Astra Zeneca: Management Accounting Systems Report Analysis

This report provides a comprehensive overview of management accounting principles and their application within Astra Zeneca, a multinational pharmaceutical company. It begins by defining management accounting and its various types, including cost accounting and traditional systems, and then explores different reporting methods such as cash flow statements, fund flow analysis, financial planning, ratio analysis, and various management reports. The report delves into the computation of net benefits using marginal and absorption costing systems, comparing their implications for financial analysis. Furthermore, it examines the similarities and dissimilarities of planning tools used for budgetary control and how management accounting systems can be utilized to respond to financial problems. The report aims to enhance efficiency, minimize costs, and maximize profits within the organization by effectively applying management accounting techniques.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and types of management accounting system...........................3
P.2 Explain different methods used for management accounting reporting:........................5
TASK.2 ...........................................................................................................................................7
P.3 Computation of net benefit utilizing marginal costing and absorption costing systems: 7
TASK.3..........................................................................................................................................11
P.4 Similarities and dissimilarities of different types of planning tools used for budgetary
control:..................................................................................................................................11
TASK.4..........................................................................................................................................12
P.5 Management accounting systems to respond to financial problems:.............................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is an process in which the preparing of an management reports
and the accounting are been done according to the managers of the organisation which would
make the then help in knowing the accounting of the organisation which would make them to
know about it which would help them to process further(What is Budgetary control?. 2017). The
management accounting is been generated in an month or in an weekly reports for the
organisation for the people such as the department managers and the chief executives. It provides
the help to the people which has to make proper day to activities so that they would make an
proper decisions in the day to day activities. Astra Zeneca is a manufacturer company which is
multinational pharmaceutical and the biopharmaceutical firm, they produces medicines for
different kinds of diseases such has cancer, respiratory, inflammation, gastric and many more.
This report will also help the manager to effectively apply the decision of the different operation
of the organisation as well as it will try to enhance the efficiency of the techniques used so as to
minimize the cost and maximising the profits. By the help of an management accounting the
different kind of an issues can be identified which is related to the budget.
TASK 1
P1 Management accounting and types of management accounting system.
Management accounting is an report and and the accounting which gives the accurate
financial and the statistical informations which is required to the managers so that they would
make the day to day operations which is have to make the in the organisation and to make the
short term decisions in the organisation. In management accounting it provided the monthly or
the weekly reports to the organisation and to those are their internal audiences some of them are
like department managers or the chief executives(marginal cost. 2017). This an report which
shows the amount of an cash which is available with the organisation, and it sales revenue which
are generated, and the amount of the orders which are in their hands, and the transactions of the
account payable and the account receivable, and many more. It helps to know about the wastage
which is occurring in the organisation so that they would know what to do in that and how to
solve it.

Management accounting system
Management accounting is an important part of the organisation which carry out the
operating activities done in the firm. This would act as the guide to the managers for all the
stages of the operations and their functions of the organisation. It make the increasing of the
effectiveness and the betterment of the organisation. And it makes improvement of the
performance and the skills of the employees which are working over their so that they would
make the proper use of it in making the organisation achieve its task in an proper manner.
Management accounting system use to focus on the cost of the induce in an products or
the services of an organisation(Cost-Volume Profit Analysis. 2017). It is an procedure from
which the organisation use to make the collection and the storing of an accounting data is been
seen so the decisions which are been taken by the top level management of an organisation. It is
an importance part of an organisation as that may help the managers to manage all the financial
and the accounting systems and all the transaction of an organisation. Type of management
accounting system are:-
 Cost accounting system- This system is used in firm so they can calculate products cost
so that they can be able to analyse profitably. To do the forecasting of cost of a
commodity is quit hard, to calculate the profitably of a products is important to be known
a firm but for this Astra Zeneca firm have to choose correct techniques and should
forecastles the cost properly.
 Traditional accounting systems- Traditional accounting is an system which helps the
business to make the track all the cost which is been related and induced in an operation
of the organisation with the help of an job or the process costing of the methodology.
And it helps them to make sure about the cost which is been involved in the inventory
cost, labour cost, etc.
 Job costing system- It is a method by which cost of any products can be determined, this
contain specific techniques by which cost is been identified.
 Batch costing techniques- It is a system which is kind of a particular order of costing,
this system is related to job costing. The batches which is over their haves the same
identical units but them also all individual batch is different.
 Inventory management- For all kinds of business inventory is the most essential part in
it and this system use to manages the inventory of organisation, this management would

