Management Accounting Systems and Techniques

This document provides an overview of management accounting systems and techniques, including different types of management accounting systems, methods used for management accounting reporting, calculation of costs with preparation of marginal and absorption costs, and advantages and disadvantages of planning tools used for budgetary control.

Management Accounting Systems
and Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and different types of management accounting systems...............3
P2) Methods used for management accounting reporting...........................................................5
TASK 2............................................................................................................................................7
P3) Calculation of the costs with preparation of the Marginal and Absorption Costs................7
TASK 3............................................................................................................................................8
P4) Advantages and disadvantages of types of planning tools used for budgetary control........8
TASK 4..........................................................................................................................................10
P5) Compare how organisations are adapting management accounting systems to respond to
financial problems.....................................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is an effective operation to render financial data and asset for
the manager to pursues proactive decisional procedures. It is only used by an internal team of an
organisation and this is the only thin which helps to makes it being different from the financial
accounting (Turner and et. al., 2017). Thus, the objectives of the management accounting is to
utilises this statistical data and takes out the better and accurate decision, controlling an
enterprise, business activities and development. In the current era, role of the management
accounting is to be deals with managerial aspects of an organisation and checks out accounting
formulation into the management of a business function. This report will be carry out on Jo-Jo
juice centre with an agenda of producing juices products.
A report will cover concept of the management accounting and essential requirements of
a different types of management accounting system. Also, report will also cover different method
which is used for management accounting reporting and finds costs of appropriate techniques of
the cost analysis to prepares income statement with using of marginal and absorption methods.
Also, assessment will also led discussion on different types of the budgetary control and how
businesses are adapting managerial accounting system.
TASK 1
P1 Management accounting and different types of management accounting systems
Management accounting is one of the essential concept, which is necessary for every firm
to takes out effective decision making in context of accounting and recording. It is an application
of professional knowledge & skills into preparation of the accounting information in such a way
as to assist management in development of the policies & planning and control of operation. It
assist manager's to pursue decision making to record data & information being relates to pure
managerial aspects (Tappura and et. al., 2015). Also, the purpose of management accounting is
to brings management into the radar of co-operative work and bring success for the organisation.
Its a clear system to keep records of management and analyse them to pursues business decision.
Organisation should start focus on development of tools or techniques. Its being necessary for a
manager's of JOJO fruit juice to utilises this concept of management accounting to ascertain
summative cost and revenue for ascertaining operational outcomes or measures.
Management accounting system

A management accounting system is termed as organisation's major sources of necessary
information in managerial decision making. As per contingency theory, there is no universally
appropriate MAS that can be implemented in different organisational types. This can also termed
as standards are made to pursues long term decision making to up-hold company to pursues
action planning (Spraakman and et. al., 2015). Its basically one of the analytical tool assists
business entity to gather decision making to lead organisation to makes its capacity that would
work with purpose of firm's profit & expenses. Such system is mainly guided by setting of the
standards and policies to build long term decisions in very profitable way. For JOJO juice centre,
management accounting system is the sustainable concept that would led to achieves long term
business goals & targets and guides organisation to built formative decision processes.
With use of management accounting system, it is very well accepted that with use of
management accounting, it would be ease for firm to pursues decisions which are in favour to
build and optimises the cost and ascertain long term profit making. In context of JOJO fruit juice,
its being proved necessary to apply management accounting system to provides assistance to the
firm to gain separate decision making. To benefit aim, different types of management accounting
system is explained as under:
Price optimisation system: The main aim of such is to ascertain manufacturing cost of
the products including all expenses such as manufacturing, selling and promotion cost for any
product. In this system, strategies such as competitive pricing, analysis of product life cycle and
goals of the company is need to achieve (Shields, 2015). If company wants to build its sales, they
have to keep their prices at low and higher the price to achieve more profits. In context of JOJO
fruit juice, aim here is to keep balance between sales and profits at one time. Also, such system
will help JOJO fruit juice to estimates demand & supply of their customer's at right price point.
This system help in finding that pricing sweet spot or maximizing price against the customers
wiliness to pay. It assist the company to assure that their products and goods will sell quickly at
the right price while still making a decent profit.
Inventory management system: It is the tool that allows you to keep tracking good across
business supply chain. It optimises entire spectrum spanning from order placement with vendor
to order delivery to your customer's and maps complete journey. Effective inventory system is
helpful to ensures on availability of raw materials without any kind of wastage of the goods. This
system is required at different locations within a facility or within many locations of a supply

