Management Accounting and Financial Analysis for Airbus UK

This report delves into the management accounting practices of Airbus UK, a major manufacturing company. It begins with an introduction to management accounting, its role in planning, controlling, and decision-making, and the comparison between management and financial accounting. The report then explores various accounting systems used by Airbus, including cost accounting, price optimization, job costing, and inventory management. It further examines different management accounting reports, such as budget reports, performance reports, and account receivable reports, highlighting their importance. The benefits of each system are detailed. The report also analyzes cost analysis techniques, financial reporting, and planning tools, emphasizing their application in financial problem-solving and strategic planning. The analysis includes detailed explanations of each system and its benefits, as well as the application of planning tools for forecasting and budgeting. The report concludes with a discussion on how Airbus utilizes these tools to address financial challenges and achieve sustainable success.

Management Accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Management accounting and accounting systems.................................................................3
P2. Methods in management accounting reports.........................................................................6
M1. Benefits of management accounting systems.......................................................................7
D1. Evaluating integration between accounting systems as well as reports with organisational
processes......................................................................................................................................8
TASK 2............................................................................................................................................8
P3. Calculation of costs by using cost analysis techniques.........................................................8
M2. Usage of appropriate techniques in order to produce financial reporting documents..........9
D2. Financial reports to interpret business operational activities................................................9
TASK 3............................................................................................................................................9
P4. Distinct Kinds of planning tools............................................................................................9
M3. Planning tools with application in order to prepare as well as forecasting budgets...........11
TASK 4..........................................................................................................................................12
P5. Comparison showing the ways organisations solve financial problems with the use of
accounting systems....................................................................................................................12
M4. Responding of management accounting towards financial problems for sustainable
success.......................................................................................................................................14
D3. Planning tools usage to respond towards solving financial problems so to lead the
organisation towards sustainable success..................................................................................14
CONCLUSION..............................................................................................................................16

REFERENCES..............................................................................................................................17
APPENDICES...............................................................................................................................18
INTRODUCTION
Management Accounting is defined as analysis of business activity for internal management
so that appropriate decision can be taken for future period of time. With the help of management
accounting, the financial department of the company transfer each and every accounting
information to manager due to which they can easily prepare the plans and policies for longer
period of time (Uyar, 2010). The main benefit of management accounting is that it allows to
enhance the overall profit of the company by reducing the chance of unnecessary expenses. The
chosen organisation for this respective project is Airbus, UK which is one of the bigger
organisation which has been involved in the field of manufacturing. The setup of company had
been done in the year 1997, where its head office is in Bristol, UK. Now, the company is
undergoing major reconstructing due to which they need to understand the roles of management
accounting so that rebuilding phase can be done easily.
In this respective file, various topics has been included which are related with management
accounting, benefits of accounting system and Cost Analysis techniques will also be used in this
file. Also, various planning tool will be used which will explain that how any of the business can
earn profit within the very short period of time by reducing the unnecessary expenses.
TASK 1
P1. Management accounting and accounting systems.
Management accounting: The concept of management accounting plays the crucial for
the development of business organisation because it tells that how company is required to take
any of the business decision for attaining the goals of a company. Analysing the total sale of an
organisation, for comparing the performance of organisation in past years and many more.
Evaluation of management accounting and financial accounting:
Basis Management accounting Financial accounting
Meaning It is a system that offers the
managers with accurate and
relevant information that
It’s main target is to focus on
preparing the financial
statement which are related

enable them to execute
successful plans and policies
(Fowzia, 2011).
with profit and loss account,
balance sheet etc. through
which company can easily
determine about the current
position of company in the
market.
Users Manager, Directors are the one
who have the power to take
any of the actions and after
that monitor them for finding
out the accurate results.
The main users in it is investor,
financial institutions has the
power to take any of the
decision regarding the
organisation.
Time focus Future perception Historical viewpoint
Rules and regulations There is no restriction on the
company from outsiders.
Here, it is necessary to follow
different format such as
IRS/GAAP and many more.
Role of Management Accounting in Planning, Controlling and Decision Making:
Management Accounting helps the administration in establishing future plans, providing
accounts related information and reports. Formulation of both short term as well as long term
plans require inputs from management accounting reports. It helps in making budgets and
schedules that help in harmonizing the implementation of plans. It helps as a control process as
it facilitates comparison of actual and budgeted figures. It establishes various control limits and
helps in standardizing the production. Management accounting further helps in decision making
in regard to company's future policies and advisable course of action. It also helps in developing
an effective communication and reporting system which helps in implementing decisions with
ease.
Management accounting systems: It is one of the most important concept for any of the
business organisation because they get the chance to take business decision as per the resource
available. It is helpful for manager because they can easily measure the price level and able to

