Management Accounting: Systems, Reports, Cost Calculation, and Budgetary Control

This report focuses on the use of management accounting for enhancing the efficiency and effectiveness level of MSD Lighting Ltd. It covers topics such as management accounting systems, reports, cost calculation, and budgetary control. The report also discusses different types of budgets and their advantages and disadvantages. The subject is management accounting, and the course code and college/university are not mentioned.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting systems..........................................................................................1
P2: Management accounting reports............................................................................................3
TASK 2............................................................................................................................................4
P3: Calculation of costs...............................................................................................................4
TASK 3............................................................................................................................................7
P4: Planning tools for Budgetary Control....................................................................................7
TASK 4............................................................................................................................................8
P5: Comparison of organizations.................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management Accounting refers to the use of a wide variety of methods and techniques
through which the appropriate financial analysis can be done and therefore the right decisions
can be taken by the managers of a particular organization which can thus help them in managing
the funds quite appropriately and properly (Alabdullah and Ahmed, 2020). Therefore, it is
necessary that the use of Management Accounting should be made so that the enhancement in
the overall level of efficiency and effectiveness level can be done in a right way. For this report,
MSD Lighting Ltd has been chosen. It is a manufacturing company which manufactures Street
Lights. In this report, there will be a detailed and specific focus on the way in which the use of
Management Accounting should be made for the purpose of enhancing the overall level of
efficiency and effectiveness level within the organization in an appropriate manner so that the
management of the financial needs and requirements can be done.
TASK 1
P1: Management accounting systems
Management accounting is an important concept which is quite helpful for the managers
so that they are able to consider the way in which they can take the decisions which can be quite
useful for the purpose of managing the funds in a right manner (Alhatabat, 2020). Therefore, the
managers of MSD Lighting Ltd are required to put their focus on its use so that the enhancement
in the efficiency and effectiveness level can be done in an appropriate way.
There are various types of Management accounting systems which can be used within a
company. These are explained as follows-
Cost Accounting System- It is a system in which a thorough and detailed assessment of
the costs is made (Amirbeyki Langroudi, Kordestani and Reazei, 2020). Therefore, in this way it
can be stated that the use of this particular system should be made so that the overall level of
efficiency and effectiveness level can be made quite appropriately in a proper manner. MSD
Lighting Ltd can use it for properly assessing the costs and determining the future course of
action to be taken.
Essential requirements-
 It is a system in which there must be identification of the methods and techniques to be
used for the determination of the level of costs in an appropriate manner.
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 In this system, the identification of the appropriate steps to be taken so that the needs and
requirements of the organization are managed should be done quite appropriately.
Inventory Management System- In this system, the use of methods and techniques
should be made for the particular purpose of assessing the level of stock effectively and
efficiently (Diab, 2020). Thus, in this way it can be stated that the management of MSD Lighting
Ltd should be able to make the use of this system for managing the stock items appropriately.
Essential requirements-
 In this system, a right tracking system must be used which can therefore help a lot in
managing the stock items systematically.
 This system should be helpful for maintaining a higher-level of efficiency and
effectiveness in the management of the stock items in the organization.
Job Costing System- In this system, the proper assessment of the various types of job
costs should be made (Dwirandra and ASTIKA, 2020). In The context of MSD Lighting Ltd it
can be stated that this system is quite important and useful for identifying and controlling the job
costs.
Essential requirements-
 This system must be able to identify the job costs and therefore ensure that the
appropriate actions can be taken by tracking them.
 This system should be able to ensure that the appropriate and right steps should be taken
for enhancing the profitability level.
Price Optimization System- In this system, the management of the prices should be
done so that the right price is selected for the particular purpose of ensuring that the level of
profits can be enhanced (Golyagina and Valuckas, 2020). Therefore, it is quite necessary that the
organizations like MSD Lighting Ltd are able to make its use for ascertaining the prices in a
proper way.
