Management Accounting Systems and Planning Tools in Atkins Global

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Management Accounting
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Contents
Introduction.................................................................................................................................................3
Scenario 1....................................................................................................................................................4
Scenario 2..................................................................................................................................................10
Conclusion.................................................................................................................................................35
Reference...................................................................................................................................................36
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Introduction
For study and understanding management accounting systems and its features, a company has
been chosen with the name of Atkins Global organization that provide consultancy services. The
company uses management accounting system and also tools related planning in order to solve
the financial dilemma (issues) for the aim of business survive in the market on a constant basis
so that company grows can and develop over the year. From the uses of different management
accounting systems such as inventory system, cost system, price-optimization and job costing
system assist company to find the cost incurring in their business activity through which
organization can ascertain its profitability accordingly. With the help of study this report, it helps
the business importance of planning tools in business and the company make income statement
from the method of marginal costing and absorption costing system in order to determine the
difference between these two profitability and also used two methods of inventory for selecting
the best method between in future which can increase profit and maintain inventory at good level
without any over or underuse.
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Scenario 1
Management accounting is a system which is adopted by the company in order to determine the
company cost structure and incurring system. The Atkins Global organization take benefit from
the use of management accounting system in business for decision making the purpose of
because of it helps in providing data in a systematic way so a decision can be taken on the quick
basis with the simple methods and made fewer efforts. This provides a better flow of
communication process within the organization among the employee, staff, labor staff and
management (both top-level and medium level). The decision is simple due to provide
information regarding business financial and non-financial. Through this company can help in
checking its business operational efficiency (AlKhajeh, and Khalid, 2018).
Both management accounting and financial accounting are different in terms of its meaning,
roles, and functions and also the importance of there is different from each other in the business
of Atkins Global Company. To understand the difference between these two terms, the following
are some points which clarify the differences.
Management Accounting, the purpose of this id to determine the company cost structure for
their products and services so that the firm can calculate its operational efficiency through the
analyzing of business profitability. The result obtained from this is used for internal purposes by
the management of the organization like create policies and other rules (AlKhajeh, and Khalid,
2018).
Financial accounting, the purpose of this is to analyzing business financial performance and its
position in the market by the process of analyzing business profitability and other criteria which
are set by the management of the company. The need for preparing this is to present the
information of the company to the interested users of the report such as investors, stakeholders
for their personal need.
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Atkins Global organization small financial company and it need to adopt management
accounting systems in order to accept consistency in the management accounting practices and
its policies within the business organization. The company uses the following systems of
management accounting within the business.
1) Cost Accounting system: It is a process adopted by the firm for the purpose of maintaining
records for the cost for the expenditures in relation to the production or manufacturing processes
(Susanto, 2018).
The company takes various benefits from this system but it also hurt in some areas of business
like:
 Aid in establishing good price tag on the services and products.
 Aid in recording every transaction which in a systematic manner which promotes consistency
within the business and also assists in the future for further record and information obtained.
 It is expensive in nature in terms of cost and time so it is must for the company before adopting
this system within the organization is to analysis its need and requirement for the business.
 Create a chance of inconsistency in cost data when a company uses its previous year data or
information.
2) Inventory management system: This system aid in managing the company stock ay optimum
level so that in future demand can be fulfilling by ascertaining the cost of the product or services.
It includes raw material and also final goods until not saleable (Hosseinzadeh, and Davari, 2018).
The advantages of this system are, company ascertain and determine the level of inventory and
also find its EOQ level, also aid in determining the production capacity of the machinery assets.
On the same hand, it has some drawback which is as it creates a complex situation which impacts
in the decision-making process slow and it does not entirely eliminate or removed risk factor by
also maintaining a proper system for this.
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3) Price-Optimization system: This also another system of management accounting used by the
Atkins Global organization for finding the best price for their services and products.
Merits of this system are an aid in finding the cost or price of the same product in the market by
the evolution of market strategies and also aid the interest of the customers towards their product
at various price tags.
4) Jobs-costing system: This is needed by the management to evaluate and analyze the cost of each
job or task which is being produced and provides services on the basis of a particular order
received (Qian, et. al., 2018).
This method is easy and simple to calculate a cost for a product and also aid in the
reimbursement process on a quick basis.
In order to choose an appropriate method among, Atkins Global organization need to analyze
each system by considering each system factors for business purpose.
Understandable: The information obtained by the use of systems should be easily
understandable for the management so that decisions and other business-related can be taken
efficiently.
Relevant: The information should be relevant to the business so that the company can focus on
its business activities.
Complete: It is also necessary that information which is obtained should be incomplete in nature
so that the management of the company can take its best decisions in the interest of the
organization.
