Management Accounting of Burberry Group PLC: A Comprehensive Analysis

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Management Accounting of Burberry Group
PLC

Table of Contents
Task 1...............................................................................................................................................3
Task 2...............................................................................................................................................7
Reference.......................................................................................................................................15
Appendix........................................................................................................................................18

Task 1
Introduction
In order to maintain the internal information gathered from administration departments, the
management accounting needs to function properly (Kaplan and Atkinson, 2015). For the
tracking of internal information and improve the profit management accounting are used
different techniques. The resource work that is found in the administration is essentially done by
controlling, a prime advantage of account management (Otley, 2016). The efficacy of the
resource production generates smooth flow of profit and benefits. The monetary balance can be
maintained by generation of reports from several departments.
The company was established by Thomas Burberry on 1863 with the company headquarters
situated in London (Renz, 2016). The company has been reported to gross a revenue of 2732.8
million euros. This report focuses on the various applications of the management accounting
with details.
Part 1
A. Explain management accounting and give the essential requirements of different types
of management accounting systems.
Management account is an essential procedure to sort various methods in which the internal
details of the administration can be traced (Maas et al., 2016). Management accounting
comprises of different systems which are explained in the report.
Job costing
Distribution of various expenditurehelps in extracting cost in the different jobs of the production
process (Messner, 2016).The variation in the different types of job are there and can be
combined with this system to reduce the overall expenditure.
Inventory management system
There are several systems that can help in management of inventory and effectively profit the
stock management (Hopper and Bui, 2016). This system has the full capability to augment

functionality and effectively help in management. FIFO and TQM are considered to be the
ultimate management systems for the company of Burberry.
Price optimization system
The effective profit earning and deduction of extra costing can be managed by recording the
product durability and sustainability in the market (Hemmer and Labro, 2017). This is also
effective to understand the will of the customer of Burberry to buy the products.

B. Explain different methods used for management accounting reporting.
The complete measurement of the durability of the products in the market is detailed in this
report (Chenhall and Moers, 2015). The profitability of sales of the products determines the
product sustainability and helps in determining the required strategies to sell the products within
a short interval of time. These strategies are effective in understanding the sustainability of the
company products.
Budget report
The various functionality of the administrations is effectively paralleled in the report in
accordance to other administrations. The excess expenditure need to be controlled for the
administration to maintain a monetary balance (Dekker, 2016). The actions of the administration
is effectively handled by the budget report along with providing scope for communication among
the departments.
Performance report
The performance gradation of the different departments are listed in this report and the workers
can be rewarded accordingly (van Helden and Uddin, 2016). The data found in the performance
report is useful for determining their values (Nitzl, 2016). The employee motivation and resource
functionality are determined through this report evaluation.
C. Evaluate the benefits of management accounting systems and their application within
an organizational context.
There are several functionalities and added benefits of management accounting that has a
number of application in an organization. According to Hall (2016), it helps to understand and
evaluate the functional and systematic structure of the organization with a number of advantages
that are discussed in the report.
Planning
The methods for planning the essentials of management accounting is crucial in determining the
aim of the whole administration and expand its reach in the vast market (Tappura et al., 2015).
The various procedures that are found in the organizations are systematically worked with a clear

and transparent overview of the work. The various requirements of resources in the organization
is well understood by clear planning and providing greater scope in expanding the future success
of the company.
Controlling
It is essential tocontrol the different work procedures and ways of implementing strategies. This
can be done by management accounting in the company (Honggowati et al., 2017). The
controlled flow of work help in maintaining the required expenditure and resource control
without any excessive hard work (Holopainen et al., 2017). The functional aspects that are not
helping the organization can be eliminated from the work force to provide greater rate of success
to the company.
Organizing
To improve the administration and synchronization of the goal in different departments can
augmented in this method.
Decision-making
According to Pelz (2019), the main advantages of the administration are Monitoring and tracking
performance. The expenditure can be reducing this way.
D. Critically evaluate how management accounting systems and management accounting
reporting is integrated within organizational processes.
The significance of managing accounting systems and accounting reporting are crucial assets for
an organization to thrive upon with greater efficacy (Bobryshev et al., 2015). Both the
management factors are absolutely essential in determining a correct way of utilizing a profit
based action for the organization. They readily help the organization in reducing the required
reports of extra costing and maintains a steady balance of the resources utilized in the
organization. The different internal functionalities are effectively evaluated by management
accounting application in the company (Endrikat et al., 2017). The risk factor in the organization
is evidently reduced by applying effective ways of managing excess cost. The cost calculation
cannot be complicated as it provides problem for the calculation and some systems are highly

