Management Accounting Report for LEGO's Sustainable Product Line

This management accounting report assesses LEGO Australia's sustainable product line for 2022. It includes an overview of expected revenues, operating expenses, and cash positions, alongside a comparison of financial performance across three sustainable LEGO packs. The report identifies and quantifies major business, economic, financial and market risks, providing mitigation strategies. It explains how the master budget assists LEGO in planning for various scenarios and adapting to economic changes. The analysis covers sales, production, direct materials, labor, overhead, operating costs, inventory, and cost of sales, culminating in a budgeted income statement and cash budget analysis. This document contributed by a student, is available on Desklib, offering valuable insights and solutions for students.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
An overview of the expected results for the 2022/23 year including total revenue, operating expenses
and expected final cash position.............................................................................................................3
Compare the financial performance of each product and make recommendations about how to
improve the individual and overall profitability of the sustainable products range. Where appropriate
use industry data.....................................................................................................................................3
Identify three major risks for the business in 2022/2023, quantify these risks in terms of the potential
impact on the profit and loss statement and provide recommendations on how to mitigate them.......4
Explain how the master budget you have prepared can assist LEGO to plan for different ‘what-if’
scenarios and help them to pivot according to changes in economic conditions....................................6
CONCLUSION...............................................................................................................................................6
REFERENCES................................................................................................................................................7

INTRODUCTION
Accounting is the method of finding, measuring, evaluating, and conveying banking details
to the top operations in order to making successful choices that will improve them accomplish
the organizational objectives. Managerial accounting's major aim is to assess and communicate
financial data with the firm's executives in order to assist them in making the right decisions.
This report based on the in 2022, three (3) plant-based LEGO Packs will be tested. In this report
consist of overview of expected results of 2022/23 with total revenues, operating expenditure and
expected cash position (Arroyo, 2012). Along with analysis the financial performance of every
item with overall profitability and determining major risks that face by the company and how to
mitigate them. Moreover, explain about the master budget with changes of economic situation.
MAIN BODY
An overview of the expected results for the 2022/23 year including total revenue, operating
expenses and expected final cash position
As per the financial results of three products total revenues in 2022/23 were of three
products are:
Total revenues: All three products are good in market and like by people in market. For
effective marketing prepare different types of budget that help to business to achieve their goals
in certified period of time. As per the sales budget analysis the total revenues of every product
from July to august was 158,373 in July, 128,378 in August, 139,976 in September, 130,377 in
October so these amounts are presenting good performance and present fluctuation in different
months.
Operating expenditure: In this expenses including utilities, insurance, interest and many other
things which is important for business and helps to calculate the net profit of the business entity.
As per the operating cost budget it has been analyzed that from July to July month wise total
expenditure of the business was 4108 in every month. At the end of the year total operating
expenditure 49297. In operating expenses consist of utilities, insurance, administrative wages
and general expenditure.

Expected final cash position: In the year 2022/23, all these three products are selling in the
market in effective manner. As per the analysis of cash budget of the three products it is getting
that all the products are selling in the market in effective manner and get great results that impact
on the cash position in positive manner. The cash budget amount was in July 183100, in July was
330000, in august was 363000. So these months are presenting increasing cash position that
helps to maintain liquid position in effective way.
Compare the financial performance of each product and make recommendations about how to
improve the individual and overall profitability of the sustainable products range. Where
appropriate use industry data
In the life cycle of a product or service, strive towards a recycling and reuse. Repurposing
or fixing outdated versions can prolong the life of a product all while saving funding and
manpower. Focus on lowering total waste production as a step toward sustainable when you
provide a product. Managers nowadays present a difficult and extraordinary confluence of social,
environmental, commercial, and technology factors. Managers, on the other hand, are frequently
hesitant to make sustainable a priority in their business’ products, mistakenly believing that the
costs exceed the advantages. Intellectual scientific and business practice, on the other hand,
suggest the exact reverse (Fullerton, Kennedy and Widener, 2013).
The impact of integrated green initiatives on financial performance is undeniable. We've
produced a viable business argument for the 21st company leader based under our own work and
that of our partners. This report also provides specific instances of how sustainably improves the
end result, in the hopes of assuaging their fears. Most of the strategic significance of sustainable
stems from the requirement to communicate with it and learning from key stakeholder on a
regular basis. A firm with sustainability goals is best placed to foresee and respond to financial,
social, ecological, and legislative changes as they emerge via regular interaction with
stakeholders and continuous innovation. Whenever companies fail to build positive connections
with their stakeholders, they risk increasing conflicts and decreasing shows the ability. This
might make it difficult for a company to stay on track and stay within budget.
Shareholder relationships, for instance, may greatly impact land permits, taxes, and the
regulatory regime, thus having an important role in influencing whether a company has the rights

