Management Accounting Report: Aston Martin, Business Strategies

This report delves into the realm of management accounting, providing a comprehensive analysis of its principles and practical applications within the context of Aston Martin, a luxury car manufacturer. The report explores various management accounting systems, including cost accounting, pr...Read More

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................4
TASK 1..........................................................................................................................................................4
(a) Management accounting and essential requirement of different types of management accounting4
(b) Explain different method that is used by industry for reporting........................................................5
(c) Benefits of management accounting system and their application....................................................7
(D) Critical evaluation of management accounting systems and reporting.............................................8
(E) Analysis of three planning tools.........................................................................................................8
TASK 2........................................................................................................................................................10
Part A.....................................................................................................................................................10
Part B.....................................................................................................................................................11
TASK 3........................................................................................................................................................15
Part A.....................................................................................................................................................15
Part B.....................................................................................................................................................15
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
It is necessary to manage a company and to make accounting effectiveness of project
transactions that is the review of financial statements and reports aims to enhance the efficiency
of the organization. Both companies use it to understand how performance and financial actions
could be handled so that expected benefits can be achieved in a competitive market setting. In an
organization that analyzes the relevant data and manages the operations, the management plays a
key role in effort to expand operational efficiency. It helps companies achieve their long-term
goals including cost reduction and optimizing profitability (Gersonius and et.al, 2015). It can
eliminate problems and challenges, and simplify operations. It assists the organisation in
managing the different activities within the company and allows the firm to make the right
choices. This report based on the Aston martin which is a manufacturing organisation. The
company provides services in luxury cars and grand tourers. In this report consist of numerous
types of accounting systems and reports and their essential requirements. Along with, analysis
three planning tools that helps to business analysis the situation.
TASK 1
(a) Management accounting and essential requirement of different types of management
accounting
A mechanism that is used to define, assess and calculate the financial accounting that
really should be fully established is called accounting management. Organizational leaders know
their obligations and finish the game to be able to successfully owned company. For any
company, management accounting is essential as it supports to preparing financial statements
and utilizes systems to operate the sales and enhance productivity. Within the framework Aston
Martin multiple kinds of accounting management system as described are:
Cost accounting system: It refers to as a cost-related method and effectively increases the
efficiency of the company. Strategy is higher for each institution, as it produces various kinds of
goods and services with both the assistance of costs that preserve the outstanding quality.
Business organization management must concentrate on costs that can help fill need but will
through cost identification. For Aston Martin, it is important that the cost accounting system be

used to assess the costs of raw materials, labor, overhead costs, etc. that may serve to boost
business operations (Grabner, Posch and Wabnegg, 2018).
Price optimization system: The organization's goal is to increase profitability and
generate customers will receive goods at affordable price. This system is used to set the cost of
the goods and services produced by the institution, which have been crucial to increase the profit
margins. The price management strategy is important for Aston Martin because it is vital to
establish prices for their goods and available to help convince customers and execute tasks.
Inventory management system: It is essential to train inventory management system for
each organization with respect to production which can actually maintain recording of their
organization. So when a firm manufactures products in large quantities, it is important to
maintain good stock levels and help coordinate the product. In connection with Aston Martin, the
manufacturing facility is responsible for monitoring the stock that is critical for maintaining great
result. LIFO, FIFO and AVCO are some of the methods that the company should use. The
commodity last purchased by the customer is first managed to sell in the LIFO procedure as they
believe how the last purchased stock is priced larger than the corresponding one. The item which
the customer first bought will be decided to sell next in the FIFO scheme. Even if in the AVCO
trying to set the maximum value of the product is claimed, the measurement is presumed.
Amongst these three, FIFO Design is perfectly suited also because institution's branded
medication corresponds to the food industry in which it would be sold initially (Hall, 2016).
Job costing system: It is one of the management accounting program that utilizes the
distribution of costs to the various things that the organization undertaken. In Aston Martin, it is
needed to ascertain the costs broken into specific development and classification together with
operations. It allows keep the proper efficiency and performance by properly calculating the
price and controlling the output.
(b) Explain different method that is used by industry for reporting
Management accounting reports collect all the relevant information of company via
financial accounting. The knowledge is being used for research, and thus for company
performance planning, regulation, decision-making, and evaluation. The management accounting
reporting methods that Tesco plc are using is as follows-

