Management Accounting Report: Bentley Motors Financial Performance

This report delves into the realm of management accounting, employing Bentley Motors Limited as a practical case study to illustrate key concepts and applications. The introduction establishes the core principles of management accounting, emphasizing its role in internal decision-making and performance improvement. The main body of the report is structured around two activities. Activity 1 explores essential aspects such as management accounting systems (inventory management, cost accounting, and price optimization), reporting, and their integration within an organization. Activity 2 examines budgeting, various planning tools, and their advantages and disadvantages. The report also details the functions of management accounting, the benefits of its systems, and specific reporting methods like inventory management, performance reports, process costing, and activity-based costing. The analysis highlights how these systems are integrated with organizational processes, culminating in a comprehensive understanding of management accounting's impact on financial stability, cost control, and strategic decision-making within a manufacturing context, specifically in the luxury car industry.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Activity 1.........................................................................................................................................1
PART A.......................................................................................................................................1
PART B........................................................................................................................................6
Activity 2.........................................................................................................................................8
PART A.......................................................................................................................................8
PART B......................................................................................................................................12
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is the process which includes the various practices which help
the business to improve their performances in order to achieve business goals & objectives. With
the help of management accounting, manager analyse the business cost for preparing various
financial reports which further helps in decision making process. It build for the internal purpose
and not regulated by the low (Ajewole, 2016) . Main objective of this accounting is that, it will
helps in decision making process and it is not mandatory to prepare any report. Bentley Motors
Limited selected for the better understanding of this report. It is British manufacturing company
which produce luxury cars & SUVs. It is founded in 1919 in Cricklewood and it is the subsidiary
of Volkswagen Group since 1998.
This report includes the various topics such as management accounting and essential
requirements of management accounting system. Accounting reports and various financial
problems which required to solved with the help of various tools & techniques. In addition, it
includes the accounting reports, advantage & disadvantage of various planning tools for the
budgetary control. Along with this, how management accounting systems help the organization
to solve their financial problems in order to achieve their business goals & objectives.
MAIN BODY
Activity 1
PART A
Management accounting: It is also called managerial accounting, where manager handle
all the operational activities which help the manager to enhance their internal activities.
Managers use the financial information for developing effective strategy and it will further helps
in decision making process. It is based on the previous trends which helps in identifying future
aspects (Azim and Ara, 2015). Management accounting follow by the manager of Bentley
Motors Limited which is beneficial for the organization to identify their actual position of the
business.
Management accounting system: It includes the various methods which requited by the
manager in order to increase their operational efficiency as well as it increase the individual
performance. These systems helps the manager to increase efficiency as well as effectiveness in
the organization. With the help of management accounting, internal as well as external users are
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able to build strategy which further used at the time of taking any decision. There are various
management accounting system which followed by the manager of Bentley Motors Limited in
their organization and it will be discussed below:
Inventory management system: This system helps in tracking inventory level of the
entire supply chain which provide the overall idea regarding further orders. It includes every
things from manufacturing to delivery of products. With the help of this system, manager can
easily track or can see the every movements in the operations. Manager of Bentley Motors
Limited used this system for the better effectiveness or efficiency in the organization because
they have to maintain optimum stock for the production. With the help of this manager identify
the requirement because shortage will affect the production and profitability. Along with this,
excess inventory can cause the wastage of raw material which increase the cost and it
automatically reduce the profit margin.
Cost accounting system: It is also called costing system, which is used by the
organization in order to estimate the each unit cost. With the help of this, manager analyse the
cost benefit for the business, inventory valuation or profitability analysis and control the cost
over the production period. This costing system evaluate the carious cost which are related to the
production such as fixed and variable. In Bentley Motors Limited, manager use this method to
analyse their per unit cost which helps the organization to develop various strategy which
beneficial for the decision making process. Manager identify each activities which represent
valuable or non valuable and after this they reduce the non valuable activities which helps in
reducing cost and try to control it for longer duration (Cheng and others, 2014). It essentially
required by the manager to identify cost and reduce it for the maximisation of profit margin.
There are different types of cost which included in the cost accounting system and it will
mentioned below:
 Fixed cost: It include those expenses which is fixed for the specific time period such as
monthly rent of warehouse. Weather production happen or not but they have to pay fixed
charges. Another example is worker's salary, premium of insurance, maintenance etc.