evaluating the business operations for effective decision making. In context of Airbus, they use
different methods of accounting system which is helpful in maintaining the records and relevant
information for the betterment of a company. Description about system has been explained in
detail below.
Cost accounting system: It is one of the accounting framework which is used by the
accountants of a company for the purpose of analysing the overall expenses and profit of a
company (Bebbington, Unerman and O'Dwyer, 2014). In context of Airbus, cost accounting
system will give the the find related to expeses which will incurre at the time of manufacturing at
any of the product. It will also help them to reduce the over cost as they will have the idea that
how much raw material is required to manufacture any of the product. It also includes FIFO,
LIFO and weighted average methods. It is the preference of company that which one they select
as per the nature of a company. Talking about LIFO, it can be easily said that the stock which
has been brought by the company recently will be used in beginning. In case of FIFO, the
product which are purchaser earlier must be used in starting. For AVCO, each and every good
are needed to be used in the form of average basis. Company like Airbus is following the concept
of FIFO method at the time of manufacturing the wings of Airbus.
Price optimisation system: In this system, mathematical analysis is used for the purpose
of finding the demand of customers. It is essential for Airbus to determine about the market
position and according to that price is required to be set so that target of a company can be
achieved. This will help them to generate more revenue for the company (Brewer, Garrison and
Noreen, 2015).
Job costing system: It is one of the accounting system where cost is allocated in a
systematic manner. It includes processes for collecting information on costs related to a
particular service or job. Production managers of Airbus calculate revenues by accumulating
costs and monitoring business performance. The main benefit that company gets at the time of
job costing system is related to accurate valuation in terms of WIP.
Inventory management system: It is the suitable way of managing the stock of a
company where each and every information are mentioned in a systematic manner. This will
allow Airbus to reduce the percentage of unnecessary overstock and under stock condition. This
will also allow to reduce the unnecessary expenses because as there will not be any requirement

to prepare the warehouse of a company. In addition, it will give the option to company to deliver
the product at small time period.
All of the above accounting systems are being implemented within Airbus. It gives
additional advantage to company to form strategies as per the requirement of a situation.
P2. Methods in management accounting reports.
In present scenario, it is said that management accounting reporting plays the crucial role
for the purpose of accomplishing the goals in specific time period. Here, reports are prepared on
the system of book keeping period. The main benefit that an organisation can get will be related
to information as every single information can be collected for better analysis. While talking
about Airbus UK, they have adopted number of accounting report which are required to be
prepared by respective department.
Budget reports: One of the main document is the budget statement as it allows to
explain and monitor costs in order to assess the quality of business. Here, obtained budget is
needed to be compared with estimated budget through which difference can be easily
determined. This helps the company to utilise the fund in appropriate manner (Busco and
Quattrone, 2015). In context of Airbus UK, the report which will be included in it, will be related
with production, marketing and sales.
Performance reports: It is prepared for the purpose of keeping the record of employee’s
performance. It is helpful for the manager of a company because they can easily distribute the
bonus to workers including incentive. The focused area will be related with the efforts which
employees shows for accomplishing the goal of a company. While talking about Airbus UK, they
use this accounting system for the purpose of determining the performance of employees that
how they are performing for accomplishing the goals of a company. If employees are
performing well then they are rewarded with awards whereas if any of the employees
underperform then in that situation they are being provided training.
Inventory management report: There are number of occasion where company
manufactures the physical product and in that situation inventory management plays the crucial
role because each and every data report can be maintained easily. This report is related with the
product which are used form the starting to end. These report is a production document that
includes manufacturer, position and product information

