Management Accounting: Systems, Reporting, and Cost Calculation

This article provides an in-depth understanding of management accounting systems, reporting, and cost calculation. It covers various types of management accounting systems used in organizations, such as cost accounting, inventory management, job order costing, and price optimization. The article also discusses the importance of management accounting reporting and the benefits and critical evaluation of these systems. Additionally, it includes a detailed explanation of different methods of cost calculation, including absorption costing and marginal costing, along with their advantages and drawbacks. Suitable for students studying management accounting.

Management Accounting

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
P1: Management accounting systems......................................................................................................3
P2: Management accounting reporting....................................................................................................5
M1: Benefits of Management accounting systems...................................................................................6
D1: Critical evaluation of Management accounting systems...................................................................6
TASK 2.......................................................................................................................................................7
P3: Calculation of costs...........................................................................................................................7
M2: Accurate application of management accounting techniques...........................................................8
D2: Producing of financial reports for accurate analysis and interpretation of data.................................8
TASK 3.......................................................................................................................................................9
P4: Advantages and Disadvantages of planning tools..............................................................................9
M3: Analysis of the use of planning tools.............................................................................................10
TASK 4.....................................................................................................................................................11
P5: Comparison of organizations in their usage of management accounting systems to solve financial
problems................................................................................................................................................11
M4: Analysis of response to financial problems....................................................................................12
D3: Evaluation of planning tools...........................................................................................................13
CONCLUSION.........................................................................................................................................13
REFERENCES..........................................................................................................................................14

INTRODUCTION
Management Accounting means the process in which administrators make use of financial
statistics, evidence and knowledge provided within an entity so that they can accurately and
reliably make smaller, medium to long choices in the future (Otley, 2016). It will be very
effective to use this strategy so that managers can promote the completion of goals and priorities
in the future. Capital Joinery Ltd will be the subject of this article. It is a business that
manufactures joinery, produced gates, frames, etc. The specific emphasis of this study would be
on showing the interpretation of management accounting practices, measuring costs using
relevant methods, and explaining the application of forecasting tools. In particular, as phase of
this effort, a contrast of the ways in which firms use accounting systems to address financial
issues would be addressed.
MAIN BODY
P1: Management accounting systems
There are various types of schemes of management accounting that are used to effectively and
successfully evaluate and handle financial data. In Capital Joinery Ltd. the following schemes
are used—
Cost accounting system-It is a system wherein inside the company a calculation of expenses is
produced. They are able to make sure how they can promote a decrease in these expenses by
incorporating suitable procedures and strategies in their use. Capital Joinery Ltd. will allow use
of such a framework so that it is important to directly quantify the impact and to use tools and
approaches to lower the costs.
Essential requirements-
 In this scheme, input estimation must be used such that the firm's inputs are evaluated.
 This method also should insure that expenses are accurately estimated and adequately
divided in the organizations so that they're being allocated as per the amount of costs
generated by each respective department.

Inventory management system- The application of strategies and practices must be used in this
process so the inventory volume can be calculated within organizations (Maas, Schaltegger and
Crutzen, 2016). Companies are now able to measure the extent of their stock accurately and
reliably when making use of everything. Thus it is critical, in the sense of Capital Joinery Ltd.,
the use of this method is made transparent to the organization so that it can reduce the expense of
its stock levels and thereby ensure maximization of the total level of income.
Essential requirements -
 In this scheme, measures such as LIFO, FIFO, Weighted Rate, etc. must be used so that
the inventory volume can be measured and recorded in the correct way.
 This method can allow companies to insure that a decrease of inventory cost of
maintenance can be accomplished, thereby helping to minimize the total amount of
spending and increase income.
Job order costing-It is a method that provides multiple methods and methods to estimate the
inflows of work order in order to identify and pay the amount of the job. Companies such as
Capital Joinery Ltd. can benefit by making use of this method. It is because it is a production
industry and the use of this method provides different kinds of advantages for industrial
companies. To increase profits, they should insure that they are using strategies and procedures
to will job costs.
Essential requirements -
 There must be a use of a variable in this method from which the expenses of work can be
measured. In this way employers can guarantee that a decrease in the amount of earnings
can be achieved by recognizing the expense of the work.
 This method would provide a clear list of the various work orders such that it is possible
to accurately do their accounting.
Price optimization system- This is a system in which it would be possible to predict costs to be
fixed for the potential so that the business can gain better income in the future (Bromwich and
Scapens, 2016). Usage of this method should be rendered in the sense of Capital Joinery Ltd. so

