Management Accounting Techniques and Budgetary Control

B10781
MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...................................................................................................................................................... 3
TASK 2......................................................................................................................................................................... 4
P3 Income statement through marginal costing and absorption costing technique:.................4
M2 Range of management accounting techniques:.................................................................................. 7
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control:........................................................................................................................................................................ 8
M3. Different planning tools and their application for forecasting budgets................................10
P5. Adaption of management accounting systems to respond to financial problems and
sustainable success:............................................................................................................................................ 11
CONCLUSION......................................................................................................................................................... 14
REFERENCES......................................................................................................................................................... 15

INTRODUCTION
Management accounting is new concept practicing by every organization. Previously accounting
was only used and applied by junior accountants and tally department due lack of understanding
about accounting reports; there were no gap filling tool available to interpret the result in simple
terms. Decision making team requires to understand what is written in report regardless it cannot
give its judgment whether to buy particular project or avoid it. The application of management
accounting technique makes it simple for strategic manager to understand the crux of report and
analyze the whole effect in single read. This project is based on these accounting tools which
help Prime furniture a leading furniture company to take several critical decisions on business
expansions. Additional to this report will show how depending on only one forecasting tool
could harm company’s yearly earnings and how mishandling of fund can impact company’s
profit.

TASK 2
P3 Income statement through marginal costing and absorption costing
technique:
Quarter 1 & 2
First we need to calculate product cost per unit:
Quarter 1 Quarter 2
Variable Cost
(78000 × 0.65) 50700 42900
+ Fixed Cost 16000 16000
= Total Product
Cost 66700 58900
÷ Total Units
Produced 78000 66000
= Product Cost Per
Unit 0.85 0.89
After that the product cost per unit used to create the absorption income statement. The Units
sold on the income statement (and not units produced) taken to determine sales, cost of goods
sold and any other variable period costs.
Income Statement (Absorption)
Quarter 1 Quarter 2
Sales (66000 × £1/ unit)
6600
0 Sales (74000 × £1/ unit)
7400
0
- COGS (66000 × 0.85)
5610
0 - COGS (74000 × 0.89)
6586
0
Gross Profit
990
0 Gross Profit
814
0