aids a corporation in
conducting its audit mission seamlessly, since this research is created in an expense framework
where almost all prices of each goods of the company are listed (Jermias, Gani and Juliana,
2018). This report provides Innocent drinks administrators with pricing of all the delivered
products from the business and divides all other things by static, semi-variable and also fixed
operating expenses to assist in decision-making.
Performance report: This is one of the most important MA document not correlated with
numerical sales or expense concerns but correlated with growing employee productivity in a
sector. This research is generated by the HR department of a company, which focuses on the
performance reviews of the 360-degree staff. Innocent drinks sees their staff person as perhaps
the most important resource through which they establish this report to determine the

performance targets of their employees. This research seeks to efficiently enhance the
productivity of the workforce and the entire business.
Accounts receivable reporting: This form is considered appropriate to major corporations
or organisations engaged in multiple cash deposits collected regularly (Kaplan and Atkinson,
2015). This account receivables overview includes the inflow cash payments made by a
corporation to maintain a track of the funds the company regularly receives for its operations.
These two inflow properties impact company revenue. Innocent Drinks finance department is
responsible for setting up such a platform, taking into consideration the financial condition of a
company, it may well be that the organisation creates an integrated receivable accounts ability to
track the working capital in its business efficiently, rather than to continue to make successful
methods.
TASK 2
P3. Calculation of costs using best method of cost analysis to make an income statement.
The cost can be mentioned as a company's monetary interest in creating information, so it
decided to donate some certain amount of money that a company often used construct or produce
goods and services. Most common cost approach that used innocent drinks for the preparation of
income statement for determining operating revenue is mentioned below:
Marginal costing:
This could be characterised as a costing system which describes the operational costs
whether as the stock cost, while fixed costs are seen as the period cost. Efficient business accrual
managers are using this costing process to develop the income statement of an organisation by
separating all of the accruing operating expenses of an organisation into just dependent variables
and variable groups (Novas, Alves and Sousa, 2017). Companies must use costing technique to
measure the projected income advantage and determine the firm's revenue from considering all
variable costs.
Absorption costing
It is a costing approach which here considers both variable and fixed operating costs as
commodity prices. That is an accounting costing tool used to identify all of an organisation's
borne expenditures. This system is known like a more progressive model mostly because it
separates the expenses of an organisation into both variable and fixed, but also separates an

organisation's expenditure into production and sales expenses, through which the level of the
share price is sometimes evaluated against the net revenue approximation.
Income statements
Marginal costing:
Particulars April £ May £
Sales revenue 56000 70000
Less: Marginal cost of sales 20000 25000
Variable manufacturing cost 30000 30000
Opening stock 0 10000
Closing stock 10000 15000
Contribution 36000 45000
Less: Fixed cost
Fixed Non-Manufacturing Cost 5000 5000
Fixed Manufacturing Overhead 18000 18000
Net profit 13000 22000
Working 1:
Marginal cost per unit April £ May £
Variable production cost 30000 30000
Number of units produced 6000 6000
Per unit cost 5 5
Absorption costing:
Particulars April £ May £
Sales 56000 70000
Less: Cost of goods sold 32000 40000
Variable Manufacturing cost per
unit 30000 30000
Fixed manufacturing cost 18000 18000
Opening stock 0 16000

Closing stock 16000 24000
Gross profit 24000 30000
Less: Fixed non-manufacturing
cost 5000 5000
Net profit 19000 25000
Working 2:
Absorption cost per unit April £ May £
Variable Manufacturing cost per
unit 30000 30000
Fixed manufacturing cost 18000 18000
Total cost of goods sold 48000 48000
Number of units produced 6000 6000
Per unit cost 8 8
Reconciliation statement:
Particulars April £ May £
Profit/loss under marginal costing 13000 22000
Add/less: Closing stock 6000 3000
Profit/loss 19000 25000
Profit/loss under absorption costing 19000 25000
Calculation of BEP:
BEP (In units)= fixed cost/contribution per unit 12727.27
BEP (In revenues)= Fixed cost/PV ratio 763636.36
Calculation of MOS:
Margin of safety (In units)= Budgeted sales units-BEP in units 7272.73
Margin of safety (In revenues)= Budgeted sales revenue-BEP in 436363.64

revenue
Working 3:
Particulars £
Variable Materials 20
Variable Labour 14
Other Variable Costs 12
Variable Administration and Selling 3
Variable cost per unit
£ 49 per
pack
Working 4:
Particulars £
Fixed Production Cost 80000
Fixed Administration and Selling 60000
Total fixed cost £140000
Working 5:
Particulars £
Selling price 60
Variable cost per unit 49
Contribution per unit (S-V) 11
Working 6:
Particulars £
Selling price 60
Contribution per unit 11
PV ratio (C/S*100) 18.33%

