Management Accounting Report: Financial Analysis of Connect Catering

This report provides a comprehensive analysis of management accounting principles and their application within Connect Catering Service. It covers essential aspects such as cost accounting systems, price optimization, inventory management, and job order costing, highlighting their benefits and requirements. The report delves into various management accounting reporting methods, including budgetary and performance reports, alongside an evaluation of their integration. Furthermore, it explores different cost methods like marginal and absorption costing, demonstrating their application in preparing income statements and interpreting financial data. Planning tools used in budgetary control are examined, with an assessment of their advantages and disadvantages. Finally, the report evaluates the impact of adopting management accounting systems to solve financial problems, offering insights into organizational responses and sustainable business success.

Management
Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and essential requirement of management accounting system.....1
P2. Explanation of different methods of management accounting reporting..............................3
M1. Evaluation of benefit of management accounting system and their application in business
.....................................................................................................................................................4
D1. Critical evaluation of integration of management accounting system with management
accounting reports........................................................................................................................4
TASK 2............................................................................................................................................5
P3. Application of different methods of cost which helps in preparation of income statement..5
M2. Application of range of techniques which helps to produce financial reporting.................7
D2. Interpretation of data used in producing financial reports....................................................7
TASK 3............................................................................................................................................8
P4. Advantage and disadvantage of planning tools used in budgetary control...........................8
M3. Analysation of different planning tool used in business which helps in preparation as well
as forecasting budgets..................................................................................................................9
D3. Evaluation of planning tool used to solve finance problem occur in business..................10
TASK 4..........................................................................................................................................10
P5. Comparison between adoption of management accounting system to solve financial
problems....................................................................................................................................10
M4. Analysation of respond of organisation towards financial problem of organisation which
helps in sustainable success of business....................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting refers to identification, analysation, interpretation and communication
of financial information to managers of enterprise which helps in making decision related to
operation as well as attainment of desired goals of organisation (Bahri Sales, Pakmaram and
Ghaderi, 2018). Main object of managerial accounting is to provide information to management
which allow them in making business decisions. It includes all approaches which assist in
improve quality of business information which is to be delivered t managers and include
information related to sales, cost of product as ell as service produced by organisation. This
project report includes study of Connect Catering Service which is based in UK providing
catering services to their customers. Company is providing food as per requirement of their
customer and is working on enhancing experience of their customer in food. This project report
includes study of various accounting system and their requirement in organisation. It also
includes management accounting reporting as ell as application of management accounting
reports.
TASK 1
P1. Management accounting and essential requirement of management accounting system
Management accounting refers recording, measuring and interpreting financial information
which assist them taking financial decision of enterprise (Braumann, 2018). It also assists
managers in making decision which ensure control over cost of business. Management
accounting is based on financial statement which provide them every information related to
business including from where they are getting finds and where they are spending these funds. It
also includes planning, budgeting and other important decision related to ensure control over cost
of business.
Cost accounting system: Cost accounting system is one of those system which is assist
managers in estimating cost for production of product and service to generate profit. It helps in
valuation of inventory as well as control of cost of business (Cockcroft and Russell, 2018). This
cost estimation helps in identification of profitable product and non-profitable product which can
be done by estimation of cost of product offered by firm in market. This system assists managers
to identify total cost included in product o product as well as service. This cost of product
includes both fixed as well as variable cost. Variable cost is those cost which vary with
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production of one additions cost whereas fixed cost is those which are fixed with production and
life of firm. This cost accounting includes cost of goods sold which include cost of selling good
in market. Cost incur in business is with entire supply chain from purchase of raw material to end
selling of good as well as service of business.
Requirement of Cost accounting system: Cost accounting system is used in business
which is suits or nature as well as size of enterprise. This system is beneficial of any organisation
as it helps them to achieve economy of scale by reducing cost of operation of Company. Connect
catering service adopt this system as it helps them to assess cost of business and ensure control
over cost of enterprise.
Price Optimisation System: Price optimisation system is one of those system which is
based on mathematical programs that is used in calculation in price. This system helps in
studying variation in demand at different level of prices (Cokins and Căpușneanu, 2020). This
can be done by using data which include information related to coast as well as inventory level.