structured in a way that it requires proper man power to properly channelize the company
benefits.
Part 2
Benchmarking
This method is used to set operating standards for a certain administration. It is achieved by
setting a particular field of performance as the objective standard and keeping the other fields as
variables as required by the administration (Tucker and Schaltegger, 2016). This field sets the
parameters against which others are compared to if and when required. It has been explained
further below:
1. Research into areas that need change is conducted and a goal is set to be achieved in a
particular area. Budgeting and planning is undertaken to fulfill the same.
2. Analysis of financial data and administrative resources is conducted, following which
trends of growth and profit are subject to the same (Eisenberg, 2019). Extent of the
administration’s ability to bear expenses as and when needed are also established at this
stage.
3. Internal data analyses help discover below-par quality products and other trends that keep
the administration from making greater profits and are thus eliminated from the processes
at this stage (Shrives and Brennan, 2017).
4. This stage helps the administration discover the opportunity to make greater strides (Teji,
2016). This method is further applied to determine the extent of value in the market
through a holistic analysis of external factors – primarily, environmental and competitor
analysis.
A run-through of all these stages demarcate the completion of the benchmarking process. This
enhances the performance of the administration and its efficiency can also be multiplied in itself.
The process of benchmarking can be further subdivided into various steps like internal
benchmarking, competitive benchmarking, functional benchmarking and generic benchmarking.
Internal processes in the market and similar processes inside the administration are compared
during internal benchmarking, and it has been seen that this is further helpful in pinpointing the

shortcomings of the administration in question. This is then followed by what is known as
competitive benchmarking. This stage is required to compare against competitors and delimit the
scope of the administration in the market. However, this can also be achieved through functional
benchmarking and increases opportunities for profit.
Cash Flow Budgeting
Inflow and outflow of monetary resources are taken care of through this process and it helps to
determine an estimated flow of cash. Inside the administration, the function it provides is to
check the position of liquidity of such resources. The immediately previous resource flow is
quantified to estimate current cash flows; and similarly, this previous flow is analysed again to
estimate any future flow of monetary resources in the administration.
This procedure is essential and, indeed, makes it less tiresome to put into numbers the total flow
of revenue in the form of cash and ambiguity of the future is dispelled to a certain extent through
this process (Sah and Dadwal, 2018). It helps enhance the scope of profit of the business. This
assumed budget should be considered together with the expenditure of the administration in the
current time. Operation, investment and financing are the three primary activities enlisted here.
These are the cornerstones that will provide accurate assumptions of revenue – both coming in
and going out. It enhances the value of whatever resources are at hand and, in turn, enhance the
profitability and cash flow of the administration.
Discounted Cash Flow Analysis
Analysis of discounted cash flow is consisted of different sub methods. According to Pavlatos
and Kostakis (2015), this analysis method is called modern technique of investment appraisal
technique method. Net present value, internal rate of return, discounted payback period and
profitability index are considered as four prime techniques under this category.
Net present value technique takes care of the return amount of the assets across the complete life
cycle (Ohkita , 2017). This technique is beneficial for calculating the future monetary value. On
the other hand, profitability can also be measured with the aid of this method. Net present value
can be figured out by considering the total cash flow.

The second technique, internal rate of return is much easier to calculate than other three methods.
However, this internal rate of return is compared to capital cost in order to determine the
attractiveness as well as profitability of the project. The rate of return, when greater than the
capital cost, the project can be determined as profitable and attractive.
In discounted payback technique, the time required to pay back the loan including the return
value can be measured (Zozulya et al., 2015). It is basically an upgraded form of the method of
payback. This is a technique, where time of payback as well as the value can be determined.
The last technique among the four, profitability index can be defined as a measure of the factors
towards the approval or the rejection of the project. The profitability index is important to select
the useful project to fit within the administration budget. However, this technique has some
limitations such as this method is not useful to calculate administration sunk cost and the proper
rate of return.
Conclusion
Discounted cash flow analysis is undoubtedly very much helpful in management accounting in
various administrative situations. The four sub methods of the analysis are actually important to
describe the costing in details. Also, this analysis of management accounting incorporates
different administrative costing under different scope of areas. Suitable and correct
implementation of the above analysis can determine the profitability and attractiveness of the
project under different administrative systems.
Task 2
Part 1
Costing techniques
Cost evaluation is an indispensible part of the administration. Proper application of cost
management techniques can be helpful in terms of expenditure reduction. As opined by Roberts
and Piller (2016), there are different techniques of costing applied in accordance with the
necessity of that particular administrative system. Three different kinds of costing have been
described below.

Job order costing
Job order costing method includes the allocated cost according to the particular job completion.
As perRoberts and Armitage (2017), this method helps towards the minimization of the
production cost.
Batch costing
In batch costing method, cost can be calculated as the production batch required. This method is
beneficial for determining the efficiency and the usefulness of the internal resources. Batch
costing is required to merge the money wastage, quality control system and inventory in a
particular administrative system.
Process costing
In process costing, production cost is taken care of separately. The nature of all the production
processes can be understood with the help of this costing method. On the other hand, process
costing is essential to distinguish different processes.
Methods of costing
Marginal costing
According to Yu et al. (2019), marginal costing method is very much useful and this method
takes care of variable cost as a separate entity called unit cost of production. Here, at the end of
the calculation, fixed production cost is required to be mentioned.
Absorption costing
Absorption costing method, fixed cost of production as well as variable cost of production have
been incorporated during calculation. Moreover that, in this costing method, the total cost of
production is considered as unit cost of production. Absorption costing technique is very helpful
to take into account the inventory rising.
The provided statement of income for the company with regard to absorption costing as of 1st
June is stated below:

Essential Factors
(Expenditure for
Absorption)
Amount Amount