Management Accounting

This report examines the concept of management accounting and its application within the context of Jupiter Plc. It analyzes various management accounting systems, including cost accounting, inventory management, and job costing, and evaluates their benefits and integration within the organizational context. The report further examines the role of budgeting as a planning tool, analyzing its advantages and disadvantages, and how it can lead to sustainable success. Desklib provides past papers and solved assignments for students.

Management Accounting
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Table of Contents
Introduction....................................................................................................................................3
Task 1..............................................................................................................................................4
1. Explain what is meant by ‘Management Accounting’ and give the essential requirement of different
types of management accounting systems..............................................................................................4
Management Accounting........................................................................................................................4
2. Explain different methods used for management accounting reporting.............................................6
3. Evaluate the benefits of management accounting systems and their application within an
organizational context.............................................................................................................................7
4. Critically evaluate how management accounting systems and management accounting reporting is
integrated within organizational context................................................................................................8
Task 2..............................................................................................................................................9
1: Calculation by using various costing method.......................................................................................9
2: Preparation of profit and loss statement by using techniques..........................................................12
3: Preparation of final account after September...................................................................................16
Task 3(LO3):................................................................................................................................19
1. Explain the advantages and disadvantages of different types of planning tools used in budgetary
control...................................................................................................................................................19
2. Analyse the use of different planning tools their application for preparing and forecasting budgets.
...............................................................................................................................................................21
Task 4............................................................................................................................................22
1. Comparison with other organisation about use of accounting system in resolving financial issues..22
2. Analyse how, in responding to financial problems, management accounting can lead organisations
to sustainable success...........................................................................................................................24
3. Evaluate how planning tools for accounting respond appropriately to solving financial problems to
lead organisations to sustainable success?............................................................................................25
Conclusion....................................................................................................................................26
References.....................................................................................................................................27
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Introduction
The report here discusses the concept of management accounting with reference to Jupiter Plc
and the practical applicability of the management accounting system in the mentioned scenario.
The report analysis and evaluates the different systems of management accounting and
management accounting reports. The study will be made on the importance of a sound
accounting system. A practical calculation will be made on the marginal and absorption costing
and different outcomes will be analyzed on the basis of the calculation. The report further
discusses the role and importance of budgeting as a planning tool for the management and the
problem-solving aspects of the same in brief and how it will guide the company for the long-term
sustainable success of the organization. In this report there are different planning tools which are
used in budgetary control are discussed below in this report with advantages and disadvantages.
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Task 1
1. Explain what is meant by ‘Management Accounting’ and give the essential requirement
of different types of management accounting systems.
Management Accounting
Management accounting is essential part of the company which guides and support them in
various decision-making process and also preparation of various plans and policies for the
growth and development of the company. Management accounting is an accounting in which
business acumen is exercised for the sustainable growth of the organization. Management
accounting enables the management to take long term and short-term decisions by providing
accurate and timely financial and statistical information. In other words, it makes use of financial
and cost data and translates it into useful information so that apt decisions can be taken for
growth of the company (Bizfluent, 2018).
The essential requirement of different types of management accounting systems which are
summarized below:
1. Cost accounting system
The cost accounting system is a management tool to track and control the cost of the product. It
will help the managers to estimate the cost of the product which are they going to produce. Cost
accounting will be used for various purposes by the managers to manage and analyze
profitability of the product; valuation and strategy manage for different purposes. In the case of
Jupiter PLC cost accounting system helps in preparation of the upcoming projects on the basis of
which prices of the tickets will be determined. Cost accounting system keeps the track records of
the materials of the business (Novas, et. al., 2017).
Direct cost - The direct cost for the product will be the cost that can directly be assign in the
production of a specified unit. It will be used by managers to determine the per unit cost for the
product on which analysis will be made (Bizfluent, 2018).
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Standard costing - Standard costing will be used by the managers to ascertain the variations In
the cost where expected cost will be set for a product and change in actual cost will determine
the variation in the cost (Accounting tools, 2017).
2. Inventory management system
Inventory management system is mostly used in the manufacturing firms but in the case of
Jupiter Plc the inventory management system helps in recording and monitoring the inventory
level in the production and manufacturing process. The management accountant of the Jupiter
Plc can sue this system to avoid wastages and maintain the inventory level system in the
manufacturing process. Inventory management system will make systematic check on the inflow
and outflow of the units of inventory used in the conduct of entertainment events. It focuses on
the real time management of the inventory in the company and ensures proper record for future
purpose on which basis business plans will be developed (Accounting tools, 2017).