that the business can accurately predict the costs and thereby encourage a decrease in the total
price cost.
Essential requirements -
 Computational and quantitative approaches and procedures must be used with this
scheme in order to be able to create an accurate price prediction.
 A corporation must be sure to establish the price with the use of this method, which
allows it a chance of achieving higher revenue amounts.
P2: Management accounting reporting
Management accounting analysis is a methodology that helps managers to clearly analyze and
understand the fiscal data supplied, thereby contributing to assumptions and guidance being
derived. It is therefore necessary for Capital Joinery Ltd. to make use of these papers. It will use
the records that follow—
Cost report- These are the reports covering the total expenses generated within an entity.
Managers should continue to be able to determine the duration accurately and reliably by making
use of them (Quattrone, 2016). These may be relevant in the sense of Capital Joinery Ltd. since it
is a manufacturing plant which needs to take control of its investments to focus on reducing them
to boost revenue.
Departmental report- There is numerous divisions in an organization. This can include
production, HR, banking, advertising, distribution, etc. Consequently, if these studies find an
issue with their divisions, a business such as Capital Joinery Ltd. needs to consider implementing
the requisite changes in these divisions. In this way, an organization must ensure that the points
of change that are existing in its divisions can be established so that the appropriate changes can
be implemented to help meet future targets and priorities. This would be beneficial in raising
both the total level of efficacy and performance.
Performance assessments- These reports are useful in making sure the company can carry out a
comprehensive evaluation of the current level of quality. Capital Joinery Ltd. administrators
should make use of it so that they can know that the average output quality can be increased. In

addition, anomalies and performance issues will be detected by using these documents and
appropriate actions and initiatives can be taken to eradicate them that would encourage an
increase in the overall performance standard.
Budget reports-A review of the numerous expenditures that are produced in an entity can be
provided in these documents. This budget will assist the organization in managing its costs by
using these documents and thereby attempting to increase the amount of earnings. The
administration of Capital Joinery Ltd. will define the places where the total amount of
expenditure has risen and how these expenditures can be compared by using these studies.
M1: Benefits of Management accounting systems
The method of cost accounting is useful for calculating the average amount of costs. By doing it,
companies can also discover ways to minimize costs by using it (Cooper, Ezzamel and Qu,
2017). The inventory control framework will be used by businesses to indicate that they can
accurately and reliably calculate the inventory levels. They are also able to facilitate a decrease
in the net cost of running the stock by allowing use of it. In calculating work costs, the Job
Costing Method may be helpful. It could also be used so that companies can keep a
comprehensive past record of their individual task orders. The method of price optimization can
be beneficial in deciding the value to be set. It could also be used such that perhaps the price can
be adjusted in such a manner that can further increase profits. Each of these structures will then
produce advantages for Capital Joinery Ltd in this manner.
D1: Critical evaluation of Management accounting systems
Management accounting frameworks must be incorporated within organizations in order to allow
the full use of them. It is also necessary for the managers of Capital Joinery Ltd. to be able to
accurately evaluate the need for systems. These technologies will then be incorporated into the
processes correctly, and this would therefore benefit a lot to ensure that the priorities and targets
will be achieved.
TASK 2
P3: Calculation of costs

Absorption costing:
Total cost of production:
Direct materials 60
Direct labor 40
Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement:
Particulars May June
Sales 25000 18750
Less: Cost of sales
Direct materials 6000 4800
Direct labor 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3475
Marginal costing:
Total cost of production:

Direct materials 60
Direct labor 40
Variable production cost 20
Full production cost 120
Income statement:
Particulars May June
sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labor 4000 3200
Variable production cost 2000 1600
Opening stock 0 0
Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
Reconciliation statement:
Particulars May June
Net profit under absorption costing 6500 3475
Add/Less: Closing stock 0 (100)

Net profit under marginal costing 6500 3375
Calculation of material
variances
Budgeted Actual Variances
Materials cost per unit £24 £18.67 £5.33
Inventory ledger record LIFO Method
Dat
e Description Sale/Purchases Balance
Unit
s
Cos
t Total
Unit
s
Tot
al
Jun
-01
Opening
Inventory 10 £35 £350 10
£35
0
Jun
-09 Purchases 15 £38 £570 25
£92
0
Jun
-15 Issued -12 £38 -£456 13
£46
4
Jun
-20 Purchases 10 £32 £320 23
£78
4
Jun
-23 Issued -10 £32 -£320 13
£46
4

Jun
-27 Issued -3 £38 -£114 10
£35
0
Jun
-30 Issued -2 £35 -£70 8
£28
0
Average cost methods
Dat
e Purchases
Unit
s
Cos
t Total
Jun
-01
Opening
Inventory 10 £35 £350
Jun
-09 Purchases 15 £38 £570
Jun
-20 Purchases 10 £32 £320
Total 35
£1,24
0
Average cost of Inventory =
Total/Units
=
1240/35
= 35.42857143
Companies may make use of various methods that help them quickly estimate the amount of
income. A company will figure out how it is moving toward its accomplishment of its defined
targets and priorities in terms of sustainability by making use of them. The following methods
are used in the sense of Capital Joinery Ltd. in order to assess the level of income.

