Management Accounting Report: R.L. Maynard's Financial Strategies

This report delves into the core concepts of management accounting, examining its role in internal decision-making and financial strategy. The analysis begins with an overview of management accounting, differentiating it from financial accounting and highlighting its importance for internal stakeholders, particularly for a company like R.L. Maynard. The report then explores various management accounting systems, including financial accounting, cost accounting, job costing, batch costing, inventory management, price optimization, traditional cost accounting, throughput accounting, transfer pricing, and lean accounting. Furthermore, the report discusses different management accounting reporting methods such as sales reports, cost accounting reports, and budgetary reports. The report also includes a detailed examination of cost analysis techniques, focusing on the preparation of income statements using both marginal and absorption costing methods. Finally, the report investigates the advantages and disadvantages of different planning tools used for budgetary control and compares how organizations adapt their management accounting systems to respond to financial problems, providing a comprehensive overview of management accounting principles and practices.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explanation on management accounting and give essential requirements of different types
of management accounting.........................................................................................................1
P2 Explain different methods used for management accounting reporting................................4
TASK 2............................................................................................................................................5
P3 Calculate cost using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption cost............................................................................5
TASK 3............................................................................................................................................9
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control........................................................................................................................9
P5 Compare how organisation are adapting management accounting system to respond to
financial problems.....................................................................................................................14
CONCLUSION..............................................................................................................................16

ILLUSTRATION INDEX
Illustration 1: Income statement using marginal costing method....................................................6
Illustration 2: Income statement using absorption costing method.................................................7

INTRODUCTION
Management accounting is differed from financial accounting as it is used by the
management for the purpose of make prediction regard to future. It is used by the internal
stakeholders for which they can easily make their day to day operations so, that business function
run smoothly. The research project in the context of R.L. Maynard it runs their business with 50
employees and earn annual profit that is less than the £500,000. In this project report there is
mainly discussion on the management accounting and its essential that needed in the
management accounting system (Pipan and Czarniawska, 2010). Furthermore, there is an also
study on the different management accounting system such as lean accounting, cost accounting,
traditional cost accounting and throughput accounting that are mainly used in responding
financial problem. Thereafter, in the project there is a discussion on different costing method that
are used at the time of ascertained of income statement. The cost is identified with both costing
techniques are marginal and absorption costing. In ending portion there is also study on the
management accounting reporting techniques are the job costing reporting, sales report, budget
report and also cost accounting etc.
TASK 1
P1 Explanation on management accounting and give essential requirements of different types of
management accounting
Management accounting include information relating to financial as well as statistical to
the business managers that assist them to take day-to-day decision for the organisation. It can be
said that it is a short-term decision regard to managerial. Therefore, it is totally differed from
financial accounting as it is used for internal stakeholder that are really opposed to external
affairs stakeholder. The reports are generated periodically such as weekly, monthly for the each
department managers as well as chief executive officer (Burritt, Schaltegger and Zvezdov,
2011). The detail information include in it are the sale revenues, cash inflow, bills payable and
receivable and sales revenue etc. Thus, it is totally different from financial accounting in which
the information used for the purpose of making future decisions. The R.L. Maynard used
management accounting for internal used only and it gives essential requirement of various types
that are as follows-
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 Financial accounting system: Under this management accounting system, all financial
records of the organisation are identified such as profit and loss account, income
statement, cash and fund flow etc. Therefore, actual economic position of R.L. Maynard
is determined on which further decisions are made regarding profitability in the future
time (Shah, Malik and Malik, 2011). Moreover, it is also helpful for optimum allocation
of funds and further business operations more efficiently. Therefore, management of fund
can be done appropriately affect profit earning capability other business operations.
 Cost accounting system: It is one of the essential tool for cost effectiveness and
increasing sales revenue of R.L. Maynard. However, different ideas are generated for
reducing expenses and enhancing selling of products. Thus, cost accounting system is
beneficial for effective price determination and adequate expenses on business operations
(Zimmerman and Yahya-Zadeh, 2011).
 Job costing system: Under this system, expenses on menufacturing of products is
maintained affect further business operations and decision making on price
determination. In this regard, cost incurred on purchasing raw materials, labour and
additional overhead is set for business operations and proper management of entire
business activities efficiently.
 Batch costing system: In costing system, cost incurred on production and distribution of
goods and services is identified for expenses on business operations. It affects
productivity and profitability of R.L. Maynard and its market position (Elbashir, Collier
and Sutton, 2011). Therefore, batch costing system remain efficient for effective pricing
and monetary management of the enterprise systematically.
