Comprehensive Management Accounting Analysis for JOJO Juice Company

This report provides a detailed analysis of management accounting principles and their application within JOJO Juice, a manufacturing company. It begins by highlighting the need for a management accounting system, emphasizing the role of cost accounting, price optimization, and inventory management. The report then explores various management accounting reporting methods, including budget reports, accounts receivable aging reports, cost managerial accounting reports, and performance reports. A significant portion of the report is dedicated to presenting income statements using both marginal costing and absorption costing methods, providing a comparative analysis of their impact on financial reporting. Furthermore, the report discusses the benefits and limitations of planning tools, such as sales and cash budgets, and outlines ways to address and resolve financial problems within the firm. The analysis covers a wide range of topics from the need for management accounting to the application of different costing methods and planning tools to improve the organization’s functioning.

Management accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P 1 Need of MA system in the company....................................................................................1
P 2 different methods of MA reporting system...........................................................................2
LO 2.................................................................................................................................................3
P 3 Presentations of income statement by using the different costing method...........................3
LO 3.................................................................................................................................................6
P 4 Benefits and limitation of various planning tools.................................................................6
LO 4 ................................................................................................................................................8
P 5 Ways to resolve or respond the financial problems of the firm............................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is used to improve the understanding of the financial and non
financial information to take the efficient decision and improve the organisational culture and
environment. It helps to provide the useful information to the stakeholders. JOJO fruit juice is a
manufacturing unit which manufacture juice for all age group. The report highlights the
management accounting role and decision making and various management accounting system
to improve the organisation functioning. It explains the various methods used by MA in
reporting the transaction. It also explains the use of marginal cost and absorption cost in
preparation of income statement. Planning tools such as sales budget, cash budget have various
advantages and disadvantages for budgetary control and the different financial problems and way
to solve these problems.
LO 1
P 1 Need of MA system in the company
Management accounting : It is the process of recording, analysing and maintaining the
accounting information to improve the operation work and prepare the financial reports to inform
the organisation condition to the management and management leaders like Owner, shareholders,
creditors etc. (Kaplan and Atkinson, 2015).
Requirement of Management accounting system
Cost accounting system : It is also known as product costing or costing system. It helps
the JOJO juice manufacturing company to estimate the cost of the product and its ingredients to
analyses the profit, inventory and control the cost of the unit. The firm has to evaluate the each
aspect of the production activity to estimate the accurate cost and profit of the organization. It
also helps them to evaluate the work in process, finished and raw material inventory level in the
company (Schaltegger and Burritt, 2017). There are two main types of cost accounting system :
process costing and job order costing.
Job order costing : It helps the organization to estimate the cost of each job and control
the activity to get the accurate result and find the area of improvement. It mainly used by the
company which produce the unique and special products and services.
Process costing : It helps the company to accumulate the cost of each process separately.
It is widely used in the organization where the production of goods and services can be done by
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department to department or the flow of production is from one department to another
department (Maskell, Baggaley and Grasso, 2017).
ABC costing : Activity based costing is used to estimate the cost of each activity and
assign the related expenses. It describes the relation between cost, overhead and manufacturing
activity. But some cost are unable to estimate by using the ABC costing system such as indirect
cost : office staff and workers salary.
Price optimization system : The system helps the company to determine the response
and behavior towards the price of the product and services. Customer is the end users of the
goods. They play major role in setting in the price to influencing manufacturers by their
activities. Organization uses various methods or tools to estimate the behavior of customer. It
also helps the JOJO juice manufacturing company to decide that whether the price set by them is
able to achieve the organization objective or not and the customer are able to reach the product
or not.
Inventory management system : It is a software system which provided the information
and support the company to record and measure the inventory lever, order quantity and sales of
the company in particular time period. Inventory management system is used to maintain the
inventory level and reduces the waste of inventory (Chenhall and Moers, 2015). It also helps the
company to minimize the over and under production of goods. JOJO manufacturing company
use the system to manage the demand and supply level and deliver the juice to the customer on
time. It is tool which record all the data related to the inventory in computer based system which
was prior done manually. It helps them to get the required stock on time by recording all the
sales and arrival of the products.
P 2 different methods of MA reporting system
The aim of MA reporting is to collect the data form the financial accounting a use them
to prepare the report by recording the transaction in different accounts to inform the stakeholders
about the financial position of the company. There are different management accounting report
such as :
Budget report : one of the role of management accounting is to plan the requirement of
finance by preparing budget for the different activities and ascertain the requirement of resource
to accomplish the goal and objectives (Maas, Schaltegger, and Crutzen, 2016). Budget are
prepared by the manager by using the past year data and add the inflation rate and estimate
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expenses to the company performance in the future. Budget report help the company to get the
current state of the company and control the limit of expending of organisation by setting the
criteria and associate the cost of each activity. It provides an estimation of all the income and
expenses in particular accounting period and done the activity according to the set of activities.
