Management Accounting and Systems: Analysis and Evaluation

This report provides a systematic examination and evaluation of management accounting terms, systems, and reporting. It covers topics such as inventory management, job costing, price optimization, and cost accounting. The report also discusses the relevance of management accounting and its systems, and includes the preparation of cost cards using absorption costing. Additionally, it explores the use of different management accounting techniques in financial reporting.

Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
SECTION 1.....................................................................................................................................1
1.1 Examination of the terms of management accounting and analysis of various kinds of
management accounting systems.................................................................................................1
1.2 Evaluation and analysis of different types of management accounting reporting that are
very important from the company’s point of view......................................................................1
1.3 Identification of the benefits of the systems of management accounting that are related
with the organisational context....................................................................................................2
1.4 Analysis of the two aspects that are management accounting and management accounting
system and its relevance with each other including examination of different methods of
accounting....................................................................................................................................3
Section Two.....................................................................................................................................4
2.1 preparation of the cost card using absorption costing as its base..........................................4
2.2 Preparation of the financial reporting document of the company by applying different
range of the techniques of management accounting that are prevailing in the current market
scenario........................................................................................................................................6
2.3 Analysis of the financial reports of the firm by appropriate application and interpretation
of the range of different type of data that are associated with the activities that are performed
in the business..............................................................................................................................9
2.4 Preparation of various statements that are very crucial in order to examine the profit that is
generated by the company over a period of time.......................................................................11
SECTION 2...................................................................................................................................12
3.1 Preparation of different kinds of budget that are very important from the firm’s point of
view............................................................................................................................................12

4.1 Analysis of various kinds of ratios that are very essential to evaluate the overall working of
the company in the long run......................................................................................................15
4.2 Identification of various types of financial issues that the company is facing and examine
the important things that can be adopted by the firm so as to overcome all of those challenges
...................................................................................................................................................17
4.3 Identification and evaluation of different kinds of planning tools and techniques that are
prevailing in the industry in the present time............................................................................18
4.4 Analysis of different kinds of variances that possess a lot of value in the current market
scenario......................................................................................................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
Management accounting is one of the most important as well as crucial aspect as it can help
a firm to grow and prosper in the current market scenario in which is highly competitive as well
as dynamic in nature as it proves beneficial in recording each and every transaction of the
business firm in an appropriate manner so that it can add value to the firm in the long run
(Amnuai, 2019). This report is a systematic and sequential examination, analysis, and evaluation
of all the related terms of management accounting that possess a lot of value in the market since
they can help the company to stand well ahead of all the rivals that are prevailing in the current
market. Apart from that the concepts of different planning tools, ratio analysis, and a preparation
of an accurate budget is also included in this report.
SECTION 1
1.1 Examination of the terms of management accounting and analysis of various kinds of
management accounting systems
Management accounting is basically regarded as a process of recording, summarising,
identifying, colleting, analysis, and evaluation of all the activities that are performed in the
company so that a detailed examination of all the aspects can be done so that it can help the
company to sustain and survive in the long term scenario. The management of the accounting
part of the organisation is a very critical part since it can help in maintaining a proper record of
all the activities so that appropriate and necessary decisions can be taken on the basis of it so that
it can help in the increase in the value of the firm by subsequently increasing its profitability.
Management accounting systems is a very important one as it helps in measuring the overall
progress of the company so that decisions can be taken which can prove in accordance with it so
that if there are some loop holes in the company’s performance so that it can be overcome by
applying effective and efficient decisions.
1.2 Evaluation and analysis of different types of management accounting reporting that are very
important from the company’s point of view
There are a number of different aspects that are involved in it and thus all of them are
explained in a well detailed and prescribed manner below-
Inventory management system- It is a system that is related with the management of the
most important aspect that is inventories that are available with the company so that a detailed