Budget report: This report is an internal document which the organizations utilize to make
comparisons the corporation's planned efficiency with overall results. By planning budget
reports, it means improved corporate objectives over a timeframe. Since expenditures are
financial targets that based on estimates and growth expectations that companies are planning to
achieve real company's profitability. Approximated tasks are sometimes imprecise, which may
differ from a company organization's financial productivity. Administration in Aston Martin
conducts budget reports by calculating the operational expenses. It has various portions that
focus on Tesco Plc corporate accounting requirements and information (Honggowati and et.al.,
2017).
Accounts receivable Agin report: It is among the most important reports that companies
use to obtain credit agencies' payments. Such methods are also used for managing cash flow so if
companies have increased credit to clients. It is fully ready in the template of receipt sections that
regard delayed payments day as 30 days, 60 days, and 90 days wherein investors are required to
make credit payments. This is useful for Aston Martin as the management team prepares aging
document wherein they recognize the way of controlling. It is also beneficial to get potentially
costly from non - payment customers this will help to effectively organizations face.
Inventory and manufacturing report: For the intent of preserving stock, all the business
uses such research. It helps preserve sufficient health upkeep and stock management. By
concentrating on inventory waste, labor costs and overhead costs, Aston Martin needs to prepare
such a document which makes it easier enhance organizational performance. Such study's key
task is to control inventory that is used to manage all the items and produce a report of all
expenditures and components that aim to ensure business objectives. Hence, inventory study is
important for company to ensure all stock levels and boost efficiency.
Cost accounting report: This report is important for an organization that offers side-by -
side perspective of total organizational costs. It considers all the value of the goods and services
that the company serves in order to keep the position up. This tends to help business to increase
profits by reducing product costs. If the Aston Martin does not produce this report so they cannot
analysis the actual amount of products as well as services. As a result, leading to a shortage of
cost accounting reports, individuals cannot make accurate management decisions. The

management of company produces this report in order to maintain cost of every products as well
as profits as per the reason of generates revenues (Lavia López and Hiebl, 2014).
(c) Benefits of management accounting system and their application
Management accounting project is helpful for organization that supports effective the
operations, stock levels, pricing and cost-setting of each segment so that all operations can be
managed correctly. Accounting system advantages are as described by:
System Benefits and uses
Inventory management system • This program saves time, and that in turn greatly
increases performance.
• This process resulted in a cost savings for the client.
Cost accounting system  Cost accounting seeks to lessen waste by
defining the component, and also offers
control measures.
 Helps in reducing the inequities usually
present in the manufacturing process so that
productivity can be incorporated into output
Price optimization system • Business can improve massive returns by finding a
particular cost.
• It allows knowing the correct price for the
commodity.
Job costing system • By using this structure the expense of completing a
particular task can be determined easily.
• Overhead recovering is not under way in this
scheme (Lindholm, Laine, and Suomala, 2017)
(Welsh, 2018).

(D) Critical evaluation of management accounting systems and reporting
Management accounting and reporting systems are useful for a company to define its
policies. The leadership of Aston Martin might use them quickly and productively to maximize
the functioning of the overall enterprise. It'll also contribute in management decision-making that
can bring the business forward with of its rivals and promote higher profits and actually achieve
the short, medium and lengthy-term objectives and outcomes set within the entire organisation.
(E) Analysis of three planning tools
Budget: This is the declaration of income and expenditure incurred in the organization and
obligated to produce well and enhance the success of the company. The institution's management
accountant will evaluate the operations and decide the number that comes in at the time of
employment. This is critical in determining the expense and efficiency for all organizations to
plan expenditures. Aston Martin takes advantage of the difference spending by cost estimation
and revenue which can help operate company and make profit (Maas, Schaltegger and Crutzen,
2016). This company prepares numerous areas of operation which are as described as:
Capital budget: This is a type of budgets that all corporations should organize to preserve
their financial situation for a lengthy amount of time. Management of the company prepares this
by including investment receivables and payables that are essential for business purposes and
allows determine the capability of company. Within the framework of Aston Martin, manager
will monitor capital budgets for lengthy-term profits by concerned with evaluating-term income
and expenditure such as machinery, construction, transport systems, professional development,
etc.
Advantage: This budget makes it easier for Aston Martin to recognize dangerous situation
and allows plan the report by including income and expenditures that will help fix complex
issues. This allows even providing opportunities in the market and judiciously selecting capital
expenditure. It helps in making the best educated decision, too.
Disadvantage: Decision for selected organization may be unimportant. Through this,
administrators use non-real strategies and build operational costs when managing business and
planning capital budgets (Malina, 2018).