Marginal costing- It is a strategy in which the indirect costs is paid to the output units and the
fixed cost towards the expenditure is paid down (van Helden and Uddin, 2016). It is a valuable
method for Capital Joinery Ltd. to figure out if it can be able to look for an increase in the overall
degree of productivity.
Benefits:
It is an easy tool to both use and appreciate. Hence, Capital Joinery Ltd. does have an edge here
in this direction.
This strategy assists in the Break-Even point assessment. This can build a benefit for Capital
Joinery Ltd. managers.
Drawbacks:
This is not a useful tool for the correct assessment and separation of underneath speeds. The
leadership of Capital Joinery Ltd. faces a drawback in this respect.
This method is not beneficial for businesses to assess the actual expenses borne by it. This poses
a downside for Capital Joinery Ltd. leadership.
Absorption costing- It is a process by which an aggregate cost and expense calculation is
rendered within the organizations. By taking use of it, businesses can therefore easily and
reliably differentiate their separate overhead costs appropriately (Dekker, 2016). This method
should be used in the sense of Capital Joinery Ltd. so that expense calculations and benefit
evaluations are rendered and the costs are accurately distributed.
Benefits-
This approach may be useful in determining the extent of organizations’ expenditures. This adds
to an advantage for Capital Joinery Ltd's management.
It is useful for administrators to make the correct use of this tool because it helps to understand
overheads. This may therefore be useful for Capital Joinery Ltd.

Drawbacks-
This approach should not be used for comparative purposes and therefore does not assist
organizations to enhance in some fields. Therefore in this sense, businesses are unable to equate
their average success standard with the rival and point out the differences and differences in it to
promote performance level enhancement. This offers a downside for Capital Joinery Ltd.
The application of this technique means using higher-level expertise. This can create a downside
for Capital Joinery Ltd. if its executives do not have these skills.
M2: Accurate application of management accounting techniques
For companies, management accounting methods are very effective and they can measure the
way they would be able to move in the right direction by making use of them. Thus it is
important for a company such as Capital Joinery Ltd. that such maintaining control use of the
costing strategies of both Marginal and Absorption. By using these methods, they would be able
to determine the income in order to conduct the research and analysis necessary.
D2: Producing of financial reports for accurate analysis and interpretation of data
Financial statements are those documents that summaries the financial statistics, facts and
statistics accessible to organizations and will guarantee that suggestions and conclusions are
drawn from the monetary data provided to allow decisions and actions to be taken (Joshi and Li,
2016). The management of Capital Joinery Ltd. can use these and they'll use the knowledge
required to make decisions.
TASK 3
P4: Advantages and Disadvantages of planning tools
The strategy methods are helpful for managers to be able to present better goals and ambitions in
the small, long-term. In Capital Joinery Ltd., the reviews methods are used—
Zero-based budget- It is a tool used in financial planning in which expenditures are needed for a
certain amount of time to be explained (Tucker and Schaltegger, 2016). It helps the owner to
start anew next year and not to use it as a base year the estimates of any specific year. Its usage

in the sense of Capital Joinery Ltd. is very beneficial in making sure the company can achieve a
higher degree of activities and success.
Advantages-
When used in industries, it helps in cost reductions for them. This thereby generates and rewards
Money Joinery Ltd. managers.
Its use will ensure that proper preparation within organizations is carried out. A benefit may also
be generated for the managers of Capital Joinery Ltd. in this manner.
Disadvantages-
The planning of a Zero-Based Budget requires a lot of operational effort. A drawback may also
be generated for the leadership of Capital Joinery Ltd in this way.
The creation of a zero-based budget will cause a lot of challenges and problems for organizations
in planning and coordination. This adds to a downside for Capital Joinery Ltd.
Operating budget- This budget is an estimation of the operating income and spending defined
for a certain long period. It is very helpful in the sense of Capital Joinery Ltd. since it can
contribute to operating benefit calculations.
Advantages-
This model is important for figuring out both the degree of organizational optimization and
productivity. This then points to a benefit for Capital Joinery Ltd.
An approximation of operating benefit can be made by using this budget. This is also useful for
Capital Joinery Ltd.
Disadvantages-
This expenditure lacks the myriad other criteria which the organizations should consider. It
therefore creates a downside for them in this way (Bui and De Villiers, 2017).
The planning of this budget is an expensive matter. For Capital Joinery Ltd., this may also lead
to a downside.

