Management Accounting Report: Vectair Holdings Analysis - Unit 5

This report delves into the realm of management accounting, focusing on its application within Vectair Holdings, a company specializing in hygienic products. The report begins by defining management accounting and its importance in aiding managerial decision-making, particularly in controlling costs and enhancing productivity. It then outlines various types of management accounting systems, including cost accounting, price optimization, job costing, batch costing, and inventory management, highlighting their roles in optimizing production processes and controlling expenses. Furthermore, the report explores different methods of management accounting reporting, such as segmental reports, performance reports, inventory management reports, accounts receivable aging reports, and job cost reports, illustrating their significance in providing crucial financial information to both internal and external stakeholders. The report also discusses the benefits of management accounting systems, such as reduced expenses and increased financial returns. Finally, it analyzes how Vectair Holdings can overcome financial problems by comparing responses of firms to overcome such issues. The report emphasizes the integration of management accounting within organizational processes to achieve effective results, improve workplace performance, and gain a competitive advantage.

Unit 5 Management
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1...................................................................................................................................3
(P1) Discuss management accounting and give the requirements of different types of........4
management accounting systems in an organisation.............................................................4
(P2) Discuss the methods used for management accounting reporting..................................7
P3 Measuring the data set on the basis of various techniques for Vectair Holdings............10
P4 Presenting the merits and demerits of planning tools and budgets.................................13
P5 Comparing the responses of firms to over come financial problems..............................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
APPENDIX....................................................................................................................................20

INTRODUCTION
Management accounting is required in the organisation as through this accounting
information managers are able to take enhanced decisions which helps organisation to increase
overall productivity. The enclosed report deals with Vectair holdings which provide hygienic
products to customers. Management accounting is useful as it provides them with useful
information by which they are able to take better internal decisions for organisation. Moreover,
various types of management accounting is used by company to control its expenses and costs in
the best possible way (Otley and Emmanuel, 2013). It helps them to be efficient in carrying out
the production process in the effectual manner. Apart from this, various budgeting tools are also
used by it so that it may be able to forecast and make effective decisions. Moreover, marginal
and absorption costing is also used by management which makes overall production process in
the most proficient way. As such, management accounting imparts useful information to
managers to take effective decisions in the best possible way.
TASK 1
To: General Manager
Vectair Holdings
From: Management accounting officer
Subject: Require writing a report to General Manager in Vectair Holdings
Introduction:
In accordance with improving the internal efficiency of the organisation to meet the financial
stability there is need to implement various management accounting techniques. The
management accounting will help Vectair Holdings to flourish.

(P1) Discuss management accounting and give the requirements of different types of
management accounting systems in an organisation
Management accounting is the branch of accounting which is quite useful for managers
as it guides them in making better and enhanced decisions which are helpful for organisation.
The Vectair holdings also uses management accounting as it provides them useful insight to take
decisions for it growth and prosperity in the market. It is available for management only as they
take decisions which are based on financial statements provided by accountants. It is quite
important for organisation as internal factors needs to be sorted out so that organisation may be
able to perform well in the market. Management accounting information is not available to
external users of accounting information as it is for managers only to guide them to take better
decisions for the company in the best possible way (Parker, 2012). Management accounting is
not required by law as it is not statutory and as such, Vectair holdings prepare this for regulating
internal factors of organisation in the most proficient manner. By improving internal factors
within organisation, it may be able to fulfil demands of customers and may also satisfy them
with better services. As such, management accounting is useful for organisation as it guides them
to be efficient so that it may flourish in the market by satisfying customers and earn reasonable
profit in the effectual manner (Schaltegger and Zvezdov, 2015).
The requirements of management accounting is wide and is required by organisation to
manage its day to day operations with much ease. The management accounting help organisation
to produce effective operational results which increases its efficiency in the most proficient way.
As such, different types of management accounting are as follows:

1. Cost accounting-
This accounting is concerned with controlling costs in the organisation. Vectair holdings
uses cost accounting as producing hygienic products to the customers, it is required that cost may
be controlled so that production may be easily done with low operational cost. It is very useful
technique which guides management as to control costs. There are various types of costs such as
direct, indirect, fixed, variable costs. These costs play an important role in channelising effective
production with the objective to control expenses which are incurred on overheads.
2. Price optimisation:
Price optimisation technique of management accounting involves preparation of mathematical
models that are used to determine whether demand varies with the price of product or not. It
is used to check that how much money customers can pay with regards to price. It is useful
method to asses how demand fluctuates with the level of price of product. Vectair holdings
effectively uses price optimisation technique by quoting price of products which consumers
prefer to buy at particular price and it helps to assess whether consumers will purchase at
that price level or not (Tappura and et.al, 2015).

