Management Accounting Principles and Applications

This assignment delves into the core principles of management accounting by examining practical case studies. It covers a range of topics including budgeting techniques (like Sales Volume Variance), break-even analysis (BEP), ratio analysis, cash flow analysis, and capital budgeting. Students are expected to demonstrate their understanding of these concepts by applying them to real-world scenarios presented in the illustrations.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and give essential requirements of different types of
management accounting system in the given case scenario...................................................1
P2 Explain different methods used for management accounting reporting...........................8
Task 2.............................................................................................................................................15
P3 calculate cost using different techniques by preparing income statement under marginal
and absorption costing..........................................................................................................15
TASK 3..........................................................................................................................................16
P4 Explain advantages and disadvantages of different types of planning tools for budgetary
control...................................................................................................................................16
P5 Compare how an entity adopt management accounting systems in order to deal with the
financial problems................................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

Illustration Index
Illustration 1: Retail performance....................................................................................................2
Illustration 2: BEP............................................................................................................................2
Illustration 3: Budget.......................................................................................................................4
Illustration 4: Ratio analysis............................................................................................................8
Illustration 5: Cash flow analysis...................................................................................................10
Illustration 6: Capital budgeting....................................................................................................13

INTRODUCTION
Role of management has increases with the introduction of higher amount of
complexities in the external business environment. Nisa Retail store has been selected for this
project report which is growing gradually in boosting the overall economy of the UK. This report
focuses on management accounting systems and management accounting reporting techniques in
complying all kinds of systems fruitful for the business enterprise. Marginal and absorption
costing has been chosen by an entity in improving the business fall under retail sector in the UK.
TASK 1
P1 Explain management accounting and give essential requirements of different types of
management accounting system in the given case scenario
Background
The current sector is regarded as most important sector in the United Kingdom which
generates higher amount of sales and the revenue every year. The economy is boosted by getting
higher revenue from this particular sector which increases the overall scope of all the businesses
fall under this category (Farías, Torres and Mora Cortez, 2017). There are different kinds of
businesses involves in this sector such as furniture, food and grocery, clothing and accessories
and electronics.
Nisa retail store has been selected in the present report which is small scale entity located
in the United Kingdom. It deals in providing grocery market products or services in order to
facilitate the needs and expectations of all the consumers. Management accountant of Nisa retail
store will take important decisions for the betterment of the current business as their desired
market aim is to achieve all the aims and the objectives within a given span of time. Analytical
ability of a manager gets increases by taking important decisions in their business.
Financial perspective
1

Illustration 1: Retail performance
The current business has generated higher amount of sales and the revenue from this
particular sector which helps in increasing higher scope. The scope will be increases with the
passage of time as this would help in enhancing the value of an entity in relation to its variety of
users. The recent study has revealed that this particular sector has produces 358 Billion GBP
every year. The financing goals of the economy will be accomplishes as this would attract
variety of users in investing lots of investments in different areas of business.
Employee strength
The biggest strength of this sector is an employee who represents an entity by their
actions as every wrong action will further ruin the performance of the business in the external
market. Total base of employees is 2.8 million in this retail sector which is collaboration of
various business enterprises (Tiwari and Debnath, 2017). There are 290315 number of retail
firms in this particular sector will be helpful in gathering large sum of revenue for the current
economy. It has been inferred that almost one third proportion of overall consumer spending
goes to the economy of UK through this kind of retail sector.
Illustration 2: BEP
2

