Management Accounting Report: Unicorn Grocery's Financial Performance

This report provides a comprehensive overview of management accounting, focusing on its application within the context of Unicorn Grocery, a small co-operative grocery store. The report begins by defining management accounting and outlining the essential requirements of various management accounting systems, including inventory management, job costing, price optimization, and cost accounting systems. It then delves into different methods used in management accounting reports, such as budget reports, performance reports, inventory control reports, and job cost reports, highlighting their significance in decision-making. The report further explores the measurement of benefits derived from management accounting systems and their practical application within a firm. It examines the integration of management accounting systems and reports within firms' processes, emphasizing their interdependence. The report also covers cost calculation using marginal and absorption costing techniques for income statement preparation, alongside the application of management accounting techniques for creating financial reports and analyzing data. Finally, the report discusses the advantages and disadvantages of different planning tools for budgetary control, the usage of management systems to resolve financial problems, and methods for responding to such problems, concluding with a summary of key findings and recommendations.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems................................................................................................1
P2 Determine different types methods used in management accounting report. .......................3
M1 Measuring the benefits of management accounting system and their application...............4
D1 Management accounting system and management accounting reports are merged with in
firms processes. ..........................................................................................................................5
TASK 2............................................................................................................................................5
P3 Calculating costs by using right techniques of cost analysis for making income statement
using marginal and absorption costs as specified above.............................................................5
M2 applying management accounting techniques for making financial report........................10
D2 preparing financial report that analysis and interpret data's for firms actives.....................10
TASK 3..........................................................................................................................................10
P4 Advantages and disadvantages of different planning tools for budgetary control...............10
M3 Management accounting techniques to produce appropriate financial reporting...............12
P5 Usage of management system to resolve financial problems..............................................12
M4 Responding to financial problems......................................................................................14
D3 Some planning tools used to solve financial problems.......................................................14
CONCLUSION..............................................................................................................................14
..................................................................................................................................................16
REFRENCES.................................................................................................................................16

INTRODUCTION
Management accounting is a term which is used to denote administration of financial
system and information which is utilized by budgetary manager for proper decision making
process. Thus, it is a process which help them in making financial reports for precise and timely
statistical information. Based on that supervisors make short term decisions on a daily basis.
Their main aim is to produce annual and half yearly fiscal reports which is required for accounts
to make balance sheets, profit and loss. Unicorn grocery is a small co-operative grocery store
situated in Chorlton-cum-Hardy, Manchester, England. It is closely connected with sister
company Glebelands City Growers in Sales. Company was founded in the year 1996 with a
turnover less than £5 million. This store sells products like processed food stuffs, drinks,
unpacked organic fruit, dried ingredients. This report includes accounting system of an
organisation, different tools used by them in decision making, methods of calculating cost with
the use of suitable cost analysis process. Other than this it tells us about advantages and
disadvantages of planning, various methods for adapting management accounting.
TASK 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems
Management accounting is also called as cost accounting or managerial accounting. It is a
process of making management report and accounts for providing necessary, accurate and timely
information to management its helps to take decision. In an organisation management accounting
have been done on weekly and monthly basis (Youssef, 2013). Its help out to internal and
external people in organisation. In internals uses are employees, suppliers, purchases etc. and in
external uses are shareholders, investors, debtors etc.
It is a process of which analyse the costs of business and operations to prepare the
financial report internally, records, and to aid managers of account decision making process for
achieving the goals of the business. Managerial accounting is a provision of financial and
information of decision making to managers.
