Management Accounting Report: Costing Methods, Budgeting Techniques

This report delves into the core concepts of management accounting, exploring the differences between financial and management accounting, and the importance of management accounting information in decision-making. It examines various cost accounting systems, including inventory management and job costing, as well as the use of price optimizing systems. The report provides a comparative analysis of marginal and absorption costing methods, highlighting their impact on net profit. Furthermore, it discusses different types of budgets, their advantages, and disadvantages, alongside the budget preparation process and pricing strategies. Finally, the report analyzes the balance scorecard and its application in addressing financial problems and improving financial governance within Imda Tech Limited. The report uses examples from Imda Tech Ltd to demonstrate the concepts.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
I)............................................................................................................................................3
B)............................................................................................................................................4
TASK 2 ...........................................................................................................................................5
Marginal and absorption costing............................................................................................5
M 2 Produced financial reporting documents........................................................................5
D2 . Interpretation..................................................................................................................7
Task 3...............................................................................................................................................7
Different types of budget their advantage and disadvantage..................................................8
B) Budget preparing process..................................................................................................9
C) Pricing strategies.............................................................................................................10
Task 4.............................................................................................................................................11
Balance score card................................................................................................................11
Use of balance score card to response the financial problems.............................................11
ii. Balance score card in order to improve financial governance and development of strategies
..............................................................................................................................................12
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

INTRODUCTION
Management accounting is that of managerial information that allow them to make their day
to day decisions in most effective manner. It helps the company to find out short decisions and
the management reports are provided to the internal affairs (Zimmerman and Yahya-Zadeh,
2011). It is based upon the statistical and financial information that allow the organisational to
run their business operations smoothly. In the present research project there is a mainly
discussion on the difference financial accounting and management accounting. There is also
study on the various management accounting system and difference among marginal and
absorption costing method.
TASK 1
I)
` Management accounting is created on weekly or monthly basis to distribute to the
external parties for the purpose of make their day to day operations. The information includes a
detailed data that are includes account receivable, inventory, outstanding debts, variance analysis
and also include trends charges. The information is based upon the futuristic and it involves
statistical information. Therefore, there is difference among the financial accounting and
management accounting. These are as follows-
 Financial accounting information is based upon historical in which only financial data are
involved in it. Whereas, management accounting is that type of accounting in which it
includes statistical and financial information.
 Financial accounting information is shared outside the company as they are interested to
know the financial position. The external affairs include in it are customers, government,
external agencies, suppliers etc (Zimmerman and Yahya-Zadeh, 2011). Beside this,
management accounting information is distributed in internal affairs of a company that
helps them to finding out day to day business operation in most effective manner.
 Financial accounting keep only financial transactions that are record, classify, summarise
in the monetary terms that helps the company in interpreting the results in most effective
manner. On contrast to this, management accounting objective is that to give both
qualitative and quantitative data to the management.
II)

Importance of management accounting information in decision making tool which are
describe as follow-
 Relevant cost Analysis: The management accounting is used by the company for
the purpose of ascertaining the company how to sell good or products and what
should be sold in the market (Baldvinsdottir, Mitchell and Nørreklit, 2010). It
helps in determining whether to discontinue operations or add product lines.
 Activity- based costing techniques: The management accounting information is used by
the company for the purpose of ascertaining what products firm want to sell and measure
what type of activities they need to generate and add product line services.
 Make or buy Analysis: The management accounting information is used by the
company management. It helps the company to finding out the make or buy decision
which one is profitable for a company.
B)
i)Cost accounting system- Imda tech limited adopts the this type of cost accounting system that
are used for ascertaining the product cost. It facilitate in measuring the inventory valuation,
control cost and profitability analysis. It helps in finding the actual cost of products so, they can
make analysis that this giver profitability to the firm or not. It can be only determined if Imda
Tech Company finding out the COG through adopting costing accounting system. The cited
Company department used this system for the aim of understanding the established the reports.
There are various formats available for the purpose of preparing the cost accounting system.
Under the information is record, summarize, evaluate in several types that assist in making
decision in most effective manner (Klychova, Faskhutdinova and Sadrieva, 2014 ).. Thus, cost
accounting system is used by the management for the purpose of enhancing the management
reports. It can be possible through finding out the actual cost by make recording of various
expense such as direct labour, direct material and direct cost. Thereafter, the benefits from the
cost accounting system is that it determine the actual cost which can be easily complied and
allocated. Therefore, the normal costing is also prepared under which material as well as labor
component are to be taken into consideration in the actual cost. It also ascertaining the original
cost which can be measure through difference among the actual cost and standard cost.
ii) Inventory management system- It is one of the latest technology that are used by Imda Tech
limited under which the company able to maintain their stock levels in most effective manner.

