Management Accounting Systems and Techniques

This document provides an introduction to management accounting and its role in providing useful information to managers. It discusses the benefits of management accounting systems such as inventory management, price optimization, job costing, and cost accounting. It also explains different techniques and methods used for management accounting reporting, including budget reports, accounts receivable aging reports, performance reports, and cost accounting reports. The document concludes with a discussion on the integration of management accounting systems and techniques.

Management
Accounting

INTRODUCTION
Management accounting is connected to ensuring managers with business information as
well as directing and controlling its operational activities to increase profit margin. MA performs
a specific significant role in supplying useful information to managers at every level so that
proper decisions are made for future improvement. The context of management accounting is
quite broad because it covers all forms of financial accounting relevant to the company. Business
managers compile, track, assess, track and evaluate data to aid themselves in developing policies
to achieve this goal. To better gain the knowledge of MA Western Foods Ltd have been selected
which is a medium sized company.
This project includes a MA framework with specific management details and the value of
various reports. Specific costing approaches such as marginal costs and absorption expense are
used to calculate net margin, study relies on multiple forecasting techniques to build budgets. In
addition use of accounting strategy methods to solve financial issues that occur within the
organization are also discussed.
TASK 1
Benefits of the Management Accounting systems
In the current era, a structured process is called MA to track and record favourable financial and
non-financial productivity information about the company within such a given time frame. There
are many systems which help to make better choices for managers which are discussed
underneath:
Inventory management system: This type of system is used to control inventory in storage
facilities and checks the accessibility of raw resources, capital etc. For any type of organization
in particular those engaged in production this system is advantageous (Kolk and Perego, 2015).
Essential requirement: This monitors the raw material movements as it goes into the
manufacturing network and monitors the commodity before it is delivered. In brief it can be
assumed that this device assists in the control of the supply chain. Western Foods
Ltd implements this program that helps to addresses any kind of mismanagement of stock or
other obstacle.
Benefits: This system support administrators to increase market performance and profitability
while retaining stocks. Moreover, it encourages an improvement in the amount of accessible

inventory details in order to facilitate the manufacturing cycle and fulfil the requirement of
existing customer of Western foods ltd.
Price optimization system: This program allows company to maintain a pricing point that is
appropriate for both enterprise and consumers. It contains of different techniques that enable to
adjust to retail prices for products and services by assessing customer’s preferences and current
market trends. It makes it possible for the Western foods to fix best price of food items.
Essential requirement: Manager of respective company uses this system when setting
appropriate prices to increase customer base and grow profit. This program will assist the client
in determining a price that can help achieve the priorities and objectives of the business. It may
also support Western Food Ltd to achieve strategic advantage over competition firms
Benefits: This system assists an organization in setting the correct selling prices so that the
business could really earn profit in the future.
Job costing system: This structure of MA provides a process to calculate cost for the component
of each good or service produced within company. This helps to measure the cost per unit of the
product independently and whether the variable cost per unit is large then it allows devising
effective cost control measures.
Essential requirement: This method is implemented in Western Foods Ltd. so they will test the
value of each product. This approach will also help raising the value of the product of the
business. It will help to achieve greater profit, since if expense is limited, price decrease and the
sales of goods increases (Mahesha and Akash, 2013).
Benefits: The efficiency of the particular work done inside an enterprise is decided by the
program administrators within Western Foods Ltd to eliminate the un-productive task and jobs.
Cost accounting system: This system provides comprehensive information related with
involvement of cost to develop prospective programs and strategies. It help to control and
monitor the costs throughout the production process and then analyses and assigns them to each
good or service and if costs are high the whole system offers guidance to the upper executives in
order to reduce costs.
Essential requirement: This structure is used by Western Foods Ltd in cost management, as it
helps in proper cost analysis used in production of different food item. This also gives
administrators ideas for preparations and approaches for the possibility and for rising costs.

Benefits: Western Food Ltd has benefit from this system in evaluating and managing the total
expense of selling products within the business. This also assists administrators in determining
real sums for goods available for sale (Neubauer and et.al, 2012).
Explanation of different techniques and methods used for management accounting reporting
Principle of MA
 Planning assistance: In a view to achieving the company's short-term and long-term
goals so that MA aids for the spending plan can be provided so that expense and profit
assessments are carried out in due course, management accounting systems help to assess
the right information in order that the aspect of a business 's goals are fulfilled.
 Helps to organize: MA supports in attempting to make those final conclusions the
guarantee of rights and duties such that an appropriate work flow can indeed be retained
in assessing the performance of Western food Ltd, so that operations can also be
modified and executed in an appropriate manner.
Different reporting methods
MA reports are beneficial in budgeting, decision-making as well as measuring
performance. Based on such findings, several important decisions are made.
Budget report: This report is used for internal use which contain targeted performance
measures and on these standards manager use to compare real performance with
anticipated performance. This study primarily seeks to assess success by calculating income or
expenditure for a program and schedules it over a specific period of time. In western foods ltd,
the financial output is analysed with the support of budget report is developed and more ways are
develop to increase profit margin (McLean, McGovern and Davie, 2015).
Accounts Receivable Ageing Report: This study is usually compiled for certain
companies who render much of their cash purchases. If a consumer does cash purchase with an
entity, so the purchase must be published in this report by the company. Generally speaking this
report aims at identifying the company's accounts receivables. In Western Foods Ltd this will
improve the business to monitor total money consumers are owed. It would also actually make
regular cash flow since it is directly relevant to accepting funds.
Performance report: It assists in success evaluation as the real result is compared to
expected results. It assesses individual and collective performance in order to make critical
decisions about the appraisal. When the work of an employee meets expectations, the employee

