Management Accounting Techniques, Cost Analysis & Planning Tools

This report provides a comprehensive analysis of management accounting techniques and their application within Capital Joinery Ltd, a furniture manufacturing firm. It covers various management accounting systems, including cost accounting, inventory management, job costing, and price optimization. The report details different methods for management accounting reporting, such as performance reports, budget reports, inventory management reports, and accounts receivable reports. Furthermore, it examines cost analysis techniques like absorption costing and marginal costing for preparing income statements, along with the advantages and disadvantages of different planning tools. The report also explores how organizations adapt management accounting systems to address financial problems and achieve sustainable success, emphasizing the integration of management accounting systems and reports within an organization. Desklib offers this assignment and many more to aid students in their studies.

Management Accounting
And Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1: Management accounting and different types of management accounting systems:..............3
P2: Different methods for management accounting reporting:....................................................5
M1: Benefits of management accounting system and their application within an organisation: 6
D1: How management accounting system and management accounting reports are integrated
within an organisation:.................................................................................................................6
TASK 2............................................................................................................................................6
P3: Techniques of cost analysis to prepare an income statement:...............................................6
TASK 3..........................................................................................................................................11
P4: Different types of planning tool and their advantages or disadvantages:............................11
M3: Planning tools and their applications for forecasting and preparing budget:.....................13
TASK 4 ........................................................................................................................................13
P5: How organisations are adapting management accounting systems in respond to financial
problems:....................................................................................................................................13
M4: Analyse financial problems in management accounting can lead organisation to
sustainable success:....................................................................................................................15
D3: How planning tools helps in to solving financial problems:...............................................15
CONCLUSION..............................................................................................................................16
REFERENCES:.............................................................................................................................17

INTRODUCTION
Management is the process of some functions that includes planning, organising,
directing, controlling and managing. These principles done by physical, financial, human and
informational resources those are done work efficiently in order to achieve organisational goals.
It is the coordination and administration of tasks in order to accomplish it with its resources. The
activities includes setting objectives, organising, motivating team, devising system, developing
people etc. management is completed for review the work and complete it on time. Although the
duties of managers differ from different departments and industries but the basic responsibilities
are almost same. Management is about handling, careful treatment and supervising skills within
an organisation (Agrawal, 2018). The company which is selected for this report is capital joinery
Ltd. The firm is deals in furniture such as doors, windows and stairs. The company was founded
in 2008, headquarter situated in London UK. This report covers topics such as requirements of
management accounting systems, methods use for management accounting report, cost analysis
for preparing income statement by using marginal and absorption costing. Apart from this it also
covers topics such as disadvantages and advantages of different types of planning tools and how
organisation adapting management accounting system in respond to financial problems.
TASK 1
P1: Management accounting and different types of management accounting systems:
In Management accounting the use of different types of systems is made. The explanation of
these systems is made as follows-
Cost accounting system- In this system, there is an explanation of the use of methods so
that the costs can be assessed. Therefore by making its use the companies can make sure that
they are able to identify the level of costs and thus reduce them. Therefore as Capital Joinery
Ltd. Is a manufacturing company it ensures that it uses this system so that it can identify its
excessive costs and overheads and facilitate their reduction (Alsharari and Abougamos, 2017).
Essential requirements-
 In this system a thorough assessment of the different types of costs must be made. It
should also be accurate so that the organizations are able to accurately find out the level
of costs without problems and issues. In this way the management of Capital Joinery Ltd.
will be able to find out its costs without problems and issues.