The main aim of this is that the company can effectively maintaining all non-financial and
financial data that improves the management accounting reports (Taipaleenmäki, 2014).. The
main characteristics of inventory management system is that they effectively tracking the records
or maintain into the system for the purpose of carry out their day to day operations in most
effective manner. It is computerised based accounting system under there are various software
are built into it. It will helps the company in tracking the sales, deliveries, stock level and orders.
It main the production based documents, bills of material and sales.
iii) Job costing system- It is that type of process that are used by the Imda Tech Company
for the purpose of finding out cost which are consider directly to the service job. The data
are needed in relation to customers cost and fining out the firm’s accuracy level (Lowe
and De Loo, 2014).. Thus, the company adopts job costing system for the aim of assign
the cost of stock level that are relating to products that are manufactured. Therefore, the
Imda Tech Limited adopts this system for the purpose of assign the cost regard to labour
to finding out punch lock, network time lock application and time sheet etc over this
sytem.
iv) Price optimising system: It is that type of mathematical tool that are used by Imda tech
company for the purpose of determining the various prices of products or services at
several channels.
TASK 2
Marginal and absorption costing
M 2 Produced financial reporting documents
Marginal costing is that type of opportunity cost produced when there is an extra unit cost
of production in a manufacturing department. It is that type of accounting under which there only
variable overhead are take into consideration and ignore the fixed expenses. Thereafter,
Absorption costing is that costing that involves both fixed and variable expenses that are also
called full costing method. The main difference among marginal and absorption is that there is a
variation of net profit of a company as it there is a variation among the expenses are one the
main reason.

1. Absorption costing method
Price optimising system: It is that type of mathematical tool that are used by Imda tech
company for the purpose of determining the various prices of products or services at several
channels.
2. Marginal costing method.

D2 . Interpretation
From the above table and figures shows that the marginal costing and absorption costing
method is used by the Imda Tech limited. Therefore, in table 1 there is calculation of marginal
costing is done in which the sale revenue of a company is 52500 Thereafter, there is an
ascertainment of cost of goods sold in which firm take only variable expenses and ignore the
fixed expenses. Under this, there is a sum of direct material, direct labour and variable are taken
by Imda Tech limited in which Cost of goods sold is determined that is 37500 .Furthermore
gross profit is determined by deducting cost of goods sold from the sales revenue that is 15000.
The Company measured the Net profit in which they deduct all types of variable expenses from
the gross profit that is 29775.On the other hand, Imda Tech Company also determine the net
profit by adopting the absorption costing in which they gross profit under which the cost of
goods sold is deducted from the sales revenues. Under this, they take both type of expenses are
fixed and variable cost through which they take all direct material, direct labor, fixed as well as
variable expenses for the purpose of calculating cost of goods sold. Thereafter, the gross profits
is determine by deducting cost of goods sold from the sales revenues that is 52500 Furthermore,
all the direct and variable expenses are deducting from the gross profit to determine the net profit
that is 24775.It has been analysed that the net profit of marginal costing is less than the
absorption costing. The reason for the variation among the net profit of management costing
method is that in one method it take only variable expenses where in the another they does take
both fixed and variable expenses.
Apart from this, most of the scholars done investigation under which they most effective
management tool is a absorption costing. Therefore, the reason for this that company able
understand their profits if they consider both cost fixed and variable expenses.
Task 3
In the meeting of Imda Tech Ltd it was discussed that employees are required more training
so that they can enhanced their working performances. All have given the concern for involving
the managers in the budget decisions. By this way cited firm will be able to overcome from its
financial problems (Burk and et. al., 2013).

