Management Accounting Report: Costing, Planning, and Adaptation

This report examines management accounting practices within Airdri Limited, a manufacturing business. It explores the core concepts of management accounting, emphasizing the importance of information for managerial decision-making. The report details various accounting systems, including inventory management, price optimization, and cost accounting, and their applications within the company. It also analyzes different types of management accounting reports, such as budget reports, cost accounting reports, performance reports, and accounts receivable aging reports. Furthermore, the report delves into costing techniques, comparing marginal and absorption costing, and planning tools used for budgetary control and forecasting. Finally, it assesses how businesses adapt their management accounting systems to address financial challenges and achieve sustainable success, using Airdri Limited as a case study. The report concludes by highlighting the significance of management accounting in resolving financial problems and fostering organizational growth.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1. Discussion of management accounting and requirements of its systems...........................................3
P2. Different types of management accounting reporting........................................................................5
M1. Evaluate the benefits of management accounting systems along with its applications.....................6
D1. Critically evaluate accounting system or accounting report which linked with organizational
process.....................................................................................................................................................7
TASK 2..........................................................................................................................................................7
P3 Calculate cost by using appropriate techniques..................................................................................7
TASK 3..........................................................................................................................................................9
P4. Advantage & disadvantage of various planning tools which used for budgetary control...................9
M3. Evaluate different planning tools which required for forecasting budget.......................................11
TASK 4........................................................................................................................................................12
P5. Compare how business adapting management accounting system to respond their financial
problems................................................................................................................................................12
M4. Evaluate that how organization lead sustainable success by using management accounting and
resolve financial problems.....................................................................................................................14
CONCLUSION.............................................................................................................................................14
REFERENCES..............................................................................................................................................15

INTRODUCTION
Management accounting is a method utilized for administrators to track and oversee the
organization's actual success by coordinating management information obtained from various
divisions. The primary goal of managerial accounting is to inform key stakeholders about the
existing iteration of the enterprise. This aids in the creation of a plan of management planning for
the long-term structure of the company (Hnedina and Vertiiko, 2020). Lengthy priorities and
strategies can be met by reflecting on the entity's present situation. This report based on the
Airdri Limited which is manufacturing business and serves their services Across UK. This report
discusses the various accounting systems and records used to run a company, as well as the
preparing of income statements, methods for forecasting, and techniques for controlling and
maintaining efficiency. This report further compares the organisation and structure that is used to
respond appropriately.
TASK 1
P1. Discussion of management accounting and requirements of its systems
Management accounting: Management accounting is described as the introduction of
information related to corporate practices that can assist in making inner managerial decisions
and generating greater competitiveness. It is crucial for managers to report on monetary and non
details so that appropriate decisions can be taken and operations can be maintained.
Airdri Ltd's management is well-versed in financial guidelines and laws that can be used
to easily define net costs and reimbursement transactions. This also aids in the management of
the market and the enhancement of the branded product by earnings. Various forms of
management accounting schemes are used, with both the following essential elements:
Inventory management system: It is a tool that allows businesses to trace products
across their distribution network. It maximizes the whole process, from order placement with the
seller to order fulfillment to their customer, simulating the entire journey of a producer. This
system's responsibility has a major impact on a company's reputation. Companies may reduce
lead time by precisely tracking goods, identifying trends, and making more informed investment
decisions (Bebbington and Unerman, 2020). The management of Airdri Ltd implements this
method in their company to monitor the inventory of product in factories on a constant schedule.

It enables them to import furniture or order additional inventory based on manufacturing needs.
As a result, an order fulfillment system is important in this enterprise, as it also aids in inventory
monitoring and accountability. Furthermore, the administrator is capable of developing an
innovative approach in the framework of the enterprise in order to operate their corporate
activities efficiently. There is mentioned different methods use by the company for selling
products:
• FIFO: This approach claims that a company sells products that were bought first or eaten
during a manufacturing.
• LIFO: This strategy claims that a company sells goods that were bought today next, that tends
to increase revenues.
• AVCO: According to this approach, a company sells items / products only at overall cost of
industry goods and services.
From this method Airdri Ltd follow FIFO method in which first in and first out of items
that manufacturing first in company that are selling first to their distributor.
Price optimization system: It is used by the firm after discovering how sensitive its
current consumers are to market volatility. It could well come down to how much a company can
do within the parameters of given productivity and effectiveness. Airdri Ltd needs to compare its
sales income with earnings in effective manner. When it wants to increase profits while retaining
the same rate of customer satisfaction, optimal pricing is critical. Since prices of different
business segments have become extremely important, price optimization is already becoming
increasingly important. Numerous firms are now planning to launch innovative brands, even
those in specific consumer goods. In this way, having the best price is much more important, as a
company can lose a large consumer base to competitors (Karagiorgos and et.al, 2020).
Cost accounting system: The other term for a cost accounting scheme is a costing
system, where it is mostly used by businesses to measure the cost of goods that exist in the
company. Airdri Ltd is a production company that uses a standard costing scheme to measure the
exact price of goods and services in order to achieve high performance and effectiveness. This is
basically expected in all organizations to quantify the expense of its goods and services. Forecast