3. Job costing:
Job costing is another effective tool to manage manufacturing cosy which is associated with cost
of labour, materials and overhead cost as well. It is assigned to specific job which are
engaged in production process. Job costing helps company to assess various expenses
which are incurred in production process and in how it can be minimised in future by the
management. All the jobs which are assessed by management helps it to reduce the
expenses on it so that cost of production may be minimised and organisation may
produce more goods by lowering cost incurred on each of the job.
4. Batch costing:
Another method of management accounting is batch costing. This means that during production
process in a day, particular batches of goods are produced by company. This batches
incur varying costs and as such, it helps organisation to reduce the expenses on batches
of products so that more production may be made by organisation by minimising
expenses on batches of products (Ward, 2012). Moreover, it assesses and estimates total
labour, machinery and equipments and quantity of material that is being used to produce
the goods. Hence, it helps Vectair holdings to estimate the needs of funds to carry out
the production of a batch.
5. Inventory management:
Vectair holdings is required to meet the production demand within stipulated time so that
production may be made in the most proficient way. For this, it is required that
inventory management is done effectively. Management is required to supply
inventories to production department in adequate manner and more than that will
generate additional cost to them which will lower their output. Excessive inventories in
the warehouse will unnecessarily lead to spoilage and organisation should be able to
manage the stock so that no loss is made and production demand is adequately met by
the management.

As a result, management accounting methods provide useful insight to organisation in
controlling various expenses in the most proficient way.
(P2) Discuss the methods used for management accounting reporting
The different types of management accounting reporting are as follows:
Illustration 1: Management accounting reports
Source :(Granlund, 2011)
1. Segmental report:
The segment reporting is quite effective management accounting reports which helps
company with operating segments by using financial statements. This report is quite useful to
investors and creditors by analysing this they are able to make decisions of whether to invest or
give funds to company or not. It is the useful measuring tool which help external users of
accounting information which has staked in the business. They make decisions by assessing

financial strength and position of organisation in effectual manner. Segment reporting is used
and require for public firm and not for private entities. It includes revenue information, types of
products which are sold by each segment and much information which aids in decision making
by investors and creditors (Weißenberger and Angelkort, 2011). As a result, it provides much
needed information to the external parties with much ease.
2. Performance report:
The performance report is another useful management accounting report which helps
organisation in the best possible way. By implementing this, Vectair holdings may be able to
asses and measure the performance of workers so that overall productivity may be increased. It is
useful becuase as by measuring the performance of workers, it is able to assess the actual
performance. This is then matched with budgeted performance and if any variances is found out,
it can be resolved by taking corrective actions by the organisation. This way, corrective actions
are taken which help organisation to regain the lost productivity. This way company may be able
to perform better than employees may increase their productivity and as such, the overall
performance of workers may be maximised. As a result, performance report serves management
useful information by which it may able to achieve goals by enhancing performance of
employees in the most productive way.
3. Inventory management report:
The inventory management report is useful technique to manage the inventory of
company in the best possible way. This report helps company to minimise the wastage of
inventory which lead to spoilage if more than required inventory is made available in the
warehouse. It helps Vectair holdings to track the inventory waste. It also includes labour costs
and overhead costs. Inventory management reports is useful for managers (Figge and Hahn,
2013). It is so because by analysing the report, they may take better decisions whether there is
adequate amount of inventory or excessive is there in the warehouse. Excessive inventory adds
to additional expenses to organisation and as such increase cost of production and ultimately
leads to decrease in revenue. Vectair holdings is required to be efficient enough so that it may
control the stocks in desired manner. This lowers down the costs and eventually increases
production and leads to maximising profit in the best possible way.

4. Accounts receivables ageing report:
The accounts receivables ageing report is much needed by organisation. This report deals
with the information of the customer invoices that are become overdue for payment. It prepares
list regarding unpaid invoices and credit memos of customer. It helps management to make
effective transparency as to how many payments are pending from customers on their invoices.
Cash flows are managed effectively of organisation (Fullerton, Kennedy and Widener, 2013).
Manager can use accounts receivables ageing report to find out difficulty that is being aroused in
collection process. Strict credit policies must be implemented by organisation so that timely
payment may be recovered.
5. Job cost report:
Job cost report deals with the cost that is involved in carrying out job. By analysing job
expense, company may be able to figure out cost that is reducing the profit and as such, wastage
and spoilage is not made. It helps mangers to analyse the specific job areas so that profit may not
get reduced. This helps company to manage its job's profitability to those areas which yield best
results to it in effectual manner.
The benefits of management accounting systems are
There are many benefits of different types of management accounting such as it helps in
reducing expenses, increase financial return etc. In order to carry out business activities company
can review the cost of economy and different operations functional. Further it helps in enhancing
the better understand running cost within the firm. Along with this, company can forecast its
customer demand and sales which help them in managing the demand and increase profit.
Therefore, it can be stated that company can easily increase it profits and sales with the help of
management accounting system (Granlund, 2011).
Management accounting reporting is integrated within organisational process
Management accounting is related to the value creators which help company in getting
effective result and improve the performance at the workplace. Along with this management
accounting is based on the action which is taken by firm. As it help in increasing the profit and
gaining competitive advantage. Apart from this it is also stated that management accounting is
related with the planning and output which support in the operational function of the business.