Different types of budget their advantage and disadvantage
Budget is the essential tool in that supports the management in conducting the operations
well. Description of several types of budget is as following:
Operational budget: It is the type of budget which is prepared by the organization in
order to conduct daily business activities effectively. In this type of budget authorities have to
made two different parts one is revenue and second is cost (Chenhall and Moers, 2015). This is
good presentable technique through which overall profitabilityOn 05/17/2017 06:46 PM, Nitish
Prakash Sharma wrote:
placement in the organisation,
On Wednesday 17 May 2017 06:44 PM, divya.s wrote:
are u clear with the concept of placement
and expenditures can be measured by the entity easily. The main benefit of operational
budgeting is that through this firms can maintain good records and can make effective control
over unnecessary expenditures. On other hand it is found that this technique is rigid and poor
accuracy in the data is present in this budget type (McPherson and Karney, 2014).
Master budget: It is another type of budget which is called master in which all essential
activities are considered by the organization while making the budget. It is beneficial tool, that
helps in providing good information about the business operations. The disadvantage of this
budget is its reliability (Miller. and Kelber, 2015). On 05/17/2017 06:46 PM, Nitish Prakash
Sharma wrote:
placement in the organisation,
On Wednesday 17 May 2017 06:44 PM, divya.s wrote:
are u clear with the concept of placement
Cash budget: It is the type of budget which focuses more on operational activities. It is
beneficial tool through which Imda Tech Ltd can make control over the unnecessary

expenditures and can enhance cash inflow in the workplace. By this way issues related to
economic status will get resolved soon. But this budget is much more depended upon the
political and technological factors, if any change occurs then it will enhance the overall
operational cost of the Imda Tech Ltd (Piacentino and et. al., 2015).
Sales Budget: It only focuses on the sales volume and accordingly allocate budget to the
selling activities. BY this way companies can earn good profit and can gain desired results.
Advantage of this budget is that by this way company can assume its future sales and income so
that it will help the cited firm in allocating funds to each activities accordingly. Disadvantage is
that that is based on assumptions so it may be possible that actual results do not get matched with
real outcomes.
B) Budget preparing process
Budget preparation is the lengthy process in which several activities are considered by
the managers (Safaei and Keith, 2014). The initial phase is forecasting stage in which authorities
forecast the requirement of resources for achieving the goal. They take into consideration all
elements such as production, sales, marketing, HR etc. By forecasting the need of resources they
find out where to allocate funds and how much amount to be On 05/17/2017 06:46 PM, Nitish
Prakash Sharma wrote:
placement in the organisation,
On Wednesday 17 May 2017 06:44 PM, divya.s wrote:
are u clear with the concept of placement
allotted. In the second phase of coordination, forecasted amount is communicated by the
authorities and ask them for resource requirements (Burk and et. al., 2013). It is necessary to
coordinate well so that Imda Tech Ltd can achieve its goal soon. Communicating the budget is
third phase in which information is circulated among all departments. In this phase higher
authorities involve the managers of each department so that they can share their views and cited
firm get to know about their decision related to budget. On the bases of this, Imda Tech Ltd takes
its decision of budget allocation.

C) Pricing strategies
To gain high profit and sustain in the market for longer duration are main motive of any
business unit. Imda wants to expand its business and want to gain high profit (Chenhall and
Moers, 2015). Pricing strategies are essential tool that helps in accomplishing overall goal of the
entity to great extent. In case if organizations adopt wrong pricing strategy then overall
performance of the entity can get down badly. There are number of strategies such as
penetration, skimming, completive etc. In the competitive pricing strategy companies keep
products rate as per the competitor rates. That helps in mainintaining the equilibrium in the
market.
On other hand skimming is another strategy in which firm concentrates on offering
unique products which is not in the market place. In addition penetration is another
pricing strategy in which firms have to keep low price at the initial stage (Burk and et. al.,
2013). Then gradually they increases prices and once product or services gets established
in the market then organizations increase their product prices. Imda Tech Ltd adopts
these pricing strategies and these all given unique benefits to the cite firm. As per the
given case study it is found that Imda Tech Ltd is currently suffering from bed situation
and there is shortage of the sales volume. So adoption of all these policies are beneficial
for the Imda Tech Ltd because by this way it will be able to recover its cost soon and that
will give huge economic benefits to the organization and its employees (Safaei and Keith,
2014). That wills resolve the main problems of the economic soon.
M3
There are many planning tools that can support in preparing the effective budget. Zero
based budgeting is the good technique because it is based on real figures. By this way managers
can compare the several activities and can identify the variance. That helps in knowing the
drawback that can help in making improvement in the budget.
D3
Variance analyses is the great technique that can help in examine the actual situation
with standards. Unfavourable variance can be determined and through this financial problems
can be resolved. Ratio analyses is another technique through profitability, liquidity ratio cited
firm can identify the loop fall and can make effective strategies to resolve the economic
problems. Capital budgeting is another tool that helps in making sound investment decisions by

