Management Accounting Systems in BBC PLC: A Comprehensive Analysis

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BUSINESS REPORT

Table of Contents
EXECUTIVE SUMMARY...................................................................................................................................... 3
PART 1........................................................................................................................................................................... 4
P1.................................................................................................................................................................................. 4
P2.................................................................................................................................................................................. 5
P3.................................................................................................................................................................................. 5
P4 THE INTEGRATION OF MANAGEMENT ACCOUNTING SYSTEMS................................7
PART 2........................................................................................................................................................................... 8
P1 BREAK-EVEN ANALYSIS........................................................................................................................ 8
P2 ACTIVITY BASED COSTING..................................................................................................................9
P3 BENCHMARKING...................................................................................................................................... 10
CONCLUSION......................................................................................................................................................... 10
REFERENCES.......................................................................................................................................................... 11
REFERENCES............................................................................................................................................................ 12

EXECUTIVE SUMMARY
Financial management has become a crucial part for each business which is also being used
by the management accountant managers in the business to take the decision. The main
aim of this report is to gain an understanding of the management accounting and the
different system of management accounting. The first part of the report provides the
meaning of management accounting and management accounting reporting. It has also
provided an understanding of the benefits of the management accounting system with their
application. The second part has provided an analysis of the tools of the accounting with
their pros and cons. This report will be based on the BPB plc that is the largest
manufacturer of plasterboard in the world.

PART 1
P1
MANAGEMENT ACCOUNTING: It presents the business activities analysis to the internal
management for facilitating decision making. It can be defined as the process that provides
the financial resources and information to their managers in decision making. It can only
use by the organizational internal team (Kaplan and Atkinson, 2015). The objective of
financial management accounting is to use the statistical data provided by the financial
account manager to take a better decision and to control the business activities and
decision. Thus it is the procedure that presents the internal financial report, account and
records to help the managers in the process to attain the business goals (Otley, 2016).
Management accounting systems
It is the internal organizational system that is used by the organization to evaluate and
measure its procedure for organization management. Management accounting systems
vary in the application. Every system delivers varying evidence on the management based
on the management required to assist in decision (Maas et al., 2016).
Cost accounting system: This is the model used by the organization to inexact the cost of
the products for valuation of the inventory and cost control. In this system, the cost
allocation is done based on this system or tradition system of costing (Mårtensson et al.,
2016).
Inventory management: It is the method that controls and oversees the purchase order,
storage and use of the constituents which organization applies in the production goods sold
by the organization. It combines the application of a different system. The objective of this
is to understand the level of the present inventory accurately and to minimize the under
stock and overstock situations.

Price optimization system: It is being referred as the application of the mathematical
analysis to the organization to determine the reaction of the consumers for the different
process of their goods and services with the help of the different channels. It is also being
applied for the determination of the prices (Weetman, 2019).
P2
Management accounting emphases on the inner evidence gained with the help of
financial accounting. It is being applied for the different process. The managers are
depended on the some of the information provided by this system. This may be applied to
other forms of the accounting reports in the evaluation of the information of the
organization, These can include the budgets cost reports, performance and products report
(Merchant and White, 2017).
Cost reports Management accounting use to calculate the expenses of the manufactured
items and it is being done with the help of considering the cost of the all kinds of the
expenses in the organisation.
Budget: Budget preparation is the main key element of management accounting. Budgets
are established with the help of the application of the budgets of the previous year and
adjusting them for future estimation and forecasting. The company budgets list all
revenues and expenses sources (Harding, 2017).
Performance reports: The managers apply the budget for comparing the real
expenditures an revenues to the budgeted amounts. The computed differences are being
evaluated for new budgets and along with this, all information of the amounts is also listed
in the performance report.
P3
Management accounting system plays a vital role in the decision making of an organization
that provides the basis for the investors and many other stakeholders

1. Proper planning: Managerial accountant develops the report that is more detailed
and descriptive than the financial accountants. It helps in gaining the information
related to he organisational products and the manager can set the goal and outline
the way it can be attained (Weetman, 2019).
2. Effective management control: Control is needed to check whether all
organizational activities were being done as per the scheme. The information gained
from the management accounting system provides managers with a sense of control
over the success of the organization. The information of this system is used in
internal-only as they do not adhere to follow GAAP. Thus managers can select
required areas for additional investigation. During the controlling period, the
managers examine feedback from managerial accounting and make an additional
decision (Harding, 2017).
3. Improvement in efficiency: The system eliminates various types of production,
wastages, other work and defectives and this help in improving the efficiency.
4. Profit maximization: management accounting aids to increase the profit of the
organization. As it provides the deviation in terms of the standard variance and
deviation which measures the actual to find out the deviations. The profit can be
increased by taking corrective actions (Carey et al., 2017).
APPLICATION OF THE MANAGEMENT ACCOUNTING:
Management accounting is the vital part of the organization that plays an important role in
deciding for the organization it also helps the BBC PLC a lot in making the profit and to
make the appropriate decision. It helps the investors and other stakeholders of BBC PLC.
Management accounting helps in preparing and preparing the report for the BBC PLC that
is more descriptive and detailed and this helps in the future planning of the research. It
helps BBC PLC in preparing the budgets for the future. The BBC PLC makes the report and
presents it before all decision-makers. The information gained from the management
accounting system provides managers of BBC PLC a sense of control over the success of the
BBC PLC (Brewer et al., 2015).