Company can accomplish aims and objectives with the help of management accounting as
because it helps in managing expense and income of the company’s.
P3 Measuring the data set on the basis of various techniques for Vectair Holdings
To measure the profitability over given data set which describes various operational
activities were held in the year (Höglund and et.al., 2016). Here, the managers as Vectair
Holdings has planned to present the income statement with the help of various costing techniques
such as:
Presenting the income statement for Vectair Holdings on the basis of Marginal costing
method:
Particulars Details Details
Sales revenue 600*35 21000
Direct material 700*6 4200
Direct labour 700*5 3500
variable production overheads 700*2 1400 9100
Less: Closing stock
Direct material 100*6 600
Direct labour 100*5 500
variable production overheads 100*2 200 1300
Variable expenses 7800
Per unit contribution 13200
less: variable sales overheads 600*1 600
Less: Fixed expense
Production overheads 2000
Fixed administrative cost 700
Fixed selling cost 600 3300
Net profit 9300
Amount in(£)
Interpretation: By considering the above table which describes the earning and
expenditures held during the period for Vectair Holdings. The firm has obtained sales revenue
over the 600 units were sold at the rate of 35 which is amounted to 2100. The costs of production
were analysed over 700 units at the rate of 13 valued at 9100. The closing stock were measures
over the remaining 100 units at the rate of 13 which in turn the over all variable costs for 7800.
The Consumer contribution is for 13200 this costing technique acts as measuring the Variable
costs after the contribution such as overheads over sales for 600. Fixed costs for 200, Production

overheads for 2000 and fixed selling cost for 600 as well as administrative fixed costs for 700.
Therefore, the net profit for the period is obtained at 9300 which is reflecting the surplus balance
for Vectair Holdings.
Presenting the income statement for Vetcair Holdings on the basis of Absorption Costing
method:
Particulars Details Details
Sales revenue 600*35 21000
Direct material 700*6 4200
Direct labour 700*5 3500
variable production overheads 700*2 1400
Variable sales overheads 700*3 2100 11200
Less: Closing stock
Direct material 100*6 600
Direct labour 100*5 500
variable production overheads 100*2 200
Variable sales overheads 100*3 300 1600
lees: Absorption of fixed overheads 100
Cost of production 9500
Per unit contribution 11500
Less: Fixed expense
Fixed administrative cost 700
Fixed selling cost 600
less: variable sales overheads 600*1 600 1900
Net profit 9600
Amount in(£)
Interpretation: In terms with analysing the profitability of organisation on the basis of
Absorption costing method which in turn n helpful in measuring the production overheads before
the gross profit. Therefore, it can be analysed such as the revenue is being generated by the
company on the basis of 600 units for price of 35 per unit which presents value of 2100. The cost
of manufacturing the units as 700 units on the rate of 16 amounted to 11200 as well as the
remaining inventories for 100 at 16 per unit valued at 1600. The fixed production overheads
were measure d for 100 will be deductible along with the costs of manufacturing such units.
Therefore, it presented the total gross profit of Vectair Holdings as 11500. The variable
overheads over sales as 600, fixed cost as 600 and the administrative fixed expenses as 700 were
to be deducted as the operational costs to the firm. It p[resents the net earning for 9600.

However, it can be said that with the help of such tools to analyse the profitability of firm
the Absorption costing method will be fruitful for the manageress in context with having most
accurate and appropriate results (Otley, 2016). Hence, it can be said that with the help of such
method the business will be beneficial in terms of attaining the benefits. Therefore, it will be
recommended to the managerial professional of Vectair Holdings that they must consider the use
of Absorption costing technique as it measure all the production related expenses before the
gross profit and presents the most favourable results. The amount generated through such income
statement as the net profit will be utilised in the other operational activities as well as enhancing
the efficiency of firm.
Implication of management accounting techniques and financial reporting
To make the most fruitful business operations there will be need of having the most
adequate management accounting techniques, strategies and planning which helps in improving
the operational efficiency of business. With the help of various tools and techniques such as
Fund flow statement, cash flow, income statement and final accounts that will help in presenting
the financial ability of firm (Granlund and Lukka, 2016). Professionals at Vectair Holdings will
be beneficial if they make the proper record of all the transactions as well as present the fruitful
disclosure of such information in the internal environment then they will have the most
favourable outcomes. It will help them in Financial planning, decision making, analysing
historical costing as well as Revaluation of accounts.
Presenting the financial report with interpretation
From: Management Accounting officer
To: General manager (Vectair Holdings)
Subject: Facilitating the use of such management accounting techniques in resolving trading
problems.
Sir,
The management accounting techniques will be helpful in terms of managing the
operational obstacles of the business. Therefore, it can be said that with the help of analysing
the budgets such as cash, production, sale and purchase the business will have proper utilisation
of such costs (Groot and Selto, 2013). Therefore, in terms of communicating such outputs it the
internal environment it will help in enhancing the activities in organisation. It will also helpful