Account receivable aging report : It helps the company to ascertain the debt of the
organization and the time period of owning the debt. Manager uses the A/R report to estimate the
defaulters of the company and find the problems in collection of the debt from the debtors
(Methods of Management Accounting Report, 2019). It helps them to renovate and improve the
policies and rules regarding the collection of debt of the organization. It breaks down the
remaining balances of the debtor so the company can estimate the time period of collection of
debt and write off the debt of the company which was about to unrecoverable.
Cost managerial accounting report : It is estimated by the company by adding all the
cost such as material cost, overhead cost, direct and indirect cost and divided by the total number
of production. It helps the JOJO juice manufacturing company to set the profit margins and
estimate the cost and price of the items (Stacchezzini, Melloni and Lai, 2016.). It is used by the
company to manage the wastage of inventory, products and labour. The treatment of wastage of
JOJO juice manufacturing company help them to minimize the cost and time in the production
activity and also increases the profit margin to get the higher profit.
Performance report : The report are prepared to analyse and reviewed the performance
of the company and its employees. It helps to manage the activities of the employees and prepare
report to analyse their growth and work in the company to provide the wages and incentives
according to their performance. JOJO juice manufacturing company use the performance report
to record the activities of each department and take the major actions on the basis of activities
growth and output and find the ways to improve performance. It helps the company to present
the financial information to the different users of the company so they can take the decision of
investing in the companies' production or manufacturing activities or not.
LO 2
P 3 Presentations of income statement by using the different costing method
Marginal costing :
Particulars Cost per unit
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Direct Material 18
Direct Labour 4
Variable O/H 3
Marginal cost per unit 25
Selling price 50
-Marginal cost per unit -25
-variable selling price -5.00
Contribution per unit 20.00
profit and loss statement by using marginal costing method
November December
particula
rs
unit
price unit amount
Net
amount
unit
price unit amount
net
amount
sales 50 10000 500000 500000 50 12000 600000 600000
less cost
of sales 25 2000 50000
variable
cost of
productio
n 25 12000 300000 25 10000 250000 300000
Less
closing
stock 25 2000 50000 250000
less
variable
cost of
productio
n 5 10000 50000 50000 5 12000 60000 60000
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200000 240000
less fixed
variable
productio
n cost
productio
n 99000 99000
Selling
price 14000 14000
administr
ative 26000 139000 139000 26000 139000 139000
61000 101000
Absorption costing
Income statement
using absorption
costing method
particulars Amount Per unit
Normal level of
production 11000
Fixed overhead cost 99000
Fixed production
overhead 9
Total production cost
variable cost 25
Fixed cost 9
Total 34
profit and loss statement by using absorption costing method
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unit
price unit amount
unit
price unit amount
sales 50 10000 500000 500000 50 12000 600000 600000
less cost
of sales
opening
stock 34 2000 68000
productio
n cost 34 12000 408000 34 10000 340000 408000
34 2000 68000 340000
gross
profit 160000 192000
adjustmen
t for fixed
and under
absorptio
n 9000 9000
169000 183000
less
overhead
cost
variable
selling
O/H 50000 60000
fixed
selling
O/H 14000 14000
fixed
administr
ative O/H 26000 90000 26000 100000 100000
net profit 79000 83000
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calculation of over and under absorption for November and December month
months
production
unit O/H unit
Total
overhead O/H incurred
Over/ under
absorption
November 12000 9 108000 99000 9000
December 10000 9 90000 99000 -9000
Absorption costing :
LO 3
P 4 Benefits and limitation of various planning tools
Budgetary control : It is the process of determining the financial position of the
company by setting the goal and objectives and reviewing the performance by comparing actual
performance with the standard performance. It helps to determine the differences in the
performance and the area where are the major changes must be needed. The evaluation of
variances in the sales of last month and current help them to get the customer taste and
preferences and the changing trend in market (Gao, and et.al., 2017.). It also provides brief
knowledge about the JOJO juice manufacturing company in market and change the policies and
renovate the product to maintain the sales and profit of the organization.
Financial budget : It helps the company to estimate the requirement of finance in the
company to accomplish the activity. It is used to spread the finance related information and the
total cash flow of the organization. Financial budget is prepared by the managers to help the
stakeholders by reveal the financial position in the market such as growth in the profit and sales
of the company in compare to the last year performance.
Advantages
 It helps the company to communicate the financial position to the internal and external
stakeholders to take the effective decisions for the improvement of profitability and
productivity of company (Financial Budget Benefits in Business, 2019).
 Financial budget provides the different business opportunity to the manager to expand
and diversified the business by gathering and collecting the finance by the investors (Bui,
and et.al., 2016).
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 It also helps to prepare the plan for ascertain the various sources of finance and manage
the assets and liability of the organization to paid the loan and debt within the time
period.
Disadvantage
 It only provides the estimation of requirement of finance and not present the true and
accurate position of the company.