network to precede the regular and planned course and stock of materials. In support to the JOJO
fruit juice, there are different types of the inventory management system discussed as below:
FIFO (first in first out method): In accordance with this, older inventory which enters
the warehouse is to be kept first is on priority for purpose of manufacturing of their products.
LIFO (last in first out method): As per this method, recent or last stock that was brought
will be put for usage as primary priority to manufactures final product or services.
Average cost method: As per this method, stock will be used on average basis. In this
method, average is taken of both inward or outward of inventory and on that basis, actual stock
size of inventory will be put down for production priority (Senftlechner and Hiebl, 2015).
In context of JOJO fruit juice, here raw material is the fresh fruits and LIFO method will
be used to avoid wastage or shortage of the material to avoid impact over the cost.
Cost accounting system: This accounting system is useful to keep records of various
cost being involved to manufactures final commodity. Here, cost such as expenses led for
manufacturing of the product, including labour, selling and distribution cost & raw material cost
etc. It is being necessary for all entities to carry out cost accounting to lower down cost by
decreasing involvement of all unwanted costs (Quattrone, 2016). Furthermore, such system also
helps to decides price steady which covers cost and give business a adequate profit numbers.
JOJO fruit juice company is using this accounting system to reduce its cost, by using raw
material easily available at low cost, and they are also hiring labours working at low salary. This
accounting system designed for manufacturers that tracks the flow of inventory continually by
various stages of production.
Job order costing system: It is mainly used when organisation is dealing with specific
customer orders or providing customised products. As each product is according to customer
needs and desire, it is considered as a job. For each job cost is separately tracked that how much
material, labour and overheads are spent for each job. JOJO being a fruit juice manufacturer it
has to make customised juice or shake as per taste & preference of customers. So this costing
system helps it in determining its cost for each unit of product.
P2) Methods used for management accounting reporting
Management accounting report is one of the formal assessment which is useful to find out
managerial aspects being related to the firm at the bigger aspects. Being as accounting reporting,
its highly responding for firm to build effective relation with standards of the accounting to

ascertain very true results or outcomes. Also, intention of the management accounting report is to
ascertain financial position of the firm along with ascertaining managerial decisions to gathers
operational accuracy for JOJO fruit juice. For this firm, JOJO fruit juice is have expectancy to
judge both long and short run goals of its own business operation. There are various techniques
for measuring management accounting reports for this leading juice manufacturers are as given
under:
Cost accounting report: Management accounting is used to be serves important part to
an analysis of cost or price of the product or services. It is quite impossible to price any product,
till ascertainment of real cost to the company is being aware to estimates business profits till
date. In context of JOJO fruit juice, such report is helpful for enterprise to pursues effective
decision to price of goods or services of this juice manufacturers. It allows business manager to
limits unnecessary cost and helps to ascertain measures to control its negative to build long term
profitability for JOJO fruit juices (Nielsen and et. al., 2015). Also, this report is helpful to assist
business to optimises its resources with aim to do optimum utilisation of resources. Also, cost
report as being prepared by JOJO fruit juice to record all its cost along with putting down
measures to reduce overall cost or expenses to increases profitability for longer time period.
Budget report: Such report is structured by a business manager's with purpose to know &
recording of different transaction like income, cash, sales etc. Also, this report is being made on
basis of the previous year and assists to do future based projection to equip business with bigger
ability. This aids JOJO fruit juice to estimates cost to be incurred in future or profit that can be
gained in minimum time period. Main aim of making budget report is to lower cost of fruit juice
manufacturing along with increase profit by doing pre-analysis of the cost to be incurred. JOJO
fruit juice is used to prepare cost budget once in every month covering estimated amount of cost
is need to be incur.
With use of budget report, JOJO fruit juice will be capable to estimates actual cost, while
preparation of fruit juice. It is helpful to list down all investment available with JOJO fruit juice
& cost estimation that needs to be incur in juice making process.
Performance report: Such report is being prepared by manager's of the firm with purpose
to ascertain various kinds of results by doing evaluation of a performance of the company and
employee's. In regards to the JOJO fruit juice, this tool is being made to record performance and
keep it to analyse for future goals or target accomplishment. Benefit of preparing report is to find