Cost volume profit- This technique is regarded as one of the important approach in management
accounting which involves three components such as cost, volume and profit. It can be said that
this trilogy involves major involvement of cost and volume of the business which will directly
affects on the production of profit in the business enterprise. Nisa retail store inspire to earn
profit in the business as their primary motive of opening the firm is to gain higher amount of
profit after dealing all their current products or services. The primary concern of the top
management of Nisa Retail store is to seek for various techniques in order to reduce overall cost
incurred by an entity in their business. Cost reduction strategies are crafted by an entity in which
major principle followed by an entity owner is of optimum utilisation of resources. The input
applied in the business needs to be check properly as wrong one would destroy the current image
of the business in front of all competitors who intends to suppress the current skills and the
capabilities of an enterprise. The different approaches will be applied by an entity as their
primary motive is to analyse the existing cost incurred in the business in order to reduce the
burden of the external market (Wouters and Stecher, 2017).
Break even point will be applied by the owner in improving the skills of their business as
this point will be helpful for an entity in boosting their skills and the capabilities. An entity
determines this break even point as the sales units produced by the firm above than this point
will lead to earn profit otherwise loss.
This point is regarded as shutdown point where an entity will only recover overall cost
incurred by them in their business and no provision of profit earned by them.
Break even point= Fixed cost/Contribution per unit
Particulars cost per unit Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8
Units produced 8000 10000 12000 14000 16000 18000 20000 22000
Sales 10 80000 100000 120000 140000 160000 180000 200000 220000
Variable cost 5 40000 50000 60000 70000 80000 90000 100000 110000
Contribution 5 40000 50000 60000 70000 80000 90000 100000 110000
Fixed cost 10000 10000 10000 10000 10000 10000 10000 10000
Profit 30000 40000 50000 60000 70000 80000 90000 100000
3

Particulars
Year
1
Year
2 Year3
Year
4
Year
5
Year
6
Year
7
Year
8
Year
9
Year
10
Fixed cost
1000
0
1000
0 10000
1000
0
1000
0
1000
0
1000
0
1000
0
1000
0 10000
Contribution
per unit 5 5 5 5 5 5 5 5 5 5
BEP 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Particulars
cost per
unit
Yea
r1
Year
2
Year
3
Year
4
Year
5
Year
6
Year
7
Units produced
800
0
1000
0
1200
0
1400
0
1600
0
1800
0
2000
0
Sales 10
800
00
1000
00
1200
00
1400
00
1600
00
1800
00
2000
00
Profit
300
00
4000
0
5000
0
6000
0
7000
0
8000
0
9000
0
Relationship percentage change among
sales and profit
63
% 60% 58% 57% 56% 56% 55%
Illustration 3: Budget
Budgeting- Nisa retail store prepare budgets in order to analyse their current resources in order
to devise future business strategies. Sales budgets prepared by them is used to forecast the future
sales earned by an entity within a short span of time. The performance can be compared by using
the current resources as this would help in gaining competitive advantage over its variety of rival
4

members in the external market. It is regarded as corporate strategy which gives ultimate
direction to different strategic business units just like budgets prepared for different business
departments of an organisation. It can be said an entity will be able to maintain perfect balance
among income and expenditure incurred by them in a particular year. The budget plan prepared
by an entity in regulating all the expenditures incurred by them in accomplishing their goals and
the objectives as their primary motive is to gain higher image in entire external market (Hiebl,
Gärtner and Duller, 2017).
Cash budget is another important statement of cash flow prepared by Nisa retail store in
order to ensure its current earnings in relation to all the expenditures incurred by them in a
particular financial year. Cash flow of future of Nisa retail store are forecasted as being a
supermarket owner they are required to analyse all the resources or inventory currently utilised in
their business in relation to the future targets of their business. Budgets prepared by an entity
will act as forecasting tool which emphasises on predicting the higher performance of the
business in relation to its external market as their primary motive is to gain the trusts of all the
employees working for the sake of an enterprise. Finance imposed by an entity in meeting their
business requirements can be tracked by preparing the budgets. These budgets can be act as
tracking system which helps an entity in order to make important decisions as delayed actions
can be rectified by preparing budgets.
Particular
s
Jan Feb Mar
ch
Apr
il
Ma
y
Jun
e
Jul
y
Au
g
Sep
t
Oct Nov Dec
Initial cash 5000
0
Bank loan 5500
0
Income
from
online
sales
3200
0
40000 3500
0
380
00
410
00
420
00
360
00
280
00
270
00
275
00
280
00
330
00
Income 2240 56400 5680 571 588 620 664 687 654 600 608 644
5

from in-
store sales
0 0 00 00 00 00 00 00 00 00 00
Sales
income
from
fashion
clothing
1000
0
10000 1000
0
100
00
100
00
100
00
100
00
100
00
100
00
100
00
100
00
100
00
Sales
income
from hair
and beauty
products
1200
0
12000 1200
0
120
00
120
00
120
00
120
00
120
00
120
00
120
00
120
00
120
00
Receipts
from
disposal of
old store
building
300
000
Total
interest
receivables
300
00
300
00
Total cash
income
1814
00
11840
0
1138
00
117
100
121
800
456
000
124
400
118
700
114
400
109
500
110
800
149
400
Cash
disburseme
nt
Store and
warehouse
building
lease rental
1440
00
Purchase
of office
8000
0
6

