Detailed Management Accounting Report for Imda Tech

This report provides a comprehensive analysis of management accounting principles and their application to Imda Tech, a company dealing in mobile chargers and electronic gadgets. It begins by defining management accounting and differentiating it from financial accounting, emphasizing its importance in decision-making and resource allocation. The report delves into various types of management accounting systems, including cost accounting, standard costing, normal costing, actual costing, and inventory management systems, highlighting their significance in cost control, pricing, and inventory optimization. The report also explores marginal costing and absorption costing, showcasing their roles in profit calculation and decision-making. Furthermore, it discusses budgeting processes and pricing strategies. Finally, the report touches upon the balance scorecard approach to performance evaluation and provides a conclusion summarizing the key findings. The report aims to offer insights into Imda Tech's financial strategies and operational efficiency.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION..........................................................................................................................3
TASK1.............................................................................................................................................3
A)............................................................................................................................................3
1. Management accounting and its differences financial accounting:....................................3
2.Importance of management accounting:.............................................................................4
B).Types of management accounting system: .......................................................................5
TASK.2............................................................................................................................................7
Income as per absorption and marginal costing:....................................................................7
TASK 3..........................................................................................................................................11
(a) Different types of budget................................................................................................11
(b) Process of preparing Budget...........................................................................................12
(c) Pricing Strategies............................................................................................................12
TASK 4 .........................................................................................................................................13
Balance score card approach................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the method which is used by the organisations in dealing with
the different types of the cost that gets incurred in the various activities of the firm. Management
accounting is a very essential element of the firm as because it helps in the making of the
decision and it also helps in identifying the financial resources that are required in the operations
of the organisation. With the help of the management accounting system the management team
of the organisation can be able to make several plans as well as strategies so that the operations
of the firm can be carried out in an effective manner (Angelakis,Theriouand Floropoulos,2010).
The issues that are regarding preparing the budgets can also be well planned with the help of it,
and the organisation's performances can also be enhanced with this. The risk factors that are
involved in the various activities of the firm can be very effectively managed in the firm and the
solutions can also be identified with the help of the management accounting systems.
Imda Tech Limited is dealing in the chargers of the mobiles and also in the different
electronic gadgets. The organisation is having the lack of financial resources to carry out its
operation, due to which the whole operation is getting hampered. Therefore the study will help in
understanding the various methods through which the firm can resolve the issues.
TASK1
A).
1. Management accounting and its differences between FA and MA:
Definition of MA:
Management accounting is the process of making reports and accounts which render adequate
and timely financial and statistical information needed by the managers to frame routine and
short term decisions. With the help of management accounting, Imda tech needs to operates their
operations in a better manner so the the objectives of the company can attained. Managerial
accounting is also known as the cost accounting. The main difference between managerial and
financial accounting is managerial accounting information is focused at assisting managers under
the cited firm to frame decisions, while on the other hands, financial accounting is entirely
focused at rendering information to the parties outside the firm.
Definition of FA:

Financial accounting is a particular branch of accounting which keeps track of firm's financial
transactions. With the help of standardized guidelines, the finance related translations are
recorded, summarized, and presented in a financial statement.
Difference between MA and FA:
There are basically few differences between management accounting and financial
accounting:
Basis of difference Management Accounting Financial Accounting
Aggregation MA reports at more defined
level.
FA reports on the outcome of
the whole business.
Efficiency It reports on more particularly
on what are the causing issues
and how to fix them.
FA reports on profitability of a
firm.
Proven information It frequently deals with the
forecasting instead of proven
and verifiable facts.
It needs that records to be held
in considerable precision, that
are required to be assured that
the financial statements are
correct.
Standards It does not need to comply any
of the standards while
reporting.
It needs to comply with so
many accounting standards in
order to make the business
sustainable.
2.Importance of management accounting:
Management accounting reports renders data driven inputs to these decisions, that could
enhance decision making. Managers could leverage this strong method to assist in making
business more successful and effective.
Relevant cost Analysis: Management accounting reports aids to the administration of the firm to
identify what are need to sold and how to sell it. For instance, a small entrepreneurs might be not