critical flaws or shortcomings that may arises at time of performing business function to achieves
strategic position in the specific segment (Modell, 2014). Company must put down its emphasis
over preparing such report with aim to increase performance of the JOJO fruit juice to survive
into the market structure. With preparation of the performance report, JOJO fruit juice can do
estimation of its future performance and develops strategies to become market leader into the UK
market.
TASK 2
P3) Calculation of the costs with preparation of the Marginal and Absorption Costs
Marginal cost: It is the additional cost incurred for a production of the additional units of
the output. This tools of costing is helpful to indicates rate at which total cost of the product
varies with change in the output by one unit (Lavia López and Hiebl, 2014). MC has proved
essential for business to pursues action planning & decision making process. Also, management
of the JOJO fruit juice to gather decision to locates best of the resources in their production
activity.
Absorption cost: It is the part of managerial accounting cost method for capturing all cost
s which are mainly associated with the manufacturing of a particular product and which is also
guided by the GAAP principles (generally accepted accounting principles). This cost is mainly
differs with variable cost, as it utilises fixed overhead cost to build each units of a product during
specific time zone.
Opportunity Cost:
The following cost can be defined as the cost which provides benefit to an individual,
investor or business at the time of choosing an alternative over another.
Particulars November (£)
Sales 50 500000
Less: Cost of sales -340000
Gross profit 160000
Variable selling overheads (10% sale value) 10000*5 -50000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Under/over absorbed prod expenses 9000

Net Profit 79000
Particulars November (£)
Sales 50 600000
Less: Cost of sales -408000
Gross profit 192000
Under/over absorbed prod expenses -9000
Variable selling overheads (10% sale value) 12000*5 -60000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Net Profit 83000
Cost of good sold November December
Opening inventory - 68000
Sales units 340000 408000
(-) Closing inventory -68000 -
Total 272000 476000
TASK 3
P4) Advantages and disadvantages of types of planning tools used for budgetary control
Budget is the preparation of detailed statement of expected financial results for time zone
and help to give revenues & expenditures for definite time period. Budgetary control is considers
as a tool which is used to plan and control organisation production to built co-ordination and also
communication between department to motivates manager and evaluates performance (Jamil and
et. al., 2015). In regard with JOJO fruit juice, planning tools such as budget and cost ratio
analysis is important to put down emphasis to do cost analysis along with ascertainment of
business profits to ensure survival of an operation.

Production budget: It is one of necessary plan that assists to list down number of outputs to be
made & at what cost during given time duration. Actually, its a formal report, which in reality
assists to find number of units being manufactured on time to time basis. In context with JOJO
fruit juice, Operation Dept. is liable for development of a production budget and finding of
supported time & cost both.
Advantages- Benefits of production budget is advantageous to find cost of raw goods and
disadvantage is to avoiding other cost & expenses. This budget is mainly prepared to have focus
onto build and rise production capacity of the firm. During preparation of this budget, all of the
cost such as direct or indirect will be record to ascertain an actual cost involves.
Disadvantage- The major disadvantage of this kind of budget is that they are time
consuming and especially in a poorly organised environment where many interactions of the
budget may be required.
Purchase budget: Its a kind of plan is useful to record purchase of the raw material for the
purpose to record supportable accounts at times of doing production activities. In context with
JOJO fruit juice, being operational manager is accountable to develops purchase budget to record
purchases of the raw goods. The main plan behind using of this budget is to save and secure all
types of purchases whether cash or credit to have right knowledge & data of raw material to be
used at time of involving it to the production of final commodity.
Advantage- The advantage of such budget is to rectify info & data to the purchase made
and disadvantage is stellar causing to a credit purchases. In this type of budget, most of the
transaction are made on credit basis.
Disadvantage- the budget may prescribes that certain amounts of overhead costs be
allocated to several departments and administrators of those divisions may take problems with
the allocation method used.
Sales budget: Its a one of the important managerial tool to estimate sales for future time zone.
Moreover, firm uses sales budget to set departmental goals and records earning per sales. The
aim of such budget is to find values of sales which is required to gain in lesser time period. In
context of the JOJO fruit juice, sales budget is responsible to impacts on over entire business and
profits estimation of this leading JOJO fruit juice (Honggowati, 2017).