and fire
Equipment
Purchase
of delivery
van and
cars
1500
00
Shelves
and store
furniture
5000
0
Purchase
of fork lift
for
warehouse
7000
0
Store
worker’s
wages
1100
0
11000 1100
0
110
00
110
00
110
00
110
00
110
00
140
00
140
00
140
00
140
00
Heating
and
lighting
2000 2000 2000 200
0
200
0
200
0
200
0
200
0
270
0
270
0
270
0
270
0
Council
taxes
1500 1500 1500 150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
150
0
Purchase
of cloths
4000
0
4000
0
400
00
400
00
550
00
550
00
Insurance 5000
Fuel and
maintenanc
e
1800 1800 1800 180
0
180
0
180
0
180
0
180
0
180
0
180
0
180
0
180
0
Total cash
outflow
5503
00
21300 5630
0
163
00
563
00
163
00
563
00
163
00
750
00
200
00
750
00
200
00
Net cash
balance
-
3689
97100 5750
0
100
800
655
00
439
700
681
00
102
400
394
00
895
00
358
00
129
400
7

00
Opening
cash
balance
0 -
36890
0
-
2718
00
-
214
300
-
113
500
-
480
00
391
700
459
800
562
200
601
600
691
100
726
900
Closing
cash
balance
-
3689
00
-
27180
0
-
2143
00
-
113
500
-
480
00
391
700
459
800
562
200
601
600
691
100
726
900
856
300
Sales Budget
Particulars Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10
Sales units 8000 10000 12000 14000 16000 18000 20000 22000 24000 26000
Sales 160000 200000 240000 280000 320000 360000 400000 440000 480000 520000
Expenses budget
Particulars Cost per unit Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9
Quantity produced 5000 7000 9000 11000 13000 15000 17000 19000 21000
Variable cost
Advertising 2 10000 14000 18000 22000 26000 30000 34000 38000 42000
Direct material 3.5 17500 24500 31500 38500 45500 52500 59500 66500 73500
labor 2.5 12500 17500 22500 27500 32500 37500 42500 47500 52500
Commission 0.5 2500 3500 4500 5500 6500 7500 8500 9500 10500
Fixed cost
Bills 5000 5000 5000 5000 5000 5000 5000 5000 5000
Loan amount 12000 12000 12000 12000 12000 12000 12000 12000 12000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000
Royalties 5400 5400 5400 5400 5400 5400 5400 5400 5400
Fees 8000 8000 8000 8000 8000 8000 8000 8000 8000
8

P2 Explain different methods used for management accounting reporting
Financial accounting method
Illustration 4: Ratio analysis
Ratio analysis- Comparative performance measurement tool that analysed the current
performance of an enterprise in accordance with its previous year performance in uplifting their
current conditions of the business. The ratio analysis is widely used technique of assessing the
current financial statements. Different forms of financial statement of several stores of Nisa retail
store are compared in relation to the headquarter of its supermarket to determine their current
performance. Income statement of all the stores contain sales and the revenue which are
compared in relation to the common goals framed by the main branch of the supermarket store in
order to ascertain the financial performance in order to gain higher competitive advantage.
Different variety of the ratio analysis states that it ascertains the performance of the business in
relation to various parameters such as profitability and liquidity (Müller-Stewens and Möller,
2017). The favourable or adverse results of all these ratios to the notice of the management as the
adverse results can be rectified by the management by making important decisions in order to
regulate their performance. The performance of an entity can be managed or regulated by
removing the causes of incurring adverse ratios. The deficiency from the management can be
rectified by focusing on capabilities of the business as an enterprise owner focuses on reducing
their weaknesses. Cost of sales and taxation are those deficiencies that reduce the capability of an
entity which will be regulated. On the other hand, liquidity is essential for the management as
expenses incurred in the business can be managed
Profitability ratios
Particulars Formula 2015 2016
9

