Galway Plc's Management Accounting Systems and Techniques

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Management accounting
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Table of Contents
Introduction......................................................................................................................................3
Scenario 1........................................................................................................................................4
Scenario 2........................................................................................................................................8
Conclusion.....................................................................................................................................18
Reference.......................................................................................................................................19
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Introduction
The management accounting is a way of information presentation which is critically analyzed by
the management of a company to make effective decisions in the company. Management
accounting is directly making an impact on the planning process of a company; a company can
easily plan their activities through management accounting. The problems can arise at any level
of business so it's important for a business to regularly monitor business activities to find out
financial problems and if a company find financial problems than they can easily solve those
problems with the help from management accounting tools and techniques. The Galway Plc
manufactures Company takes as a case study to briefly explain management accounting and
management accounting tools and techniques. Galway Plc manufactures is a British based
company and headquarter of the company is located in London. The Galway Plc manufactures is
specialized in the clothes selling, home products and food products.
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Scenario 1
The management accounting is enhancing the decision making the power of a company by
providing proper information to the management of a company. The management accounting is a
tool which is only used for the internal stakeholders of a company further they improve their
decisions through it. The financial accounting is always prepared in a structural way where on
the other hand, the management accounting cannot be regulated through any standards or laws of
accounting standards. the financial accounting is prepared a different statement to represent
financial data where on the other hand management accounting cannot prepare any statement to
show them but management accounting is prepared their financial reports to show organization
performance to the management of a company so that they can enhance their decision making
power. The management accounting is considered both monetary information as well as
nonmonetary information to improve decision making, the management accounting gather
financial information from financial statement of the company and nonfinancial information gets
from management and other sources of the business (Ismail, et. al., 2018).
These are some important characteristics of management accounting.
 Planning: the planning is always remaining an important task for a company so it's necessary for
a company to plan their activities properly so that they cannot waste their resources and save cost
for the firm. The information of management accounting is given proper guidance to a company
through which a company can easily make their important planning about the operations of the
business.
 Problem identification: the management accounting is critically examining different department
of the company than they critically examine the reports of department departments through
which they can easily identify problems that organization face.
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So the above-mentioned characteristics are briefly describing the importance of management
accounting in a company (Dabbicco, 2018).
The systems of management accounting are very crucial for a company because these systems
are collect monetary and non-monetary data from different sources of the business to measure
the performance of a company, so these are some important systems of management accounting
that can be seen in every company.
 Cost accounting system: the cost accounting system is a tool of profitability analysis in which a
company measures their actual cost of production than compare that cost with revenue of the
company to analyze the overall profitability of the company. The systems of cost accounting are
quite useful for a company to record all the cost data of a company, the cost accounting systems
consist two costing systems such as job order costing and process costing; these two are
important components of management accounting.
 Inventory management system: the inventory management system is a tool which is keeping a
track record on the sales, orders, and deliveries of the company. The inventory management
system is very important for the manufacturing sector because the inventory management system
is helpful in work order creating and payments of the bill. The inventory management system is
helpful in the production process because this system is demand inventory from production
department as per the requirements of the market which is reducing the burden of extra cost from
the company (Dabbicco, 2018).
 Job order costing system: the job order costing system is a tool of calculating the cost of a job in
which this system calculates the cost for each job in the production department which is quite
useful for knowing the actual cost of production of each product. The job order costing system is
useful for specific unique product production because it's quite difficult for a company to
calculate the separate cost for each product so they use this system to calculate the cost.
 Price optimization system: the price optimization system calculates the cost of a product but the
main task of this system is not to calculate the cost of each product but to measure price
variations of the demand of a product in the market. This system is quite useful for a company
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because through this system a company can set the price of their product according to the
demand of the market (Ismail, et. al., 2018).
So these are some important systems of management accounting which is quite useful for a
company to take an important decision in the company.
The reports of the management accounting are based on the data that management accounting
collect from different sources, so these reports also play an important role in the growth and
development of the company so the below-mentioned points are summarized important reports
of the management accounting.
 Budget report: the budget reports contain the upcoming expenses and revenue of the company in
which they estimate the revenue receipts as well as payment that the company made to the
supplier of the company. The budget report compares past budgets reports of the company so
that they can easily make present budget reports. The budget reports save the extra cost of the
company through proper allocation of resources to each department which again reduces extra
cost burden from the company (Baker, 2018).
 Performance report: A performance report is a report of the company in which the company
performance over the period is written. This report is helpful for the company when they want to
raise money from the outside by showing or presenting the performance report to the authority
because the performance report of the organization contained the entire organizational
performance whether related with the company financial or non-financial performance. To
evaluate the company performance some standard is set to that result are can be compared with
the standard. This will help in finding whether the company is doing well or need any
improvement.
There are various financial reports for the business which shows the company financial
performance over the year as such income statement, cash-flow statement and balance sheet.
These reports are related to the company performance and these are important documents
because they contained company overall performance.
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There are so many advantages of management accounting that hep Galway Plc manufactures
company in order to sustainable success (Baker, 2018).
 Enhance efficiency
 Increase profitability
 Help to resolve financial issues
 Determine and evolution of performance
 Help in the decision-making process
 Help to divide the fiscal documents into small parts
 Manage and control capital rotation
Management of the Galway Plc manufactures company attains business key and other targets
only when the company have clear vision and mission and possess the ability to take a good
decision even in the worst situation on a quick basis, only done if properly execute them within
the organization.
Accounting system and accounting reporting of management are interrelated and interlink with
each other due to company’s accounts are reported in a document known as financial reports
which included three most important reports that show company financial position and strength
in terms of financially. Before conveying or transfer the organization performance report to the
higher authority of the company it must be compared with budgeting tools (Rinaldi, et. al.,
2018).
It acts as a bridge among the managers and decisions as it helps in providing accurate and
reliable information. The accounting system of the Galway Plc manufactures present company's
documents and these compiled and produced in a well-defined manner by the use of management
accounting system. This is useful for the company as well as the shareholders (internal and
external).
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Scenario 2
Production of units:
Particulars May June
Sales (Units) 300 500
Production (Units) 500 380
Opening Stock (Units) - 200
Closing Stock (Units) 200 80
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Cost Sheet as per Absorption Costing:
Particulars
May June
Amount
($)
cost
pu
Amount
($)
cost
pu
Direct Material 4,000 8 3,040 8
Direct labour 2,500 5 1,900 5
Prime Cost 6,500 13 4,940 13
Variable Production Overheads 1,500 3 1,140 3
Fixed Production Overheads 5,000 10 3,800 10
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Factory Cost 13,000 26 9,880 26
Fixed Admin Overheads 2,000 4 2,000 5.26
Cost of Production 15,000 30 11,880 31.26
Add: Opening Stock - 30 6,253 31.26
Less: Closing Stock 6,000 30 2,501 31.26
Cost of Goods Sold 9,000 30 15,632 31.26
Over/Under Absorption of Overheads (1,000) (3.33) 200 0.40
Fixed Selling Costs 4,000 13.33 4,000 8.00
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Sales Commission 750 2.50 1,250 2.50
Cost of Sales 12,750 42.50 21,082 42.16
Profit 2,250 7.50 3,918 7.84
Sales 15,000 50 25,000 50
Absorption rate:
Particulars Amount
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(£)
Budgeted overheads 4,000
The normal level of Activity 400
Absorption rate 10
Cost Sheet as per Marginal
Costing:
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