Management Accounting Systems and Reporting for Unilever Limited

This report provides a comprehensive analysis of management accounting practices within Unilever Limited. It begins by explaining the core concepts and essential requirements of management accounting systems, detailing various reporting methods and evaluating their benefits. The report then assesses the application of these systems within Unilever, focusing on inventory management, cost accounting, price optimization, and job costing. Furthermore, it critically evaluates the integration between management accounting systems and reporting. The report includes calculations of profit using both marginal and absorption costing methods for two quarters, comparing the outcomes and interpreting the results. Additionally, it explores the advantages and disadvantages of different planning tools used for budgetary control, and compares management accounting systems that assist in resolving financial problems. The report concludes with a summary of the key findings and implications for Unilever's financial management.

Management
accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1. Explaining the concept and the essential requirement of the management accounting
systems........................................................................................................................................1
P2. Explaining several methods that are used for the management accounting reporting..........2
M1. Evaluating the benefits and the application of the management accounting systems within
the Unilever Limited. .................................................................................................................3
D1. Critically evaluating the integration in between the reporting and the systems of
management accounting .............................................................................................................4
LO3 .................................................................................................................................................4
P4 The advantages and disadvantage of different types of planning tools used for budgetary
control.........................................................................................................................................4
It does not ingnored teh non-cash transcations................................................................................7
LO 4.................................................................................................................................................8
P5. Comparing different management accounting system assisting in resolving financial
problem.......................................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting refers to the process that analyses the cost of the business and
the operations in order to formulate financial report internally. It helps the managers in making
adequate decision for the achieving the goals of the business effectively and efficiently. The
present study is based on Unilever Limited, a manufacturing firm that deals in wide range of the
products such as food, cleaning agents, personal care items and beverages. Furthermore, the
study includes the management accounting systems and the reporting that are essential for the
company in managing its functions. It also throws a deep insight towards planning tools and the
management accounting system that helps in resolving the financial problems.
LO1.
P1. Explaining the concept and the essential requirement of the management accounting systems.
Management accounting refers to the preparation and providing the statistical as well as
the financial information to the business managers that helps them in making the routine
decisions within the Unilever Limited. The roles and the principles of the management
accounting covers all the fields of the accounting that is been designed for informing the
management in relation to the parameters of the business operation (Thomas, 2016). It involves
preparing the reports of the budgeting, making trend analysis, forecasting sales, constraint
analysis and the product costing. Unlike financial accounting, management accounting facilitates
both monetary and the non-monetary information to the user. The reports under management
accounting is been prepared as per the requirements of the company while in financial
accounting, the reports is been formulated at period end. The information provided by MA is
used only by the internal users, however, financial accounting information is used by both
internal and the external users. Management accounting reports need not to be audited and
published whereas the financial accounting reports has to be published and to be audited by the
statutory auditors.
Cost accounting systems- It refers to the system that is used by the Unilever Limited in
order to estimate their product cost for making the inventory valuation, profitability analysis and
the cost control (Ismail, Isa and Mia, 2018). It acts as the critical system as it helps in
estimating accurate product cost and in improving the overall profitability with cost efficiency of
the business.
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Inventory management system- It is the system that oversee the maintenance and the
monitoring of the stocked products. This system is important because it helps the managers of
the Unilever Limited for tracing delivery of the goods in the overall supply chain management
and also provides information relating to the record of the inventory.
Optimization system- This system referred as the mathematical analysis that determines
the response of the customers at different level of the price (Messner, 2016). Price optimization
system is essential because it enables the Unilever Limited in assessing the response of its
customer towards different price set up for its product and the services which in turn assist in
fixing the best prices that leads to achievement of the profit maximization objective.
Job costing system- It involves the practice of the assigning and accumulating the
information relating to the cost that is attached to the particular production or the service job. IT
is vital for the Unilever Limited as it reveals the profitability gained from each of the job and
provides for tracking of the project at every stage so that goals can be achieved as per the
strategies set.
P2. Explaining several methods that are used for the management accounting reporting.
Management accounting reports are been prepared by the managers of the Unilever
Limited in order to plan, regulate, making decision and in measuring the performance (Maas,
Schaltegger and Crutzen, 2016). It is critical to the company as it provides the reliable, relevant
and accurate information to the mangers in relation to the activities of the business and enhance
their understanding regarding certain patterns.