Revenue 1220 1255
GP 175 178
Net Profit 23 33
Gross profit Ratio GP/Net sales*100 14.34426 14.18327
Net profit Net profit/Net sales*100 1.885246 2.629482
Liquidity ratio 2015 2016
Current assets 746 785
Current liabilities 309 317
Current ratio Current asset/Current liabilities 2.414239 2.476341
Cash flow analysis
Illustration 5: Cash flow analysis
Cash flow statements prepared in the firm in order to assess the overall movement of cash
in the business enterprise. The movement of cash inflow or outflow can be ascertained by an
enterprise owner as cash is regarded as important component for the business. The current
statement will only consider all this transaction which are only in cash as credit transactions are
not included in this particular statement. This can be prepared by categorizing into three
activities operating, financing and investing activities which will involve all business
transactions. Nisa retail store is small based entity are not under any kind of obligation while
preparing its financial statements such as cash flow statement. IAS 7 is related to the accounting
treatment of cash transactions in an entity on an international level. The slightly changes are
done while preparation of these statements under indirect or direct method of preparation whose
10

primary motive is to determine the cash balance to be kept by the owner in meeting all kinds of
expenses. The changes in the cash flow from one period to another period can easily track.
Particulars 2012 2013 2014 2015 2016
Net profit XXX XXXX XXXX XXXX XXXX
Operating activities XXX XXXX XXXX XXXX XXXX
Depreciation XXX XXXX XXXX XXXX XXXX
Provision for taxation XXX XXXX XXXX XXXX XXXX
Increase in current liabilities XXX XXXX XXXX XXXX XXXX
Decrease in current assets XXX XXXX XXXX XXXX XXXX
Cash generated after working capital
changes XXX XXXX XXXX XXXX XXXX
Income tax XXX XXXX XXXX XXXX XXXX
Cash flow generated from operating
activities XXX XXXX XXXX XXXX XXXX
Investing Activities XXX XXXX XXXX XXXX XXXX
Interest received XXX XXXX XXXX XXXX XXXX
Property purchased XXX XXXX XXXX XXXX XXXX
Furniture Purchased XXX XXXX XXXX XXXX XXXX
Plant Sold XXX XXXX XXXX XXXX XXXX
equipment Sold XXX XXXX XXXX XXXX XXXX
Cash flow generated from Investing
activities XXX XXXX XXXX XXXX XXXX
Financing Activities XXX XXXX XXXX XXXX XXXX
Issue of share capital XXX XXXX XXXX XXXX XXXX
Redemption of debentures XXX XXXX XXXX XXXX XXXX
Interest paid XXX XXXX XXXX XXXX XXXX
Cash generated from Financing
Activities XXX XXXX XXXX XXXX XXXX
Net Increase or decrease in cash XXX XXXX XXXX XXXX XXXX
Opening cash XXX XXXX XXXX XXXX XXXX
11

Closing cash XXX XXXX XXXX XXXX XXXX
Cost Accounting Information
Marginal costing
This is regarded as variable costing in which only variable costs are considered by an
entity as this is highly inspired with the marginal cost term in the economics. This marginal cost
is that term in which every additional cost will incur of every additional unit produces by the
firm. As variable cost exist in the business due the existence of units currently produces by the
business enterprise (Schulze and Heidenreich, 2017). The decisions regarding taking the
additional unit in the business after analysing the impact of that additional unit produces by the
business in boosting their efficiency.
Particular Year1 Year2 Year3 Year4 Year5
Units sold 7000 5000 6000 7000 5000
Sales 245000 175000 210000 245000 175000
Less variable cost
Opening inventory 0 28000 93000 72000 40000
Production 196000 155000 216000 280000 220000
Closing inventory 28000 93000 72000 40000 132000
Variable selling 21000 28000 35000 42000 49000
Variable overhead 14000 21000 28000 28000 35000
Contribution -14000
-
150000
-
234000
-
217000
-
301000
Less Fixed cost
Fixed
manufacturing 80000 80000 80000 80000 80000
Loss -94000 - - - -
12

230000 314000 297000 381000
SP 35
Units produced 8000
Particular Year1 Year2 Year3 Year4 Year5
Direct Material 8 9 11 13 15
Direct labor 5 5 6 7 7
Variable
Overhead 2 3 4 4 5
variable selling 3 4 5 6 7
Fixed
manufacturing 10 10 10 10 10
Total production
cost 28 31 36 40 44
Standard cost = 11000/2.5*3.60= 15840
Difference= Standard cost-Actual cost
= 37400-15840
=21560
Material price= (Standard price-Actual price)*Actual quantity
Material quantity variance
= (Standard Quantity- Actual Quantity) *Standard price
Capital budgeting
13