TASK 3
P4. Explanation of the different planning techniques used with appropriate benefits and
limitations for budgetary management.
A budget could be defined as an estimation of income and expenditures over a specified
timeframe which is determined on a timely basis. Budgetary analysis is a performance control
system in which the current sales and expense forecasts are calculated and compared with the
projected expenses and income, in order to identify volatility and variance and to take necessary
measures to raise productivity. Budgetary administration has several ways in which one can
control the company, such as having a comprehensive set of initiatives, carrying out fund
assessments, maintaining the funds open, and monitoring actual budget spending (Sims and
Smith , 2016). Methods of preparation are the instruments which an organisation uses to manage
strategies for the coming years. These methods are used to control a business's budget proposals;
in the sense of Innocent Drinks, a few of these strategies and their advantages and harms are
mentioned below:
Production schedule: This method of analysis aid the organisation such as Innocent Drinks
plan for its growth prospects by monitoring its currently estimated operating costs as well as the
anticipated manufacturing facilities. Creation of such manufacturing costs is often used as a
traditional method of estimating financial control in an organisation.
The benefit of such a framework will be that it allows the different production expenditures
such as direct procurement costs, direct production costs and other running costs to be quantified
separately where the Innocent drinks will be using that expenditure plan to assess the source of
the problem due to whereby the expenditure plan has already been run over. It also supports to
identify the manufacturing process that affects the company prices, such that measures are taken
to eradicate those processes. The downside of this approach is that it's really complicated to
divide each expense into a category, as the form of spending is also difficult to identify.
Master budget: This planning method is indeed a traditional budget designed to minimise
the activities of the top management of an enterprise (Soderstrom, Soderstrom and Stewart,
2017). All expenses are combined into one system, meaning the revenue is generated as
businesses like Innocent Drinks Management will wants to equate their respective budgets.
Regarding the above review, the benefits of master budget could be presumed to be because it
helps save space and presents a comprehensive summary within each procedure inside the

company. Like every other technique, this budget has its disadvantages which lack detailed info
due to that there is even more space for unpredictability. It also needs skilled personnel to
consider and predict potential estimates as a result about which the employee's work expense
rises.
Zero-based budgeting: This type of planning is a modern and creative way of fiscal
control, where all investment is clarified for each year not through replacing the usual formula
for particular years. This proposal includes elements that are primarily relevant to a certain future
period and making it more appropriate for project financial planning instead of whole
organisations.
Profit from this approach in the form of innocent drinks would be that it offers the
justification behind all expenses that saves the business from whatever economic crisis. It also
encourages creating a new expenditure plan for each new job or commodity that is introduced it
for the first period inside the organisation in orders to evaluate real profitability. The
disadvantages of this approach are that in short-term planning it also helps so this requires
producing high knowledge, money and energy (Yalcin, 2012).
Thus it is stated that budget simply means a standardised calculation of income and
expenses for a given period. It's a plan for the resources needed to achieve the activities that need
to be performed to satisfy the intended purpose. Budgeting outlines how the overall budget will
be executed week by week, generally including projections of revenue and expenses, and
expected operating capital including deficit spending. Companies often set their goals at the
beginning of a financial year, as well as leave room for change as revenues rise or fall. Budgets
for calculating the gaps or inconsistencies between the two here are applied to current financial
results.
TASK 4
P5. Comparison of organisations for adapting MAS to defect to financial problems.
Companies are facing numerous growing financial challenges and broader economic issues
because of a huge dynamic global economy. There are many reasons why certain situations
occur within the business, like missed consumer orders, budget deficits, un-clearance of the
commodity etc. Big corporations like Tesla and even General Motors face immense obstacles

when they are working. Beneath, the boss uses various MAS to identify and fix these very same
issues:
Basis Tesla General Motors
Problems and tool
used to detect.
Tesla is facing the largest financial
challenge linked to cash resource
transformation. Managers use KPI
now to locate the cause of
impoverished cash flow via the
different operations. Using this
method result reported by Tesla,
ratings are compared with their
forecasts, meaning the conclusions of
the business was not at least similar
to its performance, but instead to its
missed or surpassed forecast in
history. Achievement at Tesla is
adapted to its own requirements.
The business experienced
problems relating to the
excessive use of materials, which
is really the reason why
competition is rising. In the
separation of policy measures
also for financial reports,
General Motors would then see
growth in revenue and the
industry strategy as important
measure of performance. This
system would serve as the key
goal of determining the degree of
which the organisation succeeds
in achieving higher benefit.
Implementation of
MAS
By incorporating cost accounting
system management can quickly
monitor and measure the overall cost
related to specific operations and
distribute cash strategy to overcome
the above-mentioned
issue accordingly (Tucker and
Schaltegger 2016).
To address the financial issue
management team mentioned
above by using implementation
of the inventory financial
reporting process to ensure that
effective inventory records can
be preserved at every stage of
analysis because as available
stock is managed in full (Hall,
2016).
MA Technique By using cost accounting method of
the respective organisation would
enable the correct tracking of net cash
By using Financial Governance
Management System, it's indeed
easy to figure out even the least

