Management Accounting Report: Solutions for Airdri Group

This report provides a comprehensive analysis of management accounting principles and their application to the Airdri Group, a UK-based retailing organization specializing in hand dryers. The report delves into various aspects of management accounting, including different types of management accounting systems such as cost accounting, inventory management, and price optimization systems, and different methods used for management accounting reporting such as inventory and manufacturing reports, budget reports, and financial reports. It examines the benefits of a management accounting system, including maximizing organizational efficiency and improving decision-making. The report also explores different costing methods like absorption costing and marginal costing, and planning tools for budgetary control. Furthermore, it evaluates how organizations adapt management accounting systems to respond to financial problems, providing valuable insights into how Airdri Group can leverage management accounting to solve financial issues and improve its overall performance. The report concludes with an evaluation of the management accounting system and the management accounting report, emphasizing their importance in driving effective financial management and decision-making within the company.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Management accounting and different types of management accounting system...........3
P2. Explain different methods used for management accounting reporting..........................5
M1. Benefits of managements accounting system.................................................................6
D1. Evaluate the management accounting system and management accounting report........7
TASK 2............................................................................................................................................7
P3. Different types of costing methods which are used in calculation of net profit...............7
t...............................................................................................................................................9
M2.Range of Management account techniques......................................................................9
D2. Evaluate financial reports helps in business activities...................................................10
TASK 3..........................................................................................................................................10
P4 The advantages and disadvantages of different types of planning tools used for budgetary
control...................................................................................................................................10
M3 The use of different planning tools and their application for preparing and forecasting
budgets..................................................................................................................................12
D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success.........................................................12
TASK 4..........................................................................................................................................13
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems................................................................................................................13
M4.Analye how management accounting can solve financial problems.............................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is a technique which is used by the management in its
organisation so that it can know the financial and managerial information of its business. It
provide helps to the managers so that they can take important decisions in their company. In this
report chosen company is Airdri Group. It is a retailing organisation which deals in various types
hand dryer products and it is established in United Kingdom. The aim of company is to identify
and solve financial problems through management accounting system. This report has discuss
about the various topics like: management accounting report, system and methods and
appropriate techniques of cost analysis and planning tools of management accounting. Apart
from this it also talks about the management accounting system to respond the financial
problems.
TASK 1.
P1. Management accounting and different types of management accounting system
Management accounting is tool which is used to evaluate the business activities. There
are basically two types of accounting such as management accounting and financial accounting.
It provides help to the management so that it can makes effective plans so that organisation run
its business successfully (Management accounting. 2018). It helps to prepare management
reports which gives true and reliable information and data which is essential to take decisions on
regular basis. By using it organisation can know its financial position. It is a process of
analysing, summarizing, gathering and communicating information to the management of
company so that its accomplish its objectives. Airdri Group can apply it so that it can minimizes
or solves the financial problems as a result it can maximization its revenue. Organisation can use
different types of management accounting system which are described as below:
Cost accounting system:
Cost accounting system can be used by the management to ascertain the cost of its
products and services and it is also knows as product costing system. Analysis of cost can help
the company in profitability analysis and cost control. Management accounting officer can help
Airdri Group to ascertain the cost involvement in the production of goods. It helps the
organisation to minimise the cost so that profit margin can be enhanced. There are basically two
types of cost accounting system which are as follows:

Job order costing:
Job order costing is a technique which is used by the organisations to ascertain the cost of
manufacturing of an individual batch or a product. This system can be used by the company
when it manufacture various types of goods which are different from each other. It can be used
by Airdri Group to analyse the cost involvement in direct labour, direct material or overheads.
Process costing:
Process costing is used in production or manufacturing industry where company
differentiate their processes and produce a standard product then it can apply process costing
system to ascertain the cost of production. It can be evaluated by allocating all process cost to the
total units produced. Airdri Group can use this method because it deals in various types of
products and services so that they can analyse the process cost of its units which are
manufactured by them (Banerjee, 2012).
Inventory management system:
Inventory can be in form of goods or material which can be finished product or raw
material. It is hold by the organisation for the ultimate objective of resale. Airdri Group can
apply this system in its company so that is can effectively manage the stock of its business. There
are various software or applications which can be used by the management to manage the
inventory. This system can control the incoming and outgoing inventory so the company can
ascertain the present stock in the warehouse.
Price optimizing system:
This system is used to ascertain the accurate price of the products and services. It is
essential for an organisation to decide the appropriate price so that more number of consumers
show their interest to buy the goods of company. Airdri GroupLtd should use this system so that
is can determine the appropriate prices of its different products and services and it can help the
organisation to maximize the sales. So it can generates the more revenue. Consumers are price
conscious so it is important for it to decide the reasonable price so that maximum customer can
attract towards the company and show their willingness to purchase the products.
Job costing system:
This system includes the process of combined information about the cost associated with
a particular service job or production. It reflects that an organisation is able to ascertain the

appropriate cost of the particular jobs. Airdri Group can use this system so that it can determine
the effective cost of specific job in the company. So by using management accounting system
organisation to minimize or reduce the financial problems and able to generates more revenue.
P2. Explain different methods used for management accounting reporting
Management accounting report is essential to be follow by the management of the
company. It reflects the true position of company so that organisation take the financial decision
on the basis of it. These reports are prepared on quarterly, half yearly and yearly basis. There are
various methods which are used in management accounting reporting which are as follows:
Inventory and manufacturing report:
Inventory and manufacturing report is need to be maintain for those companies who
manufacture the products. It is important for the organisation to effectively manage its stock so
that they can know how much inventory they have to maintain on regular basis. Airdri Group
should prepare these reports so that they can determine various cost such as inventory cost,
manufacturing cost and overhead expenses.
Budget report:
Budget is needed to be prepare by the organisation so that it can control its expenses. It is
frame on the basis of previous year reports of the organisation. It is made for future period and it
is based on assumptions. The estimated budget for the period is usually based on the actual
expenses from prior years. Airdri Group can prepare the budget report so that it can reduces the
cost which can help the organisation to maximize the revenues.
Accounts receivable aging:
This report is important to prepare because it helps the company to manage cash flow if
they maximise credit to customers in the organisation. It can be used by the company to find
problems with the organisations collection process. There are many customers who does not pay
their balance so it is essential for the Airdri Group that it has tighten their credit policies. It can
helps to maximise the collections for the company (Bouten and Hoozée, 2013 ).
Job cost report:
Job cost report can help the organisation to analyse the cost of a particular project
financed by the business of the company. Airdri Group can match their estimate of income for
analysis of job's profitability. Through it organisation can aware about those areas where it can

maximise the revenues and than it will not focuses on those domains which are not giving the
sufficient profits to the company.
Financial report:
Financial report can be used by the company to analyse their accounts and financial
statements. It provides important and valuable information about the profit and loss which is earn
by the organisation. Airdri Group can consider its revenues by using this report which can be
useful in the decision making process. It helps the company to make its future strategies and
investment plan.
Pro forma cash flow:
Pro forma cash flow is useful for the organisation because it provides useful information
regarding cash flow. Airdri Group can prepare this report so that it can know about the inflow
and outflow of cash in their business. It helps the company to take important decisions about the
management of fund which is required to perform regular activities and operations of the
organisation (Bryer, 2013).
M1. Benefits of managements accounting system
Management accounting system helps the organisation to provides the valuable information
which are used by the organisation in planning and decision making in its business. There are
various benefits of management accounting system which are as follows:
 Maximise the efficiency of the organisation.
 Effective decision making in financial statements.
 Improves the productivity of the organisation.
So it can be used by the Airdri Group so that it financial management can be improves and it
can able to solve it money related problems in the company.
D1. Evaluate the management accounting system and management accounting report
Management accounting system and management accounting report are integrated within
organisational process. It both provides the help to the company so that its financial
management can be improve and it can take effective decision. It provides the useful
information to the organisation which help it to make better planning. Airdri Group can apply
both these concepts so that it can find the solution for its financial matters. It helps to improves
the efficiency and productivity of the business (Chenhall and Moers, 2015).

