Management Accounting Report: Analyzing Zylla's Business Operations

This report provides a comprehensive analysis of management accounting principles and their application to Zylla, a small business. It begins with an introduction to management accounting, its importance, and the essential requirements of various accounting systems, including cost accounting, inventory management, job costing, and price optimization. The report then explores different management accounting reporting methods, such as budget reports, job costing reports, performance reporting systems, and manufacturing and inventory reports, highlighting their significance in effective decision-making. It further discusses the merits of using a management accounting system and its integration with organizational processes. The core of the report focuses on cost calculation using marginal and absorption costing methods. The report also examines the advantages and disadvantages of different planning tools and their evaluation, along with their application in responding to financial problems. Finally, the report addresses the adaptation of management accounting systems to financial issues, concluding with a summary of key findings and references.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essentials requirements of various type of management
accounting systems......................................................................................................................1
P2 Various methods used for management accounting reporting...............................................3
M1 Merits of using management accounting system..................................................................5
D1 Integration of management accounting system and reporting with organisational process..5
TASK 2............................................................................................................................................5
P3 Calculate cost using marginal and absorption costing...........................................................5
M2 Use of management accounting techniques..........................................................................9
D2 Financial reports that apply for interpret business activities.................................................9
TASK 3............................................................................................................................................9
P4 Advantages and disadvantages of different types of planning tools......................................9
M3 Evaluation of planning tools...............................................................................................11
D3 Planning tools for respond financial problems....................................................................11
TASK 4..........................................................................................................................................12
P5 Adaption of management accounting system to respond financial problems......................12
M4 Evaluation of financial issues.............................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is an effective process of identifying measuring, analysing and
communicating information to attain organizational goals in appropriate time period. It include
management decision making, performance management system and controlling which help in
formulating as well implementing organisation strategy in systematic way. Basically concept of
management accounting is effective aspect which used by manager to gather relevant accounting
data. With the help of this manager easily attain effective control in over the operation which
directly contribute in attaining its goals and objectives in appropriate manner (Abrahamsson,
Englund and Gerdin, 2011). It is significant part of every type of business whether a business
small, medium and large. By using this concept company easily execute their operational
activities in an effective way which leads in enhancing overall growth of the business. Along
with this, it make the manager aware towards the actual financial report in which they easily take
all the relevant decision. Present report is based on Zylla, which is a small business organisation
in which less than 50 workers work over there. This report discussed about concept of
management accounting and requirement of various accounting system. Along with this,
different methods of management accounting is also mentioned under this assignment. In
addition to this, various benefits and disadvantage of planning tools is also mentioned in this
report.
TASK 1
P1 Management accounting and essentials requirements of various type of management
accounting systems
Preparing financial reports is an effective process for manager to take best as well as right
decision is called as management accounting. One of the main benefit of this report is to control
entire business operation in effective manner which aid in enhancing company growth at market
place. Along with this concept of management accounting help manager in preparing effective
report of employee performance. In this various sources of data like internal and external are
used by manager to analyse collected data in most effective manner. Basically concept of
management accounting is related with gathering information of financial terms of the business
organization such as variation in stock, raw material of the company (Boyns and Edwards,
2013). In context of Zylla, the main objective of this company is to attain sustainability and at
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the same time execute all the operational activities of the company in minimum cost. With the
helps of management accounting company easily improve their financial condition and attain
competitive advantage at market place (Chenhall and Moers, 2015). To attain benefits of this
concept, it is essential for company to hire good accountant to gather as well as maintain
financial record of the company in effective manner.
Various number of issues arise at the time of executing business activities in which
management accounting is an effective process which helps in removing all the problems and
improve overall performance level of the company. Along with this, it is important for Zylla to
maintain a record of their financial activities to attain set goals and objectives. In this context
there are some importance of management accounting system which can be understood by some
points are as follows: Qualitative data: It is an effective way for executing all the business operations in an
effective manner which helps in controlling. For attaining better results, it is important
that all the collected data must be relevant. Along with this, management accounting
helps in attaining evaluating as well as finding appropriate solution of all the problems in
most effective manner and also implement in business to attain positive outcomes. Ongoing training and information: It is also important for selected company to organize
effective training programs for their workers so that they can easily understand about
management accounting concept.
 Provide relevant data: It is one of the biggest advantage of management accounting
concept which help manager in collecting as well as analysing the relevant data in order
to take right decision towards the business activities in appropriate manner.
Along with this, there are some type of accounting system are as follows: Cost accounting system: This type of management accounting is more effective for
manager in which they estimate the product and service cost by using various approaches
like cost control, profitability analysis and so on (Chiwamit, Modell and Yang, 2014).
