Management Accounting Report: BRIGHTSTAR Company Financial Analysis
VerifiedAdded on 2021/01/01
|22
|6342
|417
Report
AI Summary
This report provides a comprehensive overview of management accounting, focusing on its application within the financial services sector, specifically using BRIGHTSTAR company as a case study. It begins with an introduction to management accounting systems, including their types, benefits, and application in an organizational context. The report then delves into various costing methods, such as cost accounting, actual costing, normal costing, standard costing, price optimization, inventory management, and job costing systems, along with an example of net profitability calculation. Furthermore, the report examines different planning tools used for budgetary control, discussing their advantages and disadvantages. It also explores how organizations adapt management accounting systems to respond to financial problems, highlighting planning tools and strategies to resolve financial issues and achieve sustainable success. The report emphasizes the importance of management accounting in making effective decisions, preparing suitable reports, and ensuring smooth business operations. It also includes an analysis of various management accounting reports such as budget reports, inventory management reports, account receivable reports, and performance reports. The report concludes by summarizing the key findings and recommendations for BRIGHTSTAR company.

Management Accounting
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Contents
INTRODUCTION.....................................................................................................................................3
LO 1........................................................................................................................................................3
Management accounting system and their types..............................................................................3
Different types of management accounting reports..........................................................................6
M1 Identify the benefits of management accounting system and it's application in the
organisational context ......................................................................................................................7
D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process......................................................................................8
LO 2........................................................................................................................................................8
Costing methods along with a calculation of net profitability...........................................................8
M2 Management accounting techniques and financial reporting documents................................13
D2 Financial reports which applies to interpret business activities.................................................13
LO 3......................................................................................................................................................13
Different planning tool used for budgetary control with their advantages and disadvantages.......13
M3 Use of planning tools for preparation and forecasting the budgets..........................................16
LO 4......................................................................................................................................................16
Organisations are adapting management accounting systems to respond to financial problems...16
M4 Management accounting in response to solve financial issue that can lead to the sustainable
success.............................................................................................................................................18
D3 Planning tools to resolve the financial problems........................................................................19
CONCLUSION.......................................................................................................................................19
REFERENCES.........................................................................................................................................20
INTRODUCTION.....................................................................................................................................3
LO 1........................................................................................................................................................3
Management accounting system and their types..............................................................................3
Different types of management accounting reports..........................................................................6
M1 Identify the benefits of management accounting system and it's application in the
organisational context ......................................................................................................................7
D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process......................................................................................8
LO 2........................................................................................................................................................8
Costing methods along with a calculation of net profitability...........................................................8
M2 Management accounting techniques and financial reporting documents................................13
D2 Financial reports which applies to interpret business activities.................................................13
LO 3......................................................................................................................................................13
Different planning tool used for budgetary control with their advantages and disadvantages.......13
M3 Use of planning tools for preparation and forecasting the budgets..........................................16
LO 4......................................................................................................................................................16
Organisations are adapting management accounting systems to respond to financial problems...16
M4 Management accounting in response to solve financial issue that can lead to the sustainable
success.............................................................................................................................................18
D3 Planning tools to resolve the financial problems........................................................................19
CONCLUSION.......................................................................................................................................19
REFERENCES.........................................................................................................................................20

INTRODUCTION
Management accounting play an essential role in the growth and success of an
organisation as it directs managers to prepare a suitable reports and make an effective
decisions in order to operate its business functions more smoothly. Such reports contains all
valuable information related with financial as well as non-financial transactions made by
various departments on daily basis so that the actual financial position of company can be
easily identified. For this, mutual support by various departments such as marketing,
production, finance etc. should required in order to give reliable and accurate information to
the management. The present assignment report is based on BRIGHTSTAR company which
is engaged in providing financial services to the clients operated business in UK market. The
project describes the management accounting and reporting systems along with their
integration and benefits. The project also discusses the costing methods with a suitable
example of calculation of net profitability. Various planning tools to control budget and
resolving financial issues are also briefly explained under this report.