Essential requirements-
 This system should allow for forecasting of the different types of prices so that the prices
can be set according to the level of demand.
 This system must be helpful for setting such prices so that the profits in the organization
can increase which will help the people within the organization.
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P2: Management accounting reports
Management accounting reports are those reports which are quite helpful and useful for
the particular purpose of ensuring that the analysis and interpretation can be carried out in an
appropriate way (Hutahayan, 2020). Therefore, it can be stated that the use of these reports is
quite essential and helpful for the particular purpose of ensuring that the right conclusions and
recommendations can be derived which will be useful in taking decisions. The Management
Accounting Reports which can be used by MSD Lighting Ltd are as follows-
Job Costing Reports- These reports are highly helpful and useful for the determination
of the job costs in an appropriate way (Isoh, 2020). It is therefore crucial to make sure that the
determination of the job costs should be done through making an use of these reports. MSD
Lighting Ltd's managers should be able to make their use for the analysis of job costs and
therefore determining the approach to be taken for decreasing the job costs so that the
profitability level can be enhanced.
Inventory Management Reports- These reports are necessary for ensuring that the
management of the stock level can be done appropriately (Johnstone, 2020). Therefore, it can be
stated that it is quite essential and important to make their use so that the overall level of
efficiency and effectiveness can be raised. In the context of MSD Lighting Ltd it should be
ensured that the use of these reports is done for the particular purpose of appropriate
management of the different types of stock items so that the attainment of the goals and
objectives can be done.
Departmental Reports- In these reports, the assessment of the performance level of the
departments is required to be made which will therefore help in identifying the appropriate
decisions to be taken for the future. Thus, it can be stated that through these reports the track of
the work done by the departments can be made. For MSD Lighting Ltd it is necessary that the
use of these reports should be made so that the overall level of efficiency and effectiveness can
be enhanced.
Performance Reports- In these reports, it is highly necessary that the performance
assessment is carried out which will be helpful for the purpose of taking the right steps in the
future. Therefore, it can be stated that through using these reports the performance level can be
increased. MSD Lighting Ltd's managers should be able to use them for ensuring that the
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deviations and variations in the performance are assessed and thus the corrective actions are
taken effectively and efficiently.
TASK 2
P3: Calculation of costs
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It is necessary that the appropriate assessment of the different type of costs is made
within an organization. For this purpose, the important techniques are required to be used. These
techniques are explained as follows-
Marginal Costing-
It is a technique through which the variable cost is charged to the units and the fixed cost
is written off against the contribution (Kumarasinghe and Haleem, 2020). Thus, it can be stated
that this particular method is helpful in ensuring that the right determination of the profits can be
made within the company which will thus help it a lot in the future. Therefore, it is necessary that
the managers of MSD Lighting Ltd are able to make sure that they can make the right use of this
method for determining the profitability level.
Advantages-
 It is quite simple to use and therefore in this way the people in the organization are able
to easily learn about its application. Thus, it can be easily applied within the organization
and its processes.
 It is helpful for the purpose of decision-making in the organization and therefore this can
lead towards better decisions. Thus, the managers can take the right decisions which will
thus help them a lot.
Disadvantages-
 When the use of this technique is made, the segregation of the various types of overheads
in the organization becomes difficult.
 As this technique excludes the fixed overheads from the costs it can therefore lead
towards wrong conclusions.
Absorption Costing-
It is a system through which the assessment of the costs can be made and therefore the
right course of action to be taken in the future is determined (Legaspi, 2020). Therefore, it can be
stated that the right use of this particular system has to be made so that the management of the
appropriate needs and requirements can be made quite effectively and efficiently. This will thus
lead towards enhancement of the level of profits. For the managers of MSD Lighting Ltd it is
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important that the use of this particular method is made so that the attainment of the future goals
and objectives can be carried out.
