Management Accounting Systems of Jupiter PLC

This assignment provides an in-depth examination of the management accounting systems employed by Jupiter PLC. The document covers various aspects of management accounting, including cost accounting, inventory management, job costing, benchmarking, financial governance, and key performance indicators. It also explores planning tools such as cash budgeting, operating budgeting, and zero-based budgeting. The study aims to provide insights into how management accounting systems can support business success.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management accounting and different types of management accounting systems ....................1
Different methods used for management accounting reporting ..................................................2
Benefits of management accounting systems .............................................................................2
Integration between management accounting system and reporting with organizational
processes......................................................................................................................................3
TASK 2............................................................................................................................................4
Income statement for absorption costing ....................................................................................4
Income statement for marginal costing .......................................................................................5
TASK 3............................................................................................................................................6
Advantages and disadvantages of planning tools used in budgetary control ..............................6
Use of different planning tools and their application for preparing and forecasting budgets......7
TASK 4............................................................................................................................................7
Management accounting systems adopted by different organization to respond to financial
problems ......................................................................................................................................7
Management accounting can lead organization to sustainable success by responding to
financial problems........................................................................................................................8
Evaluate planning tools for accounting to solve financial problems ........................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting is related to providing accounting information which helps in
making decision of the organisation to improve the performance of the organisation. Jupiter PLC
will be included in this report which is a medium sized manufacturing company. This study will
include about different types of management accounting systems and their benefits. It will also
include different methods of management accounting reporting. Furthermore, it will contain
advantages and disadvantages of planning tools that are used in budgetary control. Moreover,
this study will provide information about marginal costing and absorption costing. Also, it will
include management accounting systems used for solving the financial problems.
TASK 1
Management accounting and different types of management accounting systems
Management accounting is used to present the accounting information by preparing
various report and statement which assist the managements in making effective decisions on the
basis of this information to improve the profitability and productivity of the Jupiter PLC (Malmi,
2016). There are different types of management accounting systems which are used by
organization to improve the performance of enterprise that consist of Cost accounting system,
inventory management system and job costing system.
Cost accounting system : it is system used by organization to make estimates for the
cost of their products to analysis the profitability of the firm. Cost accounting system is used to
control the cost of product by taking necessary action to reduce the expenses for improving the
performance of firm. Coast accounting system include fixed cost and variable cost (Tappura and
et.al., 2015). Fixed cost is that cost which remains constant over the period and does not change
with the change in volume. Variable cost is the cost which changes with the change in the
volume of sales.
Inventory management system : This system is used to control the flow of inventory
and utilize the resources in the best way to increase the profitability of the firm. Inventory
management helps in controlling the misappropriation of inventory. It includes LIFO and FIFO
method for valuation of inventory (Chiarini and Vagnoni, 2015). In FIFO method the first good
purchased are the first to be sold. According to LIFO method the last inventory purchased is the
one to be sold first.
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Job costing system : it is the system which allocate the cost the product in to each job.
This system contains information of direct material, direct Labour and overhead. Direct Labour
is related to workforce which is used in manufacturing the product. Direct material is the raw
material used in production process. Overhead are the expenses used in production of the product
and accumulate to it cost.
Different methods used for management accounting reporting
There are different methods of reporting used in management accounting that consist of
budget report, account receivable aging report and job cost report.
Budget report : This report is prepared by management in order to improve the performance of
the organization by estimating the budgeted expenses and incomers to compare them with the
actual to measure the performance and profitability of the firm and take corrective action to
improve the performance if there are any deviations (Lavia López and Hiebl, 2014).
Account receivable aging : This report is prepared by management to have information about
the customer that have not paid the amount outstanding to the organization. This report helps in
formulating credit policies of the organization.
Job cost report : This report shows the expenses and income relating to particular job which are
compared with the estimated income and expenses. This helps in controlling the cost and
increasing revenue for the firm.
Jupiter PLC maintain these reports to have information about the various operations of
the organization to increase the profitability of firm. These reports helps Jupiter PLC in effective
decision – making.