Account receivable report: This is one of the report which is prepared by the company
for the purpose of maintaining the records of credit sales and those payments which are still due
and needed to be paid by creditors (Farrell and Gallagher, 2015). This type of reports is
necessary to be prepared by those organisation which perform business in the form of credit sale
and even record the credit transactions where they include the name of a party including address,
date and amount. In context of Airbus UK, they are required to prepare the account receivable
report because they can easily maintain the record of all the credit sale and what is the date when
payment should be done by the customers. In addition, there are number of organisation which
uses the accounting software which helps them to maintain this respective report in a systematic
manner.
All of the above mentioned management accounting reports are being used by the
company like Airbus for the purpose of maintaining the reports in a systematic manner. In short,
all of this report helps to accomplish the goals within the specific time period.
M1. Benefits of management accounting systems
Systems Benefits
Job costing system  The main benefit that company gets with the help of
job costing system is that they can easily ascertain the
cost while doing any of the particular task.
 It also allows the manager of Airbus to take the
suitable decision for reducing the overall cost while
conduct any of the project (Kaplan and Atkinson,
2015).
Cost accounting system  This accounting system allows the company to
enhance the efficiency, find the ways to reduce the
overall cost of a product and even it help to expand the
activities which are related to production.
 It can easily guide Airbus UK that how they are
required to reduce the unnecessary expenses of a
company.

Inventory management system  It basically helps to minimise the cost of a company
also give the way to that productivity of a company
can be improved.
 Here, company like Airbus UK can easily maintain the
stock level that how much inventory is required to
keep in the company so that unnecessary expenses
doesn’t occur (Kokubu and Kitada, 2015).
Price optimising system  It gives the idea to company to fix the price of any of
the product so that customers can be easily attracted
towards the organisation.
 It also gives the idea to company that what customers
think about the price which has been set the
management of a company.
D1. Evaluating integration between accounting systems as well as reports with organisational
processes.
Management accounting system and accounting report is very crucial for business
organisation because it gives the idea to company that how they can attain the goals of a
company within a short period of a time. The accounting system that is being used by Airbus UK
are job costing, cost accounting, price optimisation system which helps them in number of ways
such as that what should be the price of a product, how they can reduce the overall price. While
talking about Accounting system reports, it helps the organisation to carry out the certain task in
a systematic manner through which goals can be achieved easily. In short, different reports such
as account receivable, inventory management and many more helps company to achieve the
desire outcome. Therefore, it can be said that accounting systems are effectively merged with
Airbus UK operations.
TASK 2
P3. Calculation of costs by using cost analysis techniques.
Cost can be explained as the monetary valuation of any of the product which are required
at the time of manufacturing to delivering the product to client. Here, all of the expenses are

included and that can be direct, indirect etc. While discussing about Airbus, it is one on the large
scale industry which means they require huge amount of capital at the time of buying raw
material so that it can be easily transformed into finished goods (Labro, 2015).
Marginal costing: This is the type of costing method which only includes variable cost.
Just because of its nature, it has a direct impact on net profit of a company as it increases
significantly. This form of costing is mainly used by the firm which have to conduct their
business at smaller ground.
Absorption costing: It is also one of the accounting process which helps the company to
enhance the profit of a company where organisation gets the opportunity to overview each and
every points in detail which are related with actual costs. In context of Airbus, absorption costing
will help them to determine each and every factors
M2. Usage of appropriate techniques in order to produce financial reporting documents.
In any of the organisation, financial manager is required to adopt different types of
accounting technique through which profit can be calculated easily. It also helps manager to
analyse about the business transaction and reduces the unnecessary expenses (McNeil, Frey and
Embrechts, 2015). While talking about Airbus UK, they use absorption costing with the marginal
techniques for the purpose of preparing the financial statement which helps them to take some of
the important decision achieving better results.
D2. Financial reports to interpret business operational activities.
In any of the business, financial report helps to know about the current position of the
company that how well it is performing within the market for achieving its goal. From the above
prepared financial report, it can be understood that Airbus UK has earned the huge amount of
revenue in the month of May and June. In terms of absorption costing, the net profit which
company have earned in the month of May is £ 1050 and in the month of June it was £9792.4.
On the other hand of side, company had to bear the loss of £550 in the month of May whereas in
June company was able to earn profit which was equal to £5750.
TASK 3
P4. Distinct Kinds of planning tools.
Budget can be explained as the process of preparing the financial plan for the upcoming
period of time. Here, it is usually explained in terms of money to predict expense in accordance