Advantages-
 The analysis of the level of overheads within the organization can be made appropriately
when the use of this particular technique is made. Thus, the control on the level of
overheads can be kept in this way which will be quite useful in controlling the overheads
in an appropriate manner.
 Through the use of this technique the apportionment and allocation of the overheads can
be done in a much better way. Thus, the identification of the overheads of the various
departments in the organization can be carried out in a right manner.
Disadvantages-
 It is not useful for the purpose of decision-making and therefore in this way it can create
an impact on the organizations.
 The highlighting of certain costs is not done when this technique is used and therefore
this affects the organizations.
Therefore, it can be stated that the use of both of these techniques is quite helpful for the
particular purpose of taking of the right decisions which are related with enhancing the overall
level of efficiency and effectiveness in a better way. Therefore, the managers of MSD Lighting
Ltd should be able to ensure that they must be able to appropriately use these particular
techniques which will help them in identifying the future course of decision which has to be
taken. This will help in targeting a particular increase in the overall level of profits in the future
for the organization.
TASK 3
P4: Planning tools for Budgetary Control
Budgetary Control is a technique in which the preparation of the Budgets is done so that
the necessary course of action can be taken. Therefore, in this way it is helpful for the
management of the funds within the organization. The managers of MSD Lighting Ltd should
make its use for ensuring that the use of forecasts can be made correctly and appropriately.
Different types of Budgets can be prepared within the organizations. An explanation of
some of these Budgets can be provided as follows-
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Cash Budget-
It is a Budget in which the ascertainment of the cash receipts and expenditures is made. It
is therefore necessary that its preparation can be done so that the management of the cash can be
done in a right way (Lueg, 2020). Therefore, it is important for the management of MSD
Lighting Ltd that they make the use of this budget.
Advantages-
 Through its preparation, the cash can be managed so that the decisions can be taken in
quite an appropriate way.
 This budget is required to be prepared so that the necessary control on the cash receipts
and expenditures can be kept.
Disadvantages-
 Its preparation can affect the level of flexibility in the organizations which is related with
cash expenditures.
 Its preparation is quite time-consuming and costly and therefore in this way this affects
the organizations.
Sales Budget-
It is a forecast of the sales of a particular organization over a specific period of time. Therefore, it
is quite important that the management of the sales revenues of the organization can be done
through making an appropriate use of this particular budget (Massicotte and Henri, 2020). In the
context of MSD Lighting Ltd it is necessary that its preparation should be made for ensuring a
right management of the sales effectively and efficiently.
Advantages-
 It is a Budget through which the comparison of the actual sales data with the previous
sales data can be carried out. This can therefore help the management to be able to draw
conclusions and recommendations which are useful.
 It is a Budget through which the determination of the actions to be taken for the future
can be done which will be useful for the purpose of taking the right decisions effectively
and efficiently.
Disadvantages-
 A Sales Budget which is prepared by the higher authorities may not be acceptable to all
the people in the organization. Thus, in this way it can impact the level of operations.
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 Its preparation is quite time-consuming and costly. Therefore, in this way it affects the
organizations.
Master Budget-
It is a Budget which is prepared for the purpose of managing the overall level of needs
and requirements of the organizations which are related with the Budgeting process (Mayndarto
and Agustine, 2021). Its preparation helps the firms in keeping a tight control on their expenses
and ensuring that the decisions can be taken smoothly.
Advantages-
 It is a budget which details the estimations in a proper manner within the organizations.
Therefore this is helpful for the firms.
 This budget is quite useful for ensuring that the management of the level of expenditures
can be made in the organizations. In this way it can help the organization in a proper way.
Disadvantages-
 This budget does not offers specialization and therefore it is difficult to analyse and
interpret a particular area through its use.
 This budget is quite difficult to read and update. Therefore, in this way it affects the
different types of organizations.
