Management Accounting Systems and Reports for London Tradition

This report discusses the importance of Management Accounting Systems and Reports for London Tradition, a manufacturing company based in London. It explains different systems like Cost Accounting, Inventory Management, Job Costing, and Price Optimization, along with their essential requirements. The report also highlights the benefits of using these systems and evaluates their critical aspects. Additionally, it discusses two cost calculation techniques, Marginal Costing and Absorption Costing, along with their advantages and disadvantages.

Management Accounting

INTRODUCTION
Management Accounting refers to the way in which the use of different types of methods
and techniques can be made to take important decisions so that this can be helpful for the
organizations (Alsaid and Mutiganda, 2020). Management Accountants should make sure that
they are able to make its use for attaining goals and objectives in the future. Therefore, it is quite
crucial that it can be used according to the specific level of needs and requirements which persist
in the organization so that the necessary actions can be taken in order to solve the problems and
to take the important and crucial decisions which will be helpful for the company. London
Tradition has been selected for this report. It is a manufacturing company which has its
headquarters in London, United Kingdom. The focus of this project will be on the way in which
Management Accounting is required to be used so that the attainment of the goals and objectives
can be done.
TASK 1
P1: Management Accounting Systems
Management Accounting refers to the use of financial data, facts and information so that
the decisions can be taken in a better manner (Balashova and et.al., 2021). The managers of
London Tradition should make sure that they use it appropriately in a right way.
Different types of Management Accounting Systems can be used by the firms. Their
explanation is provided as follows-
Cost Accounting System- In this system, an accurate determination of the costs can be
made (Cvetkoska and Eftimov, 2021). Thus, it has to be used for the particular purpose of taking
actions which are crucial for reducing the costs. It is a system which is useful because it is
helpful in the determination of the overheads and segregating them according to the departments
which will therefore help a lot in taking of the necessary actions accordingly. Therefore, it
should be ensured that this system is used appropriately for managing the excessive costs in a
proper and appropriate manner. The management of London Tradition therefore should ensure
that its use is made quite properly.
Essential requirements-
 Assessment of the overheads can be done when the use of this system is made which will
help in enhancing the overall level of profits.
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 Through making the use of this system the way in which the costs are to be reduced
should be identified which can help the firm a lot.
Inventory Management System- Through the use of this system the inventory level can
be assessed quite properly (Golyagina and Valuckas, 2020). Thus, through making its use a
better track of the inventory items can be kept which will thus help a lot in taking of important
decisions for reducing the excessive costs which are related with inventory. It is required to be
used for the purpose of ascertaining the way in which the tracking of the stock items can be
carried out so that the appropriate actions can be taken accordingly. London Tradition therefore
has to make sure that it makes its use so that it can manage the different types of stock items in a
better manner.
Essential requirements-
 In this system, the tracking of the stock items should be done so that the needs and
requirements are managed well.
 In this system, the decisions which are related with inventory management should be
taken which will therefore help the organizations a lot.
Job Costing System- In this system, the better track of the different types of job orders
can be kept so that the right decisions can be taken in this manner (Indrasari, 2020). Therefore, it
can be stated that through its use the identification of the way in which the detailed track of the
different types of job orders can be kept can be done which will thus be quite helpful for the
companies. It is helpful in the identifying the way in which the enhancement in the profits which
are being earned through job orders can be done. In the context of London Tradition, it can be
stated that this particular system should be used which will help in the attainment of goals and
objectives.
Essential requirements-
 In this system, the job orders are required to be managed well so that the better decisions
can be taken. Thus in this way the better management of the job orders can be carried out
quite effectively and efficiently.
 Through this system, the tracking system can be used so that the job orders are managed
well which will help in taking important decisions.
Price Optimization System- In it, the mathematical and statistical models and
techniques should be used for setting appropriate prices (Klaprabchone, Chuaychoo and
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Chaemmuangpak, 2020). Thus, In this way better prices can be set which will therefore help the
organizations a lot in ensuring that they can enhance the overall level of profitability which will
help them a lot in ensuring that the overall level of efficiency and effectiveness level can be
carried out.
