BTEC HND Management Accounting Report: Cost Analysis and Planning

This report provides a comprehensive overview of management accounting principles and their application within a manufacturing context, specifically Tech (UK) Ltd. It delves into the significance of management accounting as a decision-making tool, contrasting it with financial accounting, and explores various management accounting systems, including cost accounting and inventory management. The report then examines different types of management accounting reports, such as budgeting, job cost, and performance reports, highlighting their importance in minimizing losses and enhancing financial returns. Furthermore, it analyzes cost analysis techniques, differentiating between fixed and variable costs, and applying absorption and marginal costing methods. Finally, the report discusses planning tools used for budgetary control, exploring their advantages and disadvantages, and addresses the adaptation of management accounting systems to overcome financial issues. The report concludes with a discussion of the advantages of different management accounting systems.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and different types of management accounting systems...............1
P2 Different types of management accounting reports...............................................................3
D1................................................................................................................................................5
TASK 2............................................................................................................................................5
P3 Calculation of cost after application cost analysis techniques...............................................5
M2...............................................................................................................................................9
D2................................................................................................................................................9
TASK 3............................................................................................................................................9
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control.........................................................................................................................................9
M3.............................................................................................................................................11
D3..............................................................................................................................................11
P5 Adaptation of management accounting systems to overcome from financial issues...........11
M4.............................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is important concept which contributes in enhancing the
decision making power of internal parties. It is broad concept which includes the provisions of
cost and managerial accounting. Through application of such provisions different kind of
accounts are formulate which depicts the performance of different departments. It further helps
in improvement of the understanding among the different team members which provides
collective efforts in accomplishment of desired objectives of organisation. Large number of
benefits are gathered by organisation through implementation of such accounting provisions like
strategic planning, risk management etc. Tech (UK)Ltd. Is manufacturing organisation which
prepare special chargers for retailers (Zimmerman and Yahya-Zadeh, 2011).
In the present report explain about, management accounting and their requirement in
effective operation of business activities, application of different methods of management
accounting reports and their importance for organisation and application of marginal and
absorption costing in preparation of income statement. Also, advantages and disadvantages of
different type of planning tools used for budgetary control and adaption of effective accounting
technique to overcome from financial issues.
TASK 1
P1 Management accounting and different types of management accounting systems
Management accounting is a procedure of preparing management accounts and reports
which gives timely and accurate statistical information which are needed through managers in
order to make all short term and daily decisions. In this, employers use provisions related to
accounting information in order to take better or effective decisions and control management
functions as well. Management accounting consists process regarding analysis, determination,
execution of the accounting information with the help of cost accounting and managerial

principles. It offers effective opportunities to Tech (UK) Ltd manager to develop better policies
in order to achieving aims and goals with in given period of time.
Importance of management accounting as decision-making tool
Tech (UK) Ltd. is a manufacturer of mobile telephones, special chargers and the other
different gadgets for retail stored in United Kingdom. It provides special features in its mobile
phones so that people can be attracted. The main issues which Tech(UK)Ltd. Faced is lack of
finance related information which develops negative impact on the decision making of business
firm. In addition to this, management accounting consists cost accounting provisions. It will be
helpful for firm to improve performance level of the various departments. Some of the
importance of management accounting given below as above:
Rate of return evaluation- Effective provisions of management accounting is helpful in
evaluation of return those are regarded with the various projects. It is contribute those projects
which are profitable and also improve earnings (Weißenberger and Angelkort, 2011).
Forecasting of cash flows- It assess in estimation of cash flow in company with in the
particular time period. It gives better opportunity to manage its all future transactions on the
basis of working capital availability.
Variances predictions- It is a necessary function and helpful in determine deviations in
performance of staff members and then compare them with actual standards. It is helpful to use
the analytical, tool in order to sustain positive variances.
Difference between management and financial accounting
Management Accounting Financial Accounting
It is helpful for managers to take effective
decisions which can satisfy goals as
objectives of firm.
Under this, there is a need of communicate
financial position of firm to related users.
Its primary users are internal and these are
managers of firm.
Its users are external and these banks,
suppliers, investors and regulators.
These types of statements are used for
internal use not needed to audited through
Charted accountants.
Under this, these statements are published
for the use of general public and then sent
to the shareholders. There is a need to