 This system must ensure the use of approaches for reducing the costs in different types of
departments. This helps a company like Capital Joinery Ltd. as it will be able to target
enhancement in the overall level of profits.
Inventory management system- In this system, the inventory can be managed properly
because it is helpful in the tracking the inwards and outwards movement of the stock orders. In
the context of Capital Joinery Ltd. It is quite important that it is used so that the assessment of
the inventory costs can be made and approaches and methods can be used so that efficiency and
effectiveness can be brought in the stock management (Borker, 2016).
Essential requirements-
 In this system the management of stock has to be done by making the use of techniques
like LIFO, FIFO, Weighted Average Cost etc. It must be reliable so that the level of
inventory can be easily forecasted effectively and efficiently. In this way it can be helpful
for a company like Capital Joinery Ltd.
 In this system the use of techniques and methods must be made so that the reduction in
the cost of inventory can be used. It will be helpful for the management of Capital
Joinery Ltd. as it will be able to reduce costs and target an enhancement in the overall
level of profits.
Job costing system- In this system, the inwards and outwards movement of job orders is
assessed. Therefore it can be said that this system is highly useful for the managers of
manufacturing organizations. As Capital Joinery Ltd. Is a manufacturing company it uses this
system properly so that the assessment of job costs can be made and techniques can be applied
for their reduction.
Essential requirements-
 In this system the use of methods and techniques for identification of job costs has to be
done. It should be up-to-date so that the latest changes in the job accounting system can
be effectively incorporated thereby helping an organization. This will help a company
like Capital Joinery Ltd. which is a manufacturing company.
 This system must ensure that by using cost reduction techniques expenses of job orders
can be reduced. This will help in reducing the costs of the job orders and targeting
higher-level of profits. In this way it can helpful for a company like Capital Joinery Ltd.

Price optimization system- In this system, the use of mathematical and statistical tools
and techniques is made so that the determination of price to be set in the organizations can be
made. For Capital Joinery Ltd. It is useful so that the company is able to set a proper price for
products and services for maximizing the level of profits.
Essential requirements-
 In this system the use of mathematical and statistical models has to be made for the
purpose of forecasting the prices. It should be able to forecast prices so that the
organizations are able to set appropriate prices. Thus in this way managers of Capital
Joinery Ltd. will be able to earn higher-level of profits.
 This system must be helpful in the setting of price for the purpose of ensuring the
maximization of profits (Cinquini and Tenucci, 2016). In this way it helps a company
like Capital Joinery Ltd. as it can target customers through fair prices so that it can attain
revenue and profit goals.
P2: Different methods for management accounting reporting:
Management accounting reporting:
It helps in telling the companies performance how well does an organisation is
performing. Management accounting reporting should always be prepare on the quarterly basis
so that the actual performance of the company can easily be analysed. With the proper
accounting one can manage our recording system of accounts and helps in analysing the reports
on daily basis (Edmonds and et. al., 2015). They includes the data like profitability, sales, cost
and transactions. It can be classified as performance report, budget report, inventory
management report and account receivable report.
Performance report: It helps in analysing, collecting information and have proper
utilisation of resource and send these to the stake holders is included in performance report.
Capital joinery company should use the performance study so that the clear picture of the
organisation can be analysed so that the company can find its weakness and work on it. Benefits
to capital joinery company after having performance they can set the targets that are easily
achievable, increase the morale of the employee and increase the productivity of the company.
Budget report: It help in estimating the budgeting performance with the actual
performance. It helps in determining which expenditure level is high and can control that

expenditure to bring back in budgeted level. Capital joinery should use the budget report so that
the actual performance of the company can be measured and actions to be taken to make them
correct so that the company can not suffer from the losses. Benefits to capital joinery after
having budgeted reports all the errors can be find out easily and the actions can be taken without
and delay and helps in controlling income and expenditure of the company.
Inventory management report: It helps in storing, selling the inventory to the business
in both ways raw materials and the finished goods and recording all these transaction in a proper
way so that desired results can be found. Capital joinery should use the inventory management
reports so that they can identify the weaknesses and the trends of the company and get the proper
results in future. Inventory management is beneficial to joint venture as it increases the
transparency of the information weather it is under or over stock and helps in increasing the
efficiency of staff in capital joinery.
Accounts receivable reports: It helps in recording the unpaid invoices are their duration
are also recorded. It helps in estimating business bad debts expense and the amount which are
unpaid or due by the customers. It analyse the financial health of the company so that the desired
results can be find. Capital joinery company can use the account receivable so that the person
who are bad debts and the amount from which cannot be recovered or delayed can be found out
easily. Benefits of accounts receivable reports to capital joinery as it helps in gathering the
information of the reliable customers and the daily customers using the services of capital
joinery.
M1: Benefits of management accounting system and their application within an organisation:
Cost accounting system helps in identifying and reducing costs within an organization.
Inventory management system is helpful in the assessment of the level of inventory and reducing
the costs associated with stock. Job costing system is helpful in the assessment of job costs and
reducing them. Price optimization system is helpful in setting of prices and forecasting changes
in prices (Horngren, Datar and Rajan, 2015).
D1: How management accounting system and management accounting reports are integrated
within an organisation:
The Management accounting systems need to be properly integrated within the
organizations. Thus when them management of Capital Joinery Ltd. Integrates these systems

