HNC Unit 5: Management Accounting Systems and Application Report

This report critically discusses management accounting methods as measurement and planning tools, evaluating performance within ABC Ltd. It explores job costing, price optimization, and inventory management systems, highlighting their essential requirements. The report analyzes various managerial accounting reporting methods, including cost reports and budgets, and their benefits. It examines the integration of management accounting systems with organizational processes, using ABC Ltd as a case study. Furthermore, the report delves into planning tools used in budgetary control, such as SCORO and Prophix, and their application in forecasting and budget preparation. It also compares how companies adopt management accounting to address financial problems, considering both financial and non-financial indicators. The analysis evaluates how these tools contribute to solving financial problems and leading organizations to sustainable success.

Running head: PROJECT MANAGEMENT ACCOUNTING
Project Management Accounting
3/27/2019

PROJECT MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Task 1.........................................................................................................................................2
Management Accounting.......................................................................................................2
Essential Requirements of Diverse Types of Management Accounting System...................2
Job Costing System............................................................................................................2
Price Optimising System....................................................................................................3
Cost Accounting System....................................................................................................3
Inventory Management System..........................................................................................4
Methods of Managerial Accounting Reporting......................................................................4
Benefits of Management Accounting.....................................................................................5
Evaluation of how management accounting systems and management accounting reporting
is integrated within organizational processes.........................................................................7
Management accounting reporting integration with ABC Ltd..........................................7
Management accounting system integration with ABC Ltd..............................................7
Task 2.........................................................................................................................................8
Task 3.......................................................................................................................................10
Advantages and Disadvantages of Planning tools used in Budgetary Control....................10
SCORO............................................................................................................................11
Prophix.............................................................................................................................11
Use of Planning Tools and their application for forecasting and preparing Budgets..........12
How planning tools for accounting respond appropriately for solving financial problems to
lead organizations to sustainable success.............................................................................13
Task 4.......................................................................................................................................14
Comparison of how companies are adopting systems of management accounting to
respond to financial problems..............................................................................................14
Financial Indicators..........................................................................................................15
Non-Financial Indicators..................................................................................................16
Analysis of how reacting to financial problems, management accounting can result in
organizations towards sustainable success...........................................................................17
Evaluate How planning tools for accounting respond appropriately for solving financial
problems to lead organizations to sustainable success.........................................................17
Conclusion................................................................................................................................18

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References................................................................................................................................19

PROJECT MANAGEMENT ACCOUNTING 3
Introduction
The aim of the report is to critically discuss the management accounting and its methods that
are used as measurement and planning tools for the company in order to evaluate its
performance. The report also discusses the use of numerous tools for planning for budgetary
control. Analysis has been presented regarding the way companies can make use of
management accounting to respond to financial issues.
Task 1
Management Accounting
Management accounting is the technique of classifying, computing, analysing, understanding,
and communicating data or information to the executives in order to attain the goals of the
organization. The key difference between financial accounting and managerial accounting is
that, financial accounting is focused at presenting information to the parties present outside
the company, whereas, managerial accounting is focused at supporting executives in the
organization in making decisions (Debarshi, 2011).
Essential Requirements of Types of Systems of Management Accounting
Job Costing System
It is one of the systems that are used to allocate manufacturing cost to every product by
maintaining the track on expense monitoring. ABC Ltd. can use this system at the time when
the goods are indistinguishable in order to maintain the track of order expenses. Job costing
accounting process is comprised of:
Receiving Enquiry – The key concern of the consumer is material quality.