with earnings. It is analysed yearly and is used for particular-term planning to list the estimated
income or losses in the final budget (McWatters and Zimmerman, 2015). Short-term expenditure
includes a one-year duration in which predictions are made at the start of the bookkeeping period
in which actual transactions are examined at the end in order to meet the budget figures. Budget
work as a control tool for the business organisation because it gives idea that how unnecessary
expenses can be controlled. Company like Airbus prepares the different spreadsheets which help
to find out the errors so that appropriate actions can be taken.
Budgetary control: It describes how executives use budgets to monitor different activities
or costs in a specified financial reporting period together power. This requires ongoing processes
to promote planning, coordination and cost control steps. In context of Airbus UK, they use
budgetary control for the purpose of doing planning as well as formulating the policies which
help them to reduce unnecessary expenses to enhance the profit. Different planning tools which
assists budgetary control are explained below:
Capital Budget – This budget is necessary for all the business organisation because it
helpful maintaining the assets for longer period of time which allows company to earn huge
amount of profit. In context of Airbus UK, they take the help of capital budget for doing the
investment for longer period of time which help them to earn profit for longer period of time. In
addition, manager of the company gets the chance that know about the long term investment
through which productivity increases automatically.
Advantages Disadvantages
1. It helps in comparing various investment
options available and choosing best out of
them.
1. It involves lots of forecasting and wrong
figures can give wrong recommendations.
2. It helps Airbus UK in controlling excessive
and unproductive expenditures.
2. Wrong capital budget decision affect long
term durability.
Sales budget: It is the form of budget where company tries to estimate that how much
sale they expect so that profitability of a company can be enhanced automatically. Here,
operation team of Airbus UK has to analyse about the sales trend, seasonal fluctuations,
technological development, production capacity so that target can be achieved in best possible

manner. The main benefit of this types of budget is that company gets the chance to enhance the
profit and maximise the sales ratio of a company (Nielsen, Mitchell and Nørreklit, 2015).
Advantages Disadvantages
1. Sales Budget helps Airbus UK in
preparation of all the other budgets.
1. Any missing or wrong inputs will provide
wrong estimates for all other budgets.
2. It helps in comparison of executives and
helps in churning.
2. The budget is generally prepared by top
level management Airbus UK, while sales
are done by front line managers whose
inputs are generally not considered.
Flexible budget: It is a budget that is modified on the grounds of changes in operations
in addition to quantity. It calculates losses and gains on the scale of actual outputs in the current
quarter. It is helpful for logical comparison of the actual costs including budgeted allowances.
While talking about the manager of Airbus UK, it helps the company at the time of price
fixations, expenditure controlling etc. The main benefit which company gets just because of
flexible budget is that company they can easily compare the standard output with actual ones.
Advantages Disadvantages
1. Flexible budget adjusts itself according to
the activity levels thus providing reliable
results.
1. A Flexible budget does not facilitate
comparison of budgeted figures with the
actual figures.
2. It is useful for businesses where costs are
closely related to level of production.
2. It is difficult to create and manage.
M3. Planning tools with application in order to prepare as well as forecasting budgets.
In present scenario, planning tool as have been very effective because it helps to
accomplish the target on given time period. The main benefit which company gets with the help
of this tool is that company gets the chance to earn the profit by predicting every situation in
advance. The tool which are used by Airbus UK for the purpose of forecasting is capital, sales

and flexible budget. This directly helps to accomplish helps company to accomplish the target
within the specified time period (Nwogugu, 2015).
TASK 4
P5. Comparison showing the ways organisations solve financial problems with the use of
accounting systems.
In every organisation, there are the situation when company have to face the financial
problem while operating the business activity. This types of condition arises whenever the
management of company fails to perform their task as per the requirement. Some of the financial
issues which are faced by Airbus UK are explained below:
Inappropriate credit policy: There are some of the policies related to providing the credit
facilities to the one to avail the services of a company. Although, it have enhanced the sale of a
company but on the other hand they are unable to raise the money due to which debt amount has
increased significantly.
Cash Flow Management: It is never an easy task for the management to focus on every
single activity due to which there are some of the decision which shows that obtained result is
not relevant just because of poor management. Talking about Airbus UK, they are unable to take
some of the important decision due to which company have to face the problem related to cash
flow management (Weygandt, Kimmel and Kieso, 2015).
For the purpose of reducing this respective problem, some of the systems are being used by
Airbus UK.
Price Optimising System: This can be helpful for the company like Airbus because it
gives the idea about the customers and their creditworthiness towards the company. If company
can introduce this policy in successful manner, then they can easily confirm that their customers
will do payment on given time period through which profitability will increase automatically.
Cost accounting systems: This will be one of the effective way to manage every single
data where work will be done automatically. This will directly help the company to manage their
task and if any of the problem occurs then they can easily sort it out. Cost accounting system can
allow the company like Airbus to find out the date on which they are needed to collect debt
amount. It will allow to manage the work in systematic manner.

