Management Accounting: Systems, Costs, and Techniques

This report discusses the importance of management accounting in decision-making and explores different systems, costs, and techniques used in the field. It focuses on J Rotherham Limited, a UK-based stone manufacturing business, and how it utilizes management accounting to improve its operations and profitability. The report covers topics such as inventory management, price optimization, cost accounting, and different types of costs. It also discusses the calculation of costs using appropriate techniques like marginal costing and absorption costing. Additionally, it highlights the various reports produced by the company and the advantages and disadvantages of planning tools in management accounting.

Management
Accounting

Contents
Activity 2......................................................................................................................................................3
Calculation of costs using appropriate techniques..................................................................................3
Activity 3: Covered in PPT............................................................................................................................5
Activity 4: Covered in PPT............................................................................................................................5
CONCLUSION...............................................................................................................................................5
REFERENCES................................................................................................................................................7

INTRODUCTION
Management accounting is a profession in which consist of partnering in management
decision making, devising panning and performance management system (Askarany, 2016).
Along with offering professional advising in financial activities and control to analysis of
administration in order to execution and implication of effective business strategy. This term has
been applied in broadly in business environment and all the activities are conducted according to
atmosphere. In any business sector, it is required to understand how this term utilized for
financial data aid planning decision and the observing and control of finance with an
organisation Managers use the provisions of accounting information in order to better inform
themselves before understand all the matters in regard of business that aids their management as
well as performance of control functions. For understanding this select J Rotherham which is a
UK based organization. It was introduced in 1930 to manufacturer stone and also does
architectural work on stone. This report comprises of various topics like requirement if different
systems and usage of managing reports. Along with use costing technique to set up cost for
business to generate more profitability and take different planning tools that is utilized for
budgetary control. To sort out financial problems by accounting system within industry.
PART A
Activity 1
Management accounting along with important requirements of different
systems
Management accounting is described as the pathway of tracking, managing as well as
measuring the effectiveness of an organisation over a given period of time (Banker and et.al.,
2018). It is quite useful for administrative interested parties as it can assist them assess the
organization's current status. The accounting systems are part of internal system which is applied
by management to conduct daily routing activities. J Rotherham Limited is a hand carved stone
manufacturing business that currently operates in Yorkshire UK. It is utilized by all
organizations to maintain track of all transactions and improve corporate productivity.

Management relates to the scheduling, coordination, resources, and monitoring of company
knowledge and operations. This helps to better manage the records and growing organization's
functioning efficiency. Management accounting's key target is quick payment and company
decision taking. There are mentioned some management accounting system are:
Inventory management system: This is an effective system that can enable enterprise
company to keep stock details and to position next orders appropriately (Dierynck and Labro,
2018). This is mainly included and is used routinely in resource management. Managers at J
Rotherham use this method to monitor and maintain the product or stock inside a company. It is
necessary for management in this business to monitor the raw ingredients and handle it to
enhance the competitiveness. This is handled through a program to analyze the data and produce
documents. The manager of J Rotherham uses different method that is described as:
 FIFO: This implies first of all that the business of states will market the commodity that
first came.
 LIFO: In these method materials come is last that was selling will first.
 AVOC: Organization sells products and services throughout this system that help
determine average growth costs.
Price optimization system: This is the framework that completes a company's quantitative
order to determine and consumers focus on goods and services for various prices (Feng and Ho,
2016). Executives are using it to adjust commodity costs and control the consumer. J Rotherham
is a maker that operates as a builder on marble and modernist work that affects clients. This uses
the tools to set market prices and preserve organizational profit margins. Such as J Rotherham
manager incur all costs and expenditures when making the goods, and establish the fair price.
This method allows companies to achieve targets such as income maximization in a business.
Cost accounting system: This is an innovative method that uses a functional inventory
system to monitor manufacturing practices by producers and other business concerns. Managing
the expenses and the reports in addition to making money is necessary in all organizations.
Basically, this method works by monitoring raw resources as J Rotherham's supervisors get by
the manufacturing process and gradually convert in to final products in actual period of time. It
lets managers concentrate on cost and enhance the manufacturing process which helps to

maintain productivity. Giving correct costs is needed by using tools that help to keep the
profitability.
Different methods used by industry for reporting
Management accounting reporting is method which is applied by different organisation to
produce reports in monthly as well as yearly bass (Maziriri and Mapuranga, 2017). Such as J.
Rotherham used this strategy to make effective decisions for the betterment of a business entity.
There are discussed various kinds of reports that produced by company such as:
Accounts receivable report: It is the collecting method which ensures customers are
paying their receipts. Effective control of liabilities tends to prevent late payment or failure to
pay. It's a fast and efficient way to improve the monetary or leverage status of the business. The
report is also used by management of J Rotherham Limited to determine the effectiveness of the
credit and collection functions of the company. It is beneficial for the company as it may help to
strengthen the credit policy.
Performance report: Performance Report assessed the outcome of an operation that an
person conducts. This study compares the real end outcome with the typical output of a given
operation and identifies variability. For instance, Annual financial report review for every worker
that in the measurement concept what they related to an organization. J Rotherham compares the
different factors surrounding the worker's current capacity with their real quality, which will help
to boost quality and profitability.
Inventory management report: This is a study that demonstrates the understanding of
stock turnover in actual time across a reporting term (Nørreklit, Raffnsøe-Møller and Mitchell,
2016). This report is developed by the producing businesses to keep track of the stock. In J
Rotherham the administrators are expected to hold accurate product details that the organization
uses to carry out its operational tasks. It helps to monitor the statement that can effectively treat
inventories and control stocks in real time.
Activity 2
Calculation of costs using appropriate techniques
Types of costs in management accounting-