audited through Charted accountants.
It gives better opportunities related to
organising, planning, controlling and
monitoring.
Under this, there is a need to make better
strategies for the improvement purposes.
Various types of management accounting systems
Under this, there are several types of management systems which help in make
improvement in performance level of various departments of Tech(UK)Ltd. Different system of
management accounting given below as above:
Cost-accounting systems- It is helpful for Tech(UK)Ltd. To estimate product cost which
need to analyse profitability of firm, cost and inventory control. Estimated costs are not
beneficial for making operations of company more profitable. It is a procedure of classifying,
recording, summarizing and also recording different course of action in order to control cost. Its
main aim to reduce operation costs. It is generally used through producers in context to record
manufacturing activities by using perceptual stock system (Ward, 2012). The different kind of
systems are defined below:
Actual costing Standard costing Normal costing
It is important part which
includes the consideration of
the costs which are actually
spent upon production of
products
Here, standard costs are
decided which are need to
achieve
It is the process of estimate of
cost which is going to incur in
production of products
Inventory management systems- This kind of system is concerned with management as
well as supervision of non- capitalized assets and also stock of business organisation. Process of
company can be coordinated with inventory management system in context to accomplish
effective or efficient inventory flow at point of sale.
Job-costing systems- This system is assign to cost of production to every individual
goods at the time of monitoring expenses. Tech. (UK) company use this kind of system to

identify other expenses. This system is used in case when goods are produced in a significant
manner. This management accounting systems gives better opportunities to monitoring expenses
for improve profit margins (Van Helden and Northcott, 2010).
P2 Different types of management accounting reports
Management accounting reports are accounting practices which are necessary for
development of business. It is varied from financial accounting and it helps in produce effective
reports for for internal stakeholders of firm as comparison to external stakeholders. All reports
give various information as well as data of the different segments which are used through
managers in context to develop future policies. These reports give reliable as well as accurate
statistical information to firm. There are various kinds of management accounting reports given
below as above:
Budgeting reports- It is a set of plan to evaluate performance level of firm at the time of
making better evaluations regarding performance of departments and control amount. For
preparation of budget, an actual expenses are occurred in the previous periods get used. This
kind of report is used to give incentives to staff members so that they can motivates and work for
achieving the set objectives with in specific period of time.
Job cost reports- These are related with determining cost, profitability and also expenses
of each specific job. There is an evaluation which can be made regarding earning of project to
earn more profit. Job cost reports are helpful in examine cost when the project is in progress so
that it can earn more money (Shah, Malik and Malik, 2011).
Manufacturing and inventory reports- Business firms which are included in
production process, they develop these kinds of reports to make inventory and production
process more effective. These reports involves labour cost, wastages, per unit overhead which
are related with stock. In addition to this, managers do comparison among various assembly lines
for see improvement opportunities which can exploited through different departments and also
their staff members.
Performance reports- Under this, differences are calculated on comparison of budgeted
performance with actual results regarding this performance reports. Generally, it is prepared on
yearly, monthly and quarterly basis. These reports are helpful in determining performance level
of firm on continuous basis and comparison with the last year performance.

Order information report- It helps for management to determining current trends in an
effective or efficient manner. Different kinds of reports which are prepared in this reporting
assess operations of integrating management ion order to accomplish minimum cost in order
placing and also management (Qian, Burritt and Monroe, 2011).
Significance of management accounting reports
Minimization in loss- Various kinds of reports give information regarding present
problems faced through firm to generate more profit and reduce loss.
Enhance financial returns- Lack information is main issue which is faced through given
form but through execution of better management accounting systems firm developed different
reports which help in decision making and improve productivity.
M1
There are advantages of different management accounting systems given below as above:
Management accounting systems Benefits
Cost accounting systems a. It is beneficial to maintain proper
investment in stocks.
b. Through this systems, firm can
measure its efficiency and make
improvement in performance.
Inventory management systems  Helpful in saving cost and time.
 Through this, firm can make
improvement in accuracy of stock
costs.
D1
REPORTING TYPE INTERGRATION WITH
ORGANISATIONAL PROCESSES
Performance reports An integration among processes included in