is compensated. This document is used by manager of Western Foods Ltd to evaluate staff
correctly and give them additional benefits on their good performance. It also helps to enhance
organizational efficiency and develop ways to increase weak performance (Miller and Power,
2013).
Cost accounting report: This report compares total cost of manufacturing with revenue
forward to total sales. This report includes all types of production costs such as raw material
costs, operating costs, price of maintenance, expense of labelling and manufacturing process, etc.
It reveals whether or not income is gained. Managers can inspect that the organization is in gains
or losses with the support of cost report. It is also used by Western Foods Ltd to analyse profit
and loss and the total expenses involved in producing goods. This also lets to develop new plans
and prepare in case if cost are higher that sales.
Critical evaluation of how MAS and MAR are integrated
From that reporting and system as well as its benefits, it has already been reviewed that
MA report and system are really very important for each small business to increase their profits
and develop international standing. Since these reports and processes gain from monitoring and
increasing market and through income within a given year. All essential systems and reports
provide feature substance to monitor and control costs, the actual amount lenders have and the
overall or recent financial climate as well as company status. In this operational method, Manger
of Western foods Ltd uses the expenditure report because it is useful in calculating the overall
cost; account receivable reports help the organisation in improving the payment strategy and the
collection mechanism. The inventory control plan is relevant to the quality that is available in the
warehouse and product used throughout the entire customer service. In addition, the Performance
Report has been used primarily to keep the day-to-day success of Western Food ltd employees
regularly registered. Eventually, the full management of the study has been objectively assessed
in order to increase business efficiency and enhance client communication.
TASK 2
Range of management accounting techniques will be applied to produce appropriate financial
reporting documents.
 Marginal costing Principles: According to this methodology the whole expense of
generating additional unit of commodity is comprehensive. With appropriate marginal

cost analysis, it is necessary to evaluate the greatest viewpoint for a company that
supports the massive profits. Marginal costing is a monetary system in which the cost per
units were also suspected of attachable charges as well as the total fixed elements for the
relevant time period have been cut off in total in context to the input level for that time
frame. As a response, it is widely known as adaptive costing in which only nominal costs
are incurred and costs accrued and costs per device are calculated according to variable
costs.
Income statement
 Absorption costing principles: It is the best approach or system to manage the actual
benefit and expense of the products is specified. Complete or full cost management
process is frequently known, which gives the best result during a given period. This is a
profit estimation technique that includes each attribute and fixed rates are allocated to
cost regions where they've been made in the production of products which have to be
enhanced through the sale of various products and services. It includes corresponding
processes such as indirect costs, premium costs and marketing or distribution expenses.
Income statement under marginal costing for month of March:
Units Amount £ Amount £
Sales 1500
£
52,500.00
Less: Variable cost 2000
£
7,875.00
Direct labour 2000
£
10,000.00
Direct material 2000
£
16,000.00
Variable production
overhead 2000
£
4,000.00
Less: Closing stock 500
£
9,468.75
£
28,406.25

Contribution
£
24,093.75
Less: Periodic cost
Fixed cost overhead
£
15,000.00
Fixed selling and
distribution cost
£
10,000.00
£
25,000.00
Net loss
-£
906.25
Working capital
Per unit Total unit Amount
Variable cost 3.9375
Direct labour 5
Direct material 8
Variable production
overhead 2
Total
18.937
5
Closing stock
18.937
5 500 9468.75
Income statement under absorption costing for month of March:
Units Amount £ Amount £
Sales 1500
£
52,500.00
Less: Direct labor 2000
£
10,000.00
Direct material 2000 £

16,000.00
Variable production
overhead 2000
£
4,000.00
Fixed production overhead 2000
£
10,000.00
Less: Closing stock 500
£
10,000.00
£
30,000.00
Gross profit
£
22,500.00
Less: Selling and
distribution cost
Fixed
£
10,000.00
Variable
£
7,875.00
£
17,875.00
Net earnings
£
4,625.00
TASK 3
Explanation of the advantages and disadvantages of the budgetary tools
Presently, making proper use of different planning tool which helps to improve the budget
management procedure is really essential for a company. Essentially, the method of budgeting
process is described as the identification and quantification expenditures and incomes that firms
may impose in the future. There are various methods of budgetary methods utilized by Western
Foods Ltd management to efficiently control the expenditures plan. A few of those including its
benefits and drawbacks are mentioned below:
Master Budgets: The cost and profit estimates for a detailed period of time are well-
defined with this budget. This is a demonstrated report which helps to achieve the goal of