Essential requirements-
 In this system, the prices can be set according to the demand level so that the attainment
of the goals and objectives can be carried out.
 The market trends can be identified through the use of this system which will help the
organizations in attaining the goals and objectives.
P2: Management Accounting Reports
Management Accounting Reports should be used so that the Analysis and Interpretation
can be performed for deriving the conclusions and recommendations can be drawn (Lada,
Kozarkiewicz and Haslam, 2020). The following reports should be used by the managers of
London Tradition-
Job Costing Reports- In these reports, a proper and detailed assessment of the different
types of job orders and the costs which are associated with them should be carried out. The
managers of London Tradition should ensure that they should be able to make the use of these
reports so that the reduction in the job costs can be carried out (Le, Nguyen and Hoang, 2020). A
detailed review of the way in which the management of the job orders should be carried out
should be done by making their use so that it can help the organizations to be able to take the
right decisions concerning with the future. In this way, the reports will help the managers to be
able to take appropriate actions which will help them in the future.
Inventory Management Reports- In these reports, a proper and detailed assessment of
the inventory should be made so that a better track record of the stock items can be made which
will help in taking of the important decisions (Liem and Hien, 2020). They are helpful because
through making their use the action related with stock management can be taken in a better way.
Thus, this will be useful so as to ensure that the problems and issues persisting with inventory
can be resolved. London Tradition's managers should therefore make sure that they should be
able to make their use so that they can ensure that the appropriate management of the stock items
can be carried out.
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Performance Reports- In these reports, the assessment of the performance level can be
carried out so that the scope of making the desired level of improvement can be found out
(Madhoun, 2020). Thus, in this way the necessary actions can be taken for the purpose of
enhancing the overall level of performance. For the management of London Tradition, it is
therefore desired that the use of these reports should be made for the purpose of assessing
performance and attaining the future goals and objectives.
Product/Service Profitability Report- In these reports, the assessment of the profits
which can be generated through the Product/Service has to be carried out which will help the
organizations a lot (Mahajan and Deobagkar, 2020). The products which are producing regular
profits can be identified in this way and the products which are not producing regular profits can
also be identified so that the profits are enhanced. London Tradition's managers should therefore
be able to make sure that they can use them for the purpose of identifying the profitable products
and taking all the desired and necessary actions which are important for meeting the needs and
requirements.
There is an importance of making the use of these reports. This importance can be
explained as follows-
 Analysis and Interpretation- With the use of these reports, the Analysis and
Interpretation can be performed in quite an appropriate manner. Therefore, for the
managers of London Tradition it is important that they are used so that the Analysis and
Interpretation can be done quite effectively and efficiently.
 Management of Needs and Requirements- With the use of these reports, the
management of needs and requirements can be carried out in an appropriate way which
will therefore be quite helpful in taking all the desired actions. In London Tradition, it is
quite important that they are used in a right way.
 Identifying the scope of making improvements- Through the use of these reports, the
scope through which the improvements can be made can be identified. London Tradition
therefore needs to ensure that it is able to identify this scope which will therefore help it a
lot for the attainment of the goals and objectives.
 Identification of problems and ensuring their solution- It is necessary that this can be
carried out because the organizations will be able to take the right steps which will help
them a lot in making the improvements as and when required . London Tradition needs to
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ensure that it can do this which will help in taking of important decisions which are
related with the future.
 Taking Decisions- The use of these reports should be made for the purpose of taking
decisions . This is so because the organizations will be able to draw the conclusions and
recommendations which are helpful for it and ensure that the decisions can be taken
accordingly. Through the use of these reports, the managers can make sure that they are
able to consult with their subordinates in detail about the actions which they need to take
for enhancing the efficiency and effectiveness level in an appropriate way.
Thus, it can be stated that through making the use of Management Accounting Reports
the managers should be able to take the essential and desired actions which can be useful for the
organization.