Budget report- This report include the estimation of cost and the income of the
enterprise. It is crucial for attaining smooth functioning of the operations with optimum use of
the resources. It helps in developing the understanding of the grand scheme of the business in
overall budget. It facilitates reliable, relevant and the accurate estimates regarding the cost
involved on the basis of the previous experiences which in turn is important for meeting the
unforeseen conditions if any occurs in the future.
Cost management reports- This report includes the computation of the cost involved in
manufacturing the article like the cost of raw material, labour cost and the overhead cost. Cost
report offers the reliable information to the managers relating to the cost of item against its
selling price (Senftlechner and Hiebl, 2015). It provides for the exact understanding of the
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overall expenses that is essential for making the use of the resources optimally among the
departments.
Performance reports- It is the report that is created for reviewing the performance of the
Unilever Limited and the individual. Performance report helps the mangers in making strategic
decisions in relation to the future of the company (Stacchezzini, Melloni and Lai, 2016). The
role of this report is very vital for the Unilever Limited in keeping the accurate measure relating
to their strategy towards reaching the mission.
Accounts receivable reports- This report is prepared by the mangers in order to know the
balances regarding the collection from the debtors and the defaulters. It is critical for an entity as
it allows in identifying the defaulters and in finding the issues if any present in the collection
process of the Unilever Limited (Christiaens, and et.al., 2015). This report provides reliable and
relevant information in respect of the making decisions relating to tighten the credit policies
which helps in maintaining the cash flow of the business.
M1. Evaluating the benefits and the application of the management accounting systems within
the Unilever Limited.
Systems Benefits
Inventory management system This system helps in achieving the efficiency
in the process of production and in increasing
the productivity within the operations.
It minimizes the cost and maximize the sales of
the Unilever Limited which in turn helps in
gaining larger profitability.
It provides for the automation in manual task
and integrates the entire business of the
Unilever Limited.
Cost accounting system It is the system of management accounting that
provides the information that can be used for in
planning process and provides for control over
the cost.
It helps the Unilever Limited in fixing the most
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suitable price which in turn results in
maximizing the profits.
Price optimization system It helps the company in determining the
demand of its product at different price level so
that it can set up the best price which leads in
gaining higher profit margins.
The information provided by this system is
reliable, relevant and accurate as it helps in
making the analysis mathematically by
applying the appropriate formulas.
Job costing system It provides the ability to the managers in
tracking the performance of the individual and
the team in respect of the cost control,
productivity and the efficiency.
It is the most useful system in calculating the
cost of each job within the Unilever Limited.
D1. Critically evaluating the integration in between the reporting and the systems of management
accounting
Management accounting systems and the reports are highly integrated with each other as
the system implies for the preparation of the reports that include measurement of the
performance, computation of the cost and in ensuring the optimum use of the resources in
operating the activities effectively and efficiently (Rutledge, Karim, and Kim,2016). However,
any failure in the system leads to inaccuracy in the framing of the report.
LO2.
P3. calculation of the profit by applying marginal and the absorption costing method
Absorption costing- It refers to the method that contains all the cost that are attached with
manufacturing a specific product for external reporting.
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Marginal costing- It is the costing technique where marginal cost that is the variable cost
is been charged to the units of the cost, however, fixed cost for a period is been entirely written
off against contribution.
