Management Accounting: Requirements, Methods, and Cost Analysis

This document provides an introduction to management accounting and its essential requirements. It explains different methods used for management accounting reporting and provides a step-by-step guide to calculating costs using appropriate cost analysis techniques. The document also includes examples of income statements prepared using marginal and absorption costs.

Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
Task1................................................................................................................................................3
P1 Management accounting it's essential requirements of different types of management
accounting systems......................................................................................................................3
P2 Explain different methods used for management accounting reporting................................5
TASK 2............................................................................................................................................7
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................7
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control......................................................................................................................11
TASK 4..........................................................................................................................................12
P5 Compare how organizations are adapting management accounting systems to respond to
financial problems.....................................................................................................................12
CONCLUSION..............................................................................................................................14
REFRENCES.................................................................................................................................15
Books and Journal.....................................................................................................................15

INTRODUCTION
The term Management accounting is described as an tools and equipments of accounting
that is plentiful to assure that the company are applying amened and finest possible usage of their
constricted and valued assets and resources. This is using for resolving the several projects and
work that involve measurement, examine and chiefly showcasing their financial information and
data to the administrator to create rapid and fine informed judgements and determination . In
regards of the organisation that is small as well as medium, The process of management
explanation resolve a several different problems that involve constricted credit facilities,
deficiency in the demand and request of their goods and sharing inappropriate system of
structure of recording(Amran, 2020).
The company Connect Catering Services, is the very famous and reputed
company in U.K. For catering fresh foods and family oriented company. The organisation have
been prosperous in directing their organisation for the many years because of their quality and
excellence in products and services. This context is going to describe about the management
accounting and their applications by assorted techniques. This is also include several tools and
equipments of planning that will going to support the company in resolving the issues and
problems of the company.
Task1
P1 Management accounting it's essential requirements of different types of management
accounting systems.
Management accounting is applicable and appropriate equipment and also very useful for
gaining financial information which are recorded annually in the statement of financial year that
is very important and that involve accounts of profit and loss, cash flow, balance sheet .The main
objective and target is to develop the procedure of decision making in the organisation to
enhance their process and system much sustainable to accomplish their targeted aims and
objectives(Borker, 2016).
The process of management accounting has been very effective to create huge and vast
share and they gain effective and better outcomes of decision making . Few of their chief rule
and values has assisted different company around the globe to develop the administrator and

director capabilities and quality of decision-making and also give their contribution to improve
and develop more productivity of the company(van der Kolk, 2019)..
The extraction of management accounting is comes from the accounting of financial year,
also there is a huge fluctuation and variation among the two managerial accounting. This
accounting is much advantageous and used by many companies(Bui, and Nguyen, 2020). There
are some differences among the financial accounting and management accounting that are
mentioned below:
Basis Managerial Accounting Financial Accounting
Content This is accounting is connected
with financial and non financial
information.
This accounting is only related
with one information and that is
financial information.
Content This accounting is generally
and mainly applied by the
internal stakeholders for the
procedure of decision making.
This cater a information that are
much required for each
stakeholder because that
alleviate decision making that
are connected to their interest
There are few kinds of system that are explained below:
 Cost Accounting System- This is the procedure of maintaining, examine and coverage
each cost such as fixed cost, semi variable cost, variable which are sustain in the regard
of business. This also support the management in analyzing and determining the domain
that required much development and few steps for minimizing the bad points. This also
called as product costing system. This structure serve the company to measure and
identify the price of the goods and their profit and earning investigation and the valuation
of inventory . The major aim behind this system is to develop and enhance the margin of
the net profit of the product in the company(Fuzi, Habidin and Effendy, 2016).
 Price Optimizing System- This is the procedure of mathematical that assist the company
to identify the cost of the products. This system also support in forecast the alteration in
the cost or volume and analysis the appropriate cost and supreme amount so that a