LO 1
Management accounting system and their types
Management accounting is concerned with an activity of identifying, evaluating,
recording, and interpreting financial information which is useful for managers to make
suitable decisions and effective plans for smooth functioning of business. The main purpose
of management accounting is to track and estimate costs that will help managers to prepare
an effective budget for future business activities. It provides information both financial as
well as non-financial information which is useful for internal as well as external interested
parties to an organisation regarding their decisions for betterment of an organisation. For this,
it is important for all the departments of an organisation such as marketing, production,
finance etc. to provide sufficient details about their transactions made on daily basis so that it
can be accurately recorded and utilised while decision-making process (Baars and et.al.,
2015).
Management accounting play an essential role in the growth and success of an
organisation as it directs managers to prepare a suitable reports and make an effective
decisions in order to operate its business functions more smoothly. Such reports contains all
valuable information related with financial as well as non-financial transactions made by
various departments on daily basis so that the actual financial position of company can be
easily identified. For this, mutual support by various departments such as marketing,
production, finance etc. should required in order to give reliable and accurate information to
the management. The present assignment report is based on BRIGHTSTAR company which
is engaged in providing financial services to the clients operated business in UK market. The
project describes the management accounting and reporting systems along with their
integration and benefits. The project also discusses the costing methods with a suitable
example of calculation of net profitability. Various planning tools to control budget and
resolving financial issues are also briefly explained under this report.
LO 1
Management accounting system and their types
Management accounting is concerned with an activity of identifying, evaluating,
recording, and interpreting financial information which is useful for managers to make
suitable decisions and effective plans for smooth functioning of business. The main purpose
of management accounting is to track and estimate costs that will help managers to prepare
an effective budget for future business activities. It provides information both financial as
well as non-financial information which is useful for internal as well as external interested
parties to an organisation regarding their decisions for betterment of an organisation. For this,
it is important for all the departments of an organisation such as marketing, production,
finance etc. to provide sufficient details about their transactions made on daily basis so that it
can be accurately recorded and utilised while decision-making process (Baars and et.al.,
2015).
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

Bases Management accounting. Financial accounting.
Meaning. It is the accounting system which
provide information to the
manager to make policies, plans
and strategies for their business.
In this accounting system company
prepare a financial statement of an
year to provide financail
information to their shareholders.
Is it necessary? No Yes
Information Monetary and non monetary
information.
Monetary information only.
Useful for? It is used by internal department
only.
It is used by both internal and
external department.
Therefore, BRIGHTSTAR company should support its accounting manager to
perform their roles and responsibilities through motivating and guiding them so that they can
bring valuable outcomes to company by analysing the actual financial position of company.
Types of management accounting systems
Cost accounting system: It is valuable system which is utilised by management to
estimate the cost that will be further incurred in future business activities so that cost has been
controlled, inventory has been valued and profitability should be increased. It is also called as
product costing which valued the cost of products after determining the actual cost incurred
in manufacturing and selling products to the final customers. It is most beneficial to use by
manufacturing company such as BRIGHTSTAR company in order to monitor and record
transactions made during financial transaction process. Therefore, BRIGHTSTAR company
must use such system in order to establish a framework and estimate the cost that will be
utilised in future transactions with their clients. It makes easy for company to value its
products and after that sell into market with an effective prices in adding with their margin
(Brennan and Merkl-Davies, 2013).
Actual costing- is a system that include direct cost rates and actual overhead which is
used in process of production. It is used by bright star comapny to find out their measurable
cost. In these they add their material cost, employee charges and time which is invested to
provide services for their customer.
Meaning. It is the accounting system which
provide information to the
manager to make policies, plans
and strategies for their business.
In this accounting system company
prepare a financial statement of an
year to provide financail
information to their shareholders.
Is it necessary? No Yes
Information Monetary and non monetary
information.
Monetary information only.
Useful for? It is used by internal department
only.
It is used by both internal and
external department.
Therefore, BRIGHTSTAR company should support its accounting manager to
perform their roles and responsibilities through motivating and guiding them so that they can
bring valuable outcomes to company by analysing the actual financial position of company.
Types of management accounting systems
Cost accounting system: It is valuable system which is utilised by management to
estimate the cost that will be further incurred in future business activities so that cost has been
controlled, inventory has been valued and profitability should be increased. It is also called as
product costing which valued the cost of products after determining the actual cost incurred
in manufacturing and selling products to the final customers. It is most beneficial to use by
manufacturing company such as BRIGHTSTAR company in order to monitor and record
transactions made during financial transaction process. Therefore, BRIGHTSTAR company
must use such system in order to establish a framework and estimate the cost that will be
utilised in future transactions with their clients. It makes easy for company to value its
products and after that sell into market with an effective prices in adding with their margin
(Brennan and Merkl-Davies, 2013).