examination of it can be done so that all the activities of the firm can be performed in a smooth
manner. Thus the stock that is with the company is analysed in it so as to determine the quantity
of raw material that will be needed for further operations so that it can prove beneficial for the
company in the long term conditions. It has many sub parts and all of them are explained below-
 FIFO- It is a method in which the stock that is received first will be sold first and the
process is repeated like that only (Andriyanto, 2016).
 LIFO- In this method the stock that has come last in the company is sold first and in this
also the process is repeated like that only.
 Average Cost method- This is a method in which the average price of the stock is
calculated and the whole stock is sold at that price only irrespective that the inventory has
came first or last.
Job costing System- It is a system which is related with allocation of funds according to
the job performed by it so as to reduce the unnecessary expenditures of the company resulting in
increase in the value of the firm and also it can help in the increment in profitability of the
enterprise in the long run.
Price optimization System- This is a system that helps in determining the actual price of
the product by analysing and evaluating all the relevant factors that are associated with it so that
it can help in striking a balance between the price and the profitability. This system is very
beneficial as it helps in cutting down irrelevant expenses that are included in the price level of
the organisation.
Cost Accounting System- It is a system that is related with evaluating all the costs that are
associated with the production of a product so that unnecessary additional cost that can be added
to the product can be reduced which can prove useful for the company so as to increase its
overall performance in the long run.
1.3 Identification of the benefits of the systems of management accounting that are related with
the organisational context
Management
accounting system
Key benefits
Inventory Management
System
The foremost benefit of this kind of system is that it helps in
controlling the level of the inventories so that it can help in using

the resources of the company in an effective and efficient manner.
Job costing System The benefit of this system is that it helps in doing the job or the
task in a precise format so that all the costs can be allocated
according to the role that is performed by the job.
Price optimization
System
This system help in striking a balanced price level so that the
company can stay competitive in the market as well as it can
maintain its level of profitability too in the market in which it is
operating (Bassani and Cattaneo, 2019).
Cost accounting system The main benefit of this kind of system is that it helps in analysing
the overall cost that is incurred while producing goods and
services so that cost can be reduced as per the requirements of the
organisation’s higher management.
1.4 Analysis of the two aspects that are management accounting and management accounting
system and its relevance with each other including examination of different methods of
accounting
The two aspects that are management accounting and its systems are inter related with each
other as one helps in gathering all of the relevant information about the working of the company
so that the other one can help in taking important natured decisions that can impact the whole
working of the organisation in a positive way. The different reports of management accounting
are elaborated below in detail-
Account Receivable Aging Report- It is a report that is helpful in analysing the debtor’s
aspect of the company in the long run as to evaluate that the company is able to receive the
amount that is outstanding with the debtors in a well précised time limit or not so that
appropriate measures can be taken in that regard which can prove useful for the company.
Cost Report- It is a report that is related with the evaluation of the cost aspect that is
incurred while producing the goods and services so that it can be used by the society. This type
of report includes all the cost starting from procurement of raw material to supplying goods to
the prospective customers and hence it helps in cutting down the costs if it is not as per
expectations in an area.
Performance Report- It is a report that is formulated on the performance of the
individuals that are working in the firm so that proper examination of the performance can be

done so as to evaluate the reasons for deviation if any. There are different ways in which it can
be evaluated and mostly it is analysed on a yearly basis so that overall evaluation can be done in
a well précised and accurate format (Bloechl, Michalicki and Schneider, 2017).
Section Two
2.1 preparation of the cost card using absorption costing as its base
Cost Card Using Absorption costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) Units
produced 11000 9500
b) Direct
Material (4kg*3pound/kg*11000) 132000 (4kg * 3 pound / kg *
9500) 114000
c) Direct
Labour
(4 hrs * 2 pound / hr *
11000) 88000 (4 hrs* 2 pound /
hr*9500) 76000
d) Variable
Overhead
(5 pounds / desk *
11000) 55000 (5 pounds / desk *
9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000
g)
Cost of
goods
produced
295000 257500
h) Variable
sales cost
(1 pound / desk *
11000) 11000 (1 pound / desk *
9500) 9500
i) fixed selling 2000 2000