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Estimate price of the job – The job costing is majorly done by the company’s auditor by
considering the preference and taste of the consumer (Blocher, 2006).
Receiving order – The order is placed by the consumer if he/she is assured regarding price
constraint.
Production order – It is positioned for initiating the procedure of production.
Cost recording – Each cost aspect in the procedure of production is logged.
Completion of Job – By completing the production, a report is submitted to the accounts
department for the financial costing of the job. The department then compares the data with
the estimated cost (Drury, 2013).
Price Optimising System
Price optimizing system is majorly utilized to manage the resource prices. This system could
be utilized in deciding the multiple products prices at a time. It supports defining how the
demand will alter at different levels of price (Phillips, 2005). ABC Ltd. can make use of this
system for modifying the prices for consumer divisions by pretending their retorts to diverse
levels of price.
ABC Ltd. will make use of this system because it will support the business in defining
structures of the pricing which is comprised of initial promotional pricing, pricing, and
discount pricing.
Cost Accounting System
This scheme supports the business in estimating the cost of the service or product while
investigation could be made regarding cost control, inventory and organizational profitability.
Two essentials of the effective cost accounting system are presented below:

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Participation and cooperation of the managers are needed by diverse departments –
This will confirm proper participation and cooperation in the creating of the cost accounting
system that can support organization in precise allocation of product’s cost (Rajasekaran,
2010).
Simple and Flexible – The developed system of cost accounting must be simple that could
support in the execution. It must encounter the necessities of numerous users and familiarize
accounting to the requirement of the company.
Inventory Management System
Inventory Management System is focused towards the direction and management of the
assets that are non-capitalized and company’s stock. Organizational procedure in ABC Ltd.
could be combined with this kind of system in order to attain an effective and efficient
inventory flow in the organization. Few of the essentials of this process are:
Inventory management can be done physically as well as monetarily– Numerous advantages
like appropriate inventory management and decreasing cost are attained through this (Muller,
2011).
Replenishing and forecasting policies – This support the company in advance management
and cost requirements preparation.
Methods of Managerial Accounting Reporting
Managerial accounting is specifically used for decision making, controlling, and planning.
The accountants are based on financial statements comprises balance sheet, income
statement, and cash flow statement. Besides this, they also make use of different kinds of
reports for evaluating the information of the company comprising, performances, cost reports,
and budgets (Adler, 2013).

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Cost Reports – Managerial accounting regulates the item's price. It is completed by
considering the prices of the entire fresh product, labor, overhead, and other prices. The total
cost is then divided by the totals of created items. These types of reports represent complete
data in brief and allow executives the capability to look at the cost of good vs selling costs. It
also supports executives in planning and managing income limits (Zain, 2019).
Budgets – The key constituent of Management accounting is the scheduling of expenditure
plans. Budgets are generally created by making use of financial strategies of earlier plans and
adjusting to upcoming forecasts. The spending of an organization lists all the expenses and
incomes sources. The organization put its efforts to attain its goals by maintaining the
budgeted amount (Johnson, 2013). Executives or managers constantly search for new sellers
in order to use them as the provider of raw resources to spare cash. Similarly, it determines
the methods to enlarge deals while diminishing costs.
Execution Reports – The accountants make use of spending plans in order to compare
honest uses and incomes with deliberate sums. After defining new budgets, the planned
alterations are analysed and complete data is listed on the performance report. Every year
performance reports are computed, in many cases, organizations create them quarterly or
monthly (International Monetary Fund, 2011). These reports allow management to be
prepared for the coming future product demand and cost addition.
Benefits of Management Accounting
The main aim of accounting information is to support decision makers like managers,
government agencies, and investors.
System Advantages
Price Optimizing System ABC Ltd. can define the approach to attract

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consumer by different product prices.
It supports consumer segmentation
Support in boosting of operating profit
through best prices (Gustavson, 2010)
Inventory Management System This system can help ABC Ltd in enhancing
the accurateness of its inventory orders.
It will enhance the effectiveness and
efficiency and support in saving money and
time.
Job Costing System ABC Ltd. will get the support of this system,
in estimating all the cost during the
procedure of manufacturing
It will stop duplication
It will ensure quality work
Cost Accounting System ABC Ltd. can evaluate the effectiveness of
its procedures and then contribute to making
enhancements with the help of this system.
Offer required information for planning
It will support in reducing the prices
(Horngren, Bhimani and Horngren, 2002)
Systems of management accounting and reporting of management accounting are
integrated with organizational procedures
Management accounting reporting integration with ABC Ltd
Management of accounting reporting Integration with ABC Ltd.

