Management Accounting Techniques and Financial Performance Report

This report delves into the application of management accounting principles within the context of The London College. It explores various systems, including inventory management, price optimization, and cost accounting, highlighting their benefits for internal decision-making. The report examines different types of management accounting reports, such as performance and budget reports, and their significance in evaluating business performance. Furthermore, it analyzes cost accounting techniques like marginal and absorption costing, providing numerical examples and interpretations. The report also discusses the purpose and types of budgets, including cash and sales budgets, and their role in financial planning. Finally, it addresses strategies to improve financial performance and the use of planning tools like budgetary control, ratio analysis, and standard costing. The report concludes by emphasizing the importance of management accounting in enhancing financial outcomes and facilitating strategic decision-making within The London College and similar organizations.

Management
Accounting

Contents
INTRODUCTION.......................................................................................................................................4
MAIN BODY..............................................................................................................................................4
1.1............................................................................................................................................................4
Management accounting is the implementation of technical expertise and skills in the analysis of
financial details to support executives in policy development and in the scheduling and monitoring of
the undertakings' operations. The basic role of accounting management is to support decision-making
by the managers.......................................................................................................................................4
1.2............................................................................................................................................................4
1.3............................................................................................................................................................5
2...............................................................................................................................................................6
2.2..........................................................................................................................................................10
2.3..........................................................................................................................................................12
3.1..........................................................................................................................................................15
4.2 Improve the financial performance:.................................................................................................20
4.3 Planning tools..................................................................................................................................20
CONCLUSION.........................................................................................................................................21
REFERENCES..............................................................................................................................................22

INTRODUCTION
Management accounting is only utilized by the internal team in order to manage all the
financial and non financial reports to present accurate position of the business entity. It is the
only thing that makes it different from financial accounting (Abdel-Maksoud, Cheffi and
Ghoudi, 2016). It is a method to classify, calculate, assess, evaluate, and convey financial details
to executives to meet the aims of an entity. This report based on The London College which is
located in London and conducts a study in business management. In this report consist of
different types of system as well as reports that defined the position of the college. Along with
address some practical problems based on the marginal and absorption costing method.
Additionally, compare with other colleges to identify financial problems that can sort out through
different management accounting systems.
MAIN BODY
1.1
Management accounting is the implementation of technical expertise and skills in the
analysis of financial details to support executives in policy development and in the scheduling
and monitoring of the undertakings' operations. The basic role of accounting management is to
support decision-making by the managers.
Prerequisite of management accounting: For this requirement to apply particular
accounting systems in the company in order to present actual performance such as cost
accounting, price optimization and inventory management system. The importance of accounting
management is for the information to fulfill its function, which is allowing the executives to
make significant strategic decisions. The essential requirement of these systems to the analysis of
the actual position of a business. In the context of The London College apply different types of
systems in a detailed manner.
1.2
 Inventory management system: This system used by the business entity to track the
record of stocks. This program is implemented by the production organization to monitor
stocks at-level following the system of monitoring, storing and undertaking a large

platform and product unit condition. Using this program in relation to the London
College to handle customer expectations and fulfill orders on time. This system's
important necessity for the proper use of inventories at each stage and the proper
reduction of wastage.
 Price optimization system: This management accounting method is used to assess the
most acceptable and optimal rate of inflation by carefully measuring and analyzing
consumer reactions and behaviors for a product or service across multiple market prices.
Pricing structure for a brand is amongst the most important factors from which the sales
volume and competitiveness of a business relies upon, so the use of price management
program for The London College is advantageous and appropriate. The basic component
of this approach involves reviewing historical information and assessing adversaries'
tactics to repair and choose with the most reasonable and competitive price for a
commodity in The London College to provide a decent possibility (Astuty, 2015)
 Cost accounting system: It is essentially a tool used by a corporation or business to
assess and accurately predict the cost of its goods by evaluating stock estimation and
value management to calculate the feasibility of producing goods. The key advantages
and benefits of using the cost accounting system for The London College are that it
provides greater oversight over products and producers and encourages the recording of a
product's correct viability.
1.3
Benefits of management accounting system: All the management accounting systems
are beneficial for The London College because it helps to present all relevant information in
front of internal shareholders. On the basis of these systems collect reliable information that
helps them to take all strategic decisions. This information easy to understand and as per the
accuracy understands actual position so accordingly apply the right strategy at the right time.
1.4
Management accounting reports: It can be described as a technique for implementing
different types of reports to evaluate the business condition being posed before investors in order
to introduce the current business position. Such as, The London College uses these reports to