For attaining profitability level, it is important for company to estimate the right cost of
the products by using all these methods because it is more difficult for Zylla to set right
cost of their products.
 Inventory management system: It is also an effective approach which help manager in
maintaining a better le of cost which leads in reducing the overall cost of the company
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and its operations in appropriate manner. For attaining the same, Zylla use some main
tools which are as follows:
Just in time approach
Economic order quantity (EOQ)
By using both tools company easily maintain their overall cost in order to attain set goals
and objectives in effective manner. Job costing: This type of approach define various to of cost like material, labour,
overhead cost (Cullen and et. al., 2013). With the help of this manager easily control all
expenditure and cost of the company which leads in increasing the revenue in most
effective manner. In this firm divided three categories like Labour cost, direct material
and overhead in which they easily calculate as well as determine the overall product cost
in appropriate manner.
 Price optimisation system: It is a mathematical approach which used by company to
assess the customers reaction towards the product price. The main benefit of using this
approach, manager easily set right price of the product which aid in attaining set goals
and objectives in systematic manner. In this information also use by company for price
optimisation which include operating cost, inventory and sales.
P2 Various methods used for management accounting reporting
Small enterprises are taking major advantage of management accounting. So it is a
responsibility of managers that they regulate and control level of performance of corporation.
Construction of adequate and accurate data and other information are in need to be convey to top
management of Zylla and this compete procedure said to be as reporting to top level
management. Management accounting is an ongoing procedure that is helpful in most profitable
decision making (What is management accounting system, 2017). To make effective report this
accounting system must be use in order to hit attainable outcomes.
Significance of management reporting system: Beneficial in profitable operations- This kind of approach gets help by reporting system
that aids in getting remarkable outcomes and thus it makes conduction of activities
smoother.
 Effective in managing system of control- For this heading it is very much important to
set targets and objective that provide guidance in conduction of operational activities.
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Now it is a duty of manager that he look forward to employees for achievement of all
objectives in set time frame. To identify correct and exact position of firm, this system
aids managers (Dosch and Wilson, 2010).
For constructing an accounting reporting Zylla is using multiple number of
methodologies that are discussed as below: Budget report- This methodology is used for identifying and monitoring performance
level of employees by business process. This method can be defined as main report that
top management uses to evaluate present functionality of budgeted project with actual
performance level for hitting all targets in limited time frame. If last budget was
overlapped then management need to take some corrective and effective action to
eliminate all extra expenses that are not much needed to do while operating business
operations in organisation. Job costing reports- This section of management accounting records actual expenses that
are related with any particular task and activity in association. To grab chances of making
profit higher this report is very fruitful as it matches all expenses with estimated revenue
of firm. Main motto of corporation is to make reductions in overlapped expenses and
wastages on the other hand it also useful in enhancing profit in an adequate manner. Job
costing report are applied with methodologies of production cost monitoring instead of
process of production. Zylla company can track how much work is done along with
performance level of his employees in best and effective manner by using this tool. Performance reporting system- To measure and assess actual and present performance
position of organisation, this reporting system pays a vital attention on determining
financial statements. For hitting all targets, it is very important for corporation that they
build final performance report for making all decisions effective to gain all objectives.
Evaluation of performance is based upon data that is collected from current and past
financial records.
 Manufacturing and inventory report- Management accounting is been utilizing for
enhancing level of production in effective and efficient manner and it is majorly used by
those organizations who have physical stock (Faÿ, Introna and Puyou, 2010). Main
component of this report is overhead cost, labour cost, wastage of inventory and many
others. So manager can control and regulate stock that is available in association.
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Thus, from above explanation it is clear that there are several methods and tools and
techniques that managers can use in corporation in order to manage accounting standards.
Multiple methodologies are being used by management personnels to determine necessary
components of reporting system (Fourie, Opperman, Scott and Kumar, 2015). These tools and
techniques are having a vital role in reducing extra expenses and in enhancing profit level than
current stage. Management accounting is a tool that showcase all expenses related with present
outcomes.
M1 Merits of using management accounting system
Management accounting play important role in managing as well as monitoring
financial activities of the company in effective manner. Basically it is important for business
organization for effectively utilise effective system in accounting such as price optimisation as
well as job costing system which aid in attaining profitability level of the company. By using
effective system of accounting aid in enhancing the profitability level of the company and also
attain sustainable position in most effective manner.
D1 Integration of management accounting system and reporting with organisational process
Growth stability is one of the important purpose of using reporting system. In this
context, it is important for manager to make as well as prepare an effective report by using past
data. Along with this manager easily analyse entire business performance in which they easily
take right investment decision in effective way. With the help of this Zylla improve their
performance level and attain competitive advantage.