M1: Benefits of Management Accounting Systems
The Management Accounting Systems are helpful for the firms and therefore they have a
wide range of benefits. In London Tradition, it is therefore important that the use of these
systems should be made in such a way so that the essential needs and requirements can be
managed within the company. They are to be applied within the functioning of the company and
thus become an essential part of the organizations so that they are able to make a proper progress
in the future which can thus help them a lot.
D1: Critical evaluation of Management Accounting Systems and Management Accounting
Reports
Their use is important because in this way the organizations will be able to identify the
best decisions can be taken. This is so because because through their use the conclusions and
recommendations can be drawn and accordingly the necessary actions can be taken. London
Tradition is required to make sure that it is able to find out the way in which they are to be used
which will therefore help it a lot in attaining the necessary goals and objectives in the future.
TASK 2
P3: Calculation of costs
This is crucial so that the organizations are able to make sure that they can take better
decisions in a right way (Safari Sarchah, Yazdifar and Pifeh, 2020). London Tradition is
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therefore required to make sure that the use of certain techniques can be made for this particular
purpose. These techniques are explained as follows-
Marginal Costing-
It is a technique which is used in the firms through which the calculation of Break-Even
Point can be done (Semenyshena, Khorunzhak and Zadorozhnyi, 2020). At this point, there are
no profits and no losses for the firm. London Tradition should be able to make sure that it is used
quite appropriately for the particular purpose of taking of important decisions in the future. This
is so because its use is helpful for ensuring that the comparison can be carried out in a better
way.
Advantages-
 The use of this technique is important for the purpose of taking of Short-term decisions. It
can therefore help the organization a lot.
 Through its use the Cost Control can be carried out so that the management of the
different types of costs can be done.
 The use of this technique can be made for avoiding the complication of under or over
absorption of overheads.
 It is quite helpful in the comparison of performance between two or more products and
departments.
Disadvantages-
 In this technique, the separation of the costs is difficult and therefore this can lead
towards inaccuracy in the results.
 Calculations which have been done through making the use of this technique can be
misleading.
 Control provided through budgetary control and standard costing is effective as compared
to marginal costing.
 This technique is useful only for a short term period. It is not useful for long term
decision making.
Absorption Costing-
It means linking of the production costs to the cost unit so that the full cost per unit of
inventories can be calculated. For an organization like London Tradition, it is important that it
can be used so that it can be useful in enhancing the overall level of profits.
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Advantages-
 It is the best method through which the overall costs which are associated with a
particular product can be ascertained quite effectively and efficiently.
 It is the most suitable method through which the preparation of accounts can be done.
Thus, in this way it can be quite helpful for the organizations.
 Through the use of this method the costing for smaller companies can be done. Therefore
this can be beneficial for the organizations.
 It is helpful for the businesses which have a constant demand for their products. Thus,
this can help the organizations.
Disadvantages-
 It is not useful as a monitoring tool and therefore in this way it cannot be used for the
purpose of keeping a check within the company.
 When the use of this method is made the company's performance can look more desirable
and good. In this way this can create a particular level of impact on the different types of
organizations.
 The use of this particular technique is not helpful for the purpose of calculation of Break-
Even Point. Therefore, it can be stated that this can impact the organizations because they
will not be able to do comparison.
 Cost Control and Cost Comparison is quite difficult when the use of this technique is
made. Thus, this can affect the organizations.
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M2: Accurate application of the techniques
It is essential and should be done so that the firms are able to make sure that they can
appropriately take the decisions which are useful. In London Tradition, it is quite important that
the appropriate application of these particular techniques should be carried out in a right way.
Thus, it is highly necessary and important for the organization to make sure that it is able to
enhance the overall level of profits through the use of these techniques. In this way, they will be
able to identify the way in which the overall level of profits can be grown in the future.
D2: Producing of financial reports
Financial reports are useful for the presentation of the financial data which is related with
the organization. London Tradition should be able to make sure that it is able to identify the way
in which it can make their use so that it can take better decisions through making their
appropriate use. Therefore, In this way the attainment of the essential goals and objectives can be
done through using them so that the better decisions can be taken. The managers should thus
ensure that they are able to make their use as and when required.