Operating budget: It is a document that lists the profits and expenditures that come from
start-ups in the sector. It is crucial for organizations to concentrate on various week and-to-day
programs that help sustain positive results. Within the framework of Aston Martin, execute
strategy the budget estimates by evaluating revenue, operating expenses, and manufacturing
labor, which helps improve business efficiency. It is a financial strategy intended to fulfill the
outstanding debt of the business and retain it for a longer period.
Advantage: The advantages of operating budgets that Aston Martin takes are tracking
whole company. Reporting operating budget administrators can monitor business-related
budgetary details and make increased revenues. This also allows managers to plan for financial
commitments needed for economic operations (Messner, 2016).
Disadvantage: This can cause uncertainty between operations as it is reported on a
regular basis including rewards as well. Aston Martin's management is decided to spend the large
investments and skills of the workforce who can start preparing the financial statements through
an improved assessment of overall budget.
Zero based budget: This is budgeting method where all expenditures are required for
every new period to be warranted and authorized. It is compliance program by management
teams to set up new businesses that do not have any historical knowledge and direct the
operations correctly. In the framework of Aston Martin, monitor the implementation the levels
and costs of all functional departments by providing funding to handle the actions
Advantage: This budgeting emphasizes correct financial decision taking for the current
time. Its purpose is an overview of cost savings that reflects on improvements and material
characterization in organizations that help sustain excellent results. Zero base budget is used in
the sense of Aston Martin to distribute the source of revenue available to an organization, bring
improvements for the next cycle and start driving advantages (Modell, 2014).
Disadvantage: This is not suitable for organizations and existing organizations that can
reduce the effectiveness of the company. It is not hang spending plan for all cases and there are
potential conflicts occurring between both the expertise and worker disputes.

TASK 2
Part A
Marginal costing: This is a costing technique that includes mostly variable costs when measuring
the total costs and eliminates operating expenses. It increases the revenue and sales value in the
accounts because it simply reflects the contribution margin (Nielsen, Mitchell and Nørreklit,
2015).
Particulars May June
Sales (14 per unit) 4200000 3920000
Less: Variable costs
Direct material 450000 450000
Direct labor 600000 600000
Net profit 3150000 2870000
Absorption costing: Costing method is absorption accounting, which includes all fixed
and variable cost, and also provides a clear image of all the expenses that the company's
expenditures in the manufacturing process have incurred. This is the common technique
employed by institutions to find out the exact manufacturing costs (Otley, 2016).
Particulars May June
Sales (14 per unit) 4200000 3920000
Less:
Direct material 450000 450000
Direct labor 600000 600000
Fixed overheads 400000 400000

Add: Closing inventory Nil 390000
Profits 2750000 2080000
While evaluating revenues by marginal costing method, for May it led to an increase in
3150000 and for June 2870000. The methodology of absorption costing resulted in earnings of
2750000 for May, and 2080000 for June. The possible explanation behind its distinction is set
price and ending stock, as these are not regarded in variable costing and both have been regarded
in absorbing methodology for profit calculation purposes.
The members of the company could use numerous methodologies of the reason pricing.
That everything of them seems to be as described in the following:
Standard costing: It is a technique used for analyzing the distinction between the corporation's
expected and actual expenses. Because once company has better bar costs compared to real,
optimistic projections can contribute. When the immediate facts are higher than previously paid
this will lead in an unfavorable business context (Quilty, Cosentino and Bagby, 2018).
Normal costing: This is used for cost deviation. All the goods made are priced on the real price
of the objects. The actual price of labor, material and overhead costs are reported in the records
in this process (Tamandeh, 2016).
Part B
Income statement of Aston Martin
Particulars 2018 2017
31/03/18 01/04/17
Total revenue 1069820 1062200
Cost of revenue 674560 662930
Gross profit 395260 399270

