Management Accounting and Techniques Report - Aston Chemicals Analysis

This report provides a detailed analysis of management accounting and its application within Aston Chemicals. It begins by defining management accounting systems and their various uses, including cost accounting, inventory management, and job costing. The report then explores different types of management accounting reports, such as budget reports, performance reports, and accounts receivable aging reports, highlighting their benefits. It evaluates the integration of management accounting systems and reporting within the organization. The assignment delves into absorption and marginal costing techniques, presenting income statements using both methods. Furthermore, it applies break-even analysis and examines the use of management accounting techniques in financial reporting. The report also discusses planning tools for budgetary control, compares Aston Chemicals' responses to financial problems, and analyzes how management accounting techniques can lead to sustainable success. The conclusion summarizes the key findings and emphasizes the importance of management accounting in decision-making.

MANAGEMENT
ACCOUNTING AND
TECHNIQUES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK 1 ...........................................................................................................................................3
A. Define the management accounting system and various management accounting system
uses by the organization .............................................................................................................3
B. Explain the various types of management accounting reports used in the organization. ......4
C. Explain the benefits of different types of management accounting system...........................6
D. Evaluating the integration of management accounting system and management accounting
report in the organization ...........................................................................................................7
TASK 2............................................................................................................................................7
A.1 Explaining the absorption costing and marginal costing ....................................................7
A.2. Producing income statements by utilising costing methods................................................8
B. Computing the following problem with the help of break-even analysis. ..........................10
C. Applying the range of management accounting techniques in the proper formal report.....11
D. Produce financial reports that accurately apply and interpret the data for the business
activities ...................................................................................................................................12
TASK 3 .........................................................................................................................................13
A. Explaining the advantages and disadvantages of different types of planning tools for
budgetary control .....................................................................................................................13
C. Comparing how the Aston chemicals is better in responding the financial problems ........17
D. Analysing management accounting techniques which could respond to financial problems
and lead the organization to sustainable success. .....................................................................17
E. Evaluate how planning tools could be used to solve financial problems and lead the
organization to sustainable success. .........................................................................................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................20
INTRODUCTION
Management accounting is that field of accounting which provides the managers with the
decision making. It plays an important role in an organization. It helps in decision-making

process of every system by taking helps from financial record. It has several techniques of like
cost accounting , fund flow analysis , standard costing etc.
Aston chemicals was profound in 1990. It supplies the raw materials to European
personal care industries. The report is about the importance of management accounting and its
techniques required by Aston chemical. The report will provide, deep insight of meaning of
management accounting, the requirement of different types of system with their benefits. The
assignment will also discuss various management accounting reports used by Aston chemicals.
The present assignment will discuss absorption and marginal costing techniques and also
presents income statement on the absorption and marginal costing. This study will present
financial reporting documents by applying the range of management accounting techniques.
Present assignment will be the deep study of various planning tools and their uses which are
required by the Aston chemicals for the further decision-making.
TASK 1
A. Define the management accounting system and various management accounting system uses
by the organization
Management accounting is a type of system which managers of Aston chemicals uses for
the decision making. It is the provision of monetary and non- monetary decision-making
information by managers. It is that field of accounting, which is beneficial to all kind of
organization for better process of decision-making. It is systematic process of making different
types of managerial reports which provides accuracy and timely information required for
manager to take decisions (Ax and Greve, 2017). These reports are derived from financial
accounting reflect the decision-making process.
The information gathers from management accounting is widely different from financial
accounting. Different types of MA system use the various data to identify several information
required by the managers of Aston chemicals. Some of the management accounting system
which are used by the organization are listed under.
Cost accounting system
This system is also known as product costing or costing system. This accounting system
used by Aston chemicals for estimating cost of commodities and services, valuation of inventory,
and cost control. For profitable operations, estimating accurate cost is very much critical. It helps