Illustration 6: Capital budgeting
Nisa retail store will assess the feasibility of all the business projects that will be helpful
for them in order to improve their existing performance within a given span of time. Projects are
assessed on the basis of various parameters as the primary motive of an entity is to earn higher
amount of profit to be earned by the business in their external market. Different techniques of
capital budgeting used by the business in analysing their projects such as NPV and IRR in order
to select or reject the business proposal. Profitability of the business projects will be assessed in
relation to the total time period of the business projects as selecting right business project is
important which would lead an entity towards the success or failure depends on the current
action taken by an entity for the betterment of their business.
Year Project A Project B
Initial cost 8.6m 4.4
1 1.6 0.8
2 2.8 1.4
3 3.4 2
4 3.6 2.4
5 4 2.3
6 4.2 2.6
Year Project A Pv@14% Present value
Initial investment 8.6
1 1.6 0.877193 1.403509
2 2.8 0.769468 2.154509
3 3.4 0.674972 2.294903
14

4 3.6 0.59208 2.131489
5 4 0.519369 2.077475
6 4.2 0.455587 1.913464
Total 11.97535
NPV 3.375348
Year Project B Pv@14% Present value
Initial investment 4.4
1 0.8 0.877193 0.701754
2 1.4 0.769468 1.077255
3 2 0.674972 1.349943
4 2.4 0.59208 1.420993
5 2.3 0.519369 1.194548
6 2.6 0.455587 1.184525
Total 6.929018
NPV 2.529018
Year Project A Project B
Initial cost -8.6 -4.4
1 1.6 0.8
2 2.8 1.4
3 3.4 2
4 3.6 2.4
5 4 2.3
6 4.2 2.6
IRR 25% 30%
Particulars January February March April May June
15

Receipts
Received in same
month(W.N.1)
15000 22500 30000 15000 15000 3750
Received in one
month(W.N.1)
120000 240000 360000 480000 240000 240000
Received in two
month(W.N.1)
22500 22500 45000 67500 90000 45000
Total receipts 157500 285000 435000 562500 345000 288750
Payments
Payment to
suppliers
807250 137250 119750 437250 227250 219750
Surplus/Deficits -649750 147750 315250 125250 117750 69000
Opening cash
balance
110000 -539750 -392000 -76750 48500 166250
Closing cash
balance
-539750 -392000 -76750 48500 166250 235250
Task 2
P3 calculate cost using different techniques by preparing income statement under marginal and
absorption costing
Particulars Absorption costing Marginal costing
Direct materials £6.00 £6.00
Direct labor £5.00 £5.00
16

Variable manufacturing overhead £2.00 £2.00
Fixed manufacturing overhead £2.86 -
Per unit cost £15.86 £13.00
Sales 21000
Less variable cost
Opening inventory 0
Production £9,100.00
Closing inventory £1,300.00
Variable selling 600
Fixed manufacturing 2000
Contribution £8,000.00
Less Fixed cost
Fixed Admin and selling 700
Fixed selling 600
Net profit £6,700.00
Absorption costing- This is renamed as full costing in which fixed as well as variable costing
will be taken into considerations as this would help in improving the business of an enterprise in
relation to its business structure. Nisa retail store has earned higher net profit of 6700 GBP which
is good in order to reflect the higher capability of the business enterprise. This will be taken into
consideration by all the investors as this is reliable as it has generated after considering fixed and
variable cost excluded from the total sales earned by the business enterprise.
Sales 21000
Less variable cost
Opening inventory 0
17