TASK 2
P3 Calculate cost using marginal and absorption costing
Management accounting is an effective process which used by business organization to
formulate a financial report which help in minimizing the overall cost of the business activities in
most effective manner. By this approach company easily attain positive outcomes in most
effective manner.
Marginal costing: Under this, company include fixed expenditure on regular basis. With
the help of this company reduce their cost and also increase overall product cost by
manufacturing an extra unit (Gates, Nicolas and Walker, 2012). Along with this, it is an effective
methods in which fixed and variable cost both are change for particular time period.
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Absorption costing: It is another expenditure method which include all costs which relate
with manufacture of the goods and services (Difference Between Marginal Costing and
Absorption Costing, 2017). Basically this, type of method define assumption in which selling
price recover all the incurred cost in effective way.
In this context, there are some difference between marginal costing and absorption costing are as
follows:
Basis Marginal costing Absorption costing
Meaning In this method of costing, variable
overheads are deducted per unit
cost and fixed expenses calculate
net income of the company.
In this method of costing, direct
expenses is done form calculation
of overall product cost in effective
way.
Cost identification In this, production cost define as a
variable and fixed cost is consider
same at the time of production.
Under this, varioable and fixed
cost include to evaluating as well
as calculation final production
cost.
Costing and inventory
valuation
Under this, it include only
variable cost.
It include variable and fixed cost.
Treatment of fixed
overhead
In this method, fixed cost include
period cost and profit ratio helps
judge profitability of the products.
Under this, every products are
define fixed cost by apportionment
of fixed overheads because fixed
cost is charge by production cost.
Unit cost of production It is not affected by opening and
closing stock variation.
This affect by the production unit
cost because it define the impact
of cost.
Lucrativeness In this profitability calculated by
cost volume analysis.
Deduction of fixed cost directly
affect the overall profitability of
the company.
High spot Under this, high spot is
contribution per unit (Harris and
Under this, calculation of net
profit of department is the high
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Durden, 2012). spot.
Categorisation of
expenses
In this method costs can be divide
into fixed and variable. With the
help of this company easily find
contribution as well as net profit
separately.
In this overall cost calculate by
customers way in effective
manner.
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Administration Cost: Budgeted cost is £800 and Actual cost is £700
Production Cost: £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Net profit using absorption costing £ £
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Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales value 21000
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Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
(7800)
13200
3900
9300
M2 Use of management accounting techniques
Various tools and techniques are used by Zylla to attain effective financial stability in
effective manner. In this the main focus of management should effectively as well as controlling
techniques so that manager effectively attain better results. With the help of these company
easily measure standard techniques in effective manner (Hutaibat, 2012). By this manager define
actual as well as genuine data in order to make effective decision. By using all the techniques
company can analysis as well as determine overall performance of the company in an accounting
period.
D2 Financial reports that apply for interpret business activities
As per given information, it can be evaluated that two effective techniques such as
marginal and absorption costing which used by business organization to calculate its net profit.
With the help of this business easily take right decision towards the investment. By these
methods manager effectively evaluate the net profit of the company in effective manner.
TASK 3
P4 Advantages and disadvantages of different types of planning tools
Budget: It is an effective and written plan which include financial activities that
formulate by business organization for a specific time period. Basically, it define overall sum of
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financial funds which helps in executing entire business operational activities in order to meet
firm expenditures in systematic manner. With the help of this manager determine the amount
which invest by the company to executing their operational activities in appropriate manner.
Along with this, budget is more important for company which prepared by them for one year and
more than one year which is related with organizational objectives and its requirements (JOSHI,
and et. al., 2011).
Budgetary control: It is one of the important and popular budgeting tools which
consider by manager to carry out the whole activities. It is important for planning, directing,
organising and allocating resources. With the help of this manager easily utilize whole business
resources at optimum level in order to attain positive outcomes in appropriate time frame.
Process of budgetary control Consult with managers: If lack of coordination are there between manager and
department then company can not able to attain control over its business activities. So
better coordination is must among manager and department. For attaining same manager
have to discussed about all the information of business activities and its expansion in
effective manner. Do assumption: This step comes after collection of relevant data which is based on
assumption. It aid in decreasing the chances to amount of loss in business organization.
Mainly it help manager attain better control over the business activities by covering all
the expenses. Fix data to attain business targets: In this, manager gather number of information about
all the department. By this they easily make an effective planning process which provide
long term advantage to business organization. Compare actual data with budgeted information: Under this step, performance of the
business is compare with its standard performance in order top determine the gaps and
also evaluate the improvement. With the help of this business get higher success at
market place. Review analysis: It is a last step of in which manager assess entire steps to evaluate the
best. In this it is important for manager that each steps must be execute effectively which
aid in attaining set results in appropriate manner.
Planning tools:
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