Management Accounting: Good Clothing Ltd - A Comprehensive Analysis

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MANAGEMENT ACCOUNTING
GOOD CLOTHING LTD

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TABLE OF CONTENTS
INTRODUCTION ................................................................................................................... 3
TASK 1 - MANAGEMENT ACCOUNTING SYSTEMS ......................................... 4
TASK 2 - MANAGEMENT ACCOUNTING TECHNIQUES .............................. 16
MARGINAL COST ........................................................................................................... 16
ABSORPTION COST ...................................................................................................... 16
CALCULATION OF COST USING MARGINAL COST AND
ABSORPTION COST ...................................................................................................... 16
FORECASTED INCOME STATEMENT ................................................................ 18
FORECASTED BALANCE SHEET ............................................................................... 19
VARIANCE .......................................................................................................................... 21
RATIO ANALYSIS ........................................................................................................... 22
TASK 3 - PLANNING TOOLS USED IN MANAGEMENT ACCOUNTING
....................................................................................................................................................... 25
BUDGET ............................................................................................................................... 25
BUDGETING CONTROL .............................................................................................. 25
TYPES OF PLANNING TOOL FOR BUDGETING CONTROL ................... 26
PLANNING TOOLS FOR GOODS CLOTHING’S LTD. ................................... 27
TASK 4 - USE OF MANAGEMENT ACCOUNTING FOR RESPONDING TO
FINANCIAL PROBLEMS ................................................................................................. 29

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INTRODUCTION
Good clothing ltd. is a medium-sized firm which is engaged in the manufacturing of clothing
majorly for the independent and emerging designers. As a junior management accountant, I
am provided with the responsibility of preparing regular management accounts which would be
sufficient in providing the information about the performance of the organization. Therefore,
this assignment has been focused on gaining a detailed understanding of management
accounting and also applies the same to the wide business environment within which the firm
operates. A detailed analysis would be conducted for analyzing how management accounting
makes use of the financial data for facilitating the decision making and controlling the finances
within the organization.

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TASK 1
Slide 1

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Slide 2

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Slide 3
This presentation would be presented by me as a junior management consultant. This
presentation would also be aimed at covering the various aspects of management accounting
and the various reporting methods which are used by the organizations.

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Slide 4
The good clothing Ltd. is a intermediate size clothing manufacturing company which has been
established in Wickford Essex with a minimum capital seven years ago. The organization has
been especially established for the designers. The organization has an immense need of
preparing the management reports for analyzing the efficiency of business operations.

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Slide 5
Management accounting can be defined as a process of preparing the management report and
interpreting the information provided in reports for ensuring that efficient short term decisions
can be made by the organization. The management accounting reports are highly efficient in
providing detailed information about the various important factors such as sales, account
payable and receivable and others which should be considered in the decision making process.

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Slide 6
Management accounting system has been defined as a system which is capable of providing
accurate and timely information to the business organization. This information is beneficial for
the organization in controlling the costs, measuring and improving the productivity and also
devising a well-defined and efficient production process. This system should be capable of
providing accurate costs for ensuring that the firm can take appropriate pricing decisions and
new product launch decisions.

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Slide 7
Cost Accounting Systems – this is a very useful framework which is being established by the
companies for determining the cost of their products. This is further beneficial in determining
the cost of products and undertaking a profitability analysis.
Inventory management - It is the component of supply chain management of an organization,
which helps in analysis and supervision of the stock items possessed by the company.
Job costing system- this form of management accounting system is used for assigning individual
cost components for a particular unit of product.
Price optimization system- this is a very efficient method of determining the demand pattern of
the products with regards to the changes in price. This also helps in determining the price levels
at which the organization can earn the desired profits.

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Slide 8
It is of crucial importance for the organizations to ensure that they integrate the management
accounting systems within their operations. This would be helpful in ensuring that the
management can exercise control over the allocation of resources and also on the coordination
of activities and communication amongst teams.

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Slide 9
Job costing reports- these reports are being prepared in accounting for tracking the cost
incurred and revenues earned from a particular job. This reporting practice ensures that a
standard reporting practice has been adopted for reporting the profitability from a particular
job.
Budget reports- the budget reports are the management reports which are being prepared
internally by the management for comparing the estimated performance with the actual
performance.
Inventory Reports- the inventory report is being prepared with the objective of providing the
summary of the items which are being possessed by the organization at any given point of time.
Performance reports- the performance report is being prepared by the management with the
objective of defining the extent of success of a particular activity during a given time frame.