Particulars formula Per unit cost
Selling price 80000/80000 1
variable cost per unit 52000/80000 0.65
Fixed cost 16000/80000 0.2
Total production cost per unit
variable cost per + fixed cost
per unit 0.85
Calculation of cost of goods sold For Quarter 1 under absorption costing
Particulars Details Amount
production cost -
variable cost 50700
fixed cost 15600 66300
Less: closing stock 10200
COGS 56100
Income statement for quarter 1 by applying absorption costing
Particulars Amount Total amount
Sales 66000
less: cost of goods sold 56100
GP 9900
less: S&D 5200
NP 4700
Calculation of cost of goods sold For Quarter 2 under absorption costing
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Particulars Details Amount
Opening stock 10200 10200
Add: Production cost :
Variable cost 42900
fixed cost 13200 56100
Less: closing stock 3400 3400
COGS 62900
Income statement for quarter 2 by applying absorption costing
Particulars Amount Total amount
Sales 74000
less: cost of goods sold 62900
GP 11100
less: S&D 5200
NP 5900
Calculation of cost of goods sold For Quarter 1 under marginal costing
Particulars Details Amount
production cost -
Variable cost 50700
Less: closing stock 10200
COGS 40500
Income statement for quarter 1 by applying marginal costing
Particulars Amount Total amount
Sales 66000
less: cost of goods sold 40500
Gross profit 25500
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less: fixed cost 15600
less: S&D 5200
NP 4700
Calculation of cost of goods sold For Quarter 2 under marginal costing
Particulars Details Amount
Opening stock 10200
Add: Production cost :
Variable cost 42900
Less: closing stock 3400
COGS 49700
Income statement for quarter 2 by applying marginal costing
Particulars Amount Total amount
Sales 74000
less: cost of goods sold 49700
Gross profit 24300
less: fixed cost 13200
less: S&D 5200
NP 5900
Interpretation- From the above analysis it can be interpreted that the profit for the 1st
and 2nd quarter for at 66000 and 74000 units resulted as 4700 and 5900 under absorption costing
and under marginal costing also the resulted profits are same for both the quarters at 66000 and
74000 units equated to 4700 and 5900. However, absorption costing method is stated as the
better technique than the marginal costing because it takes into account both variable and fixed
cost which in turn generates accurate evaluation of the profits.
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LO3
P4 The advantages and disadvantage of different types of planning tools used for budgetary
control.
Planing tools is an instrument which helps in guiding the steps of organization which is
related to the implementation of the programs, initiative and intervention. It has been provided
the detailed descriptions about the implementation o the plan and development of the plan(Hill
and et.al., 2017).
Budgetary control.
Budgetary control is a continues process that determines the actual and real results of the
budget figures of the Unilever for the future and set the standards for comparing the budget with
the potential performance for calculating the variant. The comparison of actual figures and
budget will enable the management for identifying the remedial measures for proper timing. It is
basically a system of maintaining and controlling the cost that involves the coordination between
the departments and also the action on the results.
Advantages
 Budgetary control helps the organization for maximizing the profits for achieving the
proper planing, aim and objectives.
 It helps in co-ordinating with various departments that is necessary for achieving the
budget.
 It provides target for measuring the performance of the employees.
 It also introduces the organization with the incentive schemes(Gigandet and et.al., 2018).
Disadvantages
 The main disadvantage of the budgetary control is it is uncertain in the future.
 Sometimes there are so many problems has been created at the time of co-ordinating
between departments and employees.
 One of the main disadvantages is it is fully depended on the top-level management.
Sales budget
A sales budget is a estimation of the future sales of the financial period. Unilever uses the
sales budget for setting the goals of departments, forecasting the production which is required
and also the estimate earning of the business. Sales budget impact the operation and master
budget of the company. Sales budget playing an important role in the future performance of the
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company. The critical stages and components of this budget is to control the overall expenditure
of the resources and also plan according to the sales budget.
Advantages
 Sales budget is helpful in forming the sales programmes for achieving the sales target for
the Unilever.
 It is also useful and helpful in the allotment of the resources.
 It serves the best planning tool to the organization in sales(Garcia and et.al., 2015).
 It helps in proper planing of the budgets.
Disadvantage
 The main disadvantages of the sales budget is it is time intensive job.
 It Forecast the sales depends on various factors such as market circumstances, market
forces, competition etc., which takes significant time to complete the forecasting.
 Preparation of the budget is subject to internal biases and it is a huge challenge for the
management for not affected the forecasting with judgemental views and biases
unnecessarily.
Production budget
Production budget helps in calculating the numbers of units of products which has been
manufactured and derived from the combination of the sales forecasting and also the planned of
the finished goods. It also includes the estimation and identification of the cost of the products. It
requires cost for keeping the enough of the product for meeting the inventory which is required
to the Unilever. It also refers to the budget which has been set by the business and units of the
product(Hanna, Smith and Lemon, 2015.).
Advantages
 It helps in utilizing the maximum extent of the machinery and plant.
 It helps in reducing the expenses of production as the uniform production.
 It helps in maintaining the minimum stock of exchanging the goods.
 It helps in preparing the purchase budget.