sure where they should concentrate his marketing efforts. For assessing this decisions, a manager
from accounts departments, could assess the costs which differ between advertising options for
each product, avoiding common cost. This procedure is called as the relevant cost analysis.
Make or Buy Analysis: The management information aids in making the manufacturing process
effective. For instance, an entrepreneur need to know about whether he needs to produce the item
or purchase from the supplier. The managers of the company needs to asssess the cost for
producing the cost so that they would know about whether there is a need to manufacture or need
to purchase.
B).Types of management accounting system:
Cost accounting systems: A cost accounting is said to be that framework used by the
company in order to determine cost of there product for evaluation of profitability, inventory
analysis and to control the extra cost those are incurred on the expenses.
Standard costing: It is one of the traditional cost accounting system under this cost of the
product is decided on the basis of historical costs (Baldvinsdottir, Mitchell and Nørreklit, 2010).
Normal costing: Under this costing actual prices are used in direct lobar and direct materials,
and only overhead cost are determine. In additional it also shows the various kinds of budgets for
better understanding about capital used by the organization to establish their business for smooth
running. In other words budgets are used for overall description of the amount is going to
invested in the company to acquire more and more profit with the help of appropriate balance
sheet which shows all the expenses incurred by the enterprise. Basically it also includes the
balance score card which is also consider as useful method or technique of management
accounting and job costing method by analysing the particular job of the employees. Under this
actual labour and costs are compared with the standard cost.
Actual costing: It is a method of setting the price of the product on the actual labour and cost
arises for making the product. Cost accounting: This bookkeeping framework is worried with the distinctive cost of the
items. With the assistance of this framework supervisors take different choices in regards
to the fund distribution. Subsequent to dissecting the diverse alternatives accessible with
the chiefs they pick the best reasonable one by contrasting it and the previous year
reports(Zimmerman and Yahya-Zadeh, 2011). Taken a toll bookkeeping likewise help in
keeping control over the distinctive cost of creation by keeping appropriate mind the

diverse components of the generation procedure. With the assistance of this framework
organization can take the choice of future extension too. All these are the useful
techniques used by the enterprises to set the price of the product. Managers of the Imda
tech can use these techniques in order to set the prices for their products and can create
proper revenue for them.
 Inventory management systems: Inventory management system is an tool of
management accounting system. Under this enterprises try to manage an optimum level
of inventory in order to minimising the cost or at the same time meeting all the demands
of the customers. stock alludes to the raw material kept in the business which will be
changed over into final products by processed them. It is critical to have great stock
administration framework so that circumstance of non accessibility of crude material can
be maintained a strategic distance from as this will prompt wastage of time and
furthermore loss of potential customers(Lukka and Modell, 2010). It is additionally
critical to stay away from the circumstance of abundance in the association so as to
maintain a strategic distance from the cost of capacity and upkeep which further is added
to the aggregate cost of the item. If an enterprises has its stock in a bulk that it will give
rise to the storage cost which indirectly increases the overall cost of the product. On the
other hand it the enterprise store small number of stock that that enterprise will fail to
meet the demands of the customers and this will hamper the goodwill or image of the
company. Some of the techniques are: EOQ: It is said to be that method used by the
company to keep the record of there stocks. The ideal order quantity of a company that
should related with cost of production and demand rate. LIFO: Under this method of
inventory system which is used by the company in order to make count of that stocks
which are last in and first out.
 Job costing systems: it is the another tool of management accounting. Under this
manager of the enterprises study the cost or benefit relate with the each job and managers
of the enterprises give much focuses on the job which are more beneficial for the
enterprise and delete the jobs who are not producing enough revenues for the enterprises
(Bodie, 2013). It is one of the effective tool and this helps in increasing the profit or

generate more revenues for the enterprise. Managers of the Imda tech can use this tool in
order to increase the overall effectiveness of their business operations.
 Price optimising systems: This method is used by the enterprises in order to set the prices
for their products. It is harmful for the enterprise to set a low or high price for the product
because this will not create proper revenues for the enterprise on the other hand high
price will not influence the customers to buy the product. So it is very important to set an
optimum price for the product which will give not only helps the enterprises in generating
proper revenues but also give value for mopey to the customers. Some of the price
optimising techniques are:
 Initial price optimising works according to the life cycle of products those are related
with grocery stores and other commodities.
 Promotional pricing is use to set temporary prices to spur sales of items with long term
durability of a product.
 Markdown pricing: It is use to sell short term product life cycle product those are subject
according to current trends.
TASK.2
Income as per absorption and marginal costing:
In order to calculate the net profit for Imda tech. Various techniques can be used. In order
to get the profit amount the company is calculating the net profit with the help of absorption
costing and marginal costing.
Marginal Costing: Marginal costing is the system in which the variable cost is charged against
the goods in order to write off the fixed cost a particular time period. This costing helps in the
decision making process by the mangers(Garrison and et. al.2010) . It is directly related to the
marginal which is effected by change in the total output (manaBurritt,and et. al., 2011). Marginal
cost is the change in the total cost due to a unit increase in the total output. With the help of
marginal costing the change in the total profit due to change in output is also calculated.