Management accounting approaches: This can be explained as the process which helps
to resolve every single problem which are directly related with funds. Here, Airbus uses some of
the approach which are explained below:
Benchmarking approach: It is important for the company to do comparison with other
organisation which are performing the business activity at the same ground. It directly helps
company to prepare better plans and policies through which unnecessary expenses reduces
automatically (Zheng and Alver, 2015). Here, Airbus UK will allow themselves to compare with
other business organisation which are performing their activities in the same market. This will
idea to business organisation that how they can overcome from the problem which they are
facing on regular basis.
Balanced Scorecard: It is defined as the strategic planning and management system
which organisation uses for the purpose of doing communication that what company wants to
achieve within the specific time period. In context Airbus UK, they will be helpful just because
of Balanced Scorecard as it will give the idea to monitor each and every activities which are
being performed in the company.
KPI Approach: It is the approach which is used by the business organisation for the
purpose of evaluating the success of a company through which they can reach up to the target
easily. It helps to identify the main problem so that corrective measures can be taken for solving
it out. In context of Airbus, KPI approach can be one of the suitable option available for them
because it will let them to decided that how their organisation is performing and how they can
improve the overall productivity for accomplishing the future goals.
Financial governance: It is being used by the business organisation like Airbus so that
they can easily conduct the business activity without facing any of the problem. It mainly
involves regulation or legislations which has been commenced by the government and that must
be followed all of the organisation.
Comparison among Airbus UK and Boeing
Basis Airbus UK Boeing
Problem They are facing the problem which
are related with managing the cash
flows (Bennett and James, 2017).
They have been facing the
problem which are related with
financial issues because they are
unable to manage it.

System This is one of the financial problem
which can easily sorted out with the
help of cost accounting system
where every single transaction can
be focused.
Here, price optimisation can be
used through which they can
easily find out the
creditworthiness of a company.
Approach Here, marketing department can
easily take the help of KPI approach
through which creditworthiness of a
company can be determined easily.
In this, marketing team of the
company can easily take the help
of benchmarking which can help
organisation to improve the
performance by doing comparison
(Charifzadeh and Taschner,
2017).
M4. Responding of management accounting towards financial problems for sustainable success.
By looking at the present scenario of the market, it can be easily assumed that
management accounting helps at the time of collecting, monitoring as well as controlling all of
the financial issues which are faced by the company on regular basis (Cooper, 2017). Talking
about Airbus UK, they use KPI approach for the purpose of measuring the performance of a
company so that any sort of financial problem be solved. It can directly help to accomplish the
target of a company.
D3. Planning tools usage to respond towards solving financial problems so to lead the
organisation towards sustainable success.
Planning tool is mainly used for the purpose of taking decision and preparing the
estimated budget. This tools directly helps to find that accurate result of any single transactions
so that company can take actions towards the financial problems. By taking the help of planning
tool, company like Airbus UK easily monitor the situation with flexible, capital and sales budge

through which accurate results can be compared with standard budget (Eterno and Silverman,
2017). This will help to determine whether goals have been achieved or not by the company.

CONCLUSION
It was concluded from the presented document that management accounting is important for
all organizations as it requires processes and documents that improve operating procedures.
Management account simply helps business organisation to improve the performance of
company by using suitable approach. Financial accounts can be easily prepared by the business
organisation by taking the help of absorption and marginal costing. Planning tool is one the way
through which any of the issues can be solved in short period of time.

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APPENDICES
Illustration:
Selling price per unit 50.00
Direct materials per unit 8.00
Direct labour per unit 5.00
Variable production overheads per unit 3.00
Details of May and June 2018 are listed below:
May June
Production of Product A 500 380
Sales of Product A (units) 300 500
Fixed production overheads are budgeted at £4,000 p.m. and it has been absorbed on a unit basis.
On the other hand, normal level of production is budgeted at 400 units p.m.
Other costs
Fixed selling £4,000 per month
Fixed Administration £2,000 per month
Variable sales commission 5% of sales revenue
There was no opening inventory of Product A at the start of May.
Calculation of net profit under absorption costing method:

Calculation of net profit under marginal costing method:

From the above calculations it has been analysed that when machine will be installed then
company can generate profits of 104000 pounds. Therefore, it has been suggested to the
management to install the machine.