Benefits of management accounting systems
Benefits of cost accounting system
 This system helps Jupiter PLC in controlling the cost of the product to increase the
profitability of firm. This system helps Jupiter Plc in making effective decision for the future to improve the
performance of organization.
Disadvantages of cost accounting system
 This system does not include financial figures due to which cost ascertained in not always
correct.
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 Installing cost accounting system requires high expenditure due to maintenance of many
costing records.
Benefits of inventory management system :
 This system is helpful for Jupiter PLC in controlling the stock level. It also provides assistance to Jupiter PLC in reducing the cost of maintenance by
removing the extra inventory from the warehouse.
Disadvantages of inventory management system :
 This system is highly expensive due to which medium size organization cannot afford
this system (Advantages and Disadvantages of Job Costing, 2015) . It is also complex system as it require high skills and knowledge to work with this
system.
Benefits of job costing system :
 In this system cost is ascertained at any stage which helps in controlling the cost of
product at any stage. Management can estimate the cost job on the basis of past record.
Disadvantages of job costing system :
 More clerical work is required for maintaining the detailed information in job costing.
 There is no standardization in job costing thus it requires more supervision.
Integration between management accounting system and reporting with organizational processes
Management accounting reporting and system are integrated with the organization
process as it helps in determining the cost of the product that assist in making decision for the
future to improve the profitability of the firm.
Cost accounting system helps in making cost records which are used in organization to
improve process by making planning and controlling the cost due to which revenue is increased
(Cooper, Ezzamel and Qu, 2017). Management accounting system and reporting provide
managers to make budgets which assist in comparing the actual performance with budgeted that
support in taking corrective measures to improve the performance.
Organization process are improved by using integrated management accounting system
and reporting that helps Jupiter PLC in increasing their performance to achieve the targeted goals
of the firm effectively and efficiently.
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TASK 2
Absorption costing : it is the costing techniques used by management in which all the
manufacturing cost are absorbed by the units products and tit include the direct material and
fixed cost and variable cost ad overhead expenses.
Income statement for absorption costing
Particulars Figures (in
£)
Figures (in
£)
Sales revenue (16000 * 50) 800000
Production cost (19000 * 40) 760000
Less: inventory at the end of period (3000*40) 120000 640000
Gross profit (Sales – COGS) 160000
Less: Under absorption 5000
Net gross margin 155000
Computation of manufacturing cost per unit
Particulars Figures (in £)
Direct labour 20
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Direct material 10
Variable production overhead 5
Fixed production overhead 5
Total manufacturing cost per unit 40
On the basis of above computation it can be interpreted that total cost of production for
the year 2018 is 37.6 and total sale revenue for the same year is 80000. And the gross profit for
the year is 198400.
Marginal costing : it refers to the costing techniques in which variable cost are charges to
cost unit and fixed cost are attributable to the relevant period.
Income statement for marginal costing
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On the basis of above computation it can be interpreted that net profit according to
marginal costing is 140000 and variable cost per unit is £35.
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TASK 3
Advantages and disadvantages of planning tools used in budgetary control
There are different types of planning tools which are used in budgetary control that
includes cash budget, operating budgeting and zero – based budgeting (Quattrone, 2016).
Cash budget : It shows the comparison between estimated cash inflows and outflows
with the actual to identify variations and take necessary actions to increase cash inflows and
reduce cash outflows.
Advantages
 It helps in decision making to increase the profitability of the firm.
 This planning tools helps in controlling cash outflow and increasing cash inflow to
achieve the targeted goals of Jupiter PLC.
Disadvantages
 The success of cash budget depends on the cooperation of the staff of Jupiter PLC. It is very expensive to operate a budget.
Operating Budget : It shows the comparison of the estimated operating expense and
incomes with the actual to determine the profitability of the firm.
Advantages
 It helps in estimating the future expenses of the Jupiter PLC that assist in identifying the
future profitability of firm.
 It helps in tracking the performance of firm on the basis of this budget.
Disadvantages
 It is a time consuming process. It requires lot of information for estimating the future expense and incomes.