organizing events properly by developing ways to control extra expenses (Soudani 2012). The
below are main benefits and disadvantages for respective company:
Benefits:
 It seeks to enhance the organization's efficiency, productivity and working capability.
 It enables Manager of Western Foods ltd to sets a benchmark and encourages team
member to achieve predetermined objectives in desired time frame.
Drawbacks
 Setting a budget limit is an extremely time taking as each activity is required to be closely
reviews which reduces other relevant productivity.
 In making master budget Western Foods requires highly skilled and trained professional
which ask for higher fees that increase the overall expenses.
Flexible Budgets: it is a type of expenditure plan that tends to adapt and bends in an entity
through modifications in the amount of specific programs (Watts and McNair-Connolly, 2012).
It is ascertained that such kinds of budgets are much more advanced than conventional
budgeting and are more advantageous for Western Foods Ltd.
Benefits:
 Implementing this proposal will enables respective company to cover all sorts of
potential output volumes in a specific time frame.
 Managers can anticipate all kinds of expenditures at different operating levels, and
variables could be calculated and plotted to making useful decisions at Western
Foods Ltd.
Drawbacks
 It will not support systematically making predictions of the long term as the current
position isn't really the same in future.
 It discloses confidential data which could cause conflict within Western Foods Ltd.
Zero-based budgets: That kind of budgets mostly enables a company to explain their costs for a
new offering to business. The principle basically start from even a Zero base so Western foods
ltd can analyse each operations for its expenses needed.
Benefits:

 It aims to promote staffing at all levels since a great deal of work is needed at every stage
to accomplish budgets.
 With the assistance of ZBB company, adjustments in the economic environment can be
brought (Watts and McNair-Connolly, 2012).
Drawbacks
 Discussing short-term gains at the exclusion of long-term targets is the biggest downside
for Western Foods Ltd.
 This also gives staff demotivation, because it takes more effort to budget about new
activity every time which delay other process.
Analyse of various planning tool to prepare forecasting budgets
This had been established that budget planning is an important tool for an enterprise because it
tends to plan forward and rising expenses to maximize productivity. With the help of complete
and accurate budget managers, are sure to establish a future specification and carry out work to
achieve in set time. Management utilizes adjustable schedules to manage such that improvements
may be produced in future based on the company process being available. ZBB supports Western
Foods Ltd to produce new expenditures plan for each activity with initial level in order to
achieve sustainable growth.
Comparison of how organisations are adapting management systems to respond to financial
problems
Financial problems: A circumstance which decreases the firm’s overall efficiency is
called financial difficulties (Storey, 2014). There have been massive numbers of financial
problems which a report in day to day operation. Like inappropriate resource utilization;
inappropriate inventory management, surplus expenditures than earning, etc. In context of
Western Foods the main financial issues are increase operating expenses and mismanagement of
stock.
Tools used to track and resolve these issues are:
KPI: KPIs is related to the business methods and techniques which are most significant to
measure progress toward achieving economic performance goals. In Western foods ltd, this
approach is used to compare and establish possible standards that support to detect the financial
issues of un-even use of stock (Zoni, Dossi and Morelli, 2012).

Benchmarking: This method is related with contrasting key metrics throughout the activity to
the other equivalent organization of same industry. In Western Foods Ltd management uses
this method to produce statements related to operating operation that are adopted within the same
sector by many manufacturing firms. This will let them to detect the issue of increasing operating
cost and lower revenues from operation.
Financial governance: This help manager of Western Foods Ltd to resolve the above mention
both issue as it enables in proper recording, reporting, analysing of entire detail of business
transition. It support to mark the areas which are letting operating expenses to increase and
misuse of stock due to which whole performance gets impacted in respective period.
Comparison
Particular Airdri Western Foods Ltd
Financial Problems Company faces issue related
with over spending over
unproductive jobs.
The main issue is related with
mismanagement of inventory
due to which customer order are
not complete.
MA tool Airdri management utilizes
benchmarking to address the
financial issue of absence of
money discipline and spending
control for any single task
(Takeda and Boyns, 2014).
This firm's manager implements
KPI 's methodology to optimize
inventory efficiency by
establishing acceptable
benchmarks at each output level
MA system To overcome the issue manager
apply the concept of job order
costing which let them to
maintain record of total
expenses made on job and
enables to remove non profitable
jobs.
By implementing inventory
control system the problem of
misuse of stock is solved and
each manufacturing stage is
provided with required
inventories.
Planning tool to deal with financial problems

Western Foods Ltd management implements budgets for estimating and administering the charge
and boosting the overall presentation of both the employee and the business firm. Proper usage
of the preparation method reveals an essential aspect to grab in unsafe condition and challenging
monetary which can increase in the upcoming period. Management utilizes updated accounting
approaches to overcome these problems (Strauß and Zecher, 2013).
CONCLUSION
In the end of report, it has been stated that management accounting is a valuable process
involving the preparation and delivery of concise accounting and other information to an
organization's internal business manager, making it easy for them to take effective, short-term
day-to-day decisions to improve performance. Different systems and reports makes better
decision for expanding business and costing techniques help to determine net profit for the
period. Planning tool support to resolve the financial issues by making effective budgets and
MAS system develop ways to respond various financial issues.

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