Manufacturing costs- These types of costs can be broken up into three categories- direct
materials, direct labor and manufacturing overhead (Endenich, Trapp and Brandau, 2017). Direct
material costs are incurred on production of products, labor costs are incurred on payment of
wages to workers and manufacturing overheads are incurred on expenses other than material and
labor on the production process. In J Rotherham Limited these types of costs are incurred.
Product and period costs- Product and period costs are those expenses which are
incurred in a business other than manufacturing costs (Fleischman, Johnson and Walker, 2017).
In J Rotherham Limited which is a manufacturing company these types of costs are incurred in
processes other than production.
Variable and fixed costs- Variable costs are associated with the units of output produced
and change according to it. Fixed costs are not associated with the units of output produced and
are constant in nature. Both these types of costs are incurred in J Rotherham Limited.
Direct and indirect costs- Direct costs are associated directly with the products and
services of the enterprise. Indirect costs are associated with the indirect expenses which are
incurred in business having no relation with the production of goods. In Rotherham Limited both
these types of costs are incurred.
Differential costs- In management accounting, manager sometimes has to decide
between two options. Both of them are reviewed and after that a decision is taken to select the
best one according to the needs and requirements of the organization. Thus in doing so costs are
incurred which are termed as differential costs. In J Rotherham Limited, sometimes these types
of decisions need to be taken and thus differential costs are incurred.
Opportunity costs- These are costs which cannot be valued in terms of money but are
present in terms of an available opportunity for a business from where it can profit. J Rotherham
Limited also has many opportunities which are reflected in terms of opportunity cost.
Sunk cost- Sometimes costs are incurred in enterprises in form of assets which were once
useful but are not useful currently. It is so because these assets do not have a scrap value which
can be realized. As J Rotherham is a manufacturing company it has various assets which are
discarded without realizing scrap value and thus sunk cost is incurred.
Techniques used for calculation of costs in management accounting-
Following techniques can be used for calculation of costs in management accounting in J
Rotherham Limited-
Marginal costing- In this technique, variable cost is charged to the units of output while
fixed cost is written off against the contribution (Gomez-Conde, Lunkes and Rosa, 2019). J
Rotherham Limited can use it effectively to calculate its costs.

Advantages-
 Marginal costing is an approach which is constant in nature and delivers results
consistently for a business.
 Marginal costing effectively helps a business in controlling its costs.
Disadvantages-
 The use of marginal costing technique makes it quite difficult to analyze the overheads.
 Sometimes this technique involves assumptions which are quite unrealistic.
Absorption costing- In this technique, the full cost associated with manufacturing of a
product is taken into consideration including overheads (Lowe, 2019). Thus it is useful
for manufacturing firms like J Rotherham Limited.
Advantages-
 Its usage is compliant with the Generally Accepted Accounting Principles (GAAP).
 It takes into account all the costs associated with the production process.
Disadvantages-
 The use of this technique can result in skewing of profit or loss which can mislead the
stakeholders of a business enterprise.
 Its usage doesn’t help in improving the overall operational efficiency and therefore it is
not useful in this part.

Activity 3: Covered in PPT
Activity 4: Covered in PPT
CONCLUSION
From the above report, it can be concluded that management accounting is very helpful
for managers of a firm as it aids them in decision-making. It helps the companies if they have to
attain their long-term goals, targets and objectives. It is an essential part of the processes and
functioning of the firms. It has different systems which can be used by organizations for varied
purposes. For its reporting, wide range of methods can be used. Costs can be calculated by use of
marginal and absorption costing techniques. Planning tools have advantages and disadvantages.

Organizations can use different systems of management accounting to solve their various
financial problems.

REFERENCES
Books and Journals:
Askarany, D., 2016. Attributes of innovation and management accounting
changes. Contemporary Management Research, pp.455-466.
Banker, R. D. and et.al., 2018. Cost management research. Journal of Management Accounting
Research. 30(3). pp.187-209.
Dierynck, B. and Labro, E., 2018. Management accounting information properties and
operations management. Foundations and Trends® in Technology, Information and Operations
Management. 12(1). pp.1-114.
Endenich, C., Trapp, R. and Brandau, M., 2017. Management accounting networks in corporate
processes–a cross-national study. Journal of Accounting & Organizational Change.
Feng, S. and Ho, C. Y., 2016. The real option approach to adoption or discontinuation of a
management accounting innovation: the case of activity-based costing. Review of Quantitative
Finance and Accounting. 47(3). pp.835-856.
Fleischman, G. M., Johnson, E. N. and Walker, K. B., 2017. An exploratory examination of
management accounting service and information quality. Journal of Management Accounting
Research. 29(2). pp.11-31.
Gomez-Conde, J., Lunkes, R. J. and Rosa, F. S., 2019. Environmental innovation practices and
operational performance. The joint effects of management accounting and control systems and
environmental training. Accounting, Auditing & Accountability Journal.
Lowe, E. A., 2019. On the idea of a management control system: integrating accounting and
management control. Management Control Theory. p.63.
Maziriri, E. T. and Mapuranga, M., 2017. The impact of management accounting practices
(maps) on the business performance of small and medium enterprises within the Gauteng
Province of South Africa. The Journal of Accounting and Management. 7(2).

Nørreklit, H., Raffnsøe-Møller, M. and Mitchell, F., 2016. A pragmatic constructivist approach
to accounting practice and research. Qualitative Research in Accounting & Management.