makes it easier to make good decisions and bring alterations at a lower cost by forecasting and
managing costs.
The accounting systems described above are basically expected by the administrators of
Airdri Ltd Corporation. Organizations may operate their organizational processes effectively or
accomplish strategic priorities and strategies with the aid of successful execution.
P2. Different types of management accounting reporting
Management accounting reporting: Management accounting reporting is described as
the documentation and summarization of revenue and costs reported in reports. This will aid in
the study of financial data and the making of appropriate decisions. Both commercial
organizations are expected to use various accounting processes to submit information in order to
preserve consistent results and increase company transparency. Mangers at Airdri Ltd prepare a
series of papers after doing an investigation and taking good decisions. The following are
descriptions of various administrative reports:
Budget report: This report has forecast for the upcoming, in which the majority of the
period the forecast will vary from the final numbers. Managers frequently equate their real
results to their current figures during the financial accounting. In the sense of Airdri Ltd, the
management creates a budget that includes details about each item needed to manufacture of
products. It aids in the comparison of mission results and the average total spending. This article
is used by managers to analyze related data sets. For reference, sales rate, quarterly income,
marketing cost, and so on (Steccolini, Saliterer and Guthrie, 2020).
Cost accounting report: This report is mostly used to compute the expense of imported
goods which articles and can aid in the effective operation of company operations. Management
must consider their costs and plan reports to help them monitor their operations and improve the
overall success of their corporation. By writing cost accounting reports, Airdri Ltd learns about
the cost prices of goods as well as the retail prices that can aid in the generation of profits. This
study takes into account details such as raw materials, overhead costs, labor, and manufacturing
costs so that decisions can be made appropriately while maintaining usefulness.
Performance report: Managers provide this sort of report to evaluate the overall success
of the organization as well as the progress of each staff member. It motivates workers by

rewarding them for their excellent work. Airdri Ltd's boss prepares success reports by analyzing
company practices and making important management choices about the improvement initiative.
Individuals are rewarded with their contribution and completion of targets using this study, while
underperformers are laid off, which boosts staff morale and ensures that they act efficiently.
Furthermore, a success report is an important requirement for businesses in order to objectively
assess the firm's approach and make attempts to achieve targets (Khorunzhak, Brukhanskyi and
Ivanyshyn, 2019).
Accounts receivable agin report: This part of the study is critical for any company that
provides housing finance services. It provides a description of age-specific bank transactions,
which typically contain separate grades for products that are 30, 60, and 90 days late. It can be
beneficial to adjust repayment schedule so that they are compatible with all the transaction
abilities of customers. Airdri's managers use this document to classify defaulters based on
various time periods. Managers should implement stringent credit programs to decrease their
liability in order to minimize the amount of borrowers on their roster (Bescos, Deville and
Foulquier, 2020).
M1. Evaluate the benefits of management accounting systems along with its applications
Management accounting systems are advantageous to organizations because they aid in
the provision of financial details as well as the monitoring of additional operations that aid in the
operation and continuation of the enterprise. Airdri Ltd uses a variety of management accounting
systems in their company, the advantages of which are as follows:
System of accounting Uses and benefits
Cost accounting system This system is mostly used to determine how much risk a
company bears and how those costs should be managed.
Airdri Ltd is reaping the rewards of a costing mechanism by
monitoring the business's costs and making attempts to
ensure that all operations are carried out successfully. It
often aids in the identification of productive and
unaffordable practices.
Inventory management system This method is used to keep records of and document the

stock that is available in the company, as well as to help
position the next request so that consumers do not have to
queue for items. Airdri Ltd is a distribution company that
manages and controls surplus inventory. It also aids in the
management of orders made by clients.
Price optimisation system This method is used to control the rates of their imported
goods as well as attract their best buyers. The
administration of Airdri Ltd benefits from of the price
optimization system because it allows them to earn sales
and attract new buyers by selling goods at reasonable prices
(Ouda, 2021).
D1. Critically evaluate accounting system or accounting report which linked with organizational
process
It is objectively assessed that any company must adhere to an accounting scheme or
financial statements in addition to taking into account their corporate processes and produce
intended goals. In the case of Airdri Ltd, the manager uses an inventory control system to
monitor their sales volumes, and all applicable data is recorded using a supply chain chart.
Likewise, by using pricing scheme, the administrator will attempt to minimize inventory costs,
which will be reported in the standard costing report. These details will help the organization
build a plan and make decisions. Accounts receivable reports are also used to detect defaulters
and managers create proactive credit policies to help reduce late payments (Tucker, 2019).
TASK 2
P3 Calculate cost by using appropriate techniques
Cost: Cost is defined as any cost or expenditure incurred during the manufacture of
products or services in order to obtain performance. In other terms, cost is a sum that must be
spent or received as compensation for a product. Airdri Ltd, for example, manufactures dryers
after buying raw materials at a loss to the company.