to identify the manufacturing cost of each product and services. It helps in determining ending
value of material inventory, finished goods inventory for financial statements. This system
consisted of three basic accounting techniques like actual costing which the records the actual
cost of labors , cost of overheads etc. standard costing , this costing technique provides the actual
costs of goods that were produced and the cost that is occurred. And last is normal costing,
which is used to set annual expenses rates allocated for the production to overhead.
Inventory management system
The inventory management system helps in managing inventory of organization. The
Aston chemicals uses inventory management system to manage its inventory in a proper way. It
takes care of everything starting from purchasing of raw material than to sales of finished goods
(Cooper, Ezzamel and Qu, 2017). The inventory management helps in observing small moving
part of operations, permitting it to make better decisions and investments. Various parts of
supply chain management are being focused by different inventory managers. Examples of
inventory management includes the LIFO i.e. last in first out method , FIFO that is First in First
out method, and JIT
Job costing system
This is used by Aston chemicals in order to assign manufacturing cost to an individual
product or batches of goods. This system is mainly used when commodities are manufactured
sufficiently vary from each other. This system includes process of accumulating information
about various related with a specific production or service job.
Price optimizing system
The system helps to analyze best feasible cost that should be quoted for production is
called price optimizing system. It renders chances to concentrate on different goals and
objectives of Aston chemicals.
B. Explain the various types of management accounting reports used in the organization.
There are five major types of reports which are used by organization are mentioned under
 Budget report
 Performance report
 Accounts receivable aging reports Cost managerial accounting reports
Budget reports

The budgeting reports are somewhere found critical in measuring the company's
performance because they are made on the basis of size of the organization. Like if there is a
small organization there should be only one budget report is to be made and if there are large
organizations consisted of lots of departments than the budget reports are provided according to
department. organizations. Every entity prepares budget before entering into a new contract or
project in form of report in order to identify the list of expenses. This report of Aston chemicals
was made with help of past experiences, records and budget reports (Management Accounting:
Meaning, Functions and Characteristics. 2017).
It is very important to have budget report in an organization because it helps in control
cost of entire Aston chemicals.
Account receivable aging reports
Accounts receivable aging reports are prepared in firm one the organization is extending
credit. Notify remaining balances of clients helps in identifying the defaulters and issues rising in
collection process (Eldenburg and et.al., 2016). If in report there are many defaulters than Aston
chemicals needs to strict their credit policies.
It is very important to implement the debtors aging reports so that defaulters can be
identify easily.
Cost managerial accounting reports
The cost of product and services that are manufactured is computed by management
accounting. This cost manage reports includes the computation of overhead, labor, material costs
and any added costs in it. The summary of all this information is offers by a cost report. It helps
manager to identify difference between the cost of goods and services to selling price of it.
It is very crucial to implement the cost managerial reports because it provides the exact
understanding of whole expenditures which is required for better optimization of the resources of
all information.
Performance Reports
These reports are made at end of year in order to determine performance of company as
a whole and employee's performance. In large organization performance reports are generated in
each of department.

Aston chemicals uses performance report in order to identify the capacity and ability of
its employees. For every organization it is very important to develop the performance report in
order to analyse the performance of the organization as well as the employees.
C. Explain the benefits of different types of management accounting system
Management accounting
systems
Benefits
Inventory management
system
 The first and foremost benefit of inventory management
system is that it improves accuracy of orders of inventory.
It means that it determines that how much stock should
organization kept in hand so that shortage and exceeding of
inventory do not take place.
 It increases the transparency of an information in an
organization.
 It improves the flow of goods
Cost accounting system  Wastes, inefficiencies and losses are eliminated by cost
accounting system by fixing standard for everything.
 In reduces cost by following new and improved method of
the cost (Fullerton, Kennedy and Widener, 2014.).
 It helps in determining the make or buy decision.
Job costing system  It enables the organization to assess performance of
employees
 It facilitates cost control by comparing actual with
estimates.
 It helps managers to identify that which job is more
profitable.
Price optimizing system  It assists in analysis of adequate cost over good and
services.
 It determines the suitable cost of several products of goods
and services.

D. Evaluating the integration of management accounting system and management accounting
report in the organization
The management accounting system and management accounting reporting is very well
integrated in Aston chemicals. Together work of both leads structure in top. The management
accounting system gives organization qualitative and quantitative data about functional and
operational performances. This data presented by management accounting systems in form of
report helps to identify performance of firm. The management reporting system more
specifically are made to proctor the operations of Aston chemicals associated with objectives
which are to be set out in formal plan developed by organization. This combination of
management accounting systems and management reporting systems helps company to identify
their objectives and work on that as soon as possible (Kihn and Ihantola, 2015). The integration
of these two systems is very important in an organization to implement in order to take decision
for productivity of firm. They control duplication of work, saves time and enhance ability of
firm. For Aston chemicals, it is very important to have both systems for sound decisions (Malmi,
2016).
TASK 2
A.1 Explaining the absorption costing and marginal costing
Absorption costing
Absorption costing is the method collection of all the production cost and allocating them
to the actual individual product. In other words, it means that entire cost related with production
like direct labour, overhead costs and direct material etc are included. Absorption costing
methods not only entails cost but also all the manufacturing expenses whether fined and variable.
This technique is also known as full absorption costing. This basically differs from other costing
methods because it takes fixed manufacturing expenses into consideration. For Aston absorption
costing has proven very much beneficial. It determines the value of fixed costs participating in
production (Nitzl, 2018). It shows less alteration in net profits in case of constant production but
fluctuating sales.
Marginal costing

