BTEC Higher National Diploma: Management Accounting Report - Unit 5

This report delves into the realm of management accounting, focusing on its practical applications within Capital Joinery Ltd. It begins by outlining various management accounting systems, including cost accounting, inventory management, job order costing, and price optimization systems. The report then explores management accounting reporting, detailing cost reports, departmental reports, performance assessments, and budget reports. The core of the report involves cost calculation techniques, comparing absorption and marginal costing, and analyzing material variances using the LIFO method and average cost methods. Furthermore, the report examines the benefits of management accounting systems and provides a critical evaluation of their implementation. Planning tools are discussed and analyzed, and a comparative analysis of how organizations utilize management accounting systems to solve financial problems is presented. The report concludes with an evaluation of planning tools and offers a concise summary of the key findings and recommendations.

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