flow and also outflows and also the
contrast with the original forecast to
determine overall efficiency.
number of production
intervention, and to avoid this
loop that contributes to such big
money problems.
Beneath are some discussed common issues that may come in Innocent drinks and
methods used to overcome the same:
Benchmarking: This is the process by which the performance of organisations, at every point, is
calculated. Innocent beverages may use this criterion to determine the causes for inadequate use
of the product and reduced performance. This MA management team contrasts stock usage with
other successful corporations by establishing an initial target. It is therefore similar to the main
metric, where benchmarks are chosen and the employees of organisations strive towards
reaching these thresholds. They get bonuses and promotions if the agency is able to meet the
benchmark goal.
KPI's Metrics: This tends to be a consistent measure used over a period of time to evaluate the
company's overall performance. By using such method, the innocent ltd employs various forms
of measures to assess how effectively they achieve their goals and targets. This approach was
used to assess the performance of the corporate organisation's teams. In this system indicator is
established and the managers determine on the grounds of these measures the organisation gets
awards for its results.
MA seems to have an important assignment to encourage a diversified function in the
management. Throughout terms of debt problems, managers are supposed to categorise the
words in the right moment. Work currently is the way they create their methods, response plans
and programs to handle financial and human difficulties while trying to implement funding
levels and possibilities for about their customers, some companies that they accept to solve these
problems and execute in a fair market. The management analysis finds how often aspects of the
business have disappeared, and a major legislation that ignores responsibilities to support
implementation in future within selected company.
CONCLUSION
This can be reached the conclusion from the above report that MA tools and practices enable
the organisation to collect information that perhaps the effort and commitment managers have to
obtain in order to accomplish their potential market. Innocent drinks will create and incorporate

some rather boarder system and methodologies for their productivity and upgrades to quality of
product. It provides manager-led knowledge to decide judgments and also attempts at promoting
a fluid structure. Using decreased expenditures and extra planning can help companies design
spending decisions primarily based on the firm's misrepresented reporting requirements.

REFERENCES
Books and Journals
Botes, V. L. and Sharma, U., 2017. A gap in management accounting education: fact or
fiction. Pacific Accounting Review.
Drury, C. M., 2013. Management and cost accounting. Springer.
Hiebl, M. R. and Richter, J.F., 2018. Response rates in management accounting survey
research. Journal of Management Accounting Research. 30(2). pp.59-79.
Jermias, J., Gani, L. and Juliana, C., 2018. Performance Implications of Misalignment Among
Business Strategy, Leadership Style, Organizational Culture and Management
Accounting Systems. Leadership Style, Organizational Culture and Management
Accounting Systems (January 9, 2018).
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Leotta, A., Rizza, C. and Ruggeri, D., 2017. Management accounting and leadership construction
in family firms. Qualitative Research in Accounting & Management.
Manyaeva, V., Piskunov, V., and Fomin, V., 2016. Strategic Management Accounting of
Company Costs.
Nishimura, A., 2013. The Control Functions of Accounting and Management
Accounting. Management Accounting, 11-22. Seal W. (2014). Management
Accounting (5th ed.). Maidenhead: McGraw - Hill.
Novas, J. C., Alves, M. D. C. G. and Sousa, A., 2017. The role of management accounting
systems in the development of intellectual capital. Journal of Intellectual Capital.
Obigbemi, I. F., 2013. Employee Participation in Budgeting and Effective Budgetary Control a
Tool for Enhancing Organizational Performance. Tactful Management Research
Journal, 1.
Rothaermel, Frank T. Strategic management. New York, NY: McGraw-Hill, 2015.
Selto, F. H., and Curry, D. W., 2014. Introduction to management accounting: Study guide.
Upper Saddle River, NJ: Prentice Hall.
Soderstrom, K. M., Soderstrom, N. S. and Stewart, C. R., 2017. Sustainability/CSR research in
management accounting: A review of the literature. Advances in management
accounting. 28. pp.59-85.
Vanderbeck, E. J., and Mitchell, M., 2016. Principles of cost accounting.
Wagenhofer, A., 2016. Exploiting regulatory changes for research in management
accounting. Management Accounting Research, 31, pp.112-117.
Yalcin, S., 2012. Adoption and benefits of management accounting practices: an inter-country
comparison. Accounting in Europe. 9(1). pp.95-110.