this way cited firm can achieve its goal easily. That will help in resolving financial problems
effectively.
Task 4
Balance score card
Balance score card is the technique which measures the level of performance of the
organization and accordingly develops strategies so that company can get huge benefit soon
(Miller. and Kelber, 2015). If any entity is found below performance ther they take immediate
action to resolve its. Balance score card is the effective tool that helps in managing the operation
well ad by this way companies can achieve their target soon.
Use of balance score card to response the financial problems
To maintain standards and provide quality services to the users are main objectives so the
Imda Tech Ltd. That is possible if company takes support of balance score card (Safaei and
Keith, 2014). By this way organizations can set up their entities and can enhance ne level of
standards well. It is the type of tool that covers human resource, financial, needs etc in the
organization. Balance score card helps in analyzing the overall business performance well so that
desired outcome and expected results would be same. With the help of this company can raise its
standard and can gain competition advantage significantly. Scenario shows that Imda Tech Ltd
is now a days suffering from the economic problems (Chenhall and Moers, 2015). Currently it
has faced loss of approx 1.5 million GBP. If cited firm adopt this strategy and focus on
employees needs and wants. So company will be able to achieve its goal soon. Imda Tech Ltd
has made some performance objectives which cited firm wants to accomplish soon. SMART
objectives of cited firm is as following:
 To increase profitability by 40% till end of 2018.
To increase number of consumers by 28% till end of 2018.
 To improve retention rate of customers by 30% till end of 2017.
These SMART objectives are those goal which firm wants to achieve. With the help of these
objectives respective department if Imda Tech Ltd can resolve its work based problems and can
enhance profitability to great extend (Safaei and Keith, 2014).

ii. Balance score card in order to improve financial governance and development of strategies
Imda Tech Ltd is currently facing many problems so it is necessary for the management
team to perform their duties well and work on improving performance level. Balance score card
is the technique through which business problems can be minimized soon by the manages and
authorities. In the Imda Tech Ltd managers have to shed light on the needs and perception of
consumers (Burk and et. al., 2013). Customers like to buy such products which have ability to
meet with their demands. If cited firm concentrate more on fulfilling the needs of the entity then
it will be able to resolve its working issues and will be able to gain success in the corporate
market. Marketing manager of Imda Tech Ltd is required to ask for more budget with the
concern authorities so that they can some extra benefits such as discounts, cash bonuses etc
(Miller. and Kelber, 2015).
Apart from this Imda Tech Ltd needs to review the performance of the employees and
they have to review it time to time. It is the effective strategy and can be beneficial for the cited
firm because it will benefit to the organization and they will be able to identify their mistakes
and will be able to improve their performances. These alterative strategies can support in
achieving goal, of the Imda tech Ltd significantly.
M4
Ratio analyses is the technique through which imda can identify drawback in its regular
operations. Profitability ration helps in determining whether company has gained good profit or
not by this way it can make plan to overcome the financial problems. Liquidity ratio determine
whether cited firm is able to pay liability on time or not. By using this method Imda Tech can
make balance between its assets and liabilities. Solvency is another tool through this way
company can design capital structure that would help in resolving its financial problems.
Conclusion
From the above report it can be concluded that management accounting is the field where
employees perform theri job well and companies have to pay close attention on this aspect. This
study will support in resolving the economic and non economic issues and by this way cited firm
will be able to achieve its goal within stipulated time duration (McPherson and Karney, 2014).
Imda Tech Ltd needs to go with the price penetration strategy because by this way cited firm will
perform well and its performance level will be improved soon.