Management accountants looks on a event that happens around the company while seeing
needs of the company (Van der Stede, 2015). Estimates a emerge and data. It translate these data
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and estimates into knowledge that will guide in decision making. Controlling of assist
management in formulating and implementing of the strategy in a organisation it involves
management partnering in making of decisions and the management systems performance. Their
are essential requirements of different types of managerial accounting systems: Inventory management system : Inventory management helps in tracking of goods from
the entire chain of supply and all movements of parts and goods between. Business see all
the small and every single movements of goods and parts of its operations, allow them to
take decisions and investments. Different mangers of inventory focus on different parts of
supply chain with small business as they are more interested in ordering and end of
supply chain because of wider scope inventory management costs are also wider. As
inventory management help in controlling of inventory and eliminate the wastage of
stock (Suomala and Lyly-Yrjänäinen, 2012). It helps in maintaining the balance between
the opening and closing stock or they mange the demand and supply of the goods with
the inventory management. Job costing system : Job costing system of accounting accumulates the manufacturing of
costs separate from each job. Appropriate for company do the production of special
orders and unique products. It is understood that the costing of job analyse the system
price of per job functions and performance. For example costing system of accounting is
most appropriate for an management of event of a company like a niche producing a
furniture, air surveillance system having very high cost of producer etc. Job costing
tracks the revenues and costs by job and standardized reporting enables the profitability
by job. Accounting systems supports the costing of job, allow numbers of job assign to
the individual items of revenue and expenses. Price optimisation system : Prize optimization is used in the analysis of mathematical by
the organisations. It is to determine that how customers will behave to the different cost
of services and products through the different channels (enftlechner and Hiebl, 2015). It
also help in determining the organisation cost meet its objectives like maximizing the
operating profit. Cost optimization includes such as sales, historic prices, inventories and
operating costs. Prize optimization has implemented in production companies include
such as insurance industries, cruise lines, car rental, hotels, casinos, airlines, banking and
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retail. Main motive is to increase the return of investment by which the prizes can afford
by customers.
 Cost accounting system : Cost accounting is a process of recording, classifying,
analysing, summarizing, allocating and evaluating various alternative actions of courses
for the cost control. It is a framework used by a companies to estimates the cost of their
product for their inventory valuation, profitability analysis and control of cost. Accurate
cost is estimated of product and services is critical for the operations of profitable. It goal
is appropriate action of course based on its capability and cost efficiency.
P2 Determine different types methods used in management accounting report.
Management accounting report helps managers to take decisions on behalf of
mathematics calculation of different types of accounting reports. Managers make strategies by
using reports like how many raw material are more required for new production. The major work
of accounting report are record necessary data in statistical form for showing overall company
performance and employees effectiveness (Schaltegger and Csutora, 2012 ). Unicorn grocery are
retail company , they prepare accounting reports of important factors those helps managers to
take decision. There are many types of methods are available for preparing accounting reports
like budget report, performance report, inventory control report, variable analysis report etc.
Some of the imported reports are detail as follows:
Budget Report – Budget report help managers to analysis their company performance,
but if company are big enough then every department managers are analysis department
performance. Its help out proper use of money. The calculation budgets are depending on
forecasting methods and evaluation. Preparing budget report are mostly based on expenses from
past years, some time previous budgets are over evaluated then is affected on current budgets so
its can not find feasible solution for the company. Its mostly happen in small firms, Unicorn is a
small company and they will face this problem. Management are used budget report to give
incentives to their employees according to their performance (Neubauer, 2012).
Accounts receivable - Accounting receivable are manage cash flows of the company.
Many of report are contain separate invoice columns like 30 days late, 60 days late, 90 days late
and more. This report help out to know cash inflows problem that emphasis company collection
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process. Many customers are not pay their balance amount timely so that company make strong
policies for resolve this problem effectively.
Performance report – This repost are help out to analysis performance level of
employees. Management take decision on this report like salary appreciation, appraisal,
compensation plan, incentive plan, transfers, promotion, demotion etc. That provide help to
measuring performance of employees at every level by assignment reports. If performance are
very poor then HR managers arrange training program for development in their skills and
knowledge (Maas, Schaltegger and Crutzen, 2016). The main use of this report are analysis
hidden talent in company and appreciate then, that help to motive employees toward company
goals and objectives.
Inventory control and manufacturing report – Manufacturing company can use row
material and many types of physical inventories, so that company make account to handle this all
inventories that make effective manufacturing process. The report includes inventory waste, per
unit overhead cost, hourly labour cost, row material inventories, finish goods inventories etc. The
department manager can analysis situation where the manufacturing process face quality
problem, they analysis where improvement are needed.
Job Cost report – This report show company expenses on specific projects. They
analysis overall cost and revenue of that project to determine profitability of company. This
report cover company's all working area and manager analysis of weak area and strong high
earning area, so that company engage their resources with high earning area and save money
from decrease investment in low profit area. This report help out to determinate expensive of
specific project.
Finally all types of management accounting report are help full for managers to make
appropriate strategies in their area or department and take effective decision because this show
all budgets detail and other department cost analysis (Lim, 2011). The Unicorn grocery have use
budget reports of all different department, they controlling overall firms expenses and losses, that
increase profitability by using or analysing this report.
