Management Accounting: Types of Systems, Reports, and Techniques for Decision Making

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
(a).................................................................................................................................................3
Concept of Management Accounting..........................................................................................3
Different types of management accounting systems and their advantage and disadvantage......3
Various methods used for management accounting reports........................................................5
Integration of management accounting within Nasty Gal Vintage company..............................6
(b).................................................................................................................................................6
1. Preparation of cost card under absorption and marginal costing approach.............................6
2. Preparation of Income statement under absorption and marginal costing system...................7
3. Difference between absorption and marginal costing system.................................................8
PART B...........................................................................................................................................9
Preparation of flexed budget and calculation of variances between actual and flexed budget. . .9
i) Advantages & disadvantages of planning tools used by management for establishing
budgetary control.......................................................................................................................10
ii) Incorporation and critical analysis of planning tools............................................................12
PART C.........................................................................................................................................13
(a) Comparison of how organizations can adapt management accounting system to respond to
financial problems.....................................................................................................................13
(b) Critical evaluation of how planning tools solve financial problems to lead organization to
sustainable success.....................................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES................................................................................................................................1

INTRODUCTION
Management Accounting (MA) is basically a process of identifying, measuring, analysing,
interpreting and further communication the financial information with the managers so that they
can use this accounting information in decision-making process. This report is based on the
Nasty Gal Vintage company that offers variety of vintage clothing and other items to its
customer through their eBay account. This report will discuss the concept, types of management
accounting system, reports along with their advantage and disadvantage. Further, the report will
also discuss the integration of management accounting within Nasty Gal Vintage along with the
computation of income statement under marginal and absorption costing system. The report will
than critically evaluate the difference between marginal and absorption costing systems. Further,
the report will cover the computation of flexed budget and variance calculation between actual
and flexed budget. Lastly, the report will cover the different planning tools used for budgetary
control along with the comparison of how different organization uses these tools for solving their
financial problems and achieving sustainable success.
PART A
(a)
Concept of Management Accounting
As per the Institute of Cost and Management Accountant (ICMA), London, management
accounting is the application of professional knowledge and skills in preparation of accounting
information which the manager further uses it for the formation of policies, planning &
controlling of operational activities and financial decision making (Astuty and et.al., 2021). For
example, if the manager wants to make the decision on whether to buy a specific product from
supplier and then sell it to customer or produce the product in house and then sell, the manager
of Nasty Dal Vintage can use break-even technique of MA which is known as make or buy
decision.
Different types of management accounting systems and their advantage and disadvantage
The different types of management accounting system, that can be adopted by manager of
Nasty Dal Vintage for better decision-making are as follows:

Cost-accounting system: This is a system of MA which helps in distributing the total cost
of production into direct and indirect cost which further helps in identifying per unit production
cost of products. For example, if the manager of Nasty Dal Vintage wants to set suitable price of
their vintage clothes than they have to adopt this system because based on per unit production
cost of clothes suitable price of vintage cloth will easily determine.
Advantage:
 It is helpful for eliminating wastes, losses and inefficiencies in the operational activities
by fixing standards for every product.
 On the basis of this system, the management of company can easily make decision on
whether make or buy a product in open market (ALmashkor, 2022).
Disadvantage:
 Under this system, the cost of overheads is absorbed on predetermined rates thus it
causes over absorption and under absorption issue.
Inventory management systems: This is a system which is generally used by the company
for inventory valuation and identifying closing stock of raw material using method like LIFO,
FIFO and AVCO. For example, if the manager of Nasty Dal Vintage wants to identify the
requirement of raw material used for producing vintage cloths, then they have to use this
inventory management system.
Advantage:
 It helps the company in maintaining the right amount of stocks which further leads to
reduction in the wastage of resources.
 Inventory management through bar code scanner and software improves the efficiency
and productivity of employees.
Disadvantage:
 Sometime this system became complex and difficult to understand and use on the part of
rural staffs (Gutiérrez, 2021).
Job-costing systems: This is a system which helps the management of company to track the
cost of individual projects and jobs. It broken down the total cost into three categories i.e.,
material, labour and overheads. For example, if manager of Nasty Dal Vintage need to track the
cost of its any projects such as fashion show, then they can use this MA system.