Management Accounting Report: Imda Tech Financial Performance Analysis

This report provides a comprehensive analysis of management accounting principles applied to Imda Tech, a UK-based charger and gadgets company. It begins with an introduction to management accounting, emphasizing its role in financial record-keeping, performance evaluation, and decision-making, particularly for internal stakeholders. Task 1 explores the functions of management accounting and its importance in decision-making for department managers, differentiating it from financial accounting. It also examines various types of management accounting systems, including cost accounting, inventory management, job costing, and price optimization, and their applications. Task 2 focuses on absorption and marginal costing methods, applying them to Imda Tech's financial data to determine production costs, inventory valuation, and profitability. The report includes detailed calculations and comparisons of both methods. Task 3 delves into planning tools, specifically budgeting, exploring different types of budgets, their advantages and disadvantages, and the budget preparation process. It also addresses pricing strategies. Finally, the report examines how management accounting, using the Balance Score Card method, can be used to identify and respond to financial problems, improve financial governance, and develop effective strategies for Imda Tech. The report concludes with a summary of key findings and recommendations.

Management Accounting

Table of Contents
Management Accounting.................................................................................................................1
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
(A) Functions of management accounting..................................................................................3
(B) Different types of management accounting and their usage by departments to improve
their reports.................................................................................................................................5
TASK 2............................................................................................................................................6
Absorption costing......................................................................................................................7
TASK 3..........................................................................................................................................10
Planning tools............................................................................................................................10
(A) Types of budget and their advantages and disadvantages..................................................10
(B) Process of preparing budgets .............................................................................................11
(C)Pricing strategies: ................................................................................................................12
Management accounting to respond to financial problems by using Balance Score Card
method.......................................................................................................................................13
(1) How it can be used to identify and respond to financial problems.....................................14
(2) Improve financial governance and development of effective strategies...........................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is the method and technique to maintain the financial records
and statements of the company that help to identify and determine actual performance and
financial capability and skills of the company to invest money in the market and developing
business process. Management accounting help to achieve the decided targets and goals of the
company. Financial statements and records through easy to determine financial capability of the
company and employees are easy to take better and effective decision regarding company.
Management accounting in maintain the records only internal transactions of the business not
mention external transactions or public transactions. There is not require any formate to maintain
the records and prepare the financial statements(Baldvinsdottir, 2010). Imda Tech is the charger
and gadgets company in UK there is not provide financial informations to their employees in the
company so employees are not capable to take decision and not properly understand financial
status and position of the company. So company's mangers are want to provide all financial
information to the employees and provide them financial statements so employees are increase
their understanding level regarding company in the financial terms and take better and effective
decision (Ward, 2012).
TASK 1
(A) Functions of management accounting
 Definitions of management accounting-
Management accounting is the systematic method of managing overall accounting system
of a Imda technology for appropriate estimation of a cost and capital which occurred in the
organization. Basically management accounting is all about controlling and regulating of all the
financial issues happens in the cited enterprise which means it is a effective source of a acquiring
data and information related to finance(Mitchell, 2010). Apart from this management accounting
is all about controlling of a capital invested in the company by analysing all the relevant facts
and figures with the useful data and information by adopting effective techniques and methods.
In other words management accounting is a method of calculating accurate profits and losses by
considering available assets and liability of the cited organization(Nørreklit, 2010). Last but not
the least it is a appropriate method of identifying the losses faced by the organization by
analysing all the relevant factors essential in a management accounting.

Management accounting and financial accounting both are different from each other in
every aspect due to their different role and responsibility towards organization. In fact both are
very much indispensable for proper functioning of a management to control extra and wastage
fund which might be occur in the organization(Bodie, 2013).
Here is the some useful difference in between management accounting and financial
accounting.
Management accounting Financial accounting
Management accounting is the term which
manage overall monetary terms which
occurred in the organization. It means the main
aim of the management accounting is to
provide appropriate information and data to the
organization.
Whereas financial accounting is all about
overall description of a financial statements of
the organization with the help of effective
income statement.
Management accounting is mainly control and
regulate by the managers or accountants
Whereas financial accounting requires a
specialised person and experience persons to
control or regulate all the financial activities.
Decisions of a management accounting is
mainly depend upon the guess or estimation
because most of the managers don't have much
time to calculate accurate numbers.
Whereas financial accounting is very precise
and up to dated because overall cost estimation
and accurate profit is very indispensable to
know.
Management accounting don't need to analyse
past data because managers are take decision
on the bases of present scenario
Whereas decision of financial accounting is
taken by considering all the past data and
information for effective and useful decision
(Cinquini and Tenucci, 2010).
 Importance of management accounting information as a decision making tool for
department managers
Management accounting is very much important and plays a very vital role in the
organization while decision making process for mangers because it provides effective data and
accurate information which might be very useful. Decision making is a very big responsibility
because all the activities are depended on the decision of managers so management accounting