Disadvantages
 it does not helps in Creating the comprehensive production budget which is a tedious
job that consumes the organizational resources significantly.
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 It leads to lack of flexibility where the Production process affect the various factors in
which so many changes takes place very rapidly and becomes very tangled work to
incorporate such changes in the production programming.
Cash flow management
In cash flow management it has is basically a finacial accounting process which shows
the chenges in the finacial statemnt and accounts of balanec sheet & income affect with the cash
equivalents and cash. It breaks the analysis of the down to investing and operating the finacial
activities. It is a type of analtytical tool where all the statement has been concerned with the flow
of cash and helpful in detrming uthe viability of te short-term for the Unilever(Klassen,
Lisowsky, and Mescall, 2017).
Advantages
 It helps in reducing the externakl and reliance resources.
 It helps in expanding teh buiness and also avoiding teh highest intreset.
Disadvantages
It does not ingnored teh non-cash transcations.
 It only shows the outflows an dinflows of the Unilever.
Pricing strategies
This can used for the different types of p[roducts selling. Pricing strategy takes the cacounts
segments, market conditions, ability to pay and also trade margins etc. there are mainly four
types of pricing strategies such as;
 Premium pricing
 Economy pricing
 Penetration pricing
 Price skimming
Competitors determine the PRICES
It is basically based obn the pricuing strategy which gives a tyough competition, it involves the
purchasing behaviour of the consumers that is an important crieteria. The most common tactics
which has been set acciording to the price of the of the competitors and it is basically known as
the competitive pricing stratgey(Wang and et.al., 2016).
Demand and supply consideration
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it has been cionsider that there are so many information which has been required for determining
the curriculum of the new programs. Demand cionsuiderations forcast the opportunities iof job
and on the other hand the supply consideration inviolve the types & locations of the new and
exuisting resouirces of naturals of the Unilever.
PESTLE and SWOT analysis of planning tools.
SWOT Unilever
Strength It has strong position in the market and also
have strong base of finacial performance and
strategies.
Weakness It easly wdecline the segment of grocery.
Opportunity It is potenitial for emerging in the new
markets(Garcia and et.al., 2015).
Threats Regional and global competitors
PESTLE Unilever
Political There are so many protectionist policies in
trade of the trump admisitration.
Economic The conflicts and prioblems with so many
distributor over the price of the products rasing
the impact of the currency.
Social Day by day it has growuing of the demands for
the premium skin care products in th emerging
markets.
Technological It l;evrage the data centres of people for
understanding the customers behaviours.
Legal It regulatory approves the dfelays of the
decisions for making tehgrowth of the
business.
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Enviornmental It takes actionable steps for addressing the
changes in climate within the values of
chain(Hill and et.al., 2017).
LO 4
P5. Comparing different management accounting system assisting in resolving financial
problem.
Management accounting system is defined as a process of preparing internal
managerial report which is of confidential nature assisting the manager in the decision making
process of the management. It basically involves functions related to planning, controlling,
organising and managing of business as well as financial resources of the business. Following
are the different types of system of management accounting by use of which Unilever Ltd can
overcome its financial issues:
1. Benchmarking – The term benchmarking is related with the process of making
comparison and measurement of the company's own business processes, products and
services with those business standards which are making profit in the market. It is a
concept or practice by use of which many business organisation can make improvement
in their business performance level by comparing and understanding those business
pratices which are considered as best in class. By using the tool of Benchmarking,
Unilever Ltd can indentify and assess all the opportunities and weaknesses on the internal
basis which are required to be improved (Castro and Frazzon, 2017). It helps in
determining measures and norms which are used by other business organisation in
attaining high profit margin as well as performance level. It assist Unilever Ltd in
overcoming its issue related to inefficient business operations and processes, high cost
expenditure associated with unproductive business areas. This systme of management
accounting can help Unilever Ltd in gaining competitive advantage by formulating sound
and effective business strategies and plans as followed by profit making companies in the
market.
2. Key performance indicators – It is a practice consisting of quantifiable measure which
can be used for evalauting and measuring the progress, growth level and success of every
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business organisation, individual employee and business operations. This tool assist in
determining whether the company has been working effectively as per the strategies and
plans made or not. It monitors the working performance of the business and its
employees as whole at different mutliple levels for assessing the success journey towards
the set defined business targets. Unilever Ltd by using it can overall its problem related to
poor employee performance by focusing on the strategic and operational improvement. It
further assist in reducing employees turnover and motivating them by satisfying their
needs. By imparting appropriate training sessions and workshop, the performance level of
its employees and workers can be enhanced thereby increasing the overall business
productivity.