Marginal costing is a opportunity cost which arise the cost in the other product. it is a
additional cost at a each level that can be evaluated by the next product as well as unit. Basically
it is a variable cost which is charge according to the foxed cost and it is a alternative cost which
can be define the aggregate contribution in the company (Lukka,and Modell,2010). It is a
decision making process which is evaluated by the other cost of the product. It is a total cost of
the all fixed cost which can be arise when production level of the product are increase and it can
be include the additional cost which can help to evaluate the break even analysis. The margin
costing include the different elements that can be define the contribution in the company profit.
Marginal costing is all about emergence of opportunity cost due to the increases in a unit of
production which helps in understanding the accounting systems.
Apart from this marginal costing is the difference in between opportunity or chances
which may arises when there is a change in the quantity of the production due to change in all
the existing factors of the organization. In other words marginal costing is a reformation in total
cost due to the increase or decrease in one unit of output of the production process (Li,and et. al.,
2012) . Management accounting is the term which shows the overall description of numerical
terms with the help various appropriate methods and techniques to get accurate results. In fact
management of a accounting systems really need a specialised and skilled persons to organize
and control overall accounting systems of the organization. Imda tech is a one of the famous
multinational organization whose main motive is to manufacture a charger of mobile phones by
satisfying their domestic as well as foreign clients. Apart from this, this report also covers the
usage of absorption costing by explaining the role of marginal costing in the organization by
describing it in a efficient manner (Macintoshand Quattrone,2010). All the existing
environmental factors are very much influence the marginal costing because of their role in the
business and due to which a cited enterprise run their business effectively and efficiently.
Last but not the least marginal costing also plays a very eminent role in the management
accounting system because of their specific role in the production process. In fact it get affected
due to change in a unit of production.
Absorption Costing:- In the method of absorption costing all the different cost are absorbed in
the cost of the unit produced. Different costs can be direct or indirect(Davies and Crawford,

2011). Direct cost are the cost of raw material or cost of production indirect costs are cost of
labour,rent etc. All these costs are absorbed in the units produced Generally, these types of cost
are fixed or the unit cost which are required during the manufacturing process. These cost are
recovered from the selling price that means this initial cost are included in the selling price so
that these cost can be recovered. When a company manufacture a product it requires a lots of
resources to make it and the price of those resources are the absorption cost which can also be
called as direct cost. Cost of the raw materials in producing a product, transportation cost which
is required to bring any raw material or to send the final product, labour cost are some kind of
cost which fall in absorption cost. While allocating the absorption cost it is important that the
managers should make a list of all factors which are required for the manufacturing process. For
example, Imda wants to make a video so they should allocate budget for camera's, cameraman,
directors, production team, locations, lights, reflectors etc. While making the pricing strategy
they should add all the cost of these which comes in absorption costing.
Income statement on the basis of Absorption costing method:
Selling Price £35
Unit costs
Direct materials £8
Direct Labour £5
Variable Production overhead £2
Variable sales overhead £5.25
Budgeted production for the period is 3000
units
Fixed cost for a month:
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
Absorption costing
Working 1: Calculate full production cost
Direct material £8
Direct labour £5

Variable cost £2
Fixed cost £5
Total £20
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40000 500*20 = £10000
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £15000
Fixed overhead: £10000
Total £5000(under absorbed)
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed selling expenditure
Net loss
0
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
(375)
Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
Direct material 8

Direct labour 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing £ £
Sales
Less Variable costs
Opening stock
Manufacturing
Closing stock
Variable sales
Contribution
Less Fixed costs
Fixed Production expenses
Selling cost
Net loss
0
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
(2875)
TASK 3
(a) Different types of budget.
Budget can be defined as the financial planning which describe how the cash will flow
while carrying out the operations or business activities. There are different types of budget which
can be made. some of them are defined below:-
Cash Flow Budgets:- This type of budget shows a picture about the flow of the cash in a
organisation. In a business activities cash comes and goes in simple language we can say that
there is cash inflow and outflow (Davies,and Crawford, 2011). This budget is for a specific

period of time and through this a company can get to know its status of the money which are
coming and going in the market which is its advantage. They have the detailed information that
how much money is required for a certain task after projected the resources available to the
company.
Advantages and disadvantages of cash flow budget:
 This assist the management to concentrate their focus on an important matters which is
not proceeding as per the plan.
 This assists to enhance communication, great understanding and harmonious connection
among the employee. This assist to link the activities of entire department in Imda ltd.
 It aids in reducing the cost and profit maximization.
Disadvantages:
 It success based on cooperation or operation of staffs.
 It's is made on prediction.
 It's so much expensive to operate a budget.
 It might take higher time to attain.
Financial Budget:- This budget type are responsible for managing the income, expenses
and assets of the company. Allocation of this kind of budget is important because they are cover
almost all the expenditure of the company.
Operating Budget:- This is an assumptions that how much money will be required or
what all expenses will be there for a business task (Garrison,and et. al., 2010). It has various
elements for which budgeting is done that are labour cost, material cost, manufacturing cost and
managing cost. Depending upon the requirement of the company they can be prepared within a
month, week or for a year. They help a company in managing the initial cost or the cost which is
required in manufacturing the product.
Master Budget:- This budget helps a company in analysing the overall performance of
the company because in this all the factors are included which are required in a financial activity.
Factors like sales, operating expenses, assets and income are some which decides the goals and
targets of the company so they should be properly funded.
Static Budget:- Such kind of budget is fixed because these are the factors which is
compulsory for a business activity (DRURY,2013). For example a company is setting up budget