 Manager also want to show the high profit in the balance sheet to attract the customer so
the manipulation of data is high in the financial budget.
Operating budget : It was used by the firm to plan or scheduled the requirement of
resources for the day to day operational activity. It helps to estimate the expenses, overhead and
requirement of resources by comparing it with the actual expenses.
Advantages
 It helps to manage the current expenses and cost of the product and services such as the
rent, staff salaries, overhead etc.
 Operational budget help to estimate the future expenses and resolve the last year
problems. The variance analysis help the company to manage the area of deficiency and
improve the performance. The estimation and presentation of operational budget increases the accountability of the
data and helps to gather the attention of stakeholders towards the company.
Disadvantage
 The estimation of the cost require huge time to interpret each and every activity and the
cost of the previous year.
 Operational budget also require the experts which have the knowledge about the market
and each area to accurately estimate the cost of the company.
Incremental budget : It is prepared by the company on the basis of previous year
budgets and add the incremental amount to get the new budget of the company (McCrory, and
et.al., 2015.). It helps the company to prepare the budget and control and monitor the activities of
company to reduce the wastage and improve the quality of work.
Advantages
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 It is easy to prepared and manage in the company because it is based on the previous year
budget so the employees and manager can easily understand the estimation of budget and
organise the task according to the budget. Incremental budget are prepared at multi department level which help the company to
evaluate the funding of each department.
Disadvantage
 The budget is based on the previous year budget but the market condition and investment
from the investor are fluctuating every year which did not present the true position.
 The actual expenses and revenue of the company may different from the estimated
budget because of the development of budget on the prior year data.
LO 4
P 5 Ways to resolve or respond the financial problems of the firm
Benchmarking : It is used as the measure of reviewing the performance of the product
and services in the organization by comparing the performance with the pre setted benchmark of
the company or evaluate it with the competitors' performance in the market. It helps to get the
differences in the output of the company and find the area of variation to resolve the financial
problems. It used to reviewing the revenue of the JOJO juice manufacturing company with the
last year revenue and find the reason behind increasing or decreasing the revenue (Parmenter,
2015). The benchmark system can also be used by the each department to get the financial
position of each department and analyse the problem associated with the departments output.
Benchmarking system helps to improve the understanding of the employees towards the cost and
internal process of the firm.
Key performance indicators : It is used to evaluate that how effectively a company is
able to get the target and objectives of the company. The company used the KPI system at multi
level (Chambers, Freeny and Heiberger, 2017). At high level it was used to measure the overall
performance of the company and at lower level KPI was used to evaluate the performance of
each department and measure the monetary and on monetary problems of the company.
Variance analysis : It is used to evaluate the difference between the actual performance
and estimated performance of the firm. The difference in their performance is known as
variances. It helps to get the variation in different area by evaluating each and every task and
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project to get the financial problems (Samra, 2016). It also used by the company to control and
manage the activities, inventories and cost of the firm to get the successful results.
Resolve financial problems
Financial governance : It refers to the process of collecting, monitoring, managing and
controlling the financial problems. Financial governance provide a framework to resolve the
financial problems by collecting all the necessary data and information and interpret them to get
the effective result. It is used by the organization to track the company transaction and manage
them to get effective result. A good financial governance reflects that the company used the data
and information according to the government rules and regulations (Berger, Imbierowicz and
Rauch, 2016). A sound financial governance help to prepare the effective budget plan, models
and help to forecast the financial position to take effective measures. It helps to ensure that the
collected data and information are accurate and accountable.
CONCLUSION
The study on management accounting summarizes the impact and role of MA in the
company and the requirement of various types of accounting system to monitor and control the
accounting activities. Different management accounting reports are used to record the financial
and non financial data to keep the information in accounts and provide the information to the
users to take the decision which are beneficial to the firm. It can also be concluded that the
different planning tools help the company to control the budget and take effective advantages.
KPI, benchmarking system and variance analysis is used to measure the financial problems and
financial governance is used to resolve the financial problem related to the revenue, profit and
expenses of the company.
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REFERENCES
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castration-resistant prostate cancer. Journal of managed care & specialty
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experiments. In Statistical models in S (pp. 145-193). Routledge.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, organizations and
society, 47. pp.1-13.
Gao, S., and et.al., 2017. Robust ranking and selection with optimal computing budget
allocation. Automatica, 81. pp.30-36.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136.
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Maskell, B.H., Baggaley, B. and Grasso, L., 2017. Practical lean accounting: a proven system
for measuring and managing the lean enterprise. Productivity Press.
McCrory, C.C., and et.al., 2015. Benchmarking hydrogen evolving reaction and oxygen evolving
reaction electrocatalysts for solar water splitting devices. Journal of the American
Chemical Society, 137(13). pp.4347-4357.
Parmenter, D., 2015. Key performance indicators: developing, implementing, and using winning
KPIs. John Wiley & Sons.
Samra, E., 2016. Corporate governance in Islamic financial institutions.
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