Marginal costing: It is a costing system wherein the marginal cost comprises variable costs
paid to value items, while fixed costs are completely actually written toward capacity to
participate. The term marginal cost represents the excess costs involved with producing an
additional production unit that can be measured from the operating expenses assigned to one
unit. When calculating product costs or preparing financial statements, Airdri Limited employs
the marginal costing process (Fadakar, Faghani Makranin and Zabihi, 2020).
Absorption costing: This costing scheme is used to value inventory. It includes not just the
costs of goods and labor, but also the costs of operations of both conditional and fixed output.
Full inflation is another term for the absorption rate. The guide will show you what is required,
when to calculate it, and the advantages and disadvantages of using such a type of reporting.
Airdri Limited has been using this cost estimation approach to measure commodity costs and
generate income statements for the time.
Preparation of income statement by Absorption costing:

Preparation of income statement under marginal costing:
TASK 3
P4. Advantage & disadvantage of various planning tools which used for budgetary control
Budget: There are various types of planning tools which can be used for the purpose of
budgetary control. It is thus quite important that their use is made within the organizations
(Alabdullah and Ahmed, 2020). One of these planning tools is Budget.
A Budget is a statement which shows the detailed receipts and expenditures of a
particular organization during a particular period of time say a year. Therefore, for Airdri it can
be highly useful to prepare it. The different types of budgets which can be used by AirDri are
explained in the following manner-
Fixed Budget-
It is a Budget in which the facts and figures which are taken generally remain stable for a
long period of time. Therefore, in the context of Airdri it can be useful for the purpose of

deriving of the appropriate conclusions and recommendations effectively and efficiently (Brink
and et.al, 2020).
Advantages-
 This is a budget which makes the use of fixed figures and values. Therefore, this creates
an advantage for an organization like AirDri.
 It is a budget which is useful for the organizations who do not witness many fluctuations
in their sales volume. This can create an advantage for AirDri.
Disadvantages-
 Its preparation leads towards a lack of flexibility. Thus, in the context of Airdri it creates
a disadvantage.
 Its preparation is not useful in a dynamic market. Therefore, for an organization like
Airdri it leads towards a disadvantage.
Flexible Budget-
It is a Budget where the various types of facts and figures which are taken which can
keep on changing according to the market needs and requirements (Castilla-Polo and et.al.,
2020). Therefore, for an organization like Airdri it can be highly useful because it can implement
the changes appropriately.
Advantages-
 Its use is quite useful because it can be highly helpful in ensuring that the organizations
make the required adjustments according to the market effectively and efficiently. This is
an advantage for AirDri.
 Its use can be highly helpful for the organizations as it can lead towards ensuring that
they can manage out a wide range of needs and requirements in a proper manner. This
can lead towards an advantage for AirDri.
Disadvantages-

 Its use is not helpful for those organizations where a lot of stability is required in the
facts, figures and information. This can create a disadvantage for AirDri.
 Its use does not help the firms which are operating in a market which does not witness
dynamic changes. Therefore, this creates a disadvantage for Airdri.
Master Budget-
It is a Budget which provides a lot of comprehensive information to the management
about a particular organization. It summarizes the give information and thus this can help
a lot in ensuring that a proper Analysis & Interpretation can be done. Therefore, in the
context of Airdri it is quite useful to prepare it so that the conclusions and
recommendations can be derived in a proper manner.
Advantages-
 Through making its use, the Business Organizations are required to make sure that they
are able to derive the appropriate conclusions and recommendations. This can be helpful
for a company like Airdri.
 By making the use of this Budget, the Business Organizations can ensure that they are
able to attain their goals and objectives in the future. For Airdri, it can be highly useful.
Disadvantages-
 Its preparation requires the application of a lot of higher-level of skills. In the context of
Airdri, this creates a disadvantage.
 The preparation of this Budget is costly and requires a lot of time. For Airdri, it can lead
towards a disadvantage.
M3. Evaluate different planning tools which required for forecasting budget
The forecasting methods will be used by the company to help them build for the future more
effectively. It is important for the management of Airdri Ltd. to adequately schedule the use of
certain instruments in order to make informed choices in the potential. This improves their
judgment ability and talents. While administrators use these instruments, they can forecast their
profits and expenditures. As a result, management should make sure the quality of financial