to convert bullion into regular asset, according to a research of the mineral industry (Boyns and
Edwards, 2013).
Define three significant risks for the firm in 2022/2023, evaluate them in relation to the
anticipated effects on the income statements, and make mitigation measures.
There are mentioned different risk that faced by the company in 2022/23 in regard of their
products.
Business risk: Business risk relates to a business’ financial existence, or will it be capable of
delivering adequate sales and raise significant cash to support its operations expenditures and
maintain profitability. Though financial risk is interested with the prices of capital, business
factors are concerned with most of the other expenditures that a company must cover in order to
stay active and functional. Workers, manufacturing costs, building rentals, and secretarial and
administrative expenditures are all included in various expenditures.
Economic risk: The business is continuously evolving as marketplaces adapt. Good things boost
the industry and contribute to enhance buying, whilst negative events may result in fewer sales.
In able to locate and adapt for a global recession, it's vital to maintain a watch on themes and
developments. Provide as much money as you can to avoid future damages and establish
consistent investment money. Also, as part of the operational strategy, stick to a rigorous
budgeting with minimal expenses at all times (Vasile and Man, 2012).
Financial risk: The financial risk of a firm is connected to its use of economic power and money
borrowed, instead of the operating risk of turning it into a viable business. The capacity of a firm
to produce enough income streams to fulfill interest costs on indebtedness or satisfy other
borrowing responsibilities is associated with the economic risk. A firm with a comparatively
larger level of borrowed funds has more investment burden because there is a larger chance of
the business failing to satisfy its financial responsibilities and going bankrupt.
Interest rate fluctuations and the total proportion of borrowed funds are two elements that
might influence a bank's business risks. Organizations that have a higher level of raising capital
are able to effectively manage their indebtedness. The debt/equity ratios, which determines the
average amount of stocks and bonds, is one of the significant financial lifestyle factors that
shareholders examine when determining a business' profitability.

Market risk: Market risk refers to the possibility of fluctuating market liquidity or industry
wherein a company participates for consumers. One sign of market risk is the increasing
proclivity of people to make purchases. Like a reaction of this dimension of market risk,
traditional smaller merchants have had significant difficulties. Businesses who have been flexible
to cope to serve a shopping online population have thrived and generated more money, while
those that have been slow to adjust or making bad judgments in reacting to the changing
economy have fallen ahead.
Ways to mitigate these risks
Risk management is a crucial component of every organisation, especially when the market is
through a slump. An unanticipated shock may ruin firm in one easy step in either current
economy when they don't have the appropriate risk mitigation tools and procedures to minimize,
or at the very minimum limit, the harm from that hazard.
Update plans: Even now the finest planning systems can prove inadequate, so respond properly
whenever the firm is subjected to a risk, and afterwards implemented a clear strategy and method
in case its same risk occurs later (Cadez and Guilding, 2012).
Staff training: Knowing how to prevent risks and how to manage with them if they arise can
assist a company avoid more harm or subjecting itself to risk in the first place. For instance,
when your company works with construction equipment like trucks, each worker may wish to
acquire an OSHA certificate before using the apparatus, since correct forklift operations can
reduce the chance of harm or injury.
Explain how the master budget you have prepared can assist LEGO to plan for different ‘what-if’
scenarios and help them to pivot according to changes in economic conditions
For existing firms, master budgets can indeed be based on past accounting information,
whereas for new enterprises, projections might be used. Accounting data is an important part of a
master budget because it may give historical information that can be used to set aside money
with realistic objectives. When a business goes through the merging process, the master budget is
created to determine whatever the company is getting from the purchase of the business entity.
Each business, for example, has an HR and administrative division (Herzig and et. al. 2012).
Whenever a firm is purchased, two employees in the same group are created. It is here that the

firm must create the budget to determine who to stay and who to fire for the sake of the
company's success. As a result, before implementing any growth plans, managers must set this
plan. As a result, the master budget contains extensive insights into future accounting records
and future revenues that have been predicted after engaging lending rates, future revenues, and
borrowing limitations into account (Otley and Emmanuel, 2013).
CONCLUSION
As per the above report it has been concluded that Management accounting gives data to
administration, which they use to make choices that help them accomplish corporate goals and
increase effectiveness. Management accounting encompasses the processes and ideas required
for successful budgeting, decision-making among many business options, and management via
success analysis and interpretation. The most important goal of management accounting is
judgement. Managerial choices are critical and play a critical part in determining the company's
destiny. If somehow the effective information system are well-educated on the company's
financial performance, they can make more educated and maintenance of good. Diverse
approaches from various areas, such as pricing, finance, and analytics, are examined in
accountancy. This data is displayed in the form of charts, figures, and tables, which aid managers
in making well-founded decisions, lowering the risk of failure.

REFERENCES
Books and Journal
Arroyo, P., 2012. Management accounting change and sustainability: an institutional approach.
Journal of Accounting & Organizational Change. 8(3). pp.286-309.
Fullerton, R. R., Kennedy, F. A and Widener, S. K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society.
38(1). pp.50-71.
Boyns, T. and Edwards, J. R., 2013. A history of management accounting: The British
experience(Vol. 12). Routledge.
Vasile, E. and Man, M., 2012. Current dimension of environmental management accounting.
Procedia-Social and Behavioral Sciences. 62. pp.566-570.
Cadez, S and Guilding, C., 2012. Strategy, strategic management accounting and performance: a
configurational analysis. Industrial Management & Data Systems. 112(3). pp.484-501.
Herzig and et. al. 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Otley, D and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1). pp.54-70.