3. Budgetary targets - This form of management accounting system is based on
formulation of a financial plan and budgetary target for a specific time period. It is related
with the process of making an estimation or prediction of amount of money or cost
expenses which will be required for carrying on future business operations and activities.
By using Budgetary targets, Unilever Ltd can mitigate its unnecessary business expenses
as associated with the most unproductive and less profitable business operational areas.
This will further help the company in increasing its profit margins and aquiring of large
market share as well. It also helps in making effective and proper allocation of available
and limited business as well as financial resources present with the company as per the
requirements of various business department. This can improve the cash management
activity of Unilever Ltd by designing a budget for an accounting year and compare the
actual result with the estimated one for determining variance if any . Also, it supports in
smooth functioning as well.
4. Financial governance – It is a way in which a business organisation collects, monitors,
maanges, evaluates and control all the information available with the company especially
of the financial nature. For a company, it is very important to remain competitive
throughout its business performance, by making compliance of applicable laws,
regulations, rules and other business related provisions. Timley compliance of these
regulatory rules can protect company from being penalised under strict penalty
provisions. It is the duty of company to make disclosure about all the material as well as
relevant information which is of influencing nature and can imapct the decision making
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process of any individual investors, stakeholders and other business competitors (Berger,
Imbierowicz and Rauch, 2016). With the help of this tool, Unilever Ltd can make
budget, financial plans and models thereby providing proper control over the internal
financial business processes.
Unilever Ltd has been using Benchmarking tool of management accounting system for
minimizing the issue of financial problem related to low production and profit margin arising as
a result of inappropriate and inefficient business operations, processes used by it. By getting deep
insight about competitor business strategies and plans for making market value and profit,
Unilever Ltd has been able to improve its own performance level.
Maple & Co. On the other hand has been using Key performance indicator for evalauting
the performance level of its individual employees and business processes as a whole. For making
improvement in performance, strategies and policies has been made by the management of the
company in line with the key business objectives and goals. Also, by monitoring and tracking the
performance on regular it has been able to assess whether it is working towards the attainment of
business goals or not as per the strategies made.
Management accountant is a professional employee which undertakes the work related to
planning, organising, monitoring and evaluating the whole busines operations and performance
level for making business successful. Following are the characteristics of effective management
accountant:
 It is very important to have analytical skill alomg with the mind set of problem solving.
This will help Unilever Ltd in resolving all the issues which is hampering the
performance of compay.
 Should be capable of decision making and self directed, not get influenced by any one.
 One of the most effective skill which every management accountant should posseses is
having good communication skill.
By using technical as well as operational knowledge, management accountant can boost
the production level. Adoption of better improved and innovative busines strategies, techniques
and concepts, it will help Unilever Ltd in enhancing the profitability and customer satisfaction
level and improves performance as well (Otley, 2016).
With the development of better and appropriate strategies as well as system such as
verification of information with valid evidences can help in effective and timely reporting of
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financial and accounting information. It is very much essential for making full disclosure of the
financial position of the company, depicting the true picture of the current market and liquidity
position for providing better understanding to its end users.
CONCLUSION
From the above report it can be concluded that, management accounting is concerned
with the preparation of internal managerial accounting report which forms base for the decision
making process of the company's management. By using different management accounting
report, Unilever Ltd can assess the overall business performance and also of its employee too
with the help of performance report. It is very important for a company to prepare budget or a
financial plan for making prediction related to future business expenses as well as the profit
margin to be recieved from the business operations to be undertaken in the near future. By
formulating sound and effective business strategies, plans and actions Unilever Ltd has been
able to improve its internal business efficiency which has in turn created a positive impact on the
level of productivity and profitability as well. By making use of marginal and absorption costing
techniques, the amount of profit or loss figure has been determined which interprets that it is
better to use costing technique as it is giving high return. At last, for overcoming the issue of low
productivity, profitability and inefficient business operations, Unilever Ltd has chosen
Benchmarking tool.
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