TASK 3
P4: Advantages and Disadvantages of Planning Tools
It refers to a detailed estimate of the different types of receipts and expenditures during a
particular time period (Shepherd, 2021). London Tradition must make sure that the use of the
Planning Tools should be made so that the appropriate management of the different types of need
and requirements can be carried out which will therefore help the organization a lot in taking of
the appropriate decisions.
With the use of Planning Tools the organization can make sure that they are able to attain
the goals and objectives. Therefore, London Tradition must ensure that it makes the use of these
Planning Tools-
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Operating Budget-
Operating Budget refers to a detailed and proper estimate of the different types of receipts
and expenditures which are present within an organization. The managers of London Tradition
should be able to make its proper use the enhancement in the overall level of efficiency and
effectiveness can be carried out.
Advantages-
 Operating Budget is helpful in ensuring that the different types of plans can be created so
that the various types of needs and requirements are managed in a proper way which will
therefore help it a lot.
 The requirement of various types of resources can be assessed when the use of this
Budget is made.
Disadvantages-
 There may be lack of accuracy in the preparation of this Budget and thus in this way this
can create an impact on the different types of organizations and can affect them a lot.
 If these Budgets are not set with a proper strategy then they can backfire as the
employees can get demotivated.
Sales Budget-
It is a Budget in which the proper estimation of the level of sales can be made for a
particular period of time (Stefanovova, Bartkova and Peterkova, 2020). Therefore, it will be
helpful for ensuring that the right decisions can be taken according to the needs and
requirements.
Advantages-
 Appropriate level of planning can be done through making a detailed use of Sales Budget
which will be highly helpful for the different types of organizations.
 Resource Allocation can be done appropriately through making its use which will
therefore be helpful in the attainment of the goals and objectives in a proper manner.
Disadvantages-
 There is a lack of accuracy in this Budget which therefore can create a particular level of
impact on the organizations.
 It does not accounts for Unforeseen expenses and therefore in this manner this can affect
the organizations.
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Personnel Budget-
It is a Budget in which the the Manpower Budget is covered for a specific period.
Therefore, in this way it can be highly useful for the management of the organizations to be able
to make sure that it can ascertain the right and appropriate steps which are required to be taken to
attain the necessary goals and objectives in a proper and appropriate manner.
Advantages-
 In this Budget, a detailed and proper estimate related with Personnel can be made so that
the appropriate decisions can be taken which will be highly helpful for the organizations
in ensuring that the enhancement in the overall level of efficiency and effectiveness level
can be carried out.
 Through making the use of this Budget, the right estimate of the different types of needs
and requirements which are related with Personnel can be made so that the attainment of
the goals and objectives can be done highly effectively and efficiently.
Disadvantages-
 The preparation of this Budget requires a lot of time and money. Therefore, Not all the
organizations have sufficient availability of time and money to create this Budget.
 Preparing this Budget requires the application of different types of skills. Thus, In this
way it can be stated that this can create a lot of impact on the organizations.
M3: Analysis of the use of Planning tools
The different types of Planning tools should be used in the organizations so that the
implementation of the plans can be made as and when required. For an organization like London
Tradition, it is highly essential and important that it is able to make the use of these Planning
tools so that it is able to ensure that the attainment of the goals and objectives can be done highly
effectively and efficiently as and when required.
TASK 4
P5: Comparison of organizations
Financial Problem- It means a situation in which the organizations are impacted by lack
of availability of funds (Swain, 2021). Therefore, this affects them because this can reduce their
profitability. Like other organizations, London Tradition is also affected by these problems. It
can therefore create an impact on it. This is so because its situation which is related with funds
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can be affected as a result. This can therefore create a high-level of impact on it. The
organization is facing the following financial problems-
 Improper management of overheads- In London Tradition, the overheads are not being
managed in a proper way which is thus creating a deep impact on the organization and is
affecting its functioning. Therefore, In this way it can be stated that the overall
profitability level is being impacted due to this problem.
