Management Accounting Systems and Principles - LO 1, 2, 3 and 4

Unit 5 Management
Accounting - LO 1, 2, 3 and 4

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
LO1..................................................................................................................................................3
Evaluating management accounting systems and MA reporting are integrated.........................3
Evaluating application of management accounting and its benefits...........................................4
LO2..................................................................................................................................................6
Explaining principles of management accounting and its integration........................................6
Calculating cost using marginal & absorption costing...............................................................6
LO3..................................................................................................................................................8
Analysing advantages & disadvantages of budgetary planning tools.........................................8
LO4..................................................................................................................................................9
Explaining the systems through manager respond to financial problems...................................9
Discussing ways in which MA can help organization to achieve sustainable success.............11
Comparing the ways in which Unilever Plc is adapting management accounting to respond to
financial problems.....................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting can be defined as a procedure which undertakes preparation of
reports regarding business operations to help managers in taking financial and corporate
decisions. The present report is based on Synergy manufacturing Co. Ltd. Which is medium-
sized enterprise. Report will evaluate different Management accounting system and its
application within an organization. Further, it will discuss benefits and application of
management accounting.
Study will also explain principles of MA and ways in which it is integrated in company.
It will also prepare and interpret income statement using different costing methods. In addition to
this, report will also discuss benefits and drawbacks of budgetary planning tools and methods in
which managers solve financial problems.
LO1
Evaluating management accounting systems and MA reporting are integrated
Cost Accounting System
It is a framework where firms estimate the cost of product in order to analyse
profitability, make valuation of inventory and to control the cost. Cost accounting helps in
estimating accurate cost which is required for attaining a certain level of profit. Costing system
helps Management accounting to evaluate the closing value of inventory and other resources,
WIP and finished goods for preparing financial statement (Ameen and et.al., 2018). There are
two costing system i.e. Job order costing & process costing and sometimes, combination is used
which is known as hybrid cost accounting system. Synergy Manufacturing Co. Ltd can make use
of Cost accounting system to analyse the costs in advance and identify the profit levels.
Job costing System
In this system, all the information related to a particular job and the associated costs are
collected. Synergy Manufacturing Co. Ltd. can use this costing system to determine the accuracy
of quoting prices in order to achieve profitability percentage. It can also help company to provide
cost information to its customers. The information collected is of direct materials, direct labour
& overhead. In reality such costing system is done according to the requirements of customer.
After completion of job, flag must be raised to close down the job, otherwise employees will
continue charging time to it.

Inventory management system
This system involves a procedure to track and trace all the goods throughout the supply
chain. Right from purchase of raw materials to its production to its final selling (Azudin and
Mansor, 2018). Synergy Manufacturing Co. Ltd. Can manage the stock in its own way because it
is a medium-sized enterprise having limited inventory. In the absence of inventory management
system, there will be situations where company is understocked or overstocked. It gives you
information what all resources is required to meet the production demand in order to satisfy
customer needs.
Price Optimization system
The system in which that prices is estimated which will give maximum profits to the
company and what customers are willing to pay is known as price optimization system. Synergy
Manufacturing Co. Ltd. make sure that price is quoted that will enable it to sell quickly its
product and earn a decent level of profit. If a price is quoted at higher levels, customers will not
purchase it and a low price will not allow company to cover cost and make profit.
Evaluating application of management accounting and its benefits
Cost reports
In cost reports, a process is followed about informing the party about the costs incurred in
taking a project which expressed in absolute terms (Maitanova and et,al., 2020). Synergy
Manufacturing Co. Ltd. Can prepare cost reports with the help of cost accountant to keep client
informed about all the details of a project.
Benefits
 Cost reports help in quoting prices accurately because all the cost that will be incurred is
known in advance.
 It helps in holding staff accountable if something is not done in accordance to the budget
or budget is exceeded.
Budget reports
Budget reports is used to make proper estimations of all costs that will be incurred which
helps in comparing the actual figures with estimated ones. It can assist Synergy Manufacturing
Co. Ltd. In keeping a complete track of activities performed and taking necessary actions to
reduce the deviations. It can be prepared yearly, quarterly, monthly or weekly depending upon