 Variable cost: It contain those expenditures which changed as per the production unit
increase. It includes the labour as well as material expenses and it's price will changed.
 Overheads cost: In the manufacturing business, various overheads cost are included such
as taxes, insurance etc.
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Price optimisation system: It is an mathematical analysis which helps the manager to
identify customers need & desire. It helps in measuring their buying behaviour which affect the
organization to set different price range which meet with organizational objectives. Under this
method, manager identify the price which maximise the profit margin of the business. Manager
of Bentley Motors Limited use this pricing system to measure customer's reaction toward
different price range. This system helps in providing competitive advantage because it is well
known brand in the market. They set higher price for their cars because they know that, it has
huge demand in the market as well as among the consumers.
Functions of Management accounting:
Management accounting is a process of summarising, analysing and controlling the data
and information in order to maintaining performance of the organization to achieve its
objectives. Management accounting is a tool that is used by the management of the organization
to operate its internal operations and functions. The main functions that a management
accountant has to perform are planning, organizing, monitoring and controlling.
Bentley Motors Limited which is involved in manufacturing of luxury cars, has adapted
the management accounting process within the organization. The management accountant of the
company has responsibility to plan the operational and functional agenda with the available
information for both long term and short term period (Drozd, Drozd and Zaiets, 2014). They are
supposed to suggest an effectively organized structure for activities and workforce in order to
maintain balance in performance.
Managerial accountant co-ordinate all the activities with the help of different techniques.
A monitoring over all the aspects related to the operations is expected from them. Management
accounting is responsible for analysing the activities and outcomes and find out the variances and
the reasons behind the variances. They are supposed to suggest the effective solutions for the
problems that are decreasing the performance of the company in order to achieve its goals.
Benefits of management accounting systems:
Systems Benefits
Inventory management
system
 It helps in minimising the cost or maximise the
production through reducing wastage in the operational
process.
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 Organization can regular track their inventory level which
helps in preventing shortage or wastage situation.
Cost accounting system  Helps in evaluating each unit cost for the further analysis.
 It helps in measuring the exact cause of reducing profit or
loss of the organization.
Price optimisation system  It help the organization to focus on on key areas such as
sales margin, revenue etc.
 It will help the manager to take quick decisions which
further helps in achieving business goals & objectives.
Management accounting reporting:
Management accounting reporting is a process which involve the financial and statistical
data to present the business operation to internal management. So they can take short term
decision. The process of preparing the accounting reports includes business activities and
financing information to the manager. It is controlling in nature to assessing the company's per
formation so they can yield better result in future. Management accounting reporting system are
used by the Bentley in order to control the management activities for taking internal decision of
the company. This analytical report are beneficial to manager as well as growth of the
organisation.
 Inventory management report: It is a report of business organisation that shows the real
time flow of goods to assistance the any point time of sales. This report involves supply
chain management, stock inward or outward, stock re order level and stock report. It
reflects the movement of stock as well as determine the In and Out stock management
from a certain location (Eriabie and Egbide, 2016). There are various method to calculate
the closing balance of inventory like FIFO, LIFO and weighted average method that
helps in valuation of the stock. Bentley Motors Ltd. makes this inventory report on
weekly basis to retrieve the balance of inward stock and valuation of outward inventory.
With the help of this report management can assist the inventory handling process and
real time inward stock management.
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 Performance Report : This reports is management tool or techniques that used to
transmit the organisational goal, vision to each of the employees who are engaged in the
company so they can work better according to their strength. This report can track the
progress of every individual in order to efficiency, ability of the people. Annual
performance report made of an individual in order to find out what they have contributed
for an organisation in the term of performance as per their abilities. Bentley Motors Ltd is
prepared this report to know the contribution of the employee. This report help to assess
the success of a project which they have completed. This report is also used by the
management of Bentley to rendering bonus and incentives to the workers according to
their performance. Market recognition and current status of the company can also be
assessed with the help of it.
 Process costing: It is used in cost accounting where this method identifying
manufacturing cost. Thus costing used when organization done mass production.
Basically this costing methods used by those organization which produce homogeneous
products. In the Bentley Motors Limited, manager can use this reporting system to keep
track their transaction which is related to the money. These types of organizations,
manufacture in bulk but sell in small units so it will helps in maintaining proper flow of
cash in the organization.