Zero – based budgeting :It shows the expenses of each period by starting the process
with zero – base.
Advantages
 It helps the Jupiter PLC in allocating the resources efficiently.
 It helps in making strategic planning for the future to increase profitability.
Disadvantages
 This technique is very complex as it requires detail analysis and attention.
 This planning tool does not focus on cost centers.
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Use of different planning tools and their application for preparing and forecasting budgets
There are different planning tools which are used for preparing and forecasting budgets
such as cash budget, operating budget and zero – based budgeting (Fullerton, Kennedy, and
Widener, 2014). Cash budget helps in comparing the budgeted figures of inflows and outflows
of cash with the actual to determine the performance and if there are any variation in the budget
necessary actions are taken to improve reduce the cash outflow and increase the cash inflow.
Planning tools are used for preparing and forecasting budget to improve the performance
of firm . Operating budget helps in estimating the operating expenses for the period with the
operating incomes and thus determining the deviation and then taking actions to reduce the
expenses.
TASK 4
Management accounting systems adopted by different organisation to respond to financial
problems
Tools Unicorn company Nisa company
Bench marking : It is a tool
used by Manet accounting in
which organization set
benchmarks for their
performance to achieve the
performance foals to reduce
the financial problem.
Bench marking is adopted by
Unicorn to reduce the financial
problem by setting bench
marks for their performance
and make strategies to achieve
that performance goals.
Nisa company has defined
benchmarks for its
performance to improve its
performance in the market.
Financial governance : It
refers to ways company
collect, manage and control the
financial information.
Unicorn use financial
governance to reduce financial
problems by managing the
financial information in the
proper way.
Nisa company uses financial
governance to control
misappropriation of the
financial information.
KPI of key performance
indicators :It helps in
measuring the performance of
the employees and
Unicorn uses these indicators
for measuring the performance
of employees to improve their
performance e to reduce the
Nisa company use these
indicators to improve the
performance of employees and
organization to reduce the
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organization. financial problems. financial problems.
Management accounting can lead organization to sustainable success by responding to financial
problems
Management accounting by responding to the financial problem can assist in increasing
the profitability of Jupiter PLC which will lead to sustainable success for the organization.
Organization by responding to the financial problems can support the firm in reducing
misappropriation of the financial information and thus helps in managing the financial resources
effectively and efficiently.
Jupiter PLC by responding top financial problem can improve the performance of its
employees which will assist in increasing their productivity and profitability (Renz, 2016). Also,
it helps in increasing the market share of Jupiter PLC.
Management accounting helps in reducing the financial problems which will assist the
Jupiter PLC in growing their business.
Evaluate planning tools for accounting to solve financial problems
Bench-marking : It helps in improving the product quality by setting bench marks for the
performance and also helps in increasing sales and profitability of the firm (Otley, 2016). But on
the contrary , this tools does not measure the effective of performance and also it does not
provide the completer information to set the bench-marks.
Financial governance : This planning tool helps in controlling the financial resources of
the Jupiter PLC and also assist in taking decisions for future activities. But , it also has
disadvantages that it required setting standards for comparisons which is a difficult task.
Key performance indicators : It helps inn measuring the performance of organization
and employees which helps in increasing profitability of Jupiter PLC. It also assists in
formulating strategies to improve the future performance of organization. On the contrary , KPI
does not include the external database which may affect the performance of organization.
CONCLUSION
From the above study it has been concluded about management accounting and different
management accounting systems which helps in measuring the performance of organisation and
for making various decisions to improve the profitability of organisation. Furthermore, this study
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has provided with management accounting systems which has been used by Jupiter PLC to
perform its various operation these systems consisted of cost accounting system, inventory
management system and job costing system. Moreover, it has includes various reports such as
budget report , accounts receivable report and job cost report. Also, this assignment has provided
with Planning tools such as cash budget, operating budget and zero based budgeting. This study
has provided with management accounting systems for resolving the financial problems that
consisted of benchmarking, financial governance and key performance indicates that has
supported Jupiter PLC in solving various financial problems
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