M1 Measuring the benefits of management accounting system and their application.
Management accounting system are very important for Unicorn grocery. Its help out to
analysis total firm cash inflow and outflow. Management accounting system play key role to
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manage variable and fixed costs. This system save firms time by avoiding unnecessary data's, its
include only those data's those help in decision to management, thats very short and focus
reports. They take better utilization of recourse by understanding and analysing of different
reports which give accurate data's and information to management. Unicorn grocery can
minimize their cost and expenses by making appropriate strategies and making strong
managerial policies.
D1 Management accounting system and management accounting reports are merged with in
firms processes.
Company adopt appropriate management accounting system for preparing effective
management accounting reports. The report are vary effective when company may use strong
accounting system (Hutaibat, von Alberti-Alhtaybat and Al-Htaybat, 2015). When system are not
well managed, planed and controlled then department managers can not make good report, this
directly effect to management decision. Unicorn grocery company are use well planed and
control management accounting system its help out company for making effective management
accounting reports. The accounting system and report are interdependent, firstly use appropriate
system according to company requirement then after prepare report on this.
TASK 2
P3 Calculating costs by using right techniques of cost analysis for making income statement
using marginal and absorption costs as specified above.
Management have requirement appropriate and accurate information about cost data's for
taking decision for achieving firms goals and objectives. Income statement include company's
financial performance with in specific accounting period, that summarized information about
revenue and expenses of operational and and non operational activities. Generally firms can use
marginal and absorption techniques of costing its help out to prepare financial statements.
Marginal cost – In marginal costing variable element are include like material cost,
labour cost, direct expenses and production overheads. Cost of these element are called variable
costs. So that increase in total production and sales are result to increase total variable cost on
same proportion. In an firms fixed cost like rents, employees salaries, interest payments etc. are
fix they can not change when change in sales and production (Fadzil and Rababah, 2012).
Marginal costing may be define as an accounting system where variable cost are change with
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time but fixed cost are remain unchanged over the period of time, in this fixes cost are written off
in full against aggregate contribution. In marginal costing fixed cost are show cost of period and
veritable cost are show cost of product. Marginal costing report are used by management for
taking effectively decision for appropriate use of veritable an fixed cost. Through this firm are
able to know what is the additional cost are arise due to increasing production. By this, they are
manage all manufacturing process in an effective manner thus help to achieve goals and
objectives in limited period of time effectively.
Absorption cost – in this cost system total production cost are include in product cost, so
that product cost are increase when increase in production cost. In company production cost are
effected by direct and indirect costs. Direct expenses are directly identify like interest payment,
royalties paid to designer etc. Indirect expenses can not be identify directly its also called
overheads. Overhead are two types one is fixed and second is variables, that are directly effect
to production in resulting total revenue of firms are affected. The process of absorption costing
are recovering the total production overhead by absorbing. So that, it is concluded knowledge of
absorption cost is very important in order to achieve aim of manufacturing goods and services.
Through this, they are capable to reach economical of scale point in which firm are able to
produce low cost product with out compromising with quality of commodities.
Difference between marginal costing and absorption costing are as follows:
Basis Marginal costing Absorption costing
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 Production cost
 overheads
 profit concepts
 inventory evaluation
 Economic of scale
Only variable cost are show in
product cost.
Fixed cost are unchanged, it
can be unchanged with change
in product cost.
In marginal costing profit can
be measure as contribution,
contribution mean excess of
sales revenue over marginal
cost.
For inventories evaluation
both cost fixed and variable
are consider.
By proper utilisation of
resources has help to produce
low cost product. Through this
marginal cost of reduce.
Fixed and variable cost show
in product costs.
Fixed cost are treated as
product cost, it can change
with change in product cost.
In absorption costing profit
measure as difference between
sales revenue and total cost.
In absorption costing for
evaluation of inventories only
one cost can be consider that is
variable cost.
By this, firm are properly use
all available resources and
absorption cost should be same
of minimum low as compare to
marginal cost.
Calculating costing by using marginal cost technique and absorption cost technique.
Calculation as per Absorption costing.
Working notes:
Absorption costing
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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: In this 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 £ £
Sales 21000
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(-) 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)
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
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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
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
21000
(7800)
13200
3900
9300
10