Main focus of this system is to determine price for their product and service which helps to earn
sufficient level of profit. This system helps business to use price as a competitive advantage for
firm. This helps manages of company in forecasting of demand, development of price, promotion
of strategies in order to improve satisfaction level of customers.
Requirement of Price optimisation System: Price optimisation system helps managers to
estimate cost of production of product and service and also set price which helps them to earn
profit. It provides organisation immediate financial solution which helps them to earn more profit
an also increase differentiation in price as per level of demand.
Inventory management System: Inventory management system is one of those system
which helps to tracking inventory throughout entire supply chain from purchase of raw material
to end sales of product market (Darlington, Found and Francis, 2016). This system also assists
managers in other activities like preparing work order, preparation of bill of materials and
products related to material of business. This system in business is used for purpose of
minimising situation of over stock as well as under stock. This tool is used for collecting data
related to inventory level in business to avoid wastage in enterprise. This system is easy to
understand and allow managers to coordinate between different activities.
Requirement of Inventory management system: Inventory management system helps an
organisation in reducing cost of managing inventory. It helps managers of Connect Catering
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Service in managing inventory as per capacity of warehouse which helps them to provide stock
details, history if product as well as satisfaction of product. It also assists managers in tracking
inventory to avoid wastage of material and inventory level. It also ensures control over purchase
of raw material as purchasing additional material increase cost of warehouse.
Job order costing system: Job order costing system is one of those system which helps
in business when they produce in different products as well as different units. This system assists
managers to identify cost of each different products which allow them to earn profit for
enterprise (Holm and Ax, 2020). In include information like cost of material, invoices of
suppliers, allocation of overhead to different activities and payroll records. This system track
each and every item in job records which is use in production of process of product and service.
Requirement of Job order costing system: It assist managers in determining cost of
every activities as well as job in business. It also assists in identifying profit of each activities
which helps to take decisions. It also assists managers to make decision related to data driven
which is include efficiency of their decisions. This system allow manager to see how companies
has fixed assets of business and there is different cost generated for different jobs.
P2. Explanation of different methods of management accounting reporting
Budgetary report: Budgetary report is one of those reports which is used to compare
actual performance with planned budget (Jermias, Gani and Juliana, 2018). This report assists
managers to determine expenses which are high so that appropriate action can be taken to reduce
expenses level as per budgeted amount. This report is used as a tool to control financial result of
an enterprise.
Performance report: Performance reports are those reports which is used to measure
performance of organisation, department or an employee. This assist managers to identify which
employees is working efficient and which are under performance. Managers provide appraisal to
efficient employees whereas terminate or punish under performance employee.
Account receivable report: Account receivable reports are those reports which include to
identify customers whose payment is du. If there are increasing account receivable in reports
than managers need to make changes in their collection policy as it led to shortage of funds in
their company.
M1. Evaluation of benefit of management accounting system and their application in business
Management accounting Benefit and application of management accounting system
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System
Cost accounting system Cost accounting system is beneficial for managers of Connect
catering service as it helps to reduce total cost of production of
organisation and improve their profitability level (Johnstone,
2018).
Inventory Management
System
Inventory management system assist managers in tracking
inventory at work place to avoid wastage and to identify
requirement to raw material as buying access raw material
increase cot of warehouse to store raw material.
Job order costing System Job order costing system is one of those system which helps to
reduce cost of per job. It also assists to identify which job is
more profitable for them and which is not.
Price optimisation System Price optimisation system is one of those system which assist to
identify best price for their offering which generate demand as
well as profit for firm.
D1. Critical evaluation of integration of management accounting system with management
accounting reports
Management accounting system and management accounting reports are integrated as main goal
of those is to reduce additional cost of business and increase their profitability level in
organisation (Kajüter and Schröder, 2017). This tool helps to bring closed actual result of
company with budgeted amounts as it helps the to ensure more control over their operational
activities. It also helps managers in monitoring each activity of an enterprise and enhance their
overall performance.