cost
j) Cost of
Goods sold 308000 269000
k) Profit= l-j 77000 63500
l) Sales (35 pounds / desk *
11000) 385000 (35 pounds / desk *
9500) 332500
Cost Card Using Marginal costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) units
produced 11000 9500
b) Sales price
per desk 35 35
c)
Variable
cost per
desk:
Direct
material (4 kg * 3 pound / desk) 12 (4 kg * 3 pound / desk) 12
Direct
Labour (4 hrs * 2 pound / hr) 8 (4 hrs * 2 pound / hr) 8
Variable
overhead 5 5
Variable
sales
overhead
1 1
d) Contribution 9 9
Total
contribution 99000 85500

e) Fixed costs
Production
overhead NOTE 1 22000 19000
Sales
overhead 2000 2000
Profit (d-e) 75000 64500
NOTE 1- Production overheads here are regarded by considering average productions per month
= 10000 units. Thus, for Jan. month, overheads amount= (20000/10000) *11000. While, for Feb.,
overheads amount= (20000/10000) *9500
2.2 Preparation of the financial reporting document of the company by applying different range
of the techniques of management accounting that are prevailing in the current market
scenario
Financial reporting
For the period ending February
Revenue
Sales for January 385000
Sales for February 332500
Total revenue (A) 717500
Cost of goods sold
Cost for January 308000
Cost for February 269000
Total Cost of goods sold (B) 577000
Net income(C= A-B) 140500

Financial reporting
For the period ending February
Revenue
Sales for
January 385000
Sales for
February 332500
Total
revenue (A) 717500
Cost of goods
sold
Cost for
January 308000
Cost for
February 269000
Total Cost of
goods sold
(B)
577000
Net
income(C=
A-B)
140500
Working

Notes - Cost
of Goods sold
January February
Particulars Details
Amount
(Pounds
)
Details
Amount
(Pounds
)
a) Units produced 11000 9500
b) Direct Material
(4 kg * 3
pound / kg *
11000)
132000 (4 kg * 3 pound / kg *
9500) 114000
c) Direct Labour
(4 hrs * 2
pound / hr *
11000)
88000 (4 hrs * 2 pound / hr *
9500) 76000
d) Variable Overhead
(5 pounds /
desk *
11000)
55000 (5 pounds / desk *
9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000
g) Cost of goods
produced 295000 257500
h) Variable sales cost
(1 pound /
desk *
11000)
11000 (1 pound / desk *
9500) 9500
i) fixed selling cost 2000 2000
j) Cost of Goods
sold 308000 269000

2.3 Analysis of the financial reports of the firm by appropriate application and interpretation of
the range of different type of data that are associated with the activities that are performed
in the business
(a)
Month Hours
Spent Expenses
January 630 7960
February 505 7410
Mar 705 8285
April 555 7535
May 780 9110
June 795 9820
Highest number of hours = June =
795
Lowest number of hours = February
= 505
Variable cost= (9820 - 7410)/(795 -
505)
Variable cost= 8.310345 pounds per
unit
fixed cost= 9820 - (795 * 8.31)
fixed cost= 3213.55 pounds
expenses for July= 3213.55 + (650 *
8.31)
expenses for July= 8615.05 pounds

expenses for august= 3213.55 +
(750 * 8.31)
expenses for august= 9446.05 pounds
(b)
Date Purchases Purchase Cost
Cost per
unit
Opening 50
15-May 100 1000 10
18-Aug 200 2200 11
19-Sep 130 1800 13.84615
FIFO
Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 150 * 10 + 200 * 11 3700
19-Sep 130
480 3700 + 130 * 13.84615 5500
Cost of Goods Sold 10700
LIFO
Opening 50
Purchases
19-Sep 130
180 13.84615 2492.308
18-Aug 200
380 2492.308 + 200 * 11 4692.308

