Marginal Costing System - Doc

Management Accounting

Table of Contents
INTRODUCTION ..................................................................................................3
P1 Discussing and evaluating various management accounting systems and its essential
requirements within Organization................................................................................................3
P2 Explaining different methods which can be used for preparing management accounting
reports..........................................................................................................................................5
P3 Calculation of net profit /(Loss) using absorption and marginal costing system for Unicorn
......................................................................................................................................................6
P4 Discussing various advantages and disadvantages of different types of planning tools which
can be used in budgetary control...............................................................................................12
P5 Comparing different ways in which Unicorn is using management accounting system for
dealing with the various financial problems..............................................................................13
CONCLUSION .....................................................................................................15
REFERENCES .....................................................................................................17

INTRODUCTION
Management accounting can be defined as process in which main aim is on preparing
different managerial reports that helps in short term decision making (Management Accounting,
2019). Currently, companies generally adopt the different MA tools and techniques which is
useful in company in taking profitable business decisions. The report is based on Unicorn which
is consists of groceries industry for providing wide variety of choice to customers. It covers the
different tools and techniques in calculation of net profit under marginal costing and absorption
costing. The report will be providing deeper insight about the requirements of various
management accounting tools used by Unicorn. It also depicts that how various managerial
report will be helping the company in developing different strategies and policy framework for
the near future. This also discuss the appropriateness of costing system which can be used for the
company in costing and profitability assessment. In addition to this, company can also analyse
that which planning tool will be helping Unicorn in taking better financial decisions for the
company. Further, it also entitles various Management Accounting techniques which will be
assisting company in responding various monetary problems effectively.
P1 Discussing and evaluating various MA systems and its essential requirements within
Organization
Management accounting is the method of identifying, measuring, analysing, interpretation
and communicating various information which helps the manager in preparing organizational
goals for the company (Bogsnes, 2016). With regards to Unicorn, management accounting is
highly important because it helps manager in taking profitable decisions for the company. By
using management accounting system business unit can manage their operations more effectively
and efficiently which helps in increasing profitability of company.
Job costing system
Job costing can be defined as the process where the calculation of different jobs is been
allocated in various departments of Unicorn. The job costing helps the manager in knowing
where the extra cost has been allocated and where are loopholes in the company in order to
control the cost of the company.
Advantages Disadvantages
 It helps in determining profits for the
company of each job;
 It needs more clerical work to
complete the job;

 It acts as basis for estimating cost of
similar jobs in Unicorn;
 The system provides detailed
assessment about material, labour and
overhead cost.
 There is lack of job standardization
under job costing method;
 It is highly expensive method over
others.
Cost accounting system
Every business in the industry produces and sells product and services with the aim to
generate high profit margin for the company. Under this method, it is beneficial for the company
in making assessment of cost per unit. Hence, by determining direct and indirect expenses related
to product in company cost per unit can be determined (Chenhall, 2015). Calculation of per unit
cost by dividing total cost from number of units produced in the company. Thus, by adding profit
margin in cost per unit, total price can be calculated by Unicorn.
Advantages Disadvantages
 The system helps in controlling
financial performance as the method
gives input for standard costing
 This system helps in Facilitating
ascertainment of unit production cost
 It helps in setting new prices of
products or services
 It is complex in nature and needs
professional employees for applying
cost accounting method in Unicorn;
 It is expensive and time intensive
method
Inventory system
With regards to Unicorn, management of inventory is highly required because it directly
impact on cost of the company. Thus, managing both cost and profit firm should focus on
undertaking various method of calculating inventory such as LIFO, FIFO, EOQ etc method.
However, economic order quantity method clearly presents units which needs to be maintained
within the company. This in turn helps in controlling on both holding as well as ordering and
which in turn increases profit margin.
Advantages Disadvantages
 It helps in Tracking various inventory  It takes a lot of time for determining