Management Accounting Report: Financial Performance of Focusrite Plc

This report provides an in-depth analysis of management accounting practices within Focusrite Plc, a UK-based engineering company specializing in audio electronics. It explores various management accounting systems such as cost accounting, inventory management, and job costing, highlighting their application and benefits within the company. The report also examines different management accounting reports, including performance reports, cost accounting reports, inventory management reports, and accounts receivable reports, detailing their significance in decision-making. Furthermore, it evaluates the integration of these systems and reporting methods within the business processes and demonstrates the use of cost analysis techniques, such as marginal and absorption costing, to prepare financial reporting documents. The report also covers the benefits of these systems, such as price optimization and cost reduction, and how these systems contribute to the firm's financial success.

Management
Accounting

INTRODUCTION
Management accounting is most considerable kind of accounting which provide help to
business officials to establish a core structure that provide information for monetary decision-
making. It assists employees to manage and control fiscal data to analyse them for effectively
achievement of business and trade objectives. Aim of adopting it is to facilitate and bring new
changes within business entity to attain easiness in complex trade functions (Laudon and
Laudon, 2015). This particular report exhibits about management accounting and its reporting
methods that are helpful for analysing financial information in effective manner in context of
Focusrite Plc. It is UK's one of the leading engineering company which is engaged in
engineering and design of audio electronics, synthesizers, MIDI controllers and keyboards for
music recording and creation. Report also contains other aspects of management accounting such
as planning tools, techniques and responding to financial problems.
ACTIVITY 1
Management Accounting Systems:
Management accounting is crucial process that facilitates information’s to provide
effectiveness in decisions of management. In present time, managerial officials of every business
entity tries to implement an effective system of accounting to record all its fiscal transaction and
manage activities. Management accounting is one and only way to combine both aspect
accounting and management, because it includes systems that combines all financial and
nonfinancial elements (Plumb and et.al. 2017). Focusrite Plc also adopted management
accounting systems to enhance its operating capabilities and efficiencies. Management in
company monitors the compliances of system. Company's policies and procedures are also
compatible with such systems. Following management accounting systems like cost accounting,
job costing , inventory management etc. help to increase the performance of company in short
and long run. There is explanation about systems of management accounting using respective
company, as follows:
Cost Accounting System: Focus of this system is on evaluation and analysis of costs.
Mangers under it develop processes that assist in controlling cost of processes and functions. For
engineering firms like Focusrite Plc this system is helpful in assessing the cost of different
designing, finishing and other process. It determines the cost of each product and profit margin

on it. At the time of launching of new product company take decisions of viability of such
launching by evaluating cost incurred through cost accounting system. It provides to fix a cost
structure and cost policies while considering objectives and goals. These systems also help in
making of annual financial budget. Cost accounting system help to define cost related objectives
and strategies. Any specific area of operation that leads to increase in cost, can be easily
identified by applying cost accounting system. Company can also assess the viability of any
potential project.
Inventory Management System: At the time of assessment of profitability, value of
opening and closing inventories play as significant role, as it directly influences the amount of
net income. These systems are concerned with effective supervision and control over real time
movement of inventories like raw material, finished goods, work in progress etc. Focusrite Plc
manage its wide range of inventories related to engineering of audio equipment and other its
products. It emphasises on effectively recording of inventories and organising them in effective
manner to minimise inventory costs (Hilton and Platt, 2013). Some company incurs excessive
cost of stock handling and storage, it can be easily controlled by using this system. Following are
the methods of recording inventories, as follows:
Last in First out: LIFO method focus on a rule for recording inventories that last
purchased inventories are sold or issued first. This method is is widely applied method.
First in First out: FIFO method focus on a rule for recording inventories that first
bought inventories or stocks are issued or sold first.
Average Cost Method: It emphasises on taking average cost as basis for valuing cost of
inventories.
Job-costing systems: This system is specifically used by enterprise having diversified
product range or products which are entirely different. This system focuses on assigning costs to
classified jobs and batches. It help to analyse different processes and activities of entity to
improve process efficiencies (Hopper and Bui, 2016). In Focusrite Plc, there are numerous
products so sometime it is difficult for company to assess each product cost so some products are
classified as jobs for better assessment and accountability. Following are the methods used by
company under job costing, as follows:

Batch Costing: Under this method batch or lot are created by managers to assign cost
and assess the cost of each unit. Identical units are aggregated for creation of batch or lot.
Normally very small and large quantity of similar units are classified in batch.
Process Costing: In this method costs are assigned to any particular process instated of
creation of batch. This method provides assessment of overall process costs.
Price-optimisation System: Price optimisation is essential for achieving competitive
benefits. This system focuses towards analysis of prices to analysis manner of reduction of prices
while controlling existing profit margin. Focusrite Plc facing competition in engineering
industry, so main motive of company is to minimise price of products. Managers and other
company officials try to minimise product prices to minimise competition. This system evaluates
processes to identify factors that is leading to increase in price of product. It begins from creation
of segments of clients or customers (Stein and et.al., 2015). Company than project how
customers belongs to different segment will respond at various prices. It is long term approach
which focus towards maximisation of net income by systematic increase in prices.
Management Accounting reports:
In every organisation management is divided in different levels to manage things
effectively but communication is main factors that determine effectiveness of management chain.
For communicating information one of the method is reporting under which all kind of
information is circulated in management chain. Reporting is formal method under which various
reports are prepared by heads of different department and send these report to top management
for effective decision-making (Turban, Volonino and Wood, 2015). In Focusrite Plc, reporting is
key process through it numerous type of information is transferred to higher level managers for
taking business related decisions. In this regard following are portentous reports, as discussed
below:
Performance Report: The key concept for making this kind of report is evaluation of
aggregate performance of labours, workers and employees along with other major operations of
business entity. Manager apply this report to setup significant measurements, standards and
targets and make an analytical comparison with real or existing performance of personnel’s
within organisation to avoid problem by improving efficiency of employees. In Focusrite Plc,
officials apply this report to formulate strategy and assess total performance with regards to
employees engaged in different processes. Major changes are marked in policies regarding

employees on the basis of this report. Employee orientation programs are conducted by managers
by using performance report of inefficient employees and also efficient employees are awarded
as per their performance.
Cost accounting reports: Cost report provide an evaluation and analysis of cost and
develop a basis for preparation of different budgets. Cost report contains results of different kind
of cost analysis method. It also classifies costs as per different processes and tasks (Lavia López
and Hiebl, 2014). Specially in Focusrite Plc like engineering firms focus on this report as it helps
to calculate cost per unit of its products. Cost is key factor as it determines profitability of
company. Managers and engineers tries to find out sources for minimising cost of product to
increase overall profits. It also allocates factors that are responsible for increasing expenses and
costs. With assistance of this report managerial personnel’s can evaluate and examine any
differences arisen among projected and actual expenses that at last supports in minimisation of
unwanted expenses or unproductive costs.
Inventory management report: This report exhibits value of stock business
organisation has in stores and warehouse. Tracking of real time inventory movement is hard task
for large corporates. This report alleviates in supervising and tracking different kind of stocks
and inventories to assess the requirement of inventories. Focusrite Plc has inventories related to
parts for engineering of audio equipment and other related items, which are classified in work in
progress, raw items and finished goods. Engineers prepare inventory report to track the
flocculation of inventories in term of in or out flow to ensure adequateness of items in stock.
Accounts receivable reports: Account Receivables terms implies anticipated amount or
payments collectible from organisation's customers. It is ageing report contains list of
organization's clients along with necessary contents about any amount dues of each clients, due
day of the month for receipts, any overdue dates, calculated figure of interest, vital details of
debtors, bad-debt and other inside information of respective payments from company's clients
(Leitner, 2013). Management officials of mentioned firm ready such reports on particular
intervals in order to come through records of various debtors and determine potency of their
specific credit collection duration.
Benefits of management accounting system:
There are so many advantages of practising management accounting systems that
Focusrite PLC gets in order to planning procedures and making decisions:

Price Optimisation System This system helps in choosing the optimum price for the
product with maximum profit margin.
It provides information about customer requirements and
their satisfactory needs in Focusrite PLC.
Inventory Management System  Respective firm is capable to avoid the situation of
shortage of inventory .
 The management can save lot of time, space and
energy for other productive activities in Focusrite
PLC.
Cost Accounting System  The firm can eliminate unproductive cost activities
with help of this system.
 Trend in changing costs can be identified by
respective firm (Modell, 2014).
Job Costing System  The management can estimate the cost of specific
task on the basis of past records in job costing.
 The employees in Focusrite PLC can be motivated
and rewarded.
Evaluation of manner of integration of systems and reporting within process of business entity:
At the time of adoption of management accounting system and reporting, managers
develop strategies for integration of processes. It is a necessary integration as it develops base for
generation of informatics that are useful for systems and reporting of management accounting
(Nielsen, Mitchell and Nørreklit, 2015). As accounting processes give core quantitative
informations to management which further used by them in formulating management accounting
systems and reporting of facts under it. Inventory process managers provides their observation
and other related inventory details for inventory management system and preparation of
inventories report in respective company.

Costs using appropriate techniques of cost analysis to prepare an income statement using
marginal and absorption costs:
Marginal costing method: It is most significant technique related to costing for
preparation of profit and loss or income statements. In this technique accountants emphasises on
specific and systematic classification of expenses into fixed and variable. Here fixed expenses
and costs without considering their sources are taken as period costs. Whereas all variable
production expenses are assigned to particular unit. It determines the effect of variable expenses
on net income and per unit product cost.
Absorption costing method: This method not classifies production related fixed
overhead as fixed cost and present them in production cost. This method is more acceptable as it
adopts more practical approach (Absorption costing, 2018).