Actual costing- is a system that include direct cost rates and actual overhead which is
used in process of production. It is used by bright star comapny to find out their measurable
cost. In these they add their material cost, employee charges and time which is invested to
provide services for their customer.
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Normal costing- this is a tool that is used to derive the actual cost of a product. In
normal cost process price of product are include under actual cost while overhead price is the
pre-determined factor that can be used in normal costing. Bright star company is using them
as asset valuation because they are in service industry.
Standard costing- under this type of costing their value in material, labor, and
overhead cost all are pre-determined. It work as a benchmark for them that can be used for
calculate the standard cost of the goods that can produce by the manufacture. Like bright star
company calcualte their interest rate as per the bench mark told by banks or private sector.
Price optimisation system: It is another useful system which brings valuable
information about the actual perception and buying behaviour of targeted people regarding
the pricing policies implemented by an organisation on their offerings. It assist managers of
BRIGHTSTAR company to think twice about their existing pricing policy and accordingly
make suitable changes in order to maximise the satisfaction level of customers and achieve
their loyalty with company for longer period of time. For this, managers should first
determine the rivals’ pricing policy along with the quality of their offerings and on the basis
of which decide to charge prices in exchange of their products and services to the customers.
It directly makes position impact on their existing consumer base as well as profitability.
Inventory management system: It is a system which directs the managers of an
organisation to track and monitor the products through the whole supply chain or some
portion of it which is used in its business operation. The main purpose of using such system is
to make control and monitor the level of stock along with the deliveries and orders. It also
facilitate managers to acquire knowledge about the requirements of inventory so that the
order has been take place in advance which increases their capabilities to meet customers’
needs and requirements on timely basis. Along with this, it ensures company to have
sufficient amount of funds due to which allows company to run their process without any
interruptions. It increases the brand loyalty as well as profitability of company (Hasniza
Haron, Kamal Abdul Rahman and Smith, 2013)
Job costing system: It is the framework which gathered information about the total
expenses incurred in particular generation process. Such expenses are utilised to produce
something which are more in demanded by targeted people. This will assist managers to
make an effective pricing policy that covers all the expenses incurred so that profitability can
be gained on selling each products to the customers. BRIGHTSTAR company can use such
normal cost process price of product are include under actual cost while overhead price is the
pre-determined factor that can be used in normal costing. Bright star company is using them
as asset valuation because they are in service industry.
Standard costing- under this type of costing their value in material, labor, and
overhead cost all are pre-determined. It work as a benchmark for them that can be used for
calculate the standard cost of the goods that can produce by the manufacture. Like bright star
company calcualte their interest rate as per the bench mark told by banks or private sector.
Price optimisation system: It is another useful system which brings valuable
information about the actual perception and buying behaviour of targeted people regarding
the pricing policies implemented by an organisation on their offerings. It assist managers of
BRIGHTSTAR company to think twice about their existing pricing policy and accordingly
make suitable changes in order to maximise the satisfaction level of customers and achieve
their loyalty with company for longer period of time. For this, managers should first
determine the rivals’ pricing policy along with the quality of their offerings and on the basis
of which decide to charge prices in exchange of their products and services to the customers.
It directly makes position impact on their existing consumer base as well as profitability.
Inventory management system: It is a system which directs the managers of an
organisation to track and monitor the products through the whole supply chain or some
portion of it which is used in its business operation. The main purpose of using such system is
to make control and monitor the level of stock along with the deliveries and orders. It also
facilitate managers to acquire knowledge about the requirements of inventory so that the
order has been take place in advance which increases their capabilities to meet customers’
needs and requirements on timely basis. Along with this, it ensures company to have
sufficient amount of funds due to which allows company to run their process without any
interruptions. It increases the brand loyalty as well as profitability of company (Hasniza
Haron, Kamal Abdul Rahman and Smith, 2013)
Job costing system: It is the framework which gathered information about the total
expenses incurred in particular generation process. Such expenses are utilised to produce
something which are more in demanded by targeted people. This will assist managers to
make an effective pricing policy that covers all the expenses incurred so that profitability can
be gained on selling each products to the customers. BRIGHTSTAR company can use such

system to analyse the cost of transacting its financial products and on the basis of which
setting pricing policy which increases the satisfaction level of customers as well as profit
margin of company. Job costing system includes different aspects such as getting an enquiry,
order for generation, recording of expenses and achievement of employment etc.
