Management Accounting Project 2

This project analyzes the financial performance of UCK group Plc using various costing techniques, planning tools, and financial ratios. It examines the merits and demerits of different methods and tools, assesses expenses, and analyzes the purpose of cash budgets.

Management Accounting
Project 2

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1: Use of appropriate techniques of cost analysis to formulate income statement..............1
1.2: Wide range of management accounting techniques........................................................3
1.3: Interpretation of draw results from incomes statements.................................................3
TASK 2............................................................................................................................................4
2.1: Merits and demerits of using planning tools...................................................................4
2.2: Assessment of expenses for July and August..................................................................4
2.3: Purpose of using cash budget..........................................................................................5
TASK 3............................................................................................................................................6
3.1: Effective use of accounting tools to examine financial problems...................................6
3.2: Analysing vital measures to overcome financial problems.............................................7
3.3: Evaluation of planning tools used in management accounting.......................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
This particular part of management accounting provide crucial information about all
essential costing method those are used for the purpose of calculating net profit of UCK group
Plc. It is necessary to record financial transaction in their respective set format so that maximum
chances of getting valuable outcomes can be enhanced. This project report is entirely target
merits and demerits of using planning tools for controlling budget are explained under this
report. Purpose of using cash budgets are analyse properly in this specific project module
(Tessier, and Otley, 2012). All kind of financial issues those are present in cited company are
evaluated by using certain ratios to determine current financial position during the period of
time.
TASK 1
1.1: Use of appropriate techniques of cost analysis to formulate income statement
Cost is an essential aspect for an organisation. It is used to determine total cost UCK
group Plc is investing for the purpose of producing products and services during the time. Cost is
related either directly or indirectly with production process. It seems to be value of amount
which is given to get something. The role of project managers is make use appropriate costs that
are essential for examine overall amount on production of one units of products for the company.
They required regulating planning into order to manage and control their additional cost which
enhanced efficiency as well as profitability at the same time. It has been identified that cost is
affecting manufacturing of furniture and other goods of UCK group plc. They motive behind
using effective costing techniques is to make valuable decision to manage their financial
operation (Van der Stede, 2015). By the help of this, whole productivity can be analysing in
order to increase growth and stability for the company during the period of time. There are
different types of costing techniques that are essential in analysing current management position
and other essential aspects those are related presented with UCK. Some crucial techniques are
discussed underneath:
Absorption costing: According to this particular costing method which is applicable at the time
of production of products. It consists of both variable and fixed cost because of this it is said to
be full costing methods. In accordance with making vital decision for increasing profitability for
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the company it does not taken as that much effective. But for calculating net profit for UCK
group plc they need to analyse gross profit generated during the time.
Marginal costing: It refers as one of the most effective costing techniques which is held
responsible in case of additional production of a product. It use to considers only variable cost
and fixed cost at not utilised during calculation of contribution per units. In respect of analysing
efficiency for the company they need to take into account as more reliable and accurate sources
of method.
NET INCOME AS PER ABSORPTION
COSTING: January February
Sales (35per units) 315000 402500
less:
Cost of Production (12+8+5+1.82) 295020 254790
Gross Profit 19980 147710
LESS:
Fixed and variable cost:
variable sales overheads (1 per unit) 9000 11500
Fixed selling cost 2000 2000
Total costs 11000 13500
NET INCOME AS PER ABSORPTION
COSTING: 8980 134210
Computing net profit by using marginal costing
PARTICULARS January February
Sales (35 per unit) 315000 402500
less:
Cost of Production (12+8+5) 275000 237500
variable selling overheads (1 per unit) 11000 9500
variable cost 286000 247000
Contribution 29000 155500
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less:
fixed manufacturing overheads 20000 20000
Fixed Admin & selling cost 2000 2000
total fixed costs 22000 22000
NET INCOME AS PER MARGINAL COST 7000 133500
1.2: Wide range of management accounting techniques
In every business, whether related with small business or large organisation they need to
make use of appropriate techniques which is effective enough to increase overall growth and
stability in coming time. This has been determine that without using right kind of accounting
techniques a company would not be able to reach at their set destination in allotted period of
time. In accordance with this, there are certain other specific aspects those are essential for
measuring the performance of UCK group plc by the use of appropriate accounting techniques
(JOSHI and et. al., 2011). This will analyse more effective in relation to evaluate total
profitability with the use proper allocation of resources. On the basis of collected information for
financial reporting auditor need to analyse performance of the company. There are various
techniques from which accounting information can be collected. Such as:
Financial planning: It is consider as one of the primary tools of deciding in advance
regarding the financial events for the concern to attain primary aims of an organisation. It
consists of both short and long term objectives for the company.
Historical cost: As per this cost accounting need to provide previous data to an
organisation which is associate with each job, procedure and department so that to make
comparison of present position during the time.
1.3: Interpretation of draw results from incomes statements
In order to analyse the performance of the company, it is necessary to make use of data in
specific manner so that better outcomes can be attain effectively. It has been determine that two
of the primary costing techniques to calculate annual net profit and loss of the company. The
results are found fluctuating by using either of the methods. Those techniques will be taken into
account which would provide more effective outcomes for the company in terms of net gains. It
has been seen that net profit incur by company from January and February sales they are able to
earn maximum profit from using absorption costing. The marginal costing is not that much
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effective in respect to absorption costing. The major outcomes are analyse by the help of increase