analyze the position of a business and take the right decision. There are produced various types
of reports such as:
 Performance Report: The report formulates the overall results and operating of all
divisions, including development, advertising, HR, sales, etc. It describes all the strengths
and limitations, and also offers steps to strengthen them. It is important that a The
London College development manager plan. It is often accomplished by evaluating not if
the company's targets, priorities and strategies have already been reached within a
specified period (Banker, Byzalov, Fang, and Liang, 2018).
 Budget Report: This is an official report which is planned for financial planning reasons
by the organization. It indicates all the cumulative earnings and investments for a
specified period of time. This could be used to equate huge performance with company
expectations or that of an entity itself to assess whether there are any inconsistencies,
failures and what should be done to fix them.
 Inventory management report: It relates to a document indicating the general level of
production, commodity turnover, and record of success, approaches used and numerous
other criteria needed to document. Its planning helps reduce capital inefficiency, monitor,
and sustain organizational performance, profitability and productivity growth rates.
Methods along with The London College, product assessment report are important as it
carries the risk of performing errors, prevents omissions and avoids cheating.
2.1
Cost accounting techniques: To analysis the cost as well as profitability of the business
required to apply effective costing techniques such as:
Marginal costing technique: As per the this technique recognize the cost which makes changes
in order to calculate total manufacturing costs set by the top authority. This technique apply by
manager when client demand extra units so it helps to write off all fixed costs.
 Benefits: It is easy to understand and helps to higher authorities in decision making
procedure. According to result they prepare plan in order to achieve success and
development.

 Drawback: The main drawback of this technique, it takes more time to classify different
types of cost which are variable in long run (Christ and Burritt, 2017).
Absorption costing technique: It is a type of costing in which evaluating and observing cost of
absorption. This technique applied by the UCK furniture to sort out practical problems.
 Benefits: It is a best method that can help to present effective outcomes and collect all the
data information in regard of business entity.
 Drawback: It is identified as difficult method which is not applied by every organisation
and face issues when they compare results in regard of calculate profit margins.
Material = 4*3 = 12
Labor = 4*2 = 8
Variable Production overhead = 5/unit
Fixed production overhead = 20.000
Estimated cost per unit (product cost) = 20.000/10.000 = 2/unit
Selling Price = 35 per unit
Variable selling cost = 1 per unit
Fixed selling cost = 2000 per month
January
Production = 11.000 units
Sales = 9.000 Units
Absorption costing
Sales = 9000*35 = 315.000
Production cost: Opening stock: 0
- Material = 12*11.000 = 132.000

- Labor = 8*11.000 = 88.000
- Variable production cost = 5*11.000 = 55.000
- Fixed production overhead = 2*11.000 = 22.000
Over absorption 2000 (negative)
Closing stock = (12+8+5+2) = 27*2000 = 54.000 – 241.000 = 74.000
(315.000 – 54.000) = 241.000
Non production cost
Variable selling cost = 9000
Fixed selling cost = 2000/1100
Net profit = 63.000
(132.000 + 88.000 + 55.000+ 22.000 -2000 – 540000) = 241000
(315.000 – 241.000 = 74.000)

2.2

To sort the these numerical apply absorption costing method in which identified all the
costs that related with the saleable condition. Along with all the costs are absorbed which are
essential part of the cost.
2.3
Interpretation: As per the calculation it is analyzed that there are preparing income statement
with the application of marginal costing method and absorption costing. Along with produce cost
card and get profit 75000 & 64500 January and February by marginal method. Moreover, 77000
and 63500 in Jan and Feb respectively. There are calculated profitability in case of absorption
and fixed cost.