Different types of management accounting reports
Budget reports: This is a report which is prepared for the purpose of maintaining
performance level of company for future period of time. It is prepared by every organisation
irrespective of the size whether small, medium or large as it is necessary to prepare in
advance for executing future business operations more smoothly. It is based on the estimation
of cost invested in future business activities so that desired results can be attained within pre-
determined time period. It reduces the wastage of resources which makes positive impact on
the profitability of company (Klychova, Faskhutdinova and Sadrieva, 2014).
Inventory management report: It is prepared to maintain sufficient level of inventory
with company so as to meet customers needs and requirements on time. Such reports contains
accurate information about the actual inventory and inventory required to order from
suppliers with the purpose of continuing production process without facing any interruptions
related with shortage of stock. BRIGHTSTAR company is engaged in providing financial
services therefore it is very important for their managers to prepare such report in order to
facilitate their various departments to perform their functions without facing any
disturbances. Analysing such reports enable managers to decide whether there is required to
order inventory or should wait keeping in mind the reducing storage cost. It increases
capabilities of company to fulfil the requirements of customers which in results achieving
their loyalty for longer duration.
Account receivable report: It is another reporting system which gives accurate details
about the list of default debtors so that legal action can be made against them for further
recovery. Such report maintains the financial position of company by identifying the amount
which will be recovered in future time period . It questions the existing credit policies of
management as well for non-recovery or loss to company which provides them an
opportunity to make changes in their existing credit policies so that the chances of facing
losses or bad-debt can be minimised. It indirectly supports in maintaining profitability of
company (Nas, 2016).
setting pricing policy which increases the satisfaction level of customers as well as profit
margin of company. Job costing system includes different aspects such as getting an enquiry,
order for generation, recording of expenses and achievement of employment etc.
Different types of management accounting reports
Budget reports: This is a report which is prepared for the purpose of maintaining
performance level of company for future period of time. It is prepared by every organisation
irrespective of the size whether small, medium or large as it is necessary to prepare in
advance for executing future business operations more smoothly. It is based on the estimation
of cost invested in future business activities so that desired results can be attained within pre-
determined time period. It reduces the wastage of resources which makes positive impact on
the profitability of company (Klychova, Faskhutdinova and Sadrieva, 2014).
Inventory management report: It is prepared to maintain sufficient level of inventory
with company so as to meet customers needs and requirements on time. Such reports contains
accurate information about the actual inventory and inventory required to order from
suppliers with the purpose of continuing production process without facing any interruptions
related with shortage of stock. BRIGHTSTAR company is engaged in providing financial
services therefore it is very important for their managers to prepare such report in order to
facilitate their various departments to perform their functions without facing any
disturbances. Analysing such reports enable managers to decide whether there is required to
order inventory or should wait keeping in mind the reducing storage cost. It increases
capabilities of company to fulfil the requirements of customers which in results achieving
their loyalty for longer duration.
Account receivable report: It is another reporting system which gives accurate details
about the list of default debtors so that legal action can be made against them for further
recovery. Such report maintains the financial position of company by identifying the amount
which will be recovered in future time period . It questions the existing credit policies of
management as well for non-recovery or loss to company which provides them an
opportunity to make changes in their existing credit policies so that the chances of facing
losses or bad-debt can be minimised. It indirectly supports in maintaining profitability of
company (Nas, 2016).
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

Performance reports: It provide details related with the performance level of every
departments whose contribution decide the growth and success of an organisation. For this,
managers of every departments should provide accurate information about their transaction
made on daily basis so that the comparison can be made between actual and standard results.
It makes easy for managers to identify the deviations if any, which affect their performance
level so that an effective decisions can be made to eliminate such deviations and motivate its
departments through allocating them appropriate funds and resources in order to facilitate
them for better functioning.