help in using of their resources in appropriate manner so they can get profits. It is a basic
administration framework which is typically utilized by the assembling and retailer
organizations to deal with their stock level and stock. It can support to the Astra Zeneca
to make an administration in the stock, which stock must be deal into the market and also
to deal with the stock level in the stock to decrease the possibilities and danger of the
absence of stock for future needs. This bookkeeping framework is having need of the
subtle elements of the stock which can help to the organization to make alterations in the
creation according to the market requests and achieve to supply in the market.
 Price optimisation – This management accounting system help in deciding the correct a
price which is beneficial for both cited firm and customers also. Most of the companies
face this issue as they fail to decide the correct price of a commodity. This results in loss
of money. But by using this technique they can decide as price which give them
necessary amount of profit.
These accounting framework can help to the organization to value improvement which can help
to the organization to make more benefits and additionally they can diminish their costs which
can have a beneficial outcome on their offers of the items into the focused on market.- The
management accounting helps the managers in planning perspectives as to determine the ultimate
aim of the firm. With the help of the management accounting the desired plans and the strategies
can be made (Garrison and et.al., 2010). can be able to avail best services and the products to the
customers with the help of the appropriate management accounting report. It become very easy
for the organisation to judge the several aspects of the operation and the policy can be generated
accordingly. With the help of the prepared report of the management accounting it become easy
to measure all the related performances that has been performed in the firm.
P.2 Explain different methods used for management accounting reporting:
Every single association made various reports which help to them to assess their own
particular performance in the focused on market and it backings them to make modifications into
their business exercises(Ward, 2012). These kinds of reports are framed by the association on the
premise of the diverse time lengths like; day by day, week by week, month to month, quarterly
and yearly to make an investigation of the administration bookkeeping and monetary information
of the organization. Distinctive sorts of reports are here which can be utilized by the Astra
Zeneca:

Cash flow statement- Under cash flow statement only cash related transactions are included. It is
separated into three areas which are operating action, investing action, financial action. In these
segment of the cash flow statement Astra Zeneca needs to break down the money inflow and
money outflow from the firm. As the organization is operating in the compound assembling and
offering so item deal must be canvassed into the working exercises and profit for the speculation
must be shrouded into the contributing and money inflow and surge from the budgetary sources
canvassed into the last one.
Fund flow analysis- It is used by the organization of the Astra Zeneca by which they can
enhance working in the relationship by looking at the use of funds which are open for them(Van
Helden and et.al., 2010). It assist to the association to make an examination of the sources where
they can rise budgetary resources and also it can help to the association to make a reasonable
examination of the concentrations in which they are contributing their cash related resources. It
can help to the association to make a productivity level into the relationship by making a honest
to quality examination of these sources and use of the capital.
Financial planning- It is a basic instrument for the supervisors of the Astra Zeneca to make
legitimate arranging of the investment and in addition emerge fund for the future venture. So the
Astra Zeneca needs to utilize strategies which are given under the MA framework. This could
support the organization to choose a proper source of finance for their future undertakings which
can help to the organization to make a productivity in the speculations and also it can help to the
organization to decide the best source. Administrators and proprietors of the Astra Zeneca need
to utilize this strategy which can help to them to choose a source which can possibly give them
legitimate budgetary support till to accomplish their destinations. So they need to make a
legitimate examination of the accessible alternatives of the monetary sources and it can help to
the organization to settle on a positive decision on it.
Ratio analysis- It depends on the numerical equations which assist the organization to make a
legitimate investigation of financial statements. Standard ratios must be utilized by the
organization to get review on the manufacturing cost and value of the price.
Budget Report- Associations' has to create a spending plans which incorporates the majority of
the components on which an organization work in a year. Therefore, Astra Zeneca needs to
utilize the spending report by which they can limit the cost and costs and in addition they can
oversee productivity in the association.

