Unit 5 Management Accounting Level-4

Management
Accounting

INTRODUCTION
Management accounting refer to the various concepts which help the business and it's
operations in order to collect financial records or produce financial statements for the further
analysis (Bagautdinova, Kundakchyan and Malakhov, 2013). Management accounting used by
the managers of the company in order to formulate strategies and make effective decision to
achieve organizational goals & objectives. It include the analysis of data which is beneficial for
external parties such as inventors to make their decisions regarding investment. This report based
on Alpha Ltd which is medium size manufacturing firm and they have 50 staff members which
produce a range of Pizzas. It is the small pizza company that established in 2001. This project
report cover various topics such as management accounting, different types of accounting
systems and accounting reporting. Use costing technique to prepare income statements, evaluate
advantage or disadvantage of different planning tools and how they used to resolve their
financial issues by using management accounting systems.
MAIN BODY
TASK 1
P1. Explain the management accounting term and essential requirement of various management
accounting system
Management accounting is the process which is used by the organization in order
produce report which is beneficial for the stakeholders who make further decisions regarding
investments. With the help of management accounting, managers can collect financial
information for long term as well as short term decisions (Management Accounting, 2019). It is
also useful in measuring, analysing, communicating information in the entire organization in
order to achieve business goals & objectives.
Inventory management system: It is an system or software which is used by the
manufacturing organizations in order to manage their stock level for the production. This process
include the monitoring as well as maintenance of stored items such as raw material, company's
assets etc. Through keeping records of inventory managers able to analyse the availability of
stock for the production. In context of Alpha Ltd, managers monitor or keep track the records of
raw material which is used for to produce pizzas. It is essentially required in the organizations
because they have to manage inventory for the functioning of business operations in well manner

(Ball, Grubnic and Birchall, 2014). There are various types if inventory management systems
which are mentioned bellow:
 LIFO (Last In First Out): Inventory used for the production that recently purchased and
carry out for the operational activities.
 FIFO (First In First Out): In this method, managers uses that material first which firstly
bought by the company.
 AVCO (Average Cost): In this system, management use the inventory on average basis
for the products or goods.
On the basis of above discussed Alpha Ltd are follow the FIFO method which help the
organizations to utilise their available resources in the sequence purchase. It is essentially
required for food business to manage their inventory because it is not possible to keep vegetables
for long period.
Cost accounting system: It is the accounting framework which is used by the
organizations in order to estimate each unit cost of their products. It is essential required to
calculate the accurate cost because it further influence the profit margin of the company. In
context of Alpha Ltd, managers used this system to manage their overall product cost and it
beneficial in making future decisions. Managers try to minimise the cost of pizza which helps
them to maximise the profit margin of each product.
Price optimising system: It is the method which is used to determine the set of price
range of the product and analyse that which price of product satisfy the consumers need or meet
their objectives. Managers of Alpha Ltd determine the price of pizzas which sold to the
customers and also analyse that which price range satisfy the consumers more (Bryer, 2013).
This system essential for the company to set suitable price for pizzas or able to meet their goals
& objectives through increasing productivity as well as profitability.
Job order costing: This accounting system used when different jobs are working in the
same period such as promotions, selling, advertising and marketing. It become very difficult to
allocate the cost of each activity as per their requirement. In context of Alpha Ltd, company
produce pizzas as well as perform other operational activities. So managers use job order costing
in order to evaluate the separate cost for each job. It is essentially required by the organizations
to ensure that every activity will be performed smoothly.