M1 Identify the benefits of management accounting system and it's application in the
organisational context
Adoption of various management accounting system brings negative as well as
positive impact on the business operations of company. It support organisation to maintain its
market position by keeping all records of transactions made by the different departments of
company on daily basis. Here are the some benefits of management accounting systems:
Types of management
accounting system
Benefits of accounting system
Job costing system It assist manager to analyse the cost incurred in dealing with
specific product which will help in determining their
profitability after selling into market. It makes easy for
managers to decide which product should produce more which
increases their net profitability.
Inventory management system It assist company to main adequate level of inventory which
can meet customers’ needs and requirements on time. It
contains details about stock-in and stock-out.
Cost accounting system It helps in identifying the total cost incurred in transacting
products and services with their the final customers which
enables managers to make an effective pricing policies after
adding some margin on it.
Price optimisation system It identifies the actual perception of customers towards
existing pricing policy of company which allows the managers
to make suitable changes with a motive of achieving their
departments whose contribution decide the growth and success of an organisation. For this,
managers of every departments should provide accurate information about their transaction
made on daily basis so that the comparison can be made between actual and standard results.
It makes easy for managers to identify the deviations if any, which affect their performance
level so that an effective decisions can be made to eliminate such deviations and motivate its
departments through allocating them appropriate funds and resources in order to facilitate
them for better functioning.
M1 Identify the benefits of management accounting system and it's application in the
organisational context
Adoption of various management accounting system brings negative as well as
positive impact on the business operations of company. It support organisation to maintain its
market position by keeping all records of transactions made by the different departments of
company on daily basis. Here are the some benefits of management accounting systems:
Types of management
accounting system
Benefits of accounting system
Job costing system It assist manager to analyse the cost incurred in dealing with
specific product which will help in determining their
profitability after selling into market. It makes easy for
managers to decide which product should produce more which
increases their net profitability.
Inventory management system It assist company to main adequate level of inventory which
can meet customers’ needs and requirements on time. It
contains details about stock-in and stock-out.
Cost accounting system It helps in identifying the total cost incurred in transacting
products and services with their the final customers which
enables managers to make an effective pricing policies after
adding some margin on it.
Price optimisation system It identifies the actual perception of customers towards
existing pricing policy of company which allows the managers
to make suitable changes with a motive of achieving their
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

loyalty.
D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process
Integration of management accounting system and reports
Management accounting and reporting systems both provided adequate support to an
organisation in maintaining their financial position in market through providing sufficient
details about the transactions made by departments on daily basis. BRIGHTSTAR company
can use both system in order to stable their market position for longer period of time. For
example, inventory management accounting and reporting system enable managers to make
decisions regarding maintaining sufficient inventory level which can easily meet the needs
and requirements of customers. Another accounting and reporting system is cost accounting
system which help managers to recover the total cost incurred in selling financial products to
the customers by estimating the cost and accordingly make pricing policies in addition of
their profit margin (Quattrone, 2016).
LO 2
Costing methods along with a calculation of net profitability
Cost: It Cost is a sum which is to be bring about by the organization during the
generation or instalment of something. This will comprises of time or work which is essential
for achievement of desired goals and objectives. It is known as the estimation of cash which
is utilized something like create something. In this manner, it isn't accessible for utilization of
any more. This would build profitability of the divisions and additionally in general
association. Supervisors needs to make break down of aggregate expenses to take essential
choice in regard to oversee and control additional expenses for the business (Vasile and Man,
2012).
In the event that these additional expenses are not controlled in time, it will make more
weight on clients and that make them think to buy results of the organization. Along these
lines, BRIGHTSTAR company needs to confront antagonistic ramifications over the
efficiency and generosity at a similar purpose of time. With the end goal to look with such
sort of circumstance, directors requires to distinguish every one of those essential zones that
D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process
Integration of management accounting system and reports
Management accounting and reporting systems both provided adequate support to an
organisation in maintaining their financial position in market through providing sufficient
details about the transactions made by departments on daily basis. BRIGHTSTAR company
can use both system in order to stable their market position for longer period of time. For
example, inventory management accounting and reporting system enable managers to make
decisions regarding maintaining sufficient inventory level which can easily meet the needs
and requirements of customers. Another accounting and reporting system is cost accounting
system which help managers to recover the total cost incurred in selling financial products to
the customers by estimating the cost and accordingly make pricing policies in addition of
their profit margin (Quattrone, 2016).