Personnel budget- An approximation of the expenses relating to the staff and staff of the
organization and the revenue is made for a certain amount of time throughout this budget.
Capital Joinery Ltd. should make appropriate use of it so that it can offer more process mapping
efficiency and productivity.
Advantages-
This budget includes the criteria that are correlated with the organization and jobs. Thus a profit
for the management of Capital Joinery Ltd may be generated in this manner.
The performance of management in organizational culture can be measured by using this budget
since it can effectively quantify it. This translates to an advantage for Capital Joinery Ltd.
Disadvantages-
A lot of decisions are made in this plan, and whether they are incorrect, then this will result in
inaccurate. For this purpose, a drawback may be produced for Capital Joinery Ltd.
A great deal of time is taken for the firms to plan this budget. That's in the sense of Capital
Joinery Ltd.
M3: Analysis of the use of planning tools
Planning methods can be very beneficial for marketers and they are able to make decisions that
can support their success by using these (Makrygiannakis and Jack, 2016). The use makes it
easier for managers to develop plans that will help them achieve success. Since Capital Joinery
Ltd. is a production company, planning methods such as Forecasts, Analysis Reports and Break-
Even Point can be used to draw result and discussion from their use. They should then define
their issues and concerns in this manner and should use these methods so that corrections can be
made accordingly.

TASK 4
P5: Comparison of organizations in their usage of management accounting systems to solve
financial problems
Financial crisis-A situation in which management is unable to provide the availability of
resources to efficiently operate the organization's activities and running is known as a budget
issue (Malmi, 2016). Since Capital Joinery Ltd. is a production company, it often has to face
money issues. The financial challenges the business is facing are as follows—
Improper overhead distribution- Some of Capital Joinery Limited’s units have rising material
levels. This then impacts the company in this manner as the expense increases, due to a decrease
in the total amount of earnings.
Inventory mismanagement- The quantity of stock is not well handled in Capital Joinery Ltd. This
then impacts the business in this direction, as the expense of inventory control rises, thereby
decreases the quantity of earnings.
Techniques to solve financial problems-
KPIs- These are the main markers of success. Their usage is useful in measuring the level of
success and enhancing it if appropriate. The leadership of Capital Joinery Ltd. will address the
question of fixed costs by having use of it and they can use them to recognize the way fixed costs
have raised so that they are minimized by suitable processes and policies.
Benchmarking- These apply to the standards and specifications set by the organizations so how
they can determine the quality of results and recognize anomalies and differences, if any (Oboh
and Ajibolade, 2017). They can be helpful in addressing the material dilemma in the case of
Capital Joinery Ltd. as the criteria and criteria for stock level management can be set.
Comparison of organizations-
Basis Tesco Sainsbury’s
Financial problem In Tesco, task orders are
mishandled, contributing to
a rise in the cost of the
Rates are not adequately set
at Sainsbury’s that
influences the amount of

project. income received by the
company.
Use of Management
accounting system
To address its economic
dilemma, Tesco makes use
of the Job Costing System.
Sainsbury's makes use of
the method of market
management to tackle the
financial dilemma.
Application of the system Tesco will enforce the Job
Costing System by
guaranteeing that task
orders are correctly tracked
and managed.
The pricing management
method will be used by
Sainsbury's so that the firm
can set the necessary rates
to increase its income.
It can be inferred from the above-mentioned analogy that Capital Joinery Ltd. administration can
allow use of budgetary control frameworks to address its financial problems. It will make use of
budgetary control system to address the cost-related issues. The Price Optimization Method can
also be used to solve the price-related problem.
M4: Analysis of response to financial problems
For executives, it is essential that they are able to detect their financial issues well during
advance. The administration of Capital Joinery Ltd. must then recognize its financial challenges
and use strategies and techniques well in time to address them (Mokhtar, Juso and Zulkifli,
2016). This will enable the business to reach a higher degree of performance and effectiveness
and thus enable it to reach a sustained level of growth in the industry, thus allowing targets and
priorities to be accomplished.
D3: Evaluation of planning tools
Planning techniques are effective for businesses so they can prepare easily for the future and
make use of them. This method is useful for them to quickly and productively set up their plans
(McLaren, Appleyard and Mitchell, 2016). In the sense of Capital Joinery Ltd., it could be
suggested that these methods have been used to prepare future proposals for the small, medium
to long term. In this way the organization will advance on the road of achieve successful growth
in the coming years?

CONCLUSION
It can be inferred from the aforementioned article that management accounting is a methodology
by which administrators are able to make future actions by drawing judgments and suggestions
for future research. By using it is possible to evaluate the anomalies and differences in the output
standard and take steps to eliminate them. It is a strategy that correctly uses financial records,
research and knowledge such that the records are handled properly and preserved. Its programs
are useful to organizations and in multiple cases gain benefit for them. In study and
understanding, the findings assist. For the intention of assessing the degree of productivity in an
enterprise, various types of methods may be used. Implementation tools help planners build
strategies that could be useful in the future. Accounting systems are used by companies so that
financial issues can be addressed.

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