TASK 2
P3. Different types of costing methods which are used in calculation of net profit
Cost is an essential element of a product which makes the goods and service valuable. It
is important for the company to ascertain the cost of its product so that price can be decided
according to it. Organisation wants to minimize the cost so that profit margin can be increased.
Airdri Groupcan use various methods of costing which are as such follows:
Absorption cost:
It is a costing method which can be used by the manufactures to ascertain the cost. In this
method cost of a finished unit in stock would consist of direct labour, direct material, variable
overhead and fixed expenses (Clinton and White, 2012).
Marginal costing:
It is used by the organisation to ascertain the cost of an additional unit which has been
produced by the manufactures so that it can know the exact value of that extra unit produced. It
involves variable cost in order to overall sales that used to the calculation of net profit for the
organisation.
Calculation of net profit by using marginal costing method:
Particulars Amount
Sales (number of goods sold* sales price = 600*55) 33000
Marginal cost 9600
Production cost (per unit marginal cost * units produced=
16*800
12800
Closing stock (per unit marginal cost *units of closing stock=
16*200
3200
Contribution 23400
Total fixed cost ( 1500+1200+3200) 5900
Net profit 17500
Calculation of net income by using absorption costing method
Particulars Amount

Sales (total units sold * price of selling= 600*55) 33000
Cost of goods sold (actual sales* per unit expenses= 600*23.375) 4025
Gross Profit 18975
Selling and administration expenditure ( actual sales* variable sales
overhead+ selling and administration cost= 1*2700+600
3300
Net profit 15675
Breakeven point:
Break even is a point where no profit no loss situation has arise. In this analysis total
sales and total cost are equal (Cuganesan and Palmer, 2012).
B. Total number of product sold
t
Margin of safety:

It is a principal of investing in which an investor buy securities when the market price is
extensively lower its intrinsic value. Airdri Group can know the difference between break even
sales and actual sales through it.
D. If 800 products has sold than margin of safety
Sales in units 800
Breakeven in units 500
MOS 37.5
M2.Range of Management account techniques
Management accounting techniques can help the company to ascertain the various types
of cost which are occurred in production and manufacturing process. Airdri Group can apply
these techniques to determine the different types of cost which are as follows: marginal costing,
absorption costing, margin of safety etc. Fixed and variable overheads are also be considered in
these methods. It helps to the company analyse the net profits. Financial reporting documents
provide the useful and valuable information to the organisation which can help it to solve the
finance related issues (Dekker, 2016).
D2. Evaluate financial reports helps in business activities
Financial reports provides the help to the organisation to take effective financial decisions
related to the business. There are various types of financial reports which can be used by the
management which are as follows: Cash flow statements, income statement, Balance sheet etc.
It provides the true and fair image of the company and its financial position. Airdri Group can
prepare these reports so that perform its operational business activities efficiently and effectively.
It provides helps in decision making and planning so that organization can accomplish its
objectives.
TASK 3
P4 The advantages and disadvantages of different types of planning tools used for budgetary
control.
Budgetary control is defined as a planned process assists by allocating roles and
responsibilities in order to make estimates for future planning and results. Developing basis of
measurements are made by Airdri Group and finding standards of products and evaluating