Job cost report- This is mainly done by having estimations so that organisation can value the
profitability of a job, this would help the firm to determine the high earning field of their
business as because they focus on that particular area, this would help in analysing the expenses
(Vaivio and Sirén, 2010).
Inventory management report- The firm which have the physical inventory would use the
managerial accounting reports as because of that they can be able to manages their management
in ruining smooth and effectively. All the informations like the inventory wastes and cost of
labour on hourly basis are mentioned in this report.
Accounts receivable report- This is a critical tools which use to manage the cash flow of a
company so that they can be able to widen the credit of customers.
Sales report- At the time of any sale of a product is done in a company then it is been recorded in
this report. This report helps in knowing about the sales which is been occur in a company during
a year.
TASK.2
P.3 Computation of net benefit utilizing marginal costing and absorption costing systems:
Net benefits can be made sense of through various methods in the management
accounting. Income as indicated by the absorption costing and marginal costing is showed up as
underneath:
Absorption Costing: This costing strategy is an arrangement of MA by which diverse costs
which are associated with different sorts of manufacturing techniques are absorbed on an
item(Schaltegger, Gibassier and Zvezdov, 2013). Absorption costing is needed to measure the
stock of an organisation. Budgetary estimation is the main factor of MA.
Selling price £35
Unit costs
Direct materials £6
Direct Labour £5
Variable Production overhead £2
Variable sales overhead £1
Budgeted production for the period is 600 units
Fixed costs for the month are given below

Budgeted cost Actual cost
Production overhead £1,800 £2,000
Administration cost £800 £700
Selling cost £400 £600
Sales (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable cost -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
fixed overheads -2000
Admin & selling cost (700+600) -1300
-3900
NET INCOME AS PER MARGINAL COST 9300
NET INCOME AS PER ABSORPTION
COSTING:
Sales (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600

Admin & selling cost (700+600) 1300
less;over absorbed fixed production overheads -100 -1800
NET INCOME AS PER ABSORPTION
COSTING: 9600
Marginal costing: Marginal costing is to a great degree helpful in managerial key decision
making process. Organization's manufacturing cost and trade choices may be easily impacted
from marginal costing (Renz, 2016). That is the reason, it is a piece of cost control method for
costing. Before clearing up the usage of marginal costing in authoritative decision making
process, it is processed as change in the aggregate cost due to very in the sales. Essentially, it is a
tool which is utilized for showing the impact on net benefits if bookkeeper categorised
aggregate cost in variable and fixed cost. Marginal cost is constantly equivalent to the variable
cost. Marginal costing strategy are material for internal decision-making in a short run (Pipann
and Czarniawska, 2010).
Difference between absorption and marginal costing techniques :
Basis for
Comparison Marginal Costing Absorption Costing
Meaning
Marginal costing is the strategic
tool through which decisions for
distinguishing the total cost of
production.
Absorption costing is the apportionment of
total costs to the cost centre in order to
determine the total cost of production.
Cost Recognition
The variable cost is treated as
product cost. On the other hand,
fixed cost is considered as period
costs.
Under absorption costing, fixed and
variable cost is considered as product cost.
Classification of
Overheads
Overheads are classified under
marginal costing under Fixed and
Variable.
Production, Administration and Selling &
Distribution.
Profitability Profitability is calculated through Due to addition of fixed cost, profitability