15-May 100
480 4692.308 + 100 * 10 5692.308
Cost of Goods Sold 12876.92
FIFO
Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 350 * [(10 + 11) / 2] 3675
19-Sep 130
480
(3675/350 + 13.84615)
* 480 11686.15
Cost of Goods Sold 11686.15
2.4 Preparation of various statements that are very crucial in order to examine the profit that is
generated by the company over a period of time
Selling price £300 per unit
variable cost of manufacturing per
unit
£200
Fixed cost £2,000,000
a) BEP in units Fixed cost/Contribution per unit
Contribution per unit Selling price-Variable cost per unit
= 300 – 200 = 100
BEP in units = 2000000 / 100 = 20000
BEP in pounds Fixed cost/PV ratio
PV ratio Contribution per unit/selling price*100
= 100 / 300 *100 = 33.33

BEP in pounds = 2000000 / 33.33% = 6,000,600
b) Number of units to sell Fixed cost + desired profit/contribution per
unit
= (2000000 + 1000000)/100
= 30000
c) Profit calculation
Sales (50000*300) 15000000
Less: Variable cost (200*50000) 10000000
Contribution 5000000
Less: Fixed cost 2000000
Profit 3000000
SECTION 2
3.1 Preparation of different kinds of budget that are very important from the firm’s point of view
Budget- There are a number of different budgets that are formulated so that a comparison
can be done of the set standards with the actual performance of the company so as to analyse the
reason for the deviation so that appropriate and necessary adjustments and rectification measures
can be implemented which can help the company to survive in the stiff competition for a much
longer time period as compared to its rivals. The firm that is Connect administrations use
management accounting in this aspect as it helps in achieving the desired goals of the
organisation that are set up at the starting of the firm (Mukhametzyanov, Nugaev and
Muhametzyanova, 2017). Different budgets are prepared according to it that are explained in a
well detailed manner below-
1) schedule of expected cash collections
for September
Details September
(pounds)
Cash Sale 39000

Collection for sales on account:
July 392
August 4416
September 840
Total collections 44648
2) schedule of expended cash
disbursements for merchandise
inventory purchases in September
Details September
(pounds)
Payment for inventory purchased in
September 4800
(24000*.2)
Payment for inventory purchased in
August 15000
Total disbursement for inventory
purchase 19800
3) Cash Budget
Details September
(pounds)

opening balance (A) 9000
Collections
Cash Sale 39000
Collection for sales on account:
July 392
August 4416
September 840
Total collections (B) 44648
Disbursements
Payment for inventory purchased in
September 4800
(24000*.2)
Payment for inventory purchased in
August 15000
Selling and administration expenses 9000
(excluding depreciation of 4000)
Purchase of equipment 18000
Dividend to be paid 3000
Total disbursements (C) 49800
Balance (A+B
-C) 3848

Financing Activity:
Loan Taken 1152
Closing Balance 5000
4.1 Analysis of various kinds of ratios that are very essential to evaluate the overall working of
the company in the long run
i) Return on capital employed(ROCE)
Return on capital employed = Operating Profit/ Capital
employed * 100
UCK Furniture Design Division
Return on Capital Employed= 25.49784 %
UCK Furniture Gear Box Division
Return on Capital Employed= 11.27466 %
UCK Woodworks
Return on Capital Employed= 8.562108 %
ii) Assets Turnover
due to absence of information relating to net assets,
capital employed has been assumed as net assets
Assets turnover = Sales/Total assets

UCK Furniture Design Division
Assets turnover = 0.562771
UCK Furniture Gear Box Division
Assets turnover = 0.779831
UCK Woodworks
Assets turnover = 0.191801
iii) Operating profit margin
Operating profit margin = Operating Profit/ Total sales *
100
UCK Furniture Design Division
Operating profit margin= 45.30769 %
UCK Furniture Gear Box Division
Operating profit margin= 14.45783 %
UCK Woodworks
Operating profit margin= 44.64056 %
Return on Capital Employed- The return on capital helps in determining the return that
the capital which is employed in the business is generating and thus it is regarded as to be
profitable if it is above 15 percent and thus it can be said from the above calculations that UCK
Furniture Design Division is placed at a very good position as its rate was around 25 percent