acts a very useful tool. Apart from this management accounting helps in identifying the hidden
problems and shows the effective method to overcome all the obstacles which comes while
decision making process. In fact decision making process requires a experience managers and
specialised persons because it is a very complex duty for which knowledge skills is very much
important.
Last but not the least management accounting shows the overall description or usage of
capital in the organization for effective decision by considering all the facts and figures. In other
words management accounting act as a very mandatory part in decision making process for all
the managers of different departments because it provides a accurate information and evidences.
At the end it also plays a very eminent role in the cited organization because of their usefulness
and positive results.
(B) Different types of management accounting and their usage by departments to improve
their reports
 Cost accounting systems(actual, normal and standard costing) :- Cost accounting systems
is the appropriate method or techniques of determining all the relevant cost which might
be occur while performing all the activities in the organization. The main and foremost
motive of the cost accounting system is to determine overall cost incurred in the
organization to calculate the actual profit and loses earned by the enterprise. In fact this
systems is very helpful in describing the expenses faced by the enterprise with the help of
particular useful method.
 Inventory management systems:- Inventory management systems is the term which
shows the overall management of the inventory by determining past and present stock to
avoid extra wastage. Apart from this inventory management controls the extra
manufacturing of a product by considering demand of a product. A cited organization
need to analyse the product demand by proper evaluation of a overall market for effective
management of the inventory by controlling extra stock. In additional inventory
management is a systematic computerised method of getting aware about the demand of a
product in the market.
 Job costing systems :- Job costing systems is mainly used to determine the overall cost
incurred in the production of a particular product. Mainly job costing method is applied
by most of the organization just because of their quality of determining all the actual cost

occurred in the organization while manufacturing a product. In fact job costing method
shows the actual cost incurred while performing a particular job to complete a particular
task and activities.
 Price optimising systems :- Price optimisation is a mathematical techniques of analysing
price of the product by determining the reaction of a customers towards particular price.
In fact price optimising systems is mainly invented to identify the actual price of the
product by considering all the relevant expenses which might be occurred while
manufacturing a product. Apart from this, this method is used to understand the profit
earned by the organization by introduction of product in the market according to the
customers opinion by meeting their needs and wants. In fact the main motive of this
system is to acquire appropriate data and information to predict the behaviour of the
buyers towards particular price decided by the organization.
TASK 2
Imda Tech (UK) Limited commenced business on 1 September 2010 producing special charger
for mobile telephone and other carry-on gadgets, the cost card of which is as follows:
£
Direct labour 5.00
Direct material 8.00
Variable production overhead 2.00
Fixed Production Overhead 5.00
Standard Production cost £ 20.00
The fixed production overhead figure has been calculated on the basis of a budgeted normal
output of 36,000 units per annum. The fixed production overhead incurred in September was
£15,000 each month.

Selling, distribution and administration expenses are:
Fixed £10000 per month
Variable 15% of the sales value
The selling price per unit is £35 and the number of units produced and sold were:
September (Units)
Production 2000
Sales 1500
Absorption costing
Fixed cost for month are give under the below:
Budgeted cost Actual cost
Production overhead £15000 £15000
Administration cost £10000 £10000
Working note 1.
Apportioned of fix cost per unit
£25000/2000= 12.5 per unit
Working note 2.
Calculation of production cost.
Direct material £8
Direct labour £5
Variable cost £2
Prime cost £15

Fixed cost £12.5
Total £ 27.5
Working note 3.
Calculate value of inventory and production
Opening inventory Production Closing inventory
Nil 2000*27.5= £55000 500*27.5= £13750
Working note 4.
Actual fixed production £25000
Fixed overhead £25000
Total Nil
Net profit using absorption cost:
Sales £52500(1500*35)
(-) cost of sales:
Opening inventory 0
Production £55000
Closing inventory ( £13750)
Total cost 41250
Net profit £27500
Absorption costing method through calculate the production cost at per unit, total cost of the
company is £ 27.5, closing inventory of the company is £13750 also calculate and determine the
net profit of the company in this year is £27500 this method help to identify financial position of
the company and help to take better and effective decision by the employees.

