Management Accounting Techniques and Budgetary Control

B09774
MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
L0. 2: Apply a range of management accounting techniques..........................................................4
P3. Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................4
M2. Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents.....................................................................................................9
LO. 3: Explain the use of planning tools used in management accounting using budgets for
planning and control......................................................................................................................10
P4. Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.......................................................................................................................10
M3. Use of different planning tools and their application for preparing and forecasting budgets
...................................................................................................................................................12
LO.4: Compare ways in which organizations could use management accounting to respond to
financial problems.........................................................................................................................13
P5. Compare how organizations are adapting management accounting systems to respond
financial problems.....................................................................................................................13
M4. Analyze how, in responding to financial problems, management accounting can lead
organizations to sustainable success..........................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
This project report is based on fundamentals of management accounting practice in business
environment by managerial accountant. Report consist calculation of costs on the basis of two
methods; marginal costing and absorption costing. Both costing methods have their advantage
and importance which is discussed by showing calculation of income statement through marginal
and absorption method. Some of the financial problems face by managerial accountant is also
discussed and how to solve these issues will reveal methods of costing management. Tools and
techniques of accounting finance will explore options which can be adopt by management to
budget or forecast its sales and also importance of key performance indicators to measure actual
performance has been shown in this project report. Sustainable success concept will show why it
is important to achieve by every firm and what value do it added to firm’s net worth.

L0. 2: Apply a range of management accounting techniques
P3. Calculate costs using appropriate techniques of cost analysis to prepare
an income statement using marginal and absorption costs
Cost: Also known as expenses and categories into two types; variable and fixed costs and
in income statement it further divided into two parts; direct and indirect expenses. Direct
expenses are those which are directly associated with production of finished goods;
indirect costs are not directly associated with manufacturing but it supports to reach
customers.
Different costs and cost analysis:
Variable costs: These are flexible expenses which increase with the increase in
production. Mostly it is calculated on per unit basis to decide price of product and also
known as marginal cost of the product.
Fixed costs: As per name it is fixed in nature and doesn’t change with production. It is
liability for every business and not tolerable for example; rent expenses, lighting and
salaries (Budgeting software, 2020).
Further classification of costs on the basis of method;
Marginal costing: This costing method also known as contribution margin. It concerns all
types of expenses which are variable in nature to calculate cost per unit. This variable per
costs deducts from selling price per unit to get contribution per unit.
Absorption costing: It absorbs all the expenses both fixed and variable associated with
production directly to absorb at the time of manufacturing.
Quarter 1 & 2
Calculation of product cost per unit:
Quarter Quarter