Jupiter Plc can use following method of inventory management system which are listed
below:
 LIFO (Last in First Out)
 FIFO (First in First Out)
 JIT (Just in Time)
 Weighted average method
3. Job costing system
Job costing system is sued by the managers to ascertain the cost to an individual unit of product.
Jupiter Plc uses job costing system to determine the cost of the individual project in which they
are investing, in the case of events it will be used by the mangers to detect the individual costs in
the overall project, on the basis of which it will pay to the labors in batches. A predetermined
budget will be prepared where the company tracks individual costs for future projects and same
will be used by the managers to detect the cost of the overall project (Accounting tools, 2017).
A job costing system needs to gather the following three types of information which are
listed below:
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 Direct materials
 Direct labor
 Overhead and other cost
2. Explain different methods used for management accounting reporting.
Different types of management accounting reports
 Performance report: The performance report will be prepared by the managers to
evaluate and track the performance of its individual employee and different departments.
It will be used in determining the best performing unit in the company and improvising
productivity. Jupiter Plc use this report to note down the performance level of the
company in each financial year and compare recent performance with past performance
(Cooper, et. al., 2017).
 Financial reports: Financial reports are used by the managers to evaluate and analyze
the financial records of the company. It will be used in financial management and the
management of overall finances of the organization. Financial reports consist of balance
sheet, profit and loss account statement which shows overall performance of the company
in the financial year. With the help of this report, the Jupiter Plc can show their financial
performance to its investors and other stakeholders (Leuz and Wysocki, 2016).
 Budget reports: Budget reports are used in the preparation of the budgets of the
company, and it will be used for analysis purpose of past budgets where new budgets will
be prepared on such basis. Budgets report contains all data or information about the past
budget in a well-defined manner. Jupiter Plc uses this report to record the past budget and
use this past budget in future budget also (Accounting tools, 2017).
 Sales report: Sales report is use to keep a track of the overall sales for a specified period
of time and the future sales will be forecasted on the basis of the past sales report. Jupiter
Plc use sales report to record sales performance done by the company in the past year and
also in recent year (Erkens, et. al., 2012).
 Balance scorecard report: Balance scorecard report is used by the company as strategic
management tool to keep the update of the departments for a specified duration. Jupiter
Plc use balance scorecard report to identify and improve various internal functions of a
company and their resulting external outcomes (Leuz and Wysocki, 2016).
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3. Evaluate the benefits of management accounting systems and their application within an
organizational context.
In the context of Jupiter Plc, the management accounting systems and their applications benefits
to the organization are listed below:
Inventory management system: Jupiter Plc use this system to enhance and improve the
inventory level and its business operations also improve. With the help of this system it
minimizes the costs or expenses and also saves money for the organisation. The management
accountant of the Jupiter Plc uses this system to manage and monitor entire supply chain of
inventory in an effective and efficient manner.
Cost accounting system: With the help of this system the Jupiter Plc can measure the costs and
expenses incurred in the manufacturing system and also change accordingly with the change in
market. The management accountant of Jupiter Plc uses this system to fix and reduces the prices
for the different products and services.
Job costing system: Job costing system helps the Jupiter Plc in the valuation of overall cost
during the production process in the business operations. This system helps to the management
accountant to avoids continuation of efforts in the same job and also maintain the job quality in
an appropriate manner. The management accountant uses different methods and techniques of
job costing system to prepare job sheet for the particular products and services.
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4. Critically evaluate how management accounting systems and management accounting
reporting is integrated within organizational context.
The integration of management accounting systems and management accounting reports helps to
the management accountant of Jupiter Plc in the preparation of various reports which assists to
the management in the taking various decisions for the organisation in an effective and efficient
manner. With the assistance of this the management can improve and enhance the entire system
and also helps them to make the genuine reports for the organisation on the yearly basis
(Weygandt, et. al., 2015).
Following are the benefits provided by the management accounting system and reports to the
organisation which are listed below:
 It helps the management accountant in preparing the business strategies for their business
activities.
 It helps the management accountant in the preparation of financial reports for their
external and internal stakeholders.
 It also helps the management accountant to keep away from the error or omission in the
financial accounting.