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The Atkins Global organization uses the following management accounting reports for the
development and provides information to the interested persons. Management accounting tools
Atkins Global Company to create essential financial reports for the company whose aim is to
help in the decision-making system and aid in the formulation of new policies. The company
needs to cover every strategy of the management accounting systems and roles due to both differ
in terms of information and uses.
Performance reports: This report stated company entire performance either counting in figures
or analyzing by any process such as set some standards throughout the year related with its
production, servicing and other which is considered an important factor for the development and
growth of the business.
Budget report: This report included Atkins Global Company income and expenses on a
budgeted basis for the decision making the process easier and take a relevant decision in the
welfare of the company. This will lead to saving cost and expenses which are unnecessary incur
in any activity and also find the area of profitability in the future (Latan, et. al., 2018).
Accounts receivable report: This will present the amount which is to be recovered in the future
from the company's debtors, thus it will help in preparing cash budget and also aid decision
making.
Reporting of management accounting and its systems both are considered important for the
business of Atkins Global due to both acts like a bridge which eliminate the chances of
occurrence of mistake between the employee and its company management decisions.
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The management accounting system and reporting are integrated on the following basis:
Management accounting system aid in discovering the issues within the internal management
while management accounting reporting provides a tool to solve such problems in an optimum
way so that error remove
The company uses the following planning tools:
Discounted Cash Factor (DCF): The Atkins Company uses such a tool in order to analyze the
profitability of the investment project. This method considered due to it contains time value of
money, entire income or profit from the project from the total life span of the project and provide
accurate information and management can rely on this (Qian, et. al., 2018).
Benchmarking: This is a technique used within the company for finding the company
performance in a financial and non-financial manner so can company can make its decisions and
develop its business plans and strategies for the business plans.
Cash-flow analysis: The cash flow analysis aid in tracking the cash inflow and outflow from the
business during a specified period of time which aid in providing accurate information of cash
holding within the organization. This process begins with the staring balance and ends with
generating end balance from all-cash receipts and expenses on cash (Azudin, and Mansor, 2018).
Through the uses of these tools, an organization can able to achieve success and develop its
business operations also. The benefits from the uses of these planning tools are:
 Rise in proceeds (profits).
 Increase efficiency through effectively.
 Aid in finding the solution to financial issues.
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 Aid in the decision-making process.
 Aid in managing corking capital.
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Scenario 2
It requires various types of planning tools for the effectiveness of the data collected information
and make more convenient and reliable and also understandable for the management purpose
decisions. Different tools gave different applications and also uses for the different purpose
either for financial or non-financial.
Production of units:
Detail May June
Sales
3
00
5
00
Production
5
00
3
80
Opening Stock -
2
00
Closing Stock
2
00 80
All are in units
Cost Sheet as per Absorption Costing:
Particulars
May June
$
cost/per
unit $
cost/per
unit
Direct Material 4,000 8 3,040 8
Direct labour 2,500 5 1,900 5
Prime Cost 6,500 13 4,940 13
Variable Production Overheads 1,500 3 1,140 3
Fixed Production Overheads 5,000 10 3,800 10
Factory Cost 13,000 26 9,880 26
Fixed Admin Overheads 4 5.26
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2,000 2,000
Cost of Production 15,000 30 11,880 31.26
Add: Opening Stock - 30 6,253 31.26
Less: Closing Stock 6,000 30 2,501 31.26
Cost of Goods Sold 9,000 30 15,632 31.26
Over/Under Absorption of Overheads (1,000) (3.33) 200 0.40
Fixed Selling Costs 4,000 13.33 4,000 8.00
Sales Commission 750 2.50 1,250 2.50
Cost of Sales 12,750 42.50 21,082 42.16
Profit 2,250 7.50 3,918 7.84
Sales 15,000 50 25,000 50
Absorption rate:
Particulars
Amount
(£)
Budgeted overheads 4,000
The normal level of Activity 400
Absorption rate 10
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Cost Sheet as per Marginal Costing:
Particulars May June
$
cost/per
unit $
cost/per
unit
Sales 15,000 50.00 25,000 50.00
Less: Variable Cost
Direct Material 4,000 8.00 3,040 8.00
Direct labour 2,500 5.00 1,900 5.00
Production Overheads 1,500 3.00 1,140 3.00
Add: Opening Stock - - 3,200 -
Less: Closing Stock 3,200 - 1,280 -
Sales Commission 750 2.50 1,250 2.50
Total Variable Costs 5,550 11.10 9,250 24.34
Contribution 9,450 38.90 15,750 25.66
Less: Fixed Costs
Fixed Admin Overheads 2,000 4 2,000 5
Production Overheads 4,000 8.00 4,000 10.53
Selling Overheads 4,000 13.33 4,000 8.00
Total Fixed Costs 10,000 25.33 10,000 23.79
Profit/Loss (550) 13.57 5,750 1.87
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