Production £11,100.00
Closing inventory £1,585.71
Variable selling 600
Contribution £7,714.29
Less Fixed cost
Fixed manufacturing 2000
Fixed Admin and selling 700
Fixed selling 600
Net profit £4,414.29
Marginal costing- The profit produces by the firm under this technique is less than compared to
the profit generated by the firm using absorption costing. Fixed cost is the major factor which
created changes in the profit as in absorption costing fixed cost is taken as production costs and
in marginal it is treated as period which is excluded in total from the contribution.
TASK 3
P4 Explain advantages and disadvantages of different types of planning tools for budgetary
control
 Budgetary control- The supermarket managers of Nisa retail store prepare budgets in
order to utilize them in monitoring the current cost incurred in the business in order to
gain competitive advantage over its variety of competitors. The costs can be controlled in
order to operate their business operations in improving the business entity. All the
products of Nisa retail store are compare with the other products of its competitors in
order to determine their costs by adding higher percentages of profit in each and every
price of products. The focus of the finance manager is on setting targets in the business in
accomplishing all the performance targets in accordance with the aims and targets framed
by an enterprise by analysing the current resources (Nguyen, Mia, Winata and Chong,
2017). The results will be compared by an entity in relation to the current resources
applied by them in generating higher amount of sales and the revenue. The performance
18

adjustment measures will be taken by an entity in accessing external market opportunities
as this would help in improving their skills and the capabilities.
 Coordination- Discipline is essential factor in an organisation as this would help an
entity in order to improve their working conditions. There are different departments in an
entity whose major objective is to gain competitive advantage over its variety of
customers. Budgets are prepared in order to segregate different tasks and duties among
various departments. It is essential for the business in order to use custodian of
responsibilities in which duty of one employee will be checked by other employee in
absence of them. The primary motive of this entity is to improve the efficiency of the
business in relation to its outcome generated by them.
 Communication- Budgeting is regarded as one of the important source of
communication as it conveys important financial information from one end too another.
Lower departments generally prepared various budgets like sales, purchases, expenses
and capital budget in order to convey the information to the top management. The
adverse results will be rectified by the top management by making important decisions as
their primary motive is to improve their efficiency in terms of all the deficiencies of an
entity. The external market challenges impose on the firm will be improved with the
passage of time. Email is used as important source of communication among all the
employees in a supermarket of Nisa store related to the daily responsibilities.
 Resource allocation- It can be also said that budgets prepared by an enterprise is used as
important method in allocating all the resources in the business. Sales budgets prepared
by an entity in which units produces by the business are recorded in the budgets
(Horngren and et.al., 2015). This sales budget will be helpful for an entity in order to
make important decisions regarding allocating financial or human resources properly
handling the departments of sales in an enterprise. The efficiency of all the departments
will be improved due to proper allocation of resources in order to generate higher amount
of sales and the revenue.
Disadvantages
 Lack of participation- in an organisation there are three stages of management such as
top, middle and bottom management level in the business. Budgets prepared by lower
19

management level will further supply to the top management who will approve it in
order to execute in the business enterprise. While preparing budgets if there is lack of
participation among different departments that restricts the performance of
accomplishing various gaols and the objectives. Objectives are essential in order to
complete within the prescribed time period as it is important in order to make important
decisions in the business.
 Creates competition- The rules and regulations prepared by an entity in order to
increase their business efficiency as their primary motive is to comply all the policies.
The legislations and internal code of conduct prepared by an entity owner will in turn
creates lots of competition in the internal environment. Employees working in the
business will try to pull each other working in the same firm in order to remain ahead in
the race of top employees. Employees working in the business needs to improve their
efficiencies as their wrong action will ruin the current performance of an entity.
P5 Compare how an entity adopt management accounting systems in order to deal with the
financial problems
Management accounting is vast topic in which various tools and techniques will be
adopted by an individual in order to improve their business. Several techniques will be adopted
by an entity owner in reducing their weaknesses as their primary motive is to reduce all kinds of
expenses incurred in the business in relation to the income earned by them in a particular year
(Tucker and Parker, 2014). There are various ways which helps in improving the business
performance of an entity is given as follows:
 Financial information can be gathered by using ratio analysis that helps in comparing the
performance of an entity of current year with its previous years.
 Cost accounting related information can be gather from preparing marginal or absorption
costing systems as their primary motive is to ascertain the cost of a product or service.
CONCLUSION
It can be concluded from thee above assignment that management accounting principles
will be helpful for an enterprise in gaining higher market opportunities in minimising all kinds of
deficiencies currently lies in the external market. The focus of this entity lies on applying
marginal and absorption costing system in improving the business enterprise. The best suitable
20

approach out of these two is absorption as this generated higher amount of net profit as compared
to the profit generated by the marginal costing systems.
21