 It also helps to the manager in the preparation of planning for their future growth and
development.
 With the help of the management accounting reports and systems the auditor can easily
evaluate the performance and records of the organisation in an appropriate manner.
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Task 2
1: Calculation by using various costing method
Production cost per unit Amount Details
DM 10
DL 20
VOH 5
Total fixed production overhead cost = £100000
Use standard volume of 20000 units to absorb
the fixed production overhead cost
Selling price = £50
Absorption cost = £40
Absorption Costing = £40/unit {10+20+5+100000/20000=40}
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Total production cost:
Budget: Absorption Costing technique Sep 2018
Production Cost
Per Unit Total
£ £
DM 10 18000x10 180000
DL 20 18000x20 360000
VOH 5 18000x5 90000
FOH 5 90000
40 18000x40 720000
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Cost of sales:
BUDGETED COST OF SALES: SEP 2018 Amount
£
Cost of production w1 720000
Opening Inventory 0
Closing inventory -80000
COST OF SALES 640000
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2: Preparation of profit and loss statement by using techniques
ABSORPTION COSTING: BUDGETED PROFIT
OR LOSS STATEMENT SEP 2018
PER
UNIT
TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 5 90000
40 720000
OPENING INVENTORY 0
CLOSING INVENTORY -80000
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COST OF SALES -640000
STANDARD PROFIT 160000
ADJ. FOR UNDERABSORPTION -10000
BUDGETED PROFIT 150000
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MARGINAL COSTING: BUDGETED PROFIT OR LOSS
STATEMENT SEP 2018
PER
UNIT
TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 35 630000
OPENING INVENTORY 0
CLOSING INVENTORY -70000
COST OF SALES 35 560000
CONTRIBUTION 15 240000
FOH PRODUCTION -
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100000
BUDGETED PROFIT 140000
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3: Preparation of final account after September
Actual cost by using absorption costing methods:
ABSORPTION COSTING: ACTUAL PROFIT OR LOSS
STATEMENT SEP 2018
PER
UNIT
TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 5 95000
40 760000
OPENING INVENTORY 0
CLOSING INVENTORY -
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120000
COST OF SALES 40 -
640000
STANDARD PROFIT 10 160000
ADJ. FOR UNDERABSORPTION -5000
BUDGETED PROFIT 155000
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Difference among budgeted and actual cost:
PARTICULAR BUDGET ACTUAL
£ £
FOH CHARGED TO PRODUCTION COST 90000 95000
under FOH charged to Profit or Loss account 10000 5000
FOH CHARGED IN THE MONTH 100000 100000
FOH TRANSFERRED THROUGH CLOSING
INVENTORY TO NEXT MONTH OCT 2018
10000 15000
FOH CHARGED 90000 85000
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Task 3(LO3):
1. Explain the advantages and disadvantages of different types of planning tools used in
budgetary control.
Budgeting
Budgeting is the process of future planning of business operations of the company by building
performance goals and putting them into a formal plan. In other words, budgeting is the process
of preparing financial goals for a business operation of a company and making a plan to attain
those objectives and goals (Accounting tools, 2017).
By budgeting for the future, the Jupiter plc can measure increases performance and increase the
likelihood of success. Once manager has a good idea of how the enterprise has achieved past
performance, they can start preparing an approximation and performance goals for future
expected performance.
Following there are different planning tools which are used in budgetary control are
discussed below with advantages and disadvantages:
Contingency tools: This tool is used by the management accountant for the effective planning
for the organisation growth and development. With the help of this the management accountant
of Jupiter Plc can easily evaluate the risk and manage it in an effective manner (Leuz and
Wysocki, 2016).
Advantages
 With the help of this tool the management accountant can do proper planning for the
business activities in an appropriate manner.
 With the help of this tool the management accountant easily manages the risk and resolve
them in the effective manner.
Disadvantages
 This tool cannot control the external as well as internal activities in an appropriate
manner.
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 This tool cannot easily monitor the uncertain risk and contingency which arises
randomly.
Forecasting tool: This tool is the important for the management accountant because it helps
them in preparing the forecasting budgets for the organisation. With the help of this tool the
management accountant of the Jupiter Plc can prepare budgets and reports for the organisation
future growth and development.
Advantages:
 This tool helps the management accountant to prepare the forecasting for future in which
organisation achieve their goals and targets in an appropriate manner.
