Management Accounting Report: Financial Analysis of Jaguar Land Rover

This report delves into the realm of management accounting, specifically examining its application within Jaguar Land Rover. It begins with an introduction to management accounting, emphasizing its role in evaluating business operations and supporting decision-making. The report then explores the requirements and various types of management accounting systems, including cost accounting, inventory management, and job costing systems, as well as the benefits these systems provide. Different methods of management accounting reporting are discussed, such as budget reports, account receivable reports, and performance reports. The report also includes a critical evaluation of management accounting systems and reporting. Furthermore, it outlines and analyzes management accounting techniques like marginal costing and absorption costing, along with illustrative calculations for both. The report utilizes financial data to analyze costs and profitability, providing insights into Jaguar Land Rover's financial strategies and performance.

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting is the process to evaluate and analyse of operations of business
and all statement and report that helps to making decision for achieve goal. (Kaplan and
Atkinson, 2015). On the bases of financial books, records and documents, management can take
short term and long term decision. This accounting helps to perform all its functions including
planing, organizing, staffing, directing and controlling.
This report will includes study about Jaguar land rover and it is a British multinational
automotive company. The founder of this company is TATA motors. That founded in 2008 and
provide products like luxury vehicles and sport utility vehicle. This report will be highlighted to
requirement of management accounting and different types of accounting system. Further, it also
includes the method of accounting that managers use in organization. It will involves income
statement. Furthermore, it will include advantage and disadvantage of different types of planing
tools used for budgetary control and way of organizations are adapting.
MAIN BODY
P1. Requirement and types of management accounting.
Management accounting prepare and provide information about all business condition
and situation through financial statement and records to business managers' and they use to all
informations and data to making decision and organization, so they easily achieve goal and meet
objective. It is a process that helps to make the internal and external decision in organization. It
also helpful to inventory evaluation, planing, evaluation about new products and solve to
financial problems that provide helps to organization for long term growth. The application of
this accounting, managers of Jaguar organization reduce risk and expenditure through the
operations of business.
Management accounting system
This system of accounting helps to raise the productivity and reach to higher profitability with
increasing market share (Maas, Schaltegger and Crutzen, 2016). These things help in increase to
business and growth in the future. Mangers of organization making effective and efficient
decision in organization.
Cost accounting system :- It is a tool that use by Jaguar for estimating the cost of their
product for analysing to revenue. This system is used by manufactures for recording the
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production activities that use perpetual inventory system. It is a better method to understand the
differentiation between fixed and variable cost. Cost that remain same from one period to
another so that is called fixed. If cost of production change with quality and quantity of product
so that is called variable. Through this system management of organization also easily calculate
to cost of production according to different department (What is a Cost Accounting System?,
2019). There so Many types of elements include in this system like direct and indirect labour and
overhead. Jaguar can easily analyse the work in progress, ready goods to make financial
statement.
Inventory management system :- This system accounting used by Jaguar to tracking of
good, sales and deliveries of product so that helps in reducing delay of delivery. Organization get
helps to track products and material from production to warehouse and from storage to delivery.
It includes first in first out, last in first out, just in time method and weighted average method.
Management also get helps to making decision regarding ordering and managing production.
It can be so much challenging for managing the inventory in proper manner because it helps the
Jaguar for maintaining the process of inventory in a proper manner.
LIFO
It is a method which used for the inventory of accounting of Jaguar. It is only used in the UK and
also governed by the basically accepted accounting principles.
FIFO
This word stands for the first-in, first-out which basically refers to the inventory items which has
been recorded for selling first.
AVCO
This is inventory method which is based on the average cost of the inventory during the time. It
is computed for dividing the cost of goods in the number of goods in inventory at any of time.
It has assessed from the evaluation that, in the context of business unit, inventory
management system is highly essential. Moreover, it provides better view regarding stock’s
value and thereby assists in making appropriate assessment about profitability aspects. Further,
FIFO method facilitates better management of stock and reduces the risk of obsoletion. In
addition to this, inventory management system such EOQ, JIT etc are highly significant which
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clearly entails time when order should be placed for stock. By using such system profitability can
be enhanced by reducing the cost of ordering and holding.
Job costing system:- it is a type of accounting that use by Jaguar when they produce
products according to order of customers. Each product considered a job and it records and track
by job the cost of producing each job. It includes raw material, labour and overhead (Quattrone,
2016). It also focuses on accumulating cost to each individual unit of production. This system
using by Jaguar to keep record in systematic and in effective manner.
Price optimization system :- Jaguar use to this system for track response of customer
with different prices of different product. This system helps to achieve goal and meet to objective
through maximizing profit. Customer change their behaviour toward change in price. Jaguar
evaluates customer behavior through demand and supply of product, and then they set price of
product that affordable by customers and this system also increase demand.
Benefits of management accounting system.