firm and this kind of report gives better
management of stock levels and production
costs.
Order information report An integration among process of firm and this
kind of reporting can give management with
sales analysis to generate different reports.
TASK 2
P3 Calculation of cost after application cost analysis techniques
Cost: It refers as the amount which is spend by the organisation for creation of something
valuable which results in completion of their desired objectives. There are many resources are
used in the process of production (Otley and Emmanuel, 2013). The cost related to all such
resources are considered in the total amount of cost. Such different aspects includes:
 Raw materials
 Efforts
 Resources
 Risks incurred
 Opportunity foregone
The cost are classified into different types which are defined below:
Fixed cost: It is that part of cost which always remain constant and does not get
fluctuated with the change in production level. However, per unit amount of fixed cost is
decreased with the increase in the level of production. The different costs which are included in
fixed cost are rent, depreciation etc.
Variable cost: It is considered as such cost which varies with the change in the level of
output. This cost has direct relation with production. So, it increases and decreases with the
variation in level of production. This includes the cost related to raw material, labour etc.
Cost volume profit: This analysis helps to determine that if change is happen in costs
and volume then what is the impact upon operating income and net income. While doing this
analysis, need to make several assumptions including sales price per unit id constant (Nixon and
Burns, 2012).

Absorption costing: It is effective method which is used regarding calculation of total
cost of product. As per this method both fixed and variable costs are apportioned to cost centres.
This method is also known as full costing method. By using this method of costing, value of
inventory is determined. It is one of the oldest and widely used technique for ascertainment of
the cost. In this method all costs which are related to direct and indirect are considered.
Marginal costing: While calculating cost by using the provisions of this method then
only variable cost is apportioned to cost centres and fixed cost is totally write off against
contribution. This method helps to understand about change in cost due to variation in the one
unit of level of output. The value of inventory which is calculated through this method is
considered as undervalued.
Absorption costing Marginal costing
Full costing method because fixed and variable
both costs are included
Oversee of variable cost and fixed cost is
totally ignored
Sales- cost of sales= Gross profit Sales- variable cost= contribution
It helps in long term decision making It provides opportunity for decision-making
about day to day functions
Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
Direct material cost 8
Direct labour cost 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500

Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Cost of production
Closing stock
Variable sales overheads
Contribution
Less Fixed costs:
Fixed Production overheads
Fixed Selling overheads
Net loss
0
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
(2875)
Income statement on the basis of Absorption costing method:
Selling Price per unit £35
Unit costs
Direct materials cost £8
Direct Labour cost £5
Variable Production overhead £2
Variable sales overhead £5.25
Budgeted production for the period is 3000
units
Fixed cost for a month:
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
Absorption costing working notes

Working Note 1: Calculate full production cost
Direct material £8
Direct labour £5
Variable cost £2
Fixed cost £5
Total £20
Working Note 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40000 500*20 = £10000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: £15000
Fixed overhead: £10000
Total £5000(under absorbed)
Net profit using absorption costing £ £
Sales value
(-) Cost of Sales:
Opening stock
Cost of production
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less: selling Expenses
Variable sales expenditure
Fixed selling expenditure
Net loss
0
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875