P4
The management accounting system is integrated with the organizational process of BBC
Plc and there are many different types of management accounting reporting that is related
to the organizational process of BBC Plc.:
Budgeting reports: The integration between the processes of the BBC Plc is related with
the budgeting reports prepared by BBC Plc and it helps to prepare the way for the activities
of the organization so that the organization can focus over the targeted outcomes and
objectives properly (Malina, 2017).
Accounts receivable aging report: This can be attained with the help of making efforts to
take the timely action of the accounts receivable within BBC Plc. And it also helps to create
the policy for the collection that can be monitored promptly for its accuracy and flexibility
(Brewer et al., 2015).
Job cost reports: The actions of the BBC Plc essential be directed for the attained of the
cost objectives and cost report that can make it easy for deciding the pricing strategies for
the BBC Plc and to decrease the overall product cost (Malina, 2017).
Manufacturing and inventory report: The integration between process involved in the
BBC Plc and this reports ensures the better management of the manufacturing cost and
inventory level while estimating the purchase orders that need to be placed.
Order information reports: The integration between the process of the BBC Plc and this
kind of reporting can provide the management with the analysis of the sales order
information and it also helps in generating the various reports that can help in tracking the
customers' orders and to fulfil the same on time (Malina, 2017).

PART 2
Management accounting helps in making the numerous and different planning tools like
activity-based costing, benchmarking, cash flow budgeting etc. The analysis of three main
and most effective planning tools is as below:
P1
Break-even analysis if the financial tool that helps to determine the level and point at which
the activities carried out would be profitable to the business organization. It is the method
that studies the relationship among the variable cost, sales revenue and also fixed cost for
determination of the level at which all the costs are equivalent to its sales revenue and here
there is no profit and no loss situation. And here all relevant cost is also covered. It is also
being performed with the help of fixed cost, revenues and variable cost (Brewer et al.,
2015).
Advantages and benefit of breakeven analysis:
 It helps to determine the capacity that is not utilized after the breakeven point
within the achievement of the activities. It also enables the BBC plc to assess the
maximum amount of profit that can be found out with the help of the particular
activities with the help of the products and services.
 It also helps in assessing the impact of the profits of the BBC plc when the
organizational process is being changed from the humanistic approach to the
automatic (Malina, 2017).
Disadvantages of breakeven analysis:
 This planning tool is based on the impractical assumptions
 In this method, the variable cost does not remain constant
 The sales remain to be same as the organizational output.

BBC plc can use the break-even analysis in the organization and there will be no cost to use
this in the organization as this will require only expertise of management accounting that
can use this in the organization. I recommend BBC PLc must use this tool as it will help the
organization to have the idea about the maximum amount of profit (Malina, 2017).
P2
Activity-based costing is defined as the accounting technique that can be used by the BBC
plc to evaluate the total activity cost that must be undertaken for product manufacturing.
This method considers the overhead cost and the direct cost of production activities. This
method also considers grouping the individual activities that are having a similar process
(Marinho Neto et al., 2018).
Advantages and benefits:
 It helps in facilitating the allocation of the overhead expense for the various jobs and
products based on the actions needed to perform for the production process.
 It also enhances the reliability of the data as it helps to provide the true cost and
with the help to make the cost classification
 It is also used for services pricing, assessing the profit for the product line, costing of
product etc.
Disadvantages:
 It helps in the allocation of the overheads for the specific activity is difficult
 The drivers of cost analyzed is not too accurate
 It is difficult to explain the stakeholder's system (Namazi, M., 2016).
Activity-based costing can be used by the BBC Plc as there it does not require any cost. It
requires only the identification of the cost activities for each of the specified activity and it
also includes the allocation of the overhead cost to the products. I suggest BBC plc use this
planning tool as it is better than the traditional costing method and it also helps in
facilitating the allocation of the expenses for the various products (Namazi, M., 2016).

P3
It is defined as the process that measures the overall performance for the products and
services of the business organization. The performance of the organization is assessed and
measured by comparing with the other major industry players. The process of this tool
assists to identify the internally available opportunity that can help the business to ensure
the improvements (Bragg. 2018).
Benefits and advantages:
 It helps to ensure the process that can help to make a high amount of profit for the
organization.
 It also encourages team building and cooperation that can help the business to be
more competitive
 It also helps in gaining the internal process of the organization and to have the idea
about the cost structures (Madsen et al., 2017).
Disadvantages:
 It is not adequate for measuring the overall efficiency and effectiveness of such kind
of metrics
 It reveals the standards met by the competitors but it does not assume the
circumstance under which the organizational competitors attained such kind of
standards.
BBC Plc can also use the benchmarking activity costing method. As it is the practice that
compares the business performance and processes metrics to the industry best practices
from other companies. It helps to make a high amount of profit (Madsen et al., 2017).

CONCLUSION
It can be concluded from the above report that this report is divided into parts. The first
part has provided an understanding of the management accounting and its essential
requirements. It has also provided the different types of reporting and its benefits and cons
to the organization. It has also discussed the benefits of the management accounting
system within the organizational context. Further, the integration of the management
accounting report to the organization is also being explained. The further part has provided
an understanding of the analysis of the different planning tools with their pros and cons
and its application in the organization.

REFERENCES
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