consumer can purchase the product . This system is also serve the company for applying
cost as strength and strongest profit lever.
 Influence: This principle is a very critical and described the power of communication to
make strong capabilities to take more appropriate decisions and much powerful. This
also describe the exact and unbiased information so that it become much useful to
examine and measure and choose the amended option so that the company can resolve
the problems that are facing by them. This process is merged several thought process
because one bad action and activity create huge impact on the all department so they have
to become much aware to take any actions and to build and established appropriate
coordination among the departments and develop, improve productivity, growth of the
company. This further aids to become authoritative due to the result of getting access to
the most required information that is useful to them(Grishanova, Tatarinova and Kirina,
2016).
 Relevance: The relevant information is much required for everyone. This is very required
and mandatory for the individual and for the company as well to access and used most
suitable and relevant information to take appropriate and proper decision for the available
resources. This is much required for the individual that are going to take decision to
analysis the requirements of every shareholders because as they working and contributing
in the company with the target of maximize the outcomes.
 Inventory Management System- This approach is a very systematic to share, arranging
and handling the stock list of final goods, raw material and further elements in an
company. This also manage and handle the quality of the goods for controlling the sales
and the inventory and stock of the company. This also assure the accessibility of correct
stock in correct and accurate quantity at the proper time and proper location and also
acquire them at a very appropriate cost. This also minimize the uncertainty of
merchandise oversupply and deficit for the company that are acquiring so compound
manufacturing process and supply chain. The aim of this system is minimizing the cost
and losses of the company and to maintain the fluidness.
P2 Explain different methods used for management accounting reporting.
The reports of accounting plays a important portion to provide the entire performance of
the industry trends. This report of accounting are maintain after a specific time of period that

cater a collective prospect of company fiances(Uyar, 2019). These kinds of reports involve
information of financial year from the documented transaction of accounting and also cater
information about the operational cost, profit and earnings of a goods the revenues of sales that
is earned. This context support the administrator to take better and appropriate decisions and help
them to assist the path towards the proper direction for accomplishing the goals and aims of the
company(Ismail and Mia, 2018). There are some reports that is prepared and maintained by the
administrator to use report of management accounting are mentioned below:
Budget Report- This is most cardinal kind of report and also support the company managers to
identify, analysis and handling the value out of the company. This is very required and essential
for identifying the performance of the organization. A budget is generally maintain on the behalf
of foregone experiences and also support the managers for sharing and providing the workers
amended inducement,bonus, price edged negotiations with the merchandiser and provider. This
report cater an estimation of the profitability and disbursement of the company and set up the
firm or enterprise for analyzing and observing the sudden condition and situations that arises
because of the modification in nature or dynamic environment(Kihn and Näsi, 2017).
Job Cost Report- this report cater a normal prospect of the entire cost sustain on specific task
and program and then compare them with anticipated gross and income that is generate for this
task. This report help then company to evaluate and measure the earnings of the particular
project and optimize their procedures of operational to create it much gainful. It expedited in the
determination of the advanced gain enterprise sphere and giving little concentrate on the
enterprise gain devalued returns. This also help in finding the most appropriate expenditure that
is used on this project so for obviate loss and for controlling them and make that project more
profitable.
Inventory and Manufacturing Budget- This context is the compact of the quantity of stock list
that is held by the company at a particular provided time of period. This report support in
centralization and collecting the information and data to the stock list value, assortment of
surfaces include the procedure of manufacture and value of labor that is linked with the
optimum collection of natural resources and then moving them into the complete and final
products. The aim of this report is to generating the procedure of production very effectively and
and basically it involve the item like cost of the labor or operating cost according to the per unit,
stock list loss price and so many cost(Lebedev, 2019).

Order Information Report- This report assist the management committee to measure the trend
of the business and their efficiency and effectiveness of the business. This context conduct the
information of several commands that is acquire and accepted by the organization. It also
support in integrating several direction operations for accomplishing price leadership on the
ordered and settled orders.
Accounts Receivable Aging Report- This cater a information that is connected to the credit
balance of the consumer and involve several assemblage portion like 30 days, 60 days and 90
days or later. This serve the positioning of the organization argumentation and policies with
their consumer capabilities of paying the charges. It also cut down the consumer equilibrium.
This is applied by the administrator for analyzing and determining the issues and difficulties that
is connected to the organization credit collection procedure. It also assure to pull out the aged
bad debts and maintained the capable fluidity in the company.
Performance Report- This context is going to direct the extremity outcome of the functions and
action or performance of the person in regard to the task that is done by them. This report is
perform like a base line for the modular presentation or performance, measuring the deviation
and acquire accurate activities and function to remove and minimize those difference. This also
involve the presentation sign such as accomplishment successful, aims accomplished , task and
objectives completed and so on.
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
Preparation of income statements:
Cost per unit under absorption costing-
Activities April May
Variable Manufacturing Cost per unit 4 4
Fixed Manufacturing Overhead Cost per unit 6 5
10 9
Income statement under absorption costing
Particular April May
Sales 16000 16000
Less: Cost of sales ( COS) 20000 23000