TASK 4
P5: Comparison of organizations
Financial problem- This refers to a situation in which an organization faces the financial
difficulties and therefore it creates an impact on its position of funds. Like other organizations,
MSD Lighting Ltd also faces financial problems. Some of the problems which are being faced by
it are as follows-
 Increase in overheads- The overheads of the organization have been increasing
constantly and therefore this is increasing the costs and lowering the level of profits.
Thus, this is affecting the financial problem of the organizations.
 Improper inventory management- The inventory items in the organization are not
being managed appropriately and thus this is creating an impact on the firm. Therefore,
this is impacting the financial situation of the organization.
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The use of techniques can be made for the purpose of solving financial problems. Some of them
are explained as follows-
 KPIs- These are the Key Performance Indicators. It is quite necessary and essential that
their use should be made for the particular purpose of enhancing the own performance
appropriately. Therefore, it is quite necessary that their use should be made by the
managers of MSD Lighting Ltd so that the problem of overheads can be solved because
their use will be quite helpful in the determination of the way in which the reduction in
the overheads can be done.
 Benchmarking- It refers to a technique through which the appropriate benchmarks and
standards can be set (Napitupulu, 2020). For the managers of MSD Lighting Ltd it is
necessary that its use should be made so that the problem of inventory management can
be solved which will thus result in appropriate management of the level of stock within
the organization.
Comparison of organizations
Basis Tesco Sainsbury's
Financial problem In Tesco the management of
job orders is not being done
properly which is thereby
creating an impact on the
organization.
In Sainsbury's the prices are
not being set properly which is
thereby creating an impact on
the organization.
Management accounting
system used
Tesco is making the use of Job
costing system to solve this
problem.
Sainsbury's is making the use
of Price optimization system to
solve this problem.
Application of the system The application of this system
can be done by Tesco by
ensuring that the management
of the job orders is done
appropriately and properly so
that the overall efficiency and
The application of this system
can be done by Sainsbury's by
ensuring that the prices are set
quite appropriately according
to the set level of demand
which will thereby help in
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effectiveness level increases. managing the needs and
requirements.
From the above discussion, it can be stated that the managers of MSD Lighting Ltd
should learn from the managers of Tesco and Sainsbury's and thus make sure that the appropriate
actions are taken for solving financial problems. Thus, the management of the organization can
make the use of Cost accounting system to solve the problem of overheads and Inventory
management system to solve the problem of inventory. Therefore, in this way the company will
be able to bring smoothness in its level of operations and it will also be able to make sure that it
can maintain its financial health in the right way so that the goals and objectives in the future are
attained.
CONCLUSION
From the above report, it can be concluded that Management Accounting refers to the use
of the methods and techniques through which the organization is able to manage its financial
needs and requirements quite appropriately. Thus, for the managers of an organization it
becomes necessary that they use it for the purpose of taking of various types of necessary
decisions. Therefore, it is necessary that it should be used by the managers of the organization so
that the financial facts and information can be used to facilitate decision-making. Thus, in this
way the organizations will be able to make sure that they are able to enhance the overall level of
efficiency and effectiveness in quite an appropriate way.
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REFERENCES
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in the Jordanian manufacturing companies. International Journal of Business
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Accounting Model for Sustainable Development. Journal of Management Accounting
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Diab, A. A., 2020. The relationship between informality and the formal management accounting
and control process: a case study from Egypt. Academy of Accounting and Financial
Studies Journal. 24(4).
Dwirandra, A. A. N. B. and ASTIKA, I. B. P., 2020. Impact of Environmental Uncertainty, Trust
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Kumarasinghe, W. S. L. and Haleem, A., 2020. The impact of digitalization on business models
with special reference to management accounting in small and medium enterprises in
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Legaspi, J. L. R., 2020. What business strategy does and what management accounting is
pursuing: A logistic regression analysis.
Lueg, R., 2020. Customer accounting and free return policies of retailers.
Massicotte, S. and Henri, J. F., 2020. The use of management accounting information by boards
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