In this marginal costing technique, variable cost is charged to units of cost, while fixed
cost for each of period is completely written off against the contribution. Marginal cost expresses
the additive cost concerned in bringing forth an extra unit of product, which can be anticipated
by total variable cost assigned to one unit. The calculation of marginal cost is done by adding all
the variable expenses such as direct material, dlabor, dt expenses and variable overheads.
Marginal Cost = Direct Material + Direct Labour + Direct Expenses + Variable Overhead
+ variable expenses.
Therefore, it helps managers in fetching lots of business decision, such as substitution of
machines, discontinuing a commodity or service, etc. It also aids administration in determining
the suitable level of activity, through BEP analysis, that indicates the effect of increasing or
decreasing production level, on the company’s overall profit.
A.2. Producing income statements by utilising costing methods
 Marginal costing
Particulars
Amount
(in £)
Amount
(in £)
Sales 33000 33000
Material 5600
labour 4800
Variable manufacturing
expenses 1600
Variable gross revenue
expenses 800 12800
Less: closing stock

Direct material 1400
Direct labour 1200
Variable manufacturing
expenses 400
Variable gross revenue
expenses 200 3200
Cost of Production (per unit) 9600
23400
Less: FC
Expenditures (Manufacture) 3200
Static office cost 1200
Static selling cost 1500
5900
Net income 17500
Interpretation
Above income statement is prepared with the help of marginal costing method. It is a
method which takes only variable cost into consideration. By solving this technique, in which
fixed cost is totally exempted Aston chemicals has earned net income of £17500 which is quite
appropriate.
Absorption costing
Particulars
Amount
(in £)
Amount
(in £)
Total revenue 33000 33000
Direct material 5600

Direct labour 4800
Variable expenses 1600
Variable revenue expenses 800 12800
Less: Closing inventory
Direct material 1400
Direct labour 1200
Variable sales expenses 200
Less: Variable sales overhead 600 3400
Less: Absorption of Overheads
(Fixed)
Cost of production 9400
Per unit contribution 23600
Less: FC
Overheads (production) 3200
Fixed office expense 1200
Fixed selling expense 1500 5900
Net Income 17700
Interpretation
This calculation is done by absorption techniques which is known as full absorption
method of accounting. In this technique all the cost was taken into consideration wether fixed
and variable. By applying this technique Aston chemicals had obtained profit of £17700.
B. Computing the following problem with the help of break-even analysis.
Break-Even analysis

Particulars Formula
Figures
(in £)
Selling price per unit 40
Variable cost per unit 18
Contribution per unit
Selling price per unit - variable
cost per unit 22
Fixed cost 6000
BEP (in units) Fixed cost / contribution per unit 273
BEP (in value or monetary terms)
BEP (in units) * selling price per
unit 10909.09
C. Applying the range of management accounting techniques in the proper formal report.
From: MOA
To: GM
Subject: Giving info about appropriate techniques of management accounting which must be
implemented.
Sir,
With subject to the growth of business before launching the new product and services on
your order the marketing research team has been sent into different areas of markets for
customers views of that particular product. Observing their views regarding the organization's
pricing for the product it is very important to develop some management accounting techniques
so that profit can be stated clearly. Under discussed some important techniques of management
accounting which must be implicated in Aston chemicals. In this scenario, the absorption
costing technique proved beneficial to firm (Nitzl, 2018). It has absorbed all the cost fixed as
well as variable and given appropriate profit from forecasted amount.

 Cash flow statements, historical checking
 Analyzing the financial accounts
 Financial accounting
 Communicating the information etc.
 Review of the accounts
On comparing both the techniques it is found that profit is more in absorption than to
marginal costing techniques. So, it should be appropriate to use absorption costing method in
place of marginal. This method of accounting consisted of some management techniques like
 Cash flows
 Startup costing
 Balance sheet
 Budget and forecast table.
Thank you
D. Produce financial reports that accurately apply and interpret the data for the business
activities