Operating expenses
Selling general and administrative 332470 334860
Others -4950 -6320
Total operating expenses 1002080 991470
Operating income or loss 67740 70730
Income from continuing operations
Total other income/expenses net -61060 -53090
Earnings before interest and taxes 67740 70730
Interest expense -9540 -10020
Income before tax 6680 17640
Income tax expense 3770 6070
Minority interest -250 -590
Net income from continuing ops 2910 11570
Net income 2570 11710
As pr the above income statement analysis the financial position of the business total
revenues of the company in the year of 2017 is 1069820 and in 2018, 1062200. From the
revenue less the cost of goods sold and gain mount f the gross profit which is greater the in 2018

as compare of 2017. From the gross profit of the business less all the operating expenses and get
the amount of the net profit which is 2570 in 2017 and 11710 in 2018.
Balance sheet of Aston martin
Particulars 31/03/18 01/04/17
Current assets
Cash and cash equivalents 20770 46860
Net receivables 14480 13780
Inventory 78100 75850
Other current assets 1090 16770
Total current assets 131790 172330
Long-term investments 4360 5150
Property plant and equipment 439390 483780
Goodwill 7740 7840
Intangible assets 52180 63060
Other assets 119560 97090
Total assets 755020 829250
Current liabilities
Accounts payable 87290 96750
Short/current debt 12530 51760

Other current liabilities 22260 22430
Total current liabilities 182600 236800
Long-term debt 162290 166340
Other liabilities 109940 106240
Minority interest -250 -590
Total liabilities 459600 514210
Stockholders' equity
Common stock 40620 40620
Retained earnings 656040 661760
Treasury stock -442630 -428390
Capital surplus 41640 41640
Other stockholder equity -442630 -428390
Total stockholder equity 295670 315630
Net tangible assets 235750 244730
From the above table it has been analyzed that total assets and total liabilities presents
that actual financial performance of the business that helps to business to take effective decision
in effective manner.

TASK 3
Part A
Make Buy
Net Income
increase
Decrease
Direct materials
(50000 *
$8) 400000 0 400000
Direct labor
(50000 *
$9) 450000 0 450000
Variable manufacturing
(450000 *
60%) 270000 0 270000
Fixed manufacturing costs 30000 30000 0
Purchase price
(50000 *
$21) 0 1050000 -1050000
Total annual cost 1150000 1080000 70000
(b) The seats should be bought from the outside supplier. As indicated, the company would have
incremental net income of $70000 if they purchase the seats rather than make them.
Part B
Continue Eliminate NI/Inc(Dec)
Sales 480000 0 480000
Variable expenses
Cost of goods sold 280000 0 280000
Operating expenses 35000 0 35000
Total variable 315000 0 315000
Contribution margin 165000 0 -165000
Fixed expenses
Cost of goods sold 120000 120000 0
Operating expenses 105000 90000 15000
Net Income -60000 -210000 -150000

This accountant is not correct. If the Southern division is eliminated, the net income will be
$150000 less not $60000 greater. The reduction in income is the outcomes of the loss of the
contribution margin less the avoidable fixed cost of 15000.
CONCLUSION
Accounting management is the key activities that leaders perform to improve their
financial services and enhance the profitability of the firm. These do strive to formulate different
business strategies that will move them against their aims and priorities. Management accounting
plays an important role in acknowledging corporate accounting difficulties with support from
different constructions, including such real economy optimizing, accounting records, etc.
Various planning tools are uses for tracking and controlling excess expenditures and handling the
events.

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