 Activity based costing: Under this method, it includes the various cost from finding to
distribution of products & services. With the help of activity based costing, organization
can improve their financial stability through eliminating non profitable activities
(Hoffmann, 2015). Manager of Bentley Motors Limited use this method to identify their
expenses as well as future revenues.
Evaluate how management accounting systems or reporting integrated with organizational
process:
Importance of Management Accounting: Although management accounting is not
mandatory for organizations as it is prepared to assist the managers and internal users yet it is
very important to be done. It has a lot of significances which make it necessary for organizations.
Big manufacturing companies such like Bentley Motors Limited should involve management
accounting system in their organization because:
 Management accounting helps in determining the aims of the organization.
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 It helps in utilizing the data and informations.
 It helps in maintaining the performance of the employees and controlling the costs.
 It provides accountability to the budgets and plans which have been prepared in order to
achieve the objectives of the organization (Leamer and Stern, 2017).
 It increases the efficiency of the business and provides effective managerial control over
the activities.
PART B
Annex A
Annex B
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Activity 2
PART A
Budget: Budget is a summary of estimated expenses as well as income which are based
on plans or objectives for future time period. It is a statement or document which is prepared by
top level management in order to estimate expenses along with revenues for upcoming period on
the basis of business goals. All business enterprises whether small or large prepares budget for
the purpose of allocating monetary resources in to various functional departments. Effective
budgets helps in facing financial or uncertain situations which has chances to happen in future.
Financial managers of Bentley Motors Limited prepares budgets which are based on previous
year data (Mohrweis and Shinham, 2015). A budget encompasses transactions related to planned
sales volume along with revenues, assets, liabilities, resource quantities, costs and expenses, cash
flows and so on. It is used for expressing strategic plans for events or activities in numeric or
measurable terms. These are prepared for mobilising funds in all divisions so that overspending
or overutilisation of funds can be reduced.
Purpose of preparation of budget is to provide an aspect based on operations performed
by business in order to carry out events, plans along with strategies. It renders realistic
estimations on the basis of incomes along with expenses which has chances to take place in
future time period and at the same time can affect performance of company. By using budgets,
strategies are formulated in advance in order to resolve problem of financial crisis. It performs
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various functions such as forecasting, planning, communication, evaluation, coordination and
many more. Budget provides detailed information based on sales targets, inventory production,
capital expenditures, staffing plans, cash borrowings or investment to organisational managers.
Types of planning tools used for budgetary control: Budgets are also known as
planning tools. These are used by managers of Bentley Motors Limited. Some of the budgets
with advantages and disadvantages are as follows:
Functional budget: Such type of budget is associated with various functions of any
company. The budget which is prepared by using particular division or process of any firm is
termed as functional budget. It is formulated by top level management of selected business in
order to estimate expenses related to cost of production, material, equipments, sales, overheads,
labour, marketing and so on (Mustapha and Hassan, 2018). It is further used for determining
projected sales within specified time period. There are various budgets which comes under
functional budget and all are associated with functions of company. Advantages and
disadvantages of such budget are as follows:
Advantages: Functional budgets helps managers of Bentley Motors Limited to set targets
which are to be achieved in future time period. This type of budget is more realistic as well as
motivating as it is familiar with certain issues from grass root level.
Disadvantages: While providing targets to different managers and if they are not lined
up with predetermine objectives of chosen firm then it can result in conflicts between other
functional units at workplace. This budget is based on forecasting for future and certain internal
as well as external factors related with changes in demand, political system, economic cycle,
supply, raw material availability can affect budgetary plans along with systems at great level.
Zero based budget: It is another type of budget where all expenses are justified as well
as approved for new accounting period. It is prepared by scratching with zero base. It
encompasses re evaluation of all items in cash flow statement along with justifying expenditures
incurred by various departments of any organisation. Calculation of expenses for new accounting
period are based on actual expenses which are to be incurred by considering changes in activities
related to operations. Under such method, all activities are justifies as well as explains estimation
of revenues which are linked with associated costs (Nuraini, Prasetyo and Hanafi, 2016). It is
crucial for executives to justify all activities and at the same time forecast revenues while
formulating this type of budget. At the time of preparing zero based budget, financial managers
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