Advantage-Pioneer advantage for sales budget is to be assist in clear development of the
sales program and estimate actual targets needs to be achieved during performance of business
goals or targets.
Disadvantage- It only consider financial outcomes and an intent focus on improving or
maintaining profitability. This budgeting concept does not necessarily support the needs of the
customers.
Labour budget: Such budget is used to calculates number of labour per hours is required to
produce units itemised into the production budget. Its a clear conventional budget in which
number of outputs being produced during each quarter is multiplied by the direct labour per hour.
In context with JOJO fruit juice, labour budget is useful in calculating amount of labour hours
which is need to produces units itemised in production budget. The main idea behind making of
the labour budget is estimating labour cost being inquired in every time period, when in case
they are being working.
Advantage-The major advantage of labour budget is to access ease of the available wage
analysis statement and no extra labour cost is involved and big disadvantage is majorly no
difference between skilled and unskilled workers.
Disadvantage- Time factor is totally ignored if the employees are paid on piece rate
basis. No distinction is drown among the production of hand workers and that of machine
workers.
Marketing/distribution budget: This type of budget is used to record expenses and cost
being related to the marketing domain and distribution of the product into the desired manner or
way. This type of plan is divided into two categories namely marketing and distribution channel
to bear cost into the desired manner or way (Hiebl, 2014). Such kind of budget is made, while
building of the marketing plan, either for launching new products or comes out with changes in
the existing products. Also, such kind of budget has proved necessary for JOJO fruit juice to
pursue effective decision making to promotes business effectively and provides firms with
greater competencies to built effective platform for the marketing.
Advantage-The major advantage of marketing budget is the ascertaining actual amount to
be spent on marketing and distribution related to goods or services. The major disadvantage is
covering only marketing aspect and avoiding other two.

Disadvantage- There is no system in place to formally review the situation and make
changes thereby placing at a considerable drawback to its more nimble competitors.
Capital budget: This is made up of two words namely “capital” and “budget”. It is made
up of capital receipt and capital expenditures. It is the process of evaluating investment & huge
expenses with order to best return namely ROI. Also, capital budget is consists of the machinery,
plant, building of an infrastructure along with setting up of equipments for purpose of production
to accomplishes suitable & desired manufacturing results or goals for the JOJO fruit juice in less
time zone (Fullerton and et. al., 2014).
Advantage-The major advantage of capital budgeting is assists in development of the
capital such as plant, machinery, building and equipments for the premises of the JOJO fruit
juice. One of the critical disadvantage is heavy incurring of the cost and sometimes its been
difficult to have look on big cost due to risk of theft and data loss.
Disadvantage- A wrong term capital budgeting decision taken can affect the long term
curability of the comp-any and hence it needs to be done judiciously by professionals who
understand the project well.
Brief summary: Out of the above discussion, its being summarised that planning tools
has proved as necessary tools to do pre-planning in context of budgets, acquisition of resources,
doing manpower accumulation etc., with purpose to do manufacturing of the JOJO fruit juice in
most effective way. JOJO fruit juice is having best option & strategic planning to utilises capital
budget to do optimal planning for development of its infrastructure.
TASK 4
P5) Compare how organisations are adapting management accounting systems to respond to
financial problems
Business organisations are facing issues related to the financial, legal monetary aspects
and resource aspects of the firm to lead operation effectively. Here, role of management system
of accounting is essential for firm to lead business operation and estimates financial flaws to be
solved in minimum duration. Financial issues such as resource inadequacy, less support of timely
monetary policies are in absence to notify business policies along with insufficiency of minimal
usage of lesser resources (Cooper and et. al., 2017). Also, critical issue is being facing by firm in
regards of a less working capital, cash flow issues and inefficiency of the interest to pay back all