 Inventory management system: Management accountant of R.L. Maynard analyses
inventories and their management position affect liquidity position of entity. Therefore,
optimum utilization of resources and fund is possible by using this tool for further
business operations efficiently (Zimmerman and Yahya-Zadeh, 2011).
 Price optimization system: This management accounting system is beneficial at most
for optimization of price and economic management of R.L. Maynard properly.
Therefore, decisions are made regarding cost incurred on different business operations
and planning for further years effectively (Garrison and et.al., 2010).
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Traditional cost accounting- It can be define as a allocation of manufacturing expenses
which are incur in production process. The another name of this is a conventional method that
are assigning the factory's indirect expensed to the each items manufactured based upon the
production such as direct labour hours, number of units produced and production machine hours
etc. Thus, this method fail to assign the non-manufacturing expensed which are concern with
production items like administration overhead. The traditional cost accounting are used for the
external financial reports as it deliver cost of good sold value. The main advantage of these
accounting for the R.L. Maynard is that it can easily implement which gives one product.
Whereas, due to advancement of computer and machines this system in now outdated.
Throughput accounting- It is just simply accounting that are based upon the principle
on theory of constraints ( TOC). It is the most useful for the management for growth purpose and
decisions making process becomes simpler and its is to understandable for the people within the
organisation. It is totally different from the traditional cost accounting as the main aim is that to
maximize profit instead of minimize unit cost. The main advantage of throughput accounting is
to make managerial decisions that are growth-oriented. It also allows them to make report faster
and assist individuals in operations to know the basic accounting.
Transfer pricing- There is a set of rules of regulation that are formulated when any
organisation transfer any kind of movable and immovable goods or services across another
countries. Therefore, in the management accounting system in which there is a transaction to
another at that time transfer pricing is used to measure the cost. Thus, these prices are slightly
differ from market price as on of the entities like losses' transaction. It can be said in another
words in which they either purchase for higher than prevailing MP or selling at low market price
which directly impact on company performance. The rules that are formulated on transfer pricing
that are ensured business entities' fairness as well as accuracy. Therefore, in the financial
reporting document of an organisation which are closely monitored that useful at for the auditors
as well as regulators. Thus, it has an advantage is that it can be used by company to measure
performance of divisions.
Lean accounting- It is used by company to know the information on timely,
understandable and accurately etc. Therefore, it makes decisions faster that directly leads to
enhance customer value and profitability etc. The lean tools assist them to minimize the wastages
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through financial control. Thus, the data give the accurate timely information which are used by
sales people. Accountants, operations leader and improvement team etc. It does not needed the
complex system and transaction that are wasteful.
P2 Explain different methods used for management accounting reporting
There are various type of Management accounting reporting that are used by R.L.
Maynard that are discussed below-
 Sales report- Company record all this information that are related to sales of products or
services during a particular time period. It includes sales volume and expenses that are
incurred in selling as well as selling products. The sales report is used by company
manager for the purpose of check the salesperson performance in which it shows the time
spending in a sales activity. Apart from this, it also aids organisation for the purpose of
measuring company financial performance by comparing with the previous sales profit.
There is an also data include in sales report are the customer meeting, e-mails,
conversation, outbound calls and product demonstrate that are mainly generating in
daily, weekly and monthly basis. There are many purposes that are used by R.L. Maynard
is for the purpose of determining revenue for the future time period and also know the
growth opportunities to expand business.
 Cost accounting- It is that type of accounting in which there is recording, allocating,
collecting, analysing, classifying and evaluating used for the purpose of taking action to
control cost. It is used by management to make a most appropriate action on the
capability and cost efficiency(Burritt, Schaltegger and Zvezdov, 2011). It involve a
detailed information regard to cost through management control it current operations so,
they can easily make a plan for future. The usage of cost accounting is that to determine
the cost of process, products and project etc. for the purpose of reporting the actual and
accurate amount of financial statements. Thus, it also helps the management in decision-
making, planning and controlling the organisation. Furthermore, it is also helpful in
computing the operational and capital budgeting, variance analysis, transfer pricing,
standard costing and activity based costing etc.
 Budgetary report- The management used budget report to make comparison the actual
performance number attain over a some timing period. It is a kind of internal report that
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show the close budget performance with the actual performance in a accounting periods.
Usually budget are is designed that are based upon future projection and estimation
which are largely differ form the company actual financial performance of an
organisation. It has two purpose for which the managers used to correct issues that are
occurred within the firm to make performance by matching the financial goals in the
report of budget. Thus, the other purpose is to evaluating bow accurate and realistic its
prediction accordingly they adjust its0 next budget.