Marginal costing methods
Working note 1.
Calculate variable production cost
Direct material £ 8
Direct labour £ 5
Variable production cost £ 2
Total cost £ 15
Working note 2.
Opening inventory Production Closing inventory
nil 2000*15=30000 500*15=7500
Net profit using marginal costing
Sales £ 52500
Less variable cost
Opening inventory
Production 30000
Closing inventory -2500 -22250
Variable sales -10500
Contribution 12000
Less fixed cost
Fixed production overhead 10000
Selling and admin cost 10000 -12000
Net profit nil

Marginal costing method through determine fixed costa and variable cost of the company there
are total variable production cost of the company is £ 15 and closing inventory is 7500 and sales
of the company is £52500. By using this method help to determine variable sales is ( 10500) and
contribution of the company is 12000.
Absorption Method Marginal Method
Absorption method through calculate the
production cost and inventory cost, variable
and fixed cost of the company.
Marginal costing using for to determine and
calculate the production cost and inventory
calculation, there is only including variable
cost of the company.
Absorption costing methods is refers to cost
centre is help to determine total of production
cost of the company.
Marginal costing method refers to ascertaining
the total cost of production of the company.
In this method overheads are mainly divided of
the company is three parts products overhead,
administration and last one is distribution
overheads.
But in the marginal costing method in
overheads of the company is divided into two
parts that is fixed and variable overheads.
In this method variances of the company in the
closing and opening stock affecting of the total
cost per unit of the company.
In the marginal cost method variances in the
closing and opening stock of the company
doest not affecting on cost per unit of the
company.
Absorption method is mainly using for
determine the contribution of the company.
Through the marginal costing method calculate
the net profit of the company.
In this method measure and determine the
profit of the company so there are using the
gross margin.
There is measuring the profit of the company
so there are using the contribution margin.

TASK 3
Planning tools
(A) Types of budget and their advantages and disadvantages
Budget is the term which shows the overall analysis of the capital used by the
organization to perform all the activities and task of the Imda technology by considering all the
expenses incurred in the enterprises (van der Steen, 2011).
Various types of budgets are:-
 Zero based budget :- Zero based budget is mainly started from zero which means this
budget is not going to consider the previous budgets while preparing budget for next
year. In fact this budget is a fresh and new budget because it does not show any facts and
figures of previous years.
 Master Budget: It is the main budget or the combination of all the budget which
includes the financial activity of the business that has to be performed in the next coming
year.
1. Advantage : It help in the estimation of the total finance need to be used in a year.
2. Limitation to this is misinterpretation can leads to dis balance of the company
performance.
 Operating Budget : It refers to the company income and the expenses which are
company using at the time of production of the goods and services . It is based on the cost
of labour,overhead and the sales.
1. Advantage : It will provide the knowledge and information about the daily expense done
by the company.
2. Disadvantages It has some difficulties that all the expense are not recorded.
 Cash flow budget : It simply used to know about the different activity of the business
were they are investing and how much they are earning for those activities.
1. Advantages to this is to get the cash and cash equivalent information from all the
activity.
2. Limitation : It can be very time consuming while creating cash budget.
 Production budget : It calculate the number of unit product that can be manufactured.
1. Advantages : To help in managing the inventory for long duration.

2. Disadvantages :sometime there is no control on the cost incurred in budget.
(B) Process of preparing budgets
Budget process is a appropriate method of preparing a effective budget created by the
government and approved for overall country to achieve their organization goals and objectives.
In fact budget process is a systematic procedure of preparing a effective budget with the help of
useful information and data by analysing all the facts and figures with the use of effective
techniques and methods (Soin and Collier, 2013). Budget is not an easy task as it requires a
experienced person and specialised members for effective implementation of budgets by getting
approval of central and state government by following appropriate procedure. The first and
foremost step in the budget process is to prepare a worksheet by financial service department to
prepare a budget by appropriate estimation. After that second step is to conduct a proper meeting
of all the mangers just to discuss the plans and present in front of them by explaining them
overall plan and cost of the budget to take effective decision. Third step is handled and regulate
by the managers which means they work with financial service department for appropriate
estimation of cost of the overall budget by considering all the facts and figures for upcoming
year.
In fourth step overall budget prepared by the managers is presented and shown to their
executive officers for review or suggest any changes if there is a need of reforms in the budget
plan to get approval. Second last step of preparation of budget is that managers is going to
discuss their budget requirements with their administrative officer for more suggestion if there is
a need of any adjustments (Simons, 2013). At the end budget may be implemented by getting
approval from all the officers and do specific changes or reforms if there is a need of reforms by
considering all the necessary facts and figures. The main motive of the budget is to covers all the
rules and regulation for all the departments of the country. Apart from this if there is a budget
preparation for a cited organization then also these above procedure must be followed to remove
errors and mistakes which might be come while preparing of budgets.
(C)Pricing strategies:
Pricing is the important element to sale products and goods in the market. Price of the
products are decided by the company's head by using m,any methods and strategies. Always
prices are decided with cost of the production as well as profit. To earn the profits company are
always using effective and suitable methods that help to achieve goals and objectives of the