LO 2
Costing methods along with a calculation of net profitability
Cost: It Cost is a sum which is to be bring about by the organization during the
generation or instalment of something. This will comprises of time or work which is essential
for achievement of desired goals and objectives. It is known as the estimation of cash which
is utilized something like create something. In this manner, it isn't accessible for utilization of
any more. This would build profitability of the divisions and additionally in general
association. Supervisors needs to make break down of aggregate expenses to take essential
choice in regard to oversee and control additional expenses for the business (Vasile and Man,
2012).
In the event that these additional expenses are not controlled in time, it will make more
weight on clients and that make them think to buy results of the organization. Along these
lines, BRIGHTSTAR company needs to confront antagonistic ramifications over the
efficiency and generosity at a similar purpose of time. With the end goal to look with such
sort of circumstance, directors requires to distinguish every one of those essential zones that

are taking most extreme expenses. An ideal systems and measure would be useful with the
end goal to defeat these additional expenses of the organization. For this reason there are
different costing technique that will be useful with the end goal to expand efficiency of an
association. Some of them are referenced underneath:
Absorption costing: It is an administrative bookkeeping methods which is connected
with expensing all expenses those are connected with creation of an explicit items. It
comprises of both variable and settled expenses. It incorporate whatever is a
straightforwardly have effects on the items. The expense of a complete units in stock can
comprises of direct work, material and overhead costs (Absorption Costing Method. 2019).
Marginal costing: These are said to be that costs which is connected with extra expense of
units. In bookkeeping framework under which variable expenses are brought about to a cost
units and also settled amid that specific timeframe. It doesn't taken settled expense to evaluate
net productivity yet just factor costs are taken into contemplations (Marginal Costing
Method. 2019).
Income statement by absorption costing method:
Particular Amount
Sales (25*10000)
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing overhead
Net profit
250000
140000
110000
60000
50000
Working Notes*
Calculation of sales(25*10000) - 250000
Calculation of cost of good sold - 140000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Fixed manufacturing
overhead: 50000+30000+20000+40000)
end goal to defeat these additional expenses of the organization. For this reason there are
different costing technique that will be useful with the end goal to expand efficiency of an
association. Some of them are referenced underneath:
Absorption costing: It is an administrative bookkeeping methods which is connected
with expensing all expenses those are connected with creation of an explicit items. It
comprises of both variable and settled expenses. It incorporate whatever is a
straightforwardly have effects on the items. The expense of a complete units in stock can
comprises of direct work, material and overhead costs (Absorption Costing Method. 2019).
Marginal costing: These are said to be that costs which is connected with extra expense of
units. In bookkeeping framework under which variable expenses are brought about to a cost
units and also settled amid that specific timeframe. It doesn't taken settled expense to evaluate
net productivity yet just factor costs are taken into contemplations (Marginal Costing
Method. 2019).
Income statement by absorption costing method:
Particular Amount
Sales (25*10000)
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing overhead
Net profit
250000
140000
110000
60000
50000
Working Notes*
Calculation of sales(25*10000) - 250000
Calculation of cost of good sold - 140000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Fixed manufacturing
overhead: 50000+30000+20000+40000)
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

Calculation of selling and manufacturing expenses - 60000
(Variable selling and manufacturing overhead+ Fixed selling and manufacturing overhead :
30000+30000)
Income statement by marginal costing method:
Particular Amount
Sales
Less: Marginal cost of sales
Contribution
Less: Fixed cost
Net income
250000
130000
120000
70000
50000
Working Notes*-
Calculation of marginal cost of sales - 130000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Variable selling and
administration expenses: 50000+30000+20000+30000)
Calculation of fixed cost - 70000
(Fixed manufacturing overhead+ Fixed selling and administration expenses: 40000+30000)
Interpretation- From above solved numerical, it has been analysed that in both the
method of costing, company is getting net income equally. In the absorption method net
income is of 50000 and in marginal costing method too.