overall growth and efficiency during the period of time. The main impacts are seen because of
the use of fixed cost treatment. With the use of these two methods the chances of getting more
reliable and accurate results can be more (Amoako, 2013).
TASK 2
2.1: Merits and demerits of using planning tools
Planning is happens to be an essential aspect for an organisation to attain their aims and
objective in more specific manner. This will assist in control various types of budgets in
evaluating performance during the time. It is necessary to calculate on regular basis to make use
of standard to increase overall stability and growth for the company. This seems to be effectively
related with internal tools and techniques those are useful in respect to manage and control total
risk factors that are exist in an organisation. Budget is said to be prediction of future cost and
expenses those are going to incur by the company. There are various types of planning tools that
are effective for an organisation. Some of them are:
Forecasting tools: As per this tools and techniques, manager can easily be able to
examine future activities on regular basis. It would be implemented by using past and previous
information for the purpose of evaluating performance during the time.
Advantage: The main objective of using these particular techniques is to analyse future
costs and expenses a company is going to incurred (Hilton and Platt, 2013).
Disadvantage: It is total based one estimation which wills leads to bring less chance of
growth for the company.
Contingency tools: It is an important planning tools that can be used to measure overall
risks that are present in an organisation. This seems to be effective enough to deal with any kind
of situations that are difficult to handle.
Advantage: As per this specific techniques which a company can use to determine their
total drawbacks before making any important decision related with production.
Disadvantage: This seems to be more difficult to evaluated condition without having
suitable plans. It has been seen so because of qualitative nature.
2.2: Assessment of expenses for July and August
In accordance with analysing expenses that UCK group plc has incurred during the period
of July and August are discussed underneath:
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(Total expenditure of high activity – Expenditure from low activity)
Total cost=
(Highest activity per hour spend – Lower hour spend)
Total expenditure (Per units): (9820-7410) / 795-505)=8.31
Total expenses for July:
= 650*8.31= 5401.5
For August:
= 750*8.31= 6232.5
2.3: Purpose of using cash budget
It is necessary to make use of budgets to analyse total cash flows incur during the period of
time. It is necessary for manager to make use of data in reliable and accurate manner so that maximum
chances of generating positive outcomes can be attained in more easily. This seems to be associated
with forecasting of income and expenditure as primary motive for the company (Parker, 2012). The
primary motive for the company to increase efficiency as well as productivity through controlling extra
costs those are affecting routine of an organisation. It is the total sum of amount which is uses through
proper allocation of main aims that are being set for the coming year. Cash budgets are valuable
budgets that is related with analyse total inflows and outflows that are incurred during an specific
period of time.
Cash budget Amount
Particulars September
Opening balance 9000
Cash sales 39000
Sale on account 5648
Total Cash collected 53648
Less:
Purchase -16800
Selling and administration
expenses -13000
Equipment cost -18000
Dividend paid -4000
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1848
Add: minimum cash balance 5000
Expected cash at the end of
September month 6848
TASK 3
3.1: Effective use of accounting tools to examine financial problems
Ratios Formula UCK furniture’s UCK woodworks
ROCE (Return on
capital employed):
Operating profit/Capital
employed*100
5890+3600/23100+31
930*100
=9490/55030*100
=17.24%
6955/81230*100
=8.56%
Operating profit
margin
Operating profit / sales
*100
9490/13000+24900*1
00
=25.03%
6955/81230*100
=8.56%
Assets turnover Revenue / Net assets 13000+24900/23106+
31930
=0.68 times
8150/81230
=0.100 times
UCK Furniture’s UCK WOODWORKDS
According to this particular unit which is
associated with production of only single
product. Such as Desk.
Under this company which is held responsible
for providing necessary raw material for UCK
Furniture’s.
In case of making certain investment planning,
the manager uses to examine ROCE which is
giving only 17% of total return on operating
profit for the company.
In this particular company, the only return they
are incurred from their total investment is
about 8.6% during the time.
In respect to take assets turnover as primary The total repetition of assets is taking only 10
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tool to evaluate overall performance of an
organisation. The assets are rotating in 0.68
times in financial years.
times in a year. This happens to analyse
position of the company through using detail
about proper utilisation of resources.
3.2: Analysing vital measures to overcome financial problems
There are various types of accounting related issues that are affective performance of an
organisation. It is necessary to make use of evaluated financial situation of UCK group plc to
require reaching at their set destination (Boyns and Edwards, 2013). There are certain tools are
mentioned underneath:
Key performance indicators: It happens to be more useful in order to resolve any critical
financial issues through making analysis by financial condition by using past and present time
data.
Financial governance: It is a specific technique which is based on certain rules and regulation
that are formulated by the government in order to run business in more specific manner.
3.3: Evaluation of planning tools used in management accounting
As per the above mentioned various tools those are effective enough to handled any kind
of issues associated with the company in respect to controlling budgets. Some of them are
forecasting tools which will be essential to analyse future estimation of cost and expenses that
are incur by UCK group (Banerjee, 2012). Another one is contingency tools that is use to
measure overall risk of present in the company.
CONCLUSION
From the above project report, it has been concluded that management accounting can
assists and organisation to use effective techniques that can help company to attain future aims
and objectives. By the help of various costing method they are able to evaluate total net profit
during the time. Overall analysis is done to enhance internal and external growth and
sustainability for the company in coming time.
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REFERENCES
Books and Journals:
Tessier, S. and Otley, D., 2012. A conceptual development of Simons’ Levers of Control
framework. Management Accounting Research. 23(3). pp.171-185.
Van der Stede, W. A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research. 27(1). pp.171-176.
JOSHI, P.L. and et. al., 2011. Diffusion of management accounting practices in gulf cooperation
council countries. Accounting Perspectives. 10(1). pp.23-53.
Amoako, G.K., 2013. Accounting practices of SMEs: A case study of Kumasi Metropolis in
Ghana. International Journal of Business and Management. 8(24). p.73.
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1), pp.54-70.
Boyns, T. and Edwards, J.R., 2013. A history of management accounting: The British
experience (Vol. 12). Routledge.
Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt. Ltd.
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