TASK 2
P3 Calculate cost using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption cost
Income statements show the company financial position in financial year it has been
categorised into two parts are the revenues on debit side and expenses in credit side. Therefore, it
can be also define as an operating as well as operating activities. It can be used to know the
company financial position in terms of net profit or net loss (Elbashir, Collier and Sutton, 2011).
Most of the organisation made income statements by adopting techniques either marginal costing
and absorption costing. R.L. Maynard adopt absorption costing for its advantages as it shows a
higher net profit as compared to the marginal costing. In the present scenario a cited company
needs to calculate cost for this they have to prepare income statement by adopting both methods
of costing are absorption and marginal.
TABLE 1-Income statement by adopting marginal costing:
In the marginal costing which means that total cost of production is either increment or
decrement. It only occurs when there is an addition unit of cost is produced. Thus, the calculation
based upon this method are as follows-
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TABLE 2- Income statement by adopting absorption costing:
In the absorption costing the cost are concern that are incurred in the manufacturing
process and it can be essential when the establish generating inventory valuation which are
mentioned in balance sheet as follows-
6
Illustration 1: Income statement using marginal costing method

Illustration 2: Income statement using absorption costing method
Interpretation: The above table 1 and table 2 that are discussed in which the net
profit/loss are to be calculated in income statement by adopting marginal and absorption costing.
It has been asserted that in table 1 there is a calculation of income statement that are based upon
the marginal costing in which there is a cost £12600 in a financial year. On contrast, in the Table
2 there is an income statement has been prepared in which the net profit is calculated that is
£9300 in the accounting period. Thus, in the marginal costing consider both variable expenses
that is £1800 and there is a fixed expense is £3300. Thereafter, in both costing method that are
used for the purpose of determining net profit or loss in which the table shows that absorption
cost shows higher profit than the marginal costing (Elbashir, Collier and Sutton, 2011). The net
profit is higher in absorption costing that is about £9300. Along with that, there is also a
difference in the total expenses in marginal costing method there is £8400 and in the absorption
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costing its is £5100. It has been asserted that in the absorption costing there is a less total
expenses than the marginal costing as it takes both fixed and variable expenses. It has been
occurred at the time of cost of production in these process it has been determines net profit or
loss that are varied from each other.
Several authors said that in the business condition it has been asserted in which the
organisation in which absorption costing technique is more beneficial for the purpose of
calculating net profit. It is due to as in these techniques there is a fixed as well as variable
expenses are to be taken at the time of determine validate and reliable data. Therefore, in the
absorption costing methods it shows a better financial position of an organisation in effective
manner.
Difference among Marginal and Absorption costing
Basis for comparison Marginal costing Absorption Costing
Meaning It is that type of accounting
system in which it does not
take the fixed overhead cost
and it ascertained the overall
cost of production that are
known as marginal costing
(Garrison and et.al., 2010).
Therefore, for the calculation
purpose only variable
overhead take that are arisen
within the firm. Whereas,
fixed cost of production are to
be taken as periodic expenses.
In the absorption costing
methods in which there is a
total cost are to be taken for
the purpose of measuring the
total cost of production are
called as absorption costing. In
the calculation is take both
type of cost are fixed and
variable expenses.
Cost recognition In the product cost only
variable expenses are to be
taken whereas for the periodic
cost it considers a fixed cost.
In the product cost it considers
both fixed and variable
expenses.
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Classification of overhead It will be categorise into two
fixed and variable cost
In these it has been classified
into administration, production
and selling & Distribution
Profitability In the marginal costing the
profitability can be measured
through profit-volume ratio
(Ward, 2012).
The profitability get affected
due to inclusion of fixed
expenses.
Cost per unit It does not influence the cost
per unit of output due to
variance in both closing and
opening stock.
It impacts the cost per unit of
there is any variation in the
closing and opening stock
Aim The main aim in these type of
marginal costing which are
used by internal member to
make the effective decisions
relating to the organisation.
The main objective of
absorption costing is that to
give information to the
external parties. Therefore, it
can effectively maintain the
business activities. Apart from
this, stock are managed
appropriately.
Highlights Contribution per unit (CPU) Net profit per unit ( NPU)
TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control
Budgetary control is that procedures in which actual results can be determined with
budgeted figures for the organisation in future time period. Thus, setting standard so, they make
comparison among actual performance with the budgeted figures to determine variances. It
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