Income statement by absorption costing method (When 5000 units sold)
Particular Amount
Sales (5000*25)
Less- Cost of good sold:
Direct material- 50000
Direct labour- 30000
125000
140000
(Variable selling and manufacturing overhead+ Fixed selling and manufacturing overhead :
30000+30000)
Income statement by marginal costing method:
Particular Amount
Sales
Less: Marginal cost of sales
Contribution
Less: Fixed cost
Net income
250000
130000
120000
70000
50000
Working Notes*-
Calculation of marginal cost of sales - 130000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Variable selling and
administration expenses: 50000+30000+20000+30000)
Calculation of fixed cost - 70000
(Fixed manufacturing overhead+ Fixed selling and administration expenses: 40000+30000)
Interpretation- From above solved numerical, it has been analysed that in both the
method of costing, company is getting net income equally. In the absorption method net
income is of 50000 and in marginal costing method too.
Income statement by absorption costing method (When 5000 units sold)
Particular Amount
Sales (5000*25)
Less- Cost of good sold:
Direct material- 50000
Direct labour- 30000
125000
140000
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Variable manufacturing overhead- 20000
Fixed manufacturing overhead- 40000
Gross loss
Less- Selling and manufacturing overhead
Fixed selling and manufacturing overhead- 30000
Variable selling and manufacturing overhead-30000
Net loss
(15000)
60000
(75000)
Income statement by marginal costing method( When 5000 units sold)
Particular Amount
Sales(25*5000)
Less- Marginal cost of sales:
Direct material- 50000
Direct labour- 30000
Variable manufacturing overhead- 20000
Variable selling and administration expenses- 30000
Contribution
Less- Fixed cost:
Fixed manufacturing overhead- 40000
Fixed selling and administration expenses- 30000
Net loss
125000
130000
(5000)
70000
(75000)
Interpretation- From above solved numerical, it has been analysed that company is
getting loss from both costing method. In absorption method, net loss is of (75000) as well as
in marginal costing method company is getting same loss of (75000)
Financial reporting document with labour and material variances:
Budgeted Actual Variance
Fixed manufacturing overhead- 40000
Gross loss
Less- Selling and manufacturing overhead
Fixed selling and manufacturing overhead- 30000
Variable selling and manufacturing overhead-30000
Net loss
(15000)
60000
(75000)
Income statement by marginal costing method( When 5000 units sold)
Particular Amount
Sales(25*5000)
Less- Marginal cost of sales:
Direct material- 50000
Direct labour- 30000
Variable manufacturing overhead- 20000
Variable selling and administration expenses- 30000
Contribution
Less- Fixed cost:
Fixed manufacturing overhead- 40000
Fixed selling and administration expenses- 30000
Net loss
125000
130000
(5000)
70000
(75000)
Interpretation- From above solved numerical, it has been analysed that company is
getting loss from both costing method. In absorption method, net loss is of (75000) as well as
in marginal costing method company is getting same loss of (75000)
Financial reporting document with labour and material variances:
Budgeted Actual Variance

Units 1000 1100 100(F)
Hours 3000 3400 400(A)
Units per hour 3 3.09 0.09(F)
Labour 15000 17680 2680(A)
Labour rate per unit 15 16.07 1.07(A)
Labour rate per hour 5 5.2 0.2(A)
Actual
Units 1000
Material used Kg 2200
Actual Material cost 20900
Material cost per kg 9.5
Material cost per unit 20.9
Budgeted material cost per unit of the product 2kg at £10/kg
Budgeted material cost per kg ( £ 10/2) 5
Budgeted Material cost 11000
Variance (Actual- budgeted) 9900(A)
Strengths Weaknesses
Hours 3000 3400 400(A)
Units per hour 3 3.09 0.09(F)
Labour 15000 17680 2680(A)
Labour rate per unit 15 16.07 1.07(A)
Labour rate per hour 5 5.2 0.2(A)
Actual
Units 1000
Material used Kg 2200
Actual Material cost 20900
Material cost per kg 9.5
Material cost per unit 20.9
Budgeted material cost per unit of the product 2kg at £10/kg
Budgeted material cost per kg ( £ 10/2) 5
Budgeted Material cost 11000
Variance (Actual- budgeted) 9900(A)
Strengths Weaknesses
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide
1 out of 22
Related Documents

Your All-in-One AI-Powered Toolkit for Academic Success.
+13062052269
info@desklib.com
Available 24*7 on WhatsApp / Email
Unlock your academic potential
Copyright © 2020–2025 A2Z Services. All Rights Reserved. Developed and managed by ZUCOL.