efficiency. It is based on process for preparing budgets and figures in order to arrive deviations.
Controlling is a process used by every organisation. This technique is pursued by Airdri Group
for attaining objectives and goals. In this, estimations are made in order to deal with future needs
in orderly basis for a given period of time (Kaplan and Atkinson, 2015).
Their are different types used for controlling implemented by managers in year to year
are stated as under. Cash budget: In this budget, cash receipts and payments are made from which cash
position arises. This requirements are made when planning and composing cash use for business
concern. Airdri Group helps management in concerned with income and payments for
controlling purpose. Company sales and and production is used for forecasting budgets along
with details of spending and receivables.
 Flexible budget: it is a budget that adjusts for modification in magnitude of activity. This
is a form of variable budget for estimating revenues and payments in actual amount of outcome.
Company Airdri Group uses this budget for predicting in both cases best and worse in scenario
for coming accounting period of time.
Planning tools: The instruments using in this tools are related with implementing of programs,
initiatives. In this detailed description are provided to Airdri Group about their implementing
plans and procedures. These tools are specifically initiated by checklists of things to do and
action items (Parker, 2012).
Forecasting: It is a futuristic process by making use of past and present data which helps for
commonly analysing trends. This process is made on predictions in a general form. Airdri Group
refers uses statistical methods in order to forecast accurately as possible. The advantages and
disadvantages are defined as under.
Advantages
 In participation, employees provides opportunity in team performance by having unity
and coordination (Quinn and Jackson, 2014).
 It facilitates new identification of demanding products in market trends.
 Airdri Group enables in leading with resources by assuring for making large amount of
profits for long term.
 Forecasting is helpful for making coordination and control efficiently.
 Their use is made in order to overcome uncertainties of future events.

Disadvantages
 Disorganised or quality form of data and information is received for forecasting.
 In this, the data received is in inaccurate form in recorded events. Airdri Group concerned with the system that fails to answer a logic question.
Scenario planning: This planning tool is used for examining how strategy would be changes
according to Airdri Group future terms. It is a concept of developing plans from step by step with
successful process. Its advantages and disadvantages are considered as under.
Advantages
 It emerges expertise thinking and designs.
 Scenario examines real vision and open creativity.
Disadvantages
 They having unlike possibilities for making well known plans. Plans are made not mainly for making profits.
Contingency planning:
This planning tools is used for current basis of trends which is used by Airdri Group in
adjusting need of strategy. It is no longer sufficient in use for development by having
fluctuations, unpredictability (Senftlechner and Hiebl, 2015).
Advantages
 Many of the organisation prefer their use because it is safe.
 It is an established approach adopted by Oak Cash & Carry.
Disadvantages
 In this, they put effort into those who are causing wasted.
 They are identifying discontinuous in change.
M3 The use of different planning tools and their application for preparing and forecasting
budgets
For forecasting budgets it is useful in an order to make use of planning tools. The use of
these budgets are their for analysing past and present data to generate future aspects. This
method is accurately possible for making statistical records of a project. Planning tools are
determined in 3 forms like contingency, scenario and forecasting planning. These three uses are
analysed by Airdri Group in forming budgets. For preparing budgets it is useful in a way to
make team performances by coordinating and unity. They are analysing in a manner to overcome

uncertainties for future aspects. Scenario planning is made in a way to make expertise thinking
with open creativity in their working process. Contingency planning is prefer for use safely and it
is well established by an organisation.
D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success.
In this, planning tools are examined appropriately in solving financial problems of an
accounting period. Tools are determined by resolving errors occur in any problems relating to
financial terms. For leading with succession terms Airdri Group occur many of the problems
regarding with data and resolving it by using tools. In forecasting planning they are maintaining
statistical records of the data or information recorded. The uses of all the three tools leading
organisation a sustainable success in accounting terms (Soin and Collier, 2013).
TASK 4
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems.
Financial problem is that situation when origination faces the issues related to the finance. It is
the backbone of organisation and without it companies cannot survive and continue its business.
Airdri Groupcan solve its financial problems by following the management accounting system.
There are various financial problems which can be faced by the company which are as follows:
Unplanned expenditure:
Unplanned expenditure can hamper the performance of the organisation. It can increase
the inefficiency in the company. It can be in the form of excess expenses in advertising and if
any uncertainty arises than organisation have to spent money. For example: due to the
earthquake building of company has damaged so that it have to spend the funds for the repairing.
It can be the reason of unplanned expenses and due to it Airdri Group has to suffer from the
financial problem (Tessier and Otley, 2012).
Late payments by clients:
It can be the reason of the financial problems which is faced by the organisation. Due to
the late payment from clients or customers can be the reason of financial issues so Airdri Group
should tight the credit policy so that payments can be come on time and it can meet its regular
operational expenditures in the company.