Fixed Manufacturing Overhead Cost 15000 15000
Variable Cost 10000 12000
Cl. Stock 5000 9000
Op. stock 0 5000
Gross Profit/ Loss -4000 -7000
Less: Fixed Non Manufacturing Cost -4000 -4000
Net Profit/ Loss -8000 -11000
Cost per unit under absorption costing-
Activities April May
Variable Manufacturing Cost per unit 4 4
Particular April May
Sales 16000 16000
Less: Marginal Cost of Sale (MCOS) 8000 10000
Variable Manufacturing Cost 10000 12000
Cl. stock 2000 4000
Op. stock 0 2000
Contribution 8000 6000
Less: Fixed Manufacturing Overhead Cost 15000 15000
Less: Fixed Non Manufacturing Cost 4000 4000
Net Profit/ Loss -11000 -13000
Reconciliation statement:
Particular April May
Net Profit/ Loss under absorption costing -8000 -11000
Less: Cl. stock -3000 -2000
Net loss under marginal costing -11000 -13000
2 a

1. Identify which costs are fixed and which costs are variable.
Fixed cost:
Activities Amount
Manager Salary 5000
Rent Expenses 5000
Insurance Cost 500
Utility 500
Advertisement cost 1000
£12000
Variable cost:
Activity Amount
Direct Material costs per unit of Pizza 3.50
Direct Labour costs per unit of Pizza 1.50
Direct Overhead costs per unit of Pizza 0.50
£5.50
2. Show the Break-even point using a Break-even graph.
Break Even Point (In unit): Fixed cost / contribution per unit
Contribution per unit = Selling Price per unit - Variable cost per unit
= 9.50 - 5.50
= 4.00
BEP = 12000 /4
= 3000 Units
Break Even Point (In revenue): Fixed costs / PV. Ratio
PV ratio = Contribution/selling price*100
= 4/9.50*100
= 42.10%
BEP (In revenues) = 12000 /42.10 %
= £ 28503
3. What would be the Margin of Safety if the organization managed to sell 2500 Pizzas?
Margin of safety sales = Sales unit - BEP in Units
= 2500- 3000
= -500 Units

4. If the manager’s salary is increased to £6,000, how will this affect the BEP in units and in
sales value?
If manager’s salary will increase than it will affect to fixed cost and revised fixed cost will be of
£13000.
New Break Even Point (In unit) = 13000/ 4
3250 Units
New Break Even Point (In revenue) = 13000/ 42.10
= £ 30878
2 b
Preparation of graph:
Activity Amount
Total Costs (12000+55000) 67000
Revenues per Unit (95000-67000)/10000 2.8 Per unit
Total Fixed Cost 12000
Break Even Point 28503
Variance analysis report:
Actual units sold = 12000

Budgeted units to be sold = 10000
Budgeted price per unit = 9.50
Sales volume variance = (Actual units sold - Budgeted units sold) x Budgeted price per unit
= (12000- 10000) * 9.50
= 2000 *9.50
= 19000 Favourable
Flexible budget
Items Actual Budgeted Variance
Sale price 10 9.50 .50 Favourable
Sale units 12000 10000 2000 Favourable
Revenue 120000 95000 25000 Favourable
Fixed costs 15000 12000 3000 Adverse
Variable costs 5 5.50 .50 Favourable
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.
Management equipments of accounting involves the procedure and techniques that
support the company management committee to take proper and suitable decision for the
company. The main and chief objective of this report is to develop and improve the presentation
and performance of the company also it also help them to add the belief and values in the
procedures of the company , principle and strategic aims and targets. There are several kind of
functions that is performed and present by the committee of management like controlling ,
planning, price fixing and many more. There are several equipments that are required by the
company for various purpose:
initially, the planning of the organisation activities is accomplished on the behalf of
analysing and evaluating the functions. This equipments is applied by the management
committee for the budgeting process as well(Mazarak and Fomina, 2016).
Budget: Budgeting is the process of prediction of expenses and revenues that is attained
and gained by the company on particular time of period and also reconsider on a constant cyclic
foundation. This is kind or form of financial program that explain the particular time period and
also involve the quantity of money that is allotted to a specific objective. This is categorised in to
two categories and that is capital budget and other is operational Budget. There are some various
kind of budgets that is maintained by the management team of Connect Catering Services are:

Cash Budget- This is the assuming argument that involve the outflows and cash flows in
a particular time of period. This also help the management team to find out the origin and quality
of the flows. This also identify the cash accessibility and allotment on a particular time of
period. Advantage- The cash budget support the company to avoid the conditions like below or
over fluidity and successful preparation for the effective and efficient business
operations.
 Disadvantage- These budget are maintained on assumptions and does not assure the
quality and too much stiff in the nature and does not acknowledge risk of the dynamic
environment of business.
Sales Budget- The sales budget assist to forecast and assume the sales of the organization's
goods and services of the particular time of period or financial period. This budget support the
form and plan the strategies for their sales in order to improve their sales.
Advantage- An exact and correct equipped sales budget is much required for the preparation of
the superior budget because this help as the base for the budget . This budget also helps the
management team to assume their capabilities to gain the more revenues through the gross sales
of their goods and services(Murthy and Rooney, 2018).
Disadvantage- The environment and surrounding of business is impulsive and changing,
and the desired and requirements of the goods and services is doubtful, so there are much
chances and possibilities of devise and imprecise sales prediction and that might be show in
below the presentation and manufacture or over the production.
TASK 4
P5 Compare how organizations are adapting management accounting systems to respond to
financial problems.
The issues and problems of financial year are the situations and condition in that the
company are not capable to meet their responsibilities and objectives of financial year because
of deficient resources accessible in the company. This circumstances occur because of the
advanced rigid operational cost, advance level of non fluid finances and resources, gross and
receipts because of ruination and failure in the economy and bad budgeting with the extreme
level of obligation burden. This is an sign of the company's failure and also cause to enduring
casualty and harm on their quality . The financial management involve some activities like

formulation and preparation of budget , analyzing the root and informant of funds, much
productive capital framework improvement and so on. If the management team of the company
fails in handle and manage the any kind of situations and factor that is mentioned above then it
many cause to financial problems of the company. There are some financial issues are explained
below:
 Declined Sales Revenue- In this the company faces so many problems like extreme
tumble in sales income and because of these kind of operations, they are not capable to
generate profits. The reason for this failure may relate to anemic policies of
merchandising, powerful rivalry, improper strategies of costing and anemic trade good. In
regard of connect catering services, there were deficiency in strategies of marketing.
 Unwanted High Costs- This issues is connects with modification in price and value that
shows the losses in the profits margins of company. This situation can move out to be
much risky for the endurance of the company in the market(Rizza and Ruggeri, 2018).
Accounting techniques used for solving financial problems:
 Benchmarking- This technique is used to evaluate goods, services and the process for
analysing the performance of the company. This technique cater the company an
penetration that help the company to analyse the weak points of the company.
 Key performance Indicators- This technique is used to show the aims of the
organisation. This technique is concentrating on planning, strategies, development and
efficiency in the process of the organisation.
 Financial Governance- This technique show the way for assembling, handling
observing and identifying the information of financial year of the company. This
technique is connected to the norms and process that create impact on the entity of the
company in terms of financial.
Basis of Comparisons Connect Catering Services Floral Catering Services
Financial Issues The main problem of this
company is it does not gain
continuous revenues and they
have extreme modification.
The company is constantly
spread out their operational
capabilities their market share
is not upgrading, that is why it
create a problems for the

company.
Techniques for issue
recognition
The company use budgetary
control technique, which help
the company to raise their
operational cost.
The company is using
benchmarking techniques
because it will help the
company to identify the
problems that is related market
share and unsuitable
merchandising equipments and
policies that is formulate by
the company.
Management accountants solving financial problems.
Management accountant have the skills of leadership and managerial which support them
to show the formulation of the financial statements by applying several accounting equipments
and methods that is connected to the pricing, budget control and ,any more. In the end connect
catering services are much effective because they are using much effective accounting
techniques in order to solve the financial problems. They are using benchmarking, KPI and
many more techniques which help the company measure the services, goods and techniques in
order to analyse the performance of the company. Also, They are using effective KPI techniques
in order to show and represent the aims and goals of the company. This process is focusing on
planning, making strategies and so many things in order to run the business effectively.
(Sugahara, Daidj and Ushio, 2017).
CONCLUSION
From the above mentioned report it has been concluded that Management accounting
system play a critical role for the financial wellness of the company. This compound some
technique of management accounting that serve tools and strategies to the management team to
accomplish their goals and targets. The targets is raising the productiveness and developing the
ratio and capabilities in the operations. The surrounding which the company direct are changing,

unsure, analysable and agonistic, and for a company to preserve their position it is much
required for the company to applie the tools of management accounting.

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