This accounting is beneficial for Jaguar because it measures actual performance in
comparison with pre determined budgets. This system by management to making effective plan
and make decision about future on the bases of present statement. This also helpful in raising the
productivity and profitability for growth of economies. Market share increasing due to this
accounting system and it is a very better application for managers to make effective plan and
budget.
P2. Different methods of management accounting reporting.
Management accounting report is a tool that Jaguar using it to evaluate and understanding
of the business with utmost accuracy and efficiency. This statement also provide accurate
information and data to management of organization and these strategies is helpful in making the
accurate decision for achieving the goals and objectives. Report is very helpful and essential for
CEO, owners, investors and other stakeholders.
Budget report :- It is a tool that considered different types of budget and estimate of
Jaguar at any given time. Managers evaluate and analyse past performance and profit with given
budget. It helpful in make decision and budget for future that raise profit. This report use by
management for evaluation of actual results of a business to pre established budget and analyse
gap to take necessary action (Dekker, 2016). It is an estimation of revenue and cost for particular
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period. Management using this report and achieve goal of organization through raise
profitability.
Account receivable report :- it refers that considered to all unpaid customer list and
unused credit memos by data ranges. Management of Jaguar evaluate financial health of
customers. If this report shows company's receivables and that are being collected much slower
so it provides warning sign to business and organizational credit risk increasing. It is the assets of
Jaguar because it keeps record about all customers who owe money.
Cost report :- Cost report is a financial report that analyse the cost and charges related to
each activity, products, services, projects and processes. This report helpful in control to cost in
an effective and efficient manner. The types of income and expenses which includes in the report
so management use to this report in the process of making decision. Manager computes all cost
like material, overhead, labour and other cost. Than this can be divided totals by the amount of
products produced.
Performance report :- This report use by Jaguar and it helpful to evaluate work of an
individual in organization. It provides all information and data about operation efficiency and
also provide clear pictures of operation of Jaguar. Stakeholders get accurate data and information
to making decision about invest their capital. Outsiders of organization can easily evaluate profit
of current year. Management evaluate to performance report and observe any loophole, so they
also make strategies to improve and develop action for increasing profitability and productivity.
Inventory and manufacturing report :- Management of Jaguar using to this accounting
reports and it makes the manufacturing process more effective. It contains all types of data and
information related to inventory and manufacturing (van Helden and Uddin, 2016). It also
includes items such as wastage of products, hourly labour costs or per unit overhead cost. By this
report, organization get helps in making decision and eliminate waste of hours by labour and
wastage of raw material according to per unit of product because it put effect on profit of
organization.
Sales report :- This report is useful for management accounting because it includes all
revenue through sales of product. Jaguar sale their product through retailer and wholesaler and
then evaluate and analyse that which activities earn the more income. Managers make strategies
about action for motivate to members and employees of organization through provide bonus,
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rewards and incentives. They do and operate work with full efforts and increasing sales and
profit.
Critically evaluate management accounting system and reporting .
Management accounting system is very essential for managers in Jaguar to measure
actual performance with budget. Through this system, management make decision to increasing
profit and productivity. So efficiency of business also increase and customers get quality services
and products. This system also control, to business in effective manner because if labour do
wastage of material and time so managers control to them and evaluate performance time to
time, It negatives aspect that management accounting system has futuristic nature and it provides
data and information for purpose of planing, decision-making and forecasting of future so future
is uncertain and it not necessary that plan of management can give expected results. This process
is also very costly because it consumes huge cost and time.
Management accounting reporting is very effective tools that helps in business with
accurate and efficient data and information. Stakeholders evaluate report and get ideas about
investment in organization (Tappura, 2015). It provides many types of reports like budget,
account receivable, performance etc. performance of employees is regulated and controlled. Its
negative aspect that it is an expensive method because management of organization has to make
many rules and regulation. It makes report on the basis of gathered data so its accuracy and
reliability depends on the effectiveness of cost and financial accounting.
P3Management accounting techniques.
Marginal costing :-
These techniques help to evaluate the variations in the total cost with the change in the
production. This costing is useful for management of Jaguar in determining the extra cost while
producing extra unit of product.
Advantage :-
It is a simple and understandable costing method and this toll use by managers of organization to
making plan about profitability.
Disadvantage:-
It is very difficult because it does not contain all variables so management has to face difficulty
while making decision.
Absorption costing :-
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This costing is related to the manufacturing process and it includes direct and indirect cost.
Advantage :-
This costing is effective for organization because it does not more fluctuate in profit margins.
Disadvantage:-
It is not useful in operations of the business and profit affected by production volumes.
AnnexA:
Question 1:
Calculation of the cost of table as per marginal costing method:
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Calculation of the cost of table under absorption costing method:
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Calculation of cost of chair under marginals costing method
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Calculation of cost of chair under absorption costing method:
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