 It also helps the management in making the creative products or services for the growth
and development of the business operations.
Disadvantages:
 Sometimes forecasting is not accurate and reliable in every case.
 Forecasting is useless when their will be any change occur in the future.
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2. Analyse the use of different planning tools their application for preparing and
forecasting budgets.
Following there are different planning tools their application for preparing and forecasting
budgets which are listed below:
Forecasting tools: This tool will provide Jupiter Plc and exact forecasting about the future in the
formation of budgets for their business activities. The forecasting tool helps the organisation in
estimation of expenses and income in a systematic manner for the organisation business
activities. This tool helps the management accountant in preparation of budgets and planning for
the organisation future growth and development (Leuz and Wysocki, 2016).
Contingency tools: This tool will provide to management accountant about future contingency
in the detailed manner. The contingency may or may not occur in the future but it impacts on the
strategies and planning of the management accountant in a different a manner. With the help of
this the Jupiter Plc can easily examine and monitor the risk and mange it in an accurate manner.
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Task 4
1. Comparison with other organisation about use of accounting system in resolving
financial issues.
Problems Jupiter PLC Black Rock Solution
Cash Flow Problem. The manager of
company identifies
within cash flow
various problem in
operating and
investing activity.
There is big concern
within company as
the cash outflow is
not stable.
Both companies can
reduce the problem in
their cash flow such
as decreasing
expenses and
increasing revenue
and making use of
investment approval.
Paying too much
tax.
There is big issue
going within
company as they are
too much tax liability
for an accounting
year.
Company is not able
to pay taxes as they
do not maintain
proper record about
their earning and
expenses.
The issues related to
tax could be solved
by proper formation
of budgets that keep
necessary record of
every earning and
expenses.
Declining
Profitability.
The manager of
company ascertains
different possibility
that reduces the
performance and
profitability of
Without adapting
suitable changes in
process of
production. They are
not able to produce
the best product for
Manager of both
companies could
apply activities-based
costing that help in
determining the
profitable and non-
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company such as,
lack of money
management, low
productivity and
more spending that
earning.
customer. profitable product.
The manager should
know about the linear
programming’s
techniques in order to
make optimal
allocation of
resources in situation
when company faces
shortage.
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2. Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.
Following there are essential role of management accounting can lead the organisations to
sustainable success which are discussed below:
 The management accounting helps the management accountant in preparation of strategy
which is related to the financial and non-financial reporting.
 The management accounting helps the management accountant in the preparation of
reports for their business operations and also for the departments.
 The management accounting helps the management accountant in the preparation of
budgets, strategies and also in the planning.
 The management accounting helps the management accountant in the decision-making
process for the new products or services.
 The management accounting helps the management accountant in the formation of the
reports for the senior management which helps them in the preparation of financial
strategies for the organisation.
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3. Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success?
There are various useful planning tools which helps the management of an organisation in
solving the financial problems to lead organisations to sustainable success. The management
accounting tools and techniques helps the management accountant to evaluate and monitor the
various problems in a systematic way. The collected information helps the management
accountant in the preparation of strategic decisions and also helps them in taking non- financial
and financial decisions in an appropriate manner. The management accountant uses the
management accounting tools and techniques for the sustainable growth and development of the
entire business activities of the Jupiter Plc (Weygandt, et. al., 2015).
The management accounting helps the management accountant in several ways which are
discussed below:
 The management accounting helps the management accountant in planning and
controlling the various business activities.
 The management accounting also helps the management accountant in gathering the
several information which helps them in planning the budgets for the future growth and
development.
 The management accounting is also helping the management accountant to prepare the
strategies according to the market and it also helps them to take competitive advantage in
the market of competitors.
 The management accounting also gives support to the management in the decision-
making process for the whole organisation.
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Conclusion
The report prepared on Jupiter Plc discusses on different aspects of the management accounting.
The importance of management was discussed and evaluated in brief. The different management
accounting systems and td its applicability was discussed with relation to Jupiter Plc. The
different management accounting reports were explained and the importance of sound
accounting system was discussed in detail, the contribution of each department in providing
information was evaluated. The overall purpose of management accounting is to ensure the
compliance of business activities. This report described the advantages and disadvantages of
different types of planning tools used in budgetary control of the Jupiter Plc. This report also
stated about the planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success.
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