LCBB4001 Accounting Fundamentals: Break-Even and Management Accounting

This report provides an in-depth analysis of accounting fundamentals, focusing on break-even analysis, its applications, and limitations within the context of a company, Walk about Ltd. The report delves into the calculation of break-even points, profit analysis under different scenarios, and the impact of advertising campaigns on profitability. Furthermore, it differentiates between management accounting and financial accounting, highlighting the importance of management accounting for internal decision-making, financial planning and financial statements analysis. The report also covers techniques for management accounting, such as financial planning, financial statement analysis, and historical cost accounting, providing a comprehensive overview of accounting principles and their practical implications for business decision-making. The report also includes references to books and journals related to the topics covered.

Accounting
Information

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Break even analysis:....................................................................................................................3
Importance for management accounting for the company how it different from the financial
accounting:...................................................................................................................................5
Techniques for the management accounting:..............................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial analysis is about analysing the financial performance for the company.
Accounting is all about maintaining data for the business by its information. Accounting refers
for recording business transactions which helps managers for future decision making. Break even
analysis refers for useful in difference between the variable cost, fixed cost and the revenue.
Break even analysis indicates where the company is, or a new product or service, will be benefit.
Organisations uses accounting for its financial decision making (Baboukardos and Rimmel,
2016). The company which is chooses for this report is Walk about Ltd. This report includes
topics which are break even analysis, profits. Apart from this it includes topics which are
importance for management accounting how it different from financial accounting, techniques
for the management accounting.
MAIN BODY
Break even analysis:
Break even analysis:- Break even analysis is useful in difference between the variable
cost, fixed cost and the revenue. Break even analysis indicates where the company is, or a new
product or service, will be benefit (Christensen, Nikolaev and Wittenberg‐Moerman, 2016). In
organisation, it manages the size of unit to be sold, budgeting and setting targets, manage the
margin of safety, monitor and control the cost, helps in designing pricing strategy.
for units
75000
Particulars amount in units total amount
sales 11 825000
variable costs 6 450000
Contribution 5 375000
fixed costs 4.6666666667 350000
profits 0.3333333333 25000
A. break even point ( in units and amount)
Break even point ( in units )= fixed costs / ( sales price per unit – variable costs per
unit )

= 350000 / 5
= 70000 units
Break even point ( in amount ) = Fixed costs / contribution margin
Contribution margin = sales per unit – variable costs per unit / sales per unit
= 5 / 11
= 0.45
= 350000 / 0.45
= 777777.78
(B.) profits made for sales for 75000 units:
= Sales – variable costs – fixed costs
= contribution – fixed costs
= 375000 – 350000
= 25000
(C.) The company will make an advertising campaign costs £10,000 and will improve
the product specifications, which will increase the variable cost per unit by £1. This is expected
to allow the company to increase the selling price to £13 and the sales is expected to be 80,000
unites. Calculate the new profit figure for the improved product.
for units
80000
Particulars amount in units total amount
sales 13 1040000
variable costs 7 560000
Contribution 6 480000
fixed costs 4.375 350000
profits 1.625 130000
When the company increases its advertising expenses which leads to increase in its sales.
It makes $ 10000 for its advertising this leads to increase in variable expenses by $ 1 variable
expenses which increases its sales by $ 13 per units. Increases in sales leads to increase in profits

when the company's sales price was 11 for 75000 units it generates profits for 25000 but when it
does its marketing the profits are increases by 130000 for 80000 units (Huerta and Jensen, 2017).
( D. ) Limitations for break even analysis:
 Break even analysis are the costs analysis as it not mentioned what sales actually needs
for the product at various prices. As it mentioned it helps for calculating sales price for
the company but the proper sales prices are not mentioned by using its.
 It assumes about the various costs in which fixed costs are constant. Its not possible for
larger duration that it has same for the time.
 It assumes average variable costs are same for the per units.
 It assumes that the quantity for the goods produces are same as quantity for goods sales.
 In multi products, it assumes the relative products for every products sold and produces
are constant for the company.
Importance for management accounting for the company how it different from the financial
accounting:
Management accounting are the process for preparing reports about the business which
helps managers for decision making. It helps business for identify, measuring, analysing,
interpreting, communicating information to managers. Managers uses accounting information for
making decisions for the business activities. It provides financial information for managers so
that they can acquire the funds, manages it for the business activities for the higher profitability.
Companies are wants for sales increase, profits (Turner, Weickgenannt and Copeland, 2020).
Costs and profits are important factors for the success. It helps for managing maximum profits
for the organisations success. It helps companies in order to assessing financial position for the
businesses.
Financial accounting are related for arranging funds for the organisations. Management
accounting, financial accounting are different from each other as management accounting keeps
data for information and financial accounting helps for arranging funds. Financial accounting are
the collection for data for making financial statements where management accounting are the
process for account for the business. Management accounting are provides information to the
managers where financial accounting provides information to the stakeholders, creditors,
customers etc. Management accounting use for business for internal functions where financial
accounting use for businesses for external functions.

Techniques for the management accounting:
 Financial planning: Financial planning are the act for deciding in advance for the
financial activities for achieving its objectives. Financial planning includes decision
making related to the financial objectives for the businesses. Financial planning are the
process for planning about the financial needs for the company which helps it for
managing financial resources for the organisations higher ability for higher profitability.
 Financial statements analysis: Financial analysis are the process for analysing financial
position for the company which helps for future decision making. Financial analysis is
about analysing the financial performance for the company. Financial accounting are the
collection for data for making financial statements where management accounting are the
process for account for the business. Financial analysis helps organisations for making
finance related decisions which are uses for business success (Turtle and Wang, 2017).
 Historical costs accounting: Historical costs accounting helps for providing information
relating to the costs for the every job. It helps business for compare costs, future
planning. Historical costs helps organisations for making future decisions for
management accounting. It helps businesses for decision making for the its success which
helps organisations for expanding sales which helps for achieving higher profitability.
CONCLUSION
From the above report it has been concluded that financial analysis are the process for
analysing financial performance for the businesses. Accounting refers for recording business
transactions which helps managers for future decision making. Organisations using various
elements for forecasting business performance its profits. Break even analysis, it helps for
managing the size of unit to be sold, budgeting and setting targets, manage the margin of safety,
monitor and control the cost, helps in designing pricing strategy. Management accounting are the
process for preparing reports about the business which helps managers for decision making
Financial accounting are related for arranging funds for the organisations. Management
accounting are provides information to the managers where financial accounting provides
information to stakeholders, clients, customers etc. accounting helps business for the analysing
its financial information which helps managers for decision making.

REFERENCES
Books and journals:
Baboukardos, D. and Rimmel, G., 2016. Value relevance of accounting information under an
integrated reporting approach: A research note. Journal of Accounting and Public
Policy. 35(4). pp.437-452.
Christensen, H. B., Nikolaev, V. V. and Wittenberg‐Moerman, R., 2016. Accounting information
in financial contracting: The incomplete contract theory perspective. Journal of
accounting research. 54(2). pp.397-435.
Huerta, E. and Jensen, S., 2017. An accounting information systems perspective on data analytics
and Big Data. Journal of Information Systems. 31(3). pp.101-114.
Turner, L., Weickgenannt, A. B. and Copeland, M. K., 2020. Accounting information systems:
controls and processes. John Wiley & Sons.
Turtle, H. J. and Wang, K., 2017. The value in fundamental accounting information.Journal of
Financial Research. 40(1). pp.113-140.