Basis for
Comparison Marginal Costing Absorption Costing
Profit Volume Ratio. gets affected.
Cost per unit
Deviation in the opening and
closing inventory does not impact
on per unit cost.
Deviation in the opening and closing
inventory influence the cost per unit.
Highlights Contribution per unit Net Profit per unit
Cost data Presented to outline total
contribution of each product. Presented in conventional manner
Cost Volume Profit Analysis(CVP Analysis): CVP analysis is used by the firm for knowing
the effect of change in the cost of product and it's volume on the cited firm's net income. Astra
Zeneca need to plan a precondition under selling price will constant at the time of
operation(Nixon and Burns, 2012). Exactness of CVP examination in light of the way that
organization's cost of creation is settled at a settled time frame. In the said period genuine
generation overhead, organization cost and offering expense is higher than the planned cost, as
aggregately planned aggregate cost of these three segment was £ 2600 yet real cost is £ 3300.
Absorption Costing: According to above calculation, income of absorption costing is
calculated. Cost per unit of Astra Zeneca was £19 which incorporates £ 6 of direct material, £ 5
of direct work, £ 3 is for variable cost and £5 of settled cost allotted on particular premise. Under
this costing method, Astra Zeneca seek out under and over ingested generation overhead keeping
in mind the end goal to achieve better cost management.
TASK.3
P.4 Advantages and disadvantages of different types of planning tools used for budgetary
control:
Budgetary control is used as a gadget of Astra Zeneca control and decides a couple favourable
circumstances. Notwithstanding the way that, there are a couple of hindrances or limitations as
well. Which are said underneath.
Similarities of Budgetary Control

1. The budgetary arrangements are set up on the premise of forecasting. If the forecasting is
wrong, the budgetary arrangements will lead to make the wrong interpretation(Macintosh and
Quattrone, 2010). Consequently, the accomplishment of budgetary control is totally depending
on the level of precision of forecasting.
2. Future is uncertain and can't be obvious definitely. A spending arrangement is made for future
period. Therefore, these spending plans does not exhibit reality(Lukka, 2010).
3. A budgetary program is a rigid one. The deviations are found by differentiating genuine
execution and arranged figures. The deviations are aggregating due to direct result of changed
conditions. Expecting this is the situation, Astra Zeneca can't settle obligation on any specialists.
4. The money related arrangements may be reconsidered now and then in perspective of changed
conditions. Accepting this is the situation, it prompts more association expenses.
5. In the event that the money related arrangements are reconsidered generally, the labourers can
lose their trust in budgetary arranging.
6. Spending arrangements may fill in as goals on managerial movement in light of the way that
every labourer tries to finish the arranged figures (Kaplan and Atkinson, 2015).
7. The budgetary control requires dynamic speculation and interest in arranging and use among
the specialists at all levels. Be that as it may, such sort of venture and investment are not easily
open to the affiliation.
8. The budgetary control makes conflicts among the line bosses. The reason is that every director
needs to get more asset designation through budgetary arrangements, dodge commitment and
accuse people others for pit falls.
9. A budgetary arrangement can't be used as a substitute for organization.
10. An autonomous wander affiliation can't shoulder the cost of the work of budgetary control as
a cost control methodology since it incorporates more expenses (Garrison and et.al., 2010).
11. The course of action of budgetary arrangements requires specific staff. Such specific staff is
not available agreeably to the affiliation.
12. The cost of presenting and working a budgetary control system should be identical with the
focal points arrived from. Be that as it may, it hate so.
13. On the off chance that the budgetary control system is wrongly actualized, the agents are
frustrated and cause resistance. These things incite low confirmation among the agents.

Despite the above obstacles of budgetary control system, the financial backing is a fundamental
one to a relationship for honing effective control on workers.
Master budget – This budget is made for a complete organisation, all the departments and teams
are included in this budget. It talks about the income which cited firm may earn in upcoming
year, their planning expenditure is also included in it.
Advantage – It remove any kind of conflicts and confusion that can arise between two
wings of a corporation. It also assist in synchronization of various task, this ultimately help in
reducing the wastage of resources.
Disadvantage – It is one of the most expensive form of budget, Astra Zeneca also have
to spend huge time on its formation because it is every time consuming.
Cash budget – All the transaction which are either direct or indirectly related to cash are
planned under this form of budget.
Advantage – It shows the exact amount which company will be needing in upcoming
time. This minimises the fear of uncertainty. Timely payment to vendors is one of the prime
advantage of this budget.
Disadvantage – Most of the managers do not have faith in this type of budget because
they are concerned about its reliability and effective. Prediction of needed liquid assets is very
difficult.
Operating budget – This type of budget help in predicting the expenses and income related to
manufacturing and administration.
Advantage – It helping optimum utilisation of the resources which is present in the
organisation.
Disadvantage – Significant amount of time and money is needed for this business. It puts
additional burden on the financial resources of the company.