properly in the company they can create benefits for the company and ensure that the maximum
use of these systems is made in the organization therefore helping in the achievement of goals
and objectives.
TASK 2
P3: Techniques of cost analysis to prepare an income statement:
Costing is which management apply in order to know about the cost of activities and
involved all costs occurs in the project and business. It is the process which defining the cost of
product, component and services. Cost accounting determines the cost of each element used in
production includes materials, wages and industrial costs. An efficient business focuses on cost
of inventory, labour and various overheads costs.
There are two types of costing which Capital joinery uses such as Absorption costing and
marginal costing.
Absorption costing: Absorption costing refers all production costs for all units which are
proceed. This costs using both fixed and variable costs as product costs. This costing method
used for reporting purpose (Marelli, 2015). Reporting purpose includes both financial reporting
and tax reporting. Absorption costing is the technique that assumes both fixed costs and variable
costs as product costs. It considers net profit per unit.
Marginal costing: Marginal costing refers to those costs which are occurs in each units
of produced goods. Marginal costing refers to variable costs considered on product costs and
fixed costs considered costs of the period. It is the technique that only assumes variable costs as
product costs. It considers contribution per unit.
Inventory costs: Inventory costs refers to the costs related to storing and managing firms
inventory in the specific period of times. Generally, inventory costs are described as the
percentage of the inventory value on its average inventory. It involves three types of inventory
costs ordering costs, carrying costs and storage costs.
 Ordering costs: The ordering costs refers to order for inventory is placed includes
receiving costs, preparing purchase costs, data interchange costs, transportation costs,
cost of suppliers etc.
 Carrying costs: Carrying costs refers to expenses which are occur on inventory storage
and its maintenance.

 Storage costs: Storage costs refers to which costs business faces when inventory has out
of stock and customers demanded for products (Murthy and Rooney, 2018).
Marginal costing:
Absorption costing:

Reconciliation statement:
Working notes:

LIFO (last in First Out):

AVCO (Average cost):

M2: Range of management accounting techniques for financial reporting:
In this costing of production in organisation, costs plays vital role. Cost should be
relevant in the pricing decisions and estimations. Costs helps firms to know its productivity and
profitability from optimum utilisation of resources. It includes absorption and marginal costing.
D2: Explanation of financial reports in range of business activities:
According to marginal costing net profit is in May 15400 and in June 10500 that refers
less profitability in June month. In absorption costing net profit shows 6400 in June and 4000 in
June that also represents less sell in June rather than May. Reconciliation statement also shows
that in June sales performance was less than May. In using of LIFO method firm left inventory
about 289 units and by using average cost method of inventory valuation it shows 274 units that
refers that average costing method is better for increasing sales.
TASK 3
P4: Different types of planning tool and their advantages or disadvantages:
Budget is refers to process of creating plans to manage spending in the business function.
In other words, it is the process of pre estimation of expenses and income within the
organisation. It allows firms to determine its spendings and helps employees to understand the
way they have to work for efficiently and according to pre estimation. It is about forecasting and
planning of activities which will run in the business by its resources. It allows firms in order to
better utilisation of funds and resources for efficiency in their work. Utilisation of budget out into