(Hsu and Lin, 2016). While the other two that are UCK Furniture Gear Box Division and UCK
Woodworks are lacking in this aspect as the rate was around 11 and 8 percent respectively.
Asset Turnover ratio- It is a ratio that helps in analysing the return that the total assets
of the company is generating as compared with the sales of the firm. In this ratio UCK Furniture
Gear Box Division has performed satisfactory as its ratio was 0.779831while the other two that
are UCK Furniture Design Division and UCK Woodworks are not performing that well as the
ratio for them are 0.562771 and 0.191801 respectively.
Operating profit margin ratio- It is a ratio that helps in determining the total operating
profit that the firm is generating with the context of the sales of the company. In this ratio UCK
Furniture Design Division and UCK Woodworks are performing almost similarly and are placed
at good positions the ratio for them in this regard is 45.30769 percent and 44.64056 percent
respectively. While the other one that is UCK Woodworks has performed horrible in this regard
as the ratio was just 14.45783 percent for it (Rodliyah, 2017).
4.2 Identification of various types of financial issues that the company is facing and examine the
important things that can be adopted by the firm so as to overcome all of those challenges
Scenario- To understand the concept of system of management accounting comparison of
two companies are done below in a very accurate manner.
Financial issue- The issues that are related with the mismanagement of funds in the day
to day activities. Below are these issues discussed with reference to the above mentioned firm-
 Decreased volume of revenues- Revenues are a very important part of each and every
business firm it keeps on decreasing for UCK furniture since the cost of expenses
increased many folds as compared to its profitability (Romadhoni, 2016).
 Ineffective management of stock- Stock management is also not done in an appropriate
manner in the firm and thus hampering the overall working of it in the long term.
There are various methods of find out financial issues and thus are explained below-
Benchmarking- It is a method in which a set standard is set so that all the activities and
efforts are directed towards the accomplishment of the desired goals.
Key performance indicator- In this method both elements that are financial as well as
non financial are considered so that all of them are evaluated in a precise format.
Financial governance- It is a method in which financial part of the company is governed
so that it can help in reducing the overall cost of the organisation (Suhartini, 2018).

Comparison between companies:
Basis UCK furniture Tesco plc
Financial
issue
The main issue is the decreasing
revenues of the firm.
The major issue of the company is
irregular management of stock that
results in barriers in overall working.
Technique The technique that is used by the
firm is KPI.
It uses benchmarking as its technique
to overcome all the issues.
Accounting
system
It mainly uses system of cost
accounting so that unnecessary
costs can be reduced (Левицька,
2017).
It uses inventory management system
that helps in managing the stock in an
effective and efficient way.
4.3 Identification and evaluation of different kinds of planning tools and techniques that are
prevailing in the industry in the present time
Planning is the foremost activity that is involved in the business firms so that all the
resources can be fully utilised that can add value to the company in the long run. There are many
tools and techniques of it like budget, standard costing, ratio analysis and thus all of them are
used so as to improve the overall condition of the company (Серая and Слабая, 2016).
4.4 Analysis of different kinds of variances that possess a lot of value in the current market
scenario
Variance analysis- It is a way to evaluate the standard with actual performance so that
deviation can be analysed (Сигидов and Мороз, 2017). It helps in increasing financial
performance of the company and thus its parts are discussed below-
 Material Variance- It is related with the material aspect of the company and its sub parts
are shown below-

 Labour variance- It includes labour aspects that are shown below-
 Overhead variance- It includes various kinds of aspects that are shown below-

CONCLUSION
It can be concluded from the above that management accounting is a very important aspect
and hence has to be evaluated in a very accurate manner.

REFERENCES
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