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Budgeting The organizational procedures of ABC Ltd.
and budgeting reports are integrated as these
reports will provide a direction to the
activities of the company to focus on targeted
outcomes and goals in a superior manner
(Lalli, 2011).
Cost Reports ABC Ltd. Company activities must be
focused on attaining the cost objectives and
cost reports can support company in
simplifying the selection procedure of pricing
policies for the business and decreasing the
product total cost.
Execution Reports ABC Ltd. and Execution reports are
integrated because these reports will support
executives to plan for forthcoming
productions and increased cost can result in
higher profitability.
Management accounting system integration with ABC Ltd
Management accounting system Integration with ABC Ltd.
Price Optimizing System Price Optimization system is integrated with
the objective of ABC Ltd. as it will support
the company in targeting different segments
of the customer with the help of different

PROJECT MANAGEMENT ACCOUNTING 9
price level.
Inventory Management System The inventory Management system will be
integrated with the company has it will
effectively manage them in the stock of the
company which will result in reducing
wastage and price (Stevenson, Hojati and
Cao, 2007).
Job Costing System Job Costing system is integrated with the
procedures of ABC Ltd. as it will reduce the
chances of duplicity and enhance the quality
Cost Accounting System The cost accounting system will be integrated
into the system of the company because it is
focused on providing the required
information for preparing reports which will
eventually support in reducing the manual
efforts and company's cost (Maingi, 2013)
Task 2
Calculation of the production cost per unit
Marginal
Costing
absorption costing
Production cost per unit
Direct materials 10 10 180000
Labours 20 20 360000
Overhead 5 5 90000
35 35
Less: Fixed cost 5.6 100000

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Fixed cost per unit 5.56
Cost per unit 35.00 40.56
cost of sales
variable costing 490000
Absorption costing 528889
2 Profit and loss statement Marginal Absorption
Sales 800000 800000
Less: Variable cost
Opening Inventory 0 0
Direct materials 160000 160000
Direct Labor 320000 360000
Variable production overhead 80000 90000
Less: Closing Inventory 70000 81111
Contribution 170000 108889
Less: fixed costs 100000 100000
Profit 70000 8889
3 Profit and loss statement Marginal Absorption
Sales 800000 800000
Less: Variable cost
Opening Inventory
Direct materials 160000 160000
Direct Labor 320000 360000
Variable production overhead 80000 90000
Less: Closing Inventory 105000 121667
Contribution 135000 68333
Less: fixed costs 100000 100000
Profit 35000 -31667

PROJECT MANAGEMENT ACCOUNTING 11
Task 3
Planning tools used in Budgetary Control
Tools of budget planning are utilized to plan, manage, and forecast the budget of the business
that must be managed and executed to attain the targeted goals and outcomes. In recent time,
companies are converting their operations in more advanced systems used for planning
strategies that have lifted the traditional budgeting tools trends towards the tools and software
of cloud-based budgeting (Chen, Weikart and Williams, 2014).
SCORO
This kind of tool for planning support in uniting numerous sorts of budgeting with different
tools in order to track the complete business under a single system and offers a united
proposal for the organization (SCORO, 2019). It offers the ability to handle numerous
expenses and resources accessible with the organization by managing the budget of the
project.
Advantages of SCORO are
 Financial Reports and examination support in the assessment of the planned goals and
definite presentation
 Through this tool, invoices offer an automated revenue stream which supports in
superior planning and forecasting (Crunch Base, 2019).
Disadvantages of SCORO
 Implementation of SCORO budgeting tool will be costly and time consuming for the
company.
 The entire automation system cannot meet the complete requirements which
eventually require team efforts and capabilities to set up everything (Chiuariu, 2016).