 Mismanagement of the inventory items- In London Tradition, there is a
mismanagement of the inventory items. This can create a high-level of impact on the
organizations. Thus, it can be stated that the cost of inventory is increasing as a result
which is also therefore reducing the profits as a result.
The use of different types of techniques can be made so as to solve the financial problems. These
techniques are-
 KPIs- It means Key Performance Indicators (Vakhrushina and Vakhrushina, 2021).
London Tradition therefore has to make sure that the detailed use of the KPIs can be
made so that the attainment of the goals and objectives can be carried out. Thus, In this
way it can be stated that the appropriate and proper assessment of the performance can be
done. Also through making their use the organization will be able to make sure that the
problem of overheads can be solved because their use will help in identifying the
departments where the overheads are higher in number so that the actions can be taken to
reduce them in a proper way.
 Benchmarking- It refers to the setting of the different types of benchmarks can be set
(Wang, Qiong and Wang, 2020). The use of this technique can be made so that the
problem of inventory can be solved because the use of this particular technique will be
useful in setting the benchmarks related to inventory and ensuring that they are followed
so that the actions can be taken.
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Comparison of Organizations
Basis Tesco Sainsbury's
Financial Problem It is facing a problem related
with mismanagement of the
job orders which is therefore
creating an impact on the
organization.
It is facing a problem related
with setting of price which is
thus creating a high-level of
impact on the organization.
Management Accounting
System Used
Job Costing System can be
used here by Tesco.
Price Optimization System can
be used here by Sainsbury's.
Application of the System Its application can be done by
ensuring that the track of the
job orders can be kept within
the system so that their
management is done in a better
way.
Its application can be done by
ensuring that the forecast of
the price to be set can be done
in a right way so that the prices
can be set in a better manner
for enhancing the profitability
level.
From the above discussion, it can be concluded that the use of Management Accounting
Systems can be made to solve the financial problems. The use of Cost Accounting System is
essential for solving the problems which are related with the cost. The use of Inventory
Management System is also crucial so that the problem related with the inventory can be solved.
This will therefore be quite useful in the attainment of the goals and objectives in quite a proper
and appropriate manner and will therefore help the organization a lot.
M4: Analysis of response to financial problems
It is important to assess the financial problems because this will be quite helpful in
ensuring that the right decisions can be taken which will help the organizations a lot. Thus, for
the managers of London Tradition it is highly necessary that they should be able to make sure
that they are able to help in appropriately dealing with the different types of needs and
requirements in this way.
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D3: Evaluation of Planning Tools
Planning Tools are quite important as well as necessary because through making their use
the organizations can make sure that they can take the appropriate decisions. The managers of
London Tradition should identify the way in which the use of these planning tools should be
made which will therefore help the managers a lot in deriving the conclusions and
recommendations which are important.
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CONCLUSION
From the above report, it can be concluded that Management Accounting refers to the use
of methods and techniques which can help a lot in taking of the important decisions which can
therefore create a benefit for the organization. Thus, it is highly crucial for the organizations that
they are able to make its proper and detailed use so that they are able to make sure that they can
appropriately manage the different types of needs and requirements which will thus help them a
lot. Therefore, it is highly crucial and necessary to make sure that the Analysis and Interpretation
can be carried out by making its use which will help a lot in ascertaining the actions which hare
quite necessary to be taken and therefore this can he highly helpful for the different types of
organizations in a proper way. Therefore, it can be stated that Management Accounting is quite
important for the organizations. Thus, it can be stated that the identification of the way in which
the needs and requirements can be managed should be carried out. In this way the managers will
be able to help a lot in ensuring that the Analysis and Interpretation can be carried out. The
managers should identify the way in which the application of Management Accounting should be
carried out so that the firms are able to take the decisions which can benefit them a lot. Thus, it
can be stated that it will be quite useful for the managers to make sure that they can manage the
financial facts and information well through making its use appropriately.
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