TASK 2
P3. Application of different methods of cost which helps in preparation of income statement
To apply different method to cost, sales taken of two quarters of connect catering service in
which sales of first quarter is 66000 ￡ and sales of second quarter is 74000 ￡. Organisation has
zero opening stock in first quarter whereas 7800 ￡ in closing stock. In second quarter opening
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stock is 7800 ￡ and closing stock is 2600 ￡ . Production cost of first quarter in organisation is
50700￡ and for second quarter is 42900￡.
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6

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Some of example of calculation of marginal and absorption costing are as follows:
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M2. Application of range of techniques which helps to produce financial reporting
Marginal costing: Marginal coting is one of those tools in which cost like variable cost is incur
as per cost unit and fixed cost remain fixed for whole period that is written off against
contribution of firm (Kirli, 2016).
Absorption techniques: Absorption method is one of those techniques in which production cost
that add proportion of production overhead and direct cost. This include value of inventory is at
full production cost for a unit of product.
D2. Interpretation of data used in producing financial reports
From above mention calculation it can be interpreted that opening inventory of quarter 2 from
marginal costing is less than abortion inventory. There is also different between net profit of
business. Net profit from absorption costing is 1900 pound whereas from marginal costing, it is
4700 pounds.
TASK 3
P4. Advantage and disadvantage of planning tools used in budgetary control
Budgetary control: Budgetary control refers to a process which helps to ensure control
over actual result in terms of planned result (Makarenko, 2018). There is various tool which are
used by managers of connect catering service to ensure control over organisational activities and
these are as follows:
Zero based budgeting: Zero based budgeting is one of those approach which helps in in
preparation of budget that starts from Zero. It is not based on previous year rather than it is
prepared new for every year. It is important for managers to justify various expenses before
applied them in official budget (Narayanan and Boyce, 2019). Process of preparation of zero-
based budgeting include identification of goals to prepare budget. It also includes identification
of various ways o attain these goals. It assists managers to access different ways to get funds for
firm and also helps in prioritising funds on basis of their cost and availability.
Advantage of zero-based budgeting: Zero based budgeting helps an organisation
preparation of budget which helps them control over cost of business. It helps to reduce cost of
firm and also to improve profitability level of enterprise. To also assist managers by providing
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information related to use of funds in company. Managers of Connect Catering Service helps an
organisation in creating budget and in reducing their cost of operation.
Disadvantage of zero-based budgeting: It is a complex tool and is expensive for an
organisation as managers need to invest their time as well as efforts. It is connected with
tangibility as t deliver information about organisation to all department but there is some
information should be limited to managers of business. Managers need to prepare xero based
budget new for every year as it is not based on previous year performance.
Variance analysis: Variance analysis refers to a process of analysis of different between
actual as well as planned performance of organisation This variance assists in estimating whether
enterprise is getting under performance or over performance (Nishimura, 2019). This variance
can be identified in differentiating between standard cost and actual cost of business. This
variance is calculated for both quantity of labour, overhead, material as well as price of firm.
This variance assists managers in identifying problem in operation of company and also allow
them to prepare strategies for firm to improve their performance. There are two types of variance
analysis existed in business including fixed overhead and material, labour, overhead variance.
Advantage of Variance analysis: Variance analysis provide competitive advantage to a
firm which helps them to capture market. To also helps managers in attaining their desired goals
and also helps in attaining business strategy. It helps in identification of risk for business which
helps managers in solving problem of enterprise.
Disadvantage of Variance analysis: Variance analysis cause delay in completion of
work as result from this tool can be identified after completion of project. It is difficult for
managers of organisation to identify reason behind variance. It is not suitable of managers of
Connect Catering as it causes delay in getting in result of activity or task performed by
organisation.
Operating budget: Operating budget is one of those budgets which include both
expenses as well as profit generated by firm. Main focus of this budget is on operating expenses
of business including cist of good sold which is directly linked with production process and
incudes cost of direct material as well as labour (Sands, Lee and Fonseka,2016). This budget
includes all cost as well as administration overhead which is linked with production proves of
organisation.
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