the debt. In regard to the JOJO fruit juice, management accounting system is being faced with
financial problem such as cash inflow, lack of working capital along with risk management.
Analysis of financial issues are as follows:
Cash flow problem: This involves both inflow or outflow of the fund in respective of the
business premises. Also, the purpose of cash flow is to led flow of the money and led
continuation of the business activity or promotion in most profitable way. This kind of issues
happens with fluctuation between demand & supply whichever is lower or less.
Risk management: Risk is the occurrence comes out of the expected or critical events at
one point of time. The purpose of risk management is to takes out strategies that suits out best to
remove risk and ascertain profit in very selective way. Here, risk of financial inaccuracy can be
caused as due to lesser planning or prospects to issue funds. This level of risk would might be
have critical or major impacts onto business operation.
Working capital issue: This is the category of fund which is required for carry out day to
day business activities of the company in part of their business operations. In context of JOJO
fruit juice, as firm is currently new to deal with business and they are facing issues to carry
business function on daily basis (Bromwich and Scapens, 2016). Also, funds planning, budgeting
tools etc., are two necessary mode for collecting in best possible state.
Management accounting approach: This is a set of strategy is essential to figure suitable
answer for checking viable progression of money on daily basis of the task for achieving JOJO
fruit juice aims and goals. With use of management accounting approach, JOJO fruit juice can go
for evaluates & arranges funds to avoid funds emergencies.
KPI: It stands for key performance indicator. This level of strategy is used to alter the
generic executing and expanding benefit to the association through chop assessment of tasks.
Key performance indicator is a measurable value that demonstrate how effectively a fiem is
attaining key business objectives.
Benchmarking: This instrument is used to have a look on execution out of a rival to
support market. The link of demonstrations on a same condition to brought about breaking down
the situation of organization. It is a procedure of measuring the performance of a company's
products, services or processes against those of another business considered to be the best in the
sector.

Performance analysis: The major intention of the performance analysis is to check out
whether performance of the JOJO fruit juice is being going or not (Ahmad, 2015). In this leading
fruit juice, role of performance analysis is to carry out analysis of performance of the business
and realises that are they capable to carry operation in long run.
Basis of Difference Oshodi Limited Rites Limited
Problem With compare to the expenses
made, incomes of this firm are
very low which are effecting
with negative outcomes
working for this company as
like in form of losses. These
level of problems arises in the
company due to less finance &
decision of the organisation.
In this firm, such issue is
linked to an deficient supply of
the liquidity which would be
impacting upon the working of
the organisation.
Approach This firm used to approach
inventory control system to
keeps records of an inventory
which has been placed during
process to the final production
of product or services. Also,
this system would help Oshodi
Ltd to have check onto the
availability of the goods and
initiates order with accordance
to the JOJO fruit juice.
Management accounting
system will surely assists Rites
Limited to capture costs such
as material, labour, expenses
etc., with purpose to keep last
cost of the production. Also,
this will help Rites Limited to
have control over prices of
final goods or services.

CONCLUSION
From above project report, its been concluded that management accounting system has
comes out as common & necessary for every firm to led their business achieves common
objectives. Basically, its a clear application of the management accounting systems such as price
improvement, cost accounting process, companies comes out with united decisions. As well as
different type of management accounting reports i.e., budget reports which is necessary to
pursues exact estimation of the cost. Apart from it, project report has also puts discussion on
absorption versus marginal costing. Also, activity based method has been proved as appropriate.
Along with, the project report concludes about the role of management accounting techniques
and planning tools in solving the financial issues.

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