M2
Income statement is one of the important document which helps to ascertain about the
financial position of organisation. Through such collected information better financial decisions
are taken. It is observed from the above analysis of income statement of Tech (UK)Ltd is that it
is working in loss.
D2
From the above analysis of income statement, it is noticed that through use of the method
of marginal costing the loss is ascertained of the amount of 375. But with the help of absorption
costing method loss of 2875 is identified. This difference is arise due to the acceptance of fixed
cost in absorption costing method (Garrison And et. al., 2010).
TASK 3
P4 Advantages and disadvantages of different types of planning tools used for budgetary control
Different types of budgets
There are different types of budgets which provides the direction to the employees of
organisation in performance of their functions in effective manner. All budgets prepared by
organisation different in nature and having different roles. The different budgets which are
formulate by Tech(UK)Ltd. Are defined below:
 Capital budget: This budgets includes the information regarding capital receipts and
payments which are going to come from different sources in future. It helps in effective
use of funds regarding purchase of their fixed assets.
 Operational budget: This budget is prepared by the management of organisation for
effective performance of different business activities in more appropriate manner. It helps
in planning of their different types of expenditures which further contributes in
improvement in the number of profits.
 Cash flow budget: It is effective budget which provides the information regarding
availability of cash in organisation. It helps the manager of organisation is to effective
perform their day to day functions (Fullerton, Kennedy and Widener, 2014).
Budget preparation process
 Calculation of expenses: For preparation of budget need to identify expenses.

 Determination of income: Identification of earning capacity. Strategies are set according
to that.
 Setting of savings: Determination of the amount which is need to save from business
operations.
 Record of spending: Track their actual expenditure which helps in reduction of
unnecessary costs.
 Try to follow budget: Guide employees to follow standards for accomplishment of
desired goals.
Strategic planning
Strategic planning tools help the organization to understand the environment whether it’s
external or internal in which they develop and prepare plans that according to the environment.
This tool allows the organization to eliminate the unwanted risk which arises in the market and
take the opportunity which is predictable in the market.
Following are the strategic planning tools which help the accountant of an organization:-
 SWOT Analysis: This tool analysis and identify the organization position in the market.
It stands for STRENGTHS,WEAKNESSES,OPPORTUNITIES & THREATS. The
SWOT analysis identifies the organizational strengths and opportunities while decreasing
the weaknesses and threats.
 PEST Analysis: A PEST analysis estimates the political, economic, social and
technological environment in which the business of an organization are functioned. This
analysis is useful if the organization wants to enter the international market.
 Five Forces Analysis: This forces measures the organization business place in the
market. It considers the bargaining power of customers, suppliers and threats of
substitutes, new entrants and rivalry in the industry. It also determines the competition
intensity in the market by the business and its level of profitability (Dillard and
Roslender, 2011).
M3
Scenario is effective planning tool which helps in assessing the risks. On the other hand,
forecasting tool helps to forecast about future actions. This will contributes in effective
accomplishment of objectives.

D3
As per analysis of financial statement, it is observed that Tech(UK) Ltd. Is working in
loss. To overcome from the amount of such loss planning tool plays an important role.
 Scenario tool: It helps in early identification of risks and formulation of effective
principles. This provides opportunity is to save their costs (Cinquini and Tenucci, 2010).
P5 Adaptation of management accounting systems to overcome from financial issues
As per analysis of the income statement of Tech(UK)Ltd. It is observed that organisation
is incurred loss from their business operations. There are are many reason which results in loss
from the business functions like low level of product quality, management issues etc.
Management accounting is effective system which consists different tools which provides
opportunity regarding early identification of issues and contributes in responding them in
effective manner. The three different tools which are used by the management of organisation
regarding identification of financial problems are defined below:
 Benchmarks: It is one of the effective tool emerges from the principles of accounting.
This will provides the standards which are work as benchmarks need to adhere by
employees for effective accomplishment of objectives. This will provides the opportunity
regarding identification of issues in the performance of employees through measurement
with set standards. It helps to identify the ability of all individual employees, so roles are
effectively disbursed by the management according to their calibre.
 Key performance indicators: These indicators provide different information which is
used by the management further for determination of issues associated with their
transactions. It can be classified into two different types financial and non financial.
Financial indicator includes income statements, balance sheet etc. It provides the
information regarding expenditures which are occur unnecessarily. On the other hand,
non financial KPI includes management and employee relation etc. This will helps in
determination about the low morale of employees while performing their functions.
The tool which helps to overcome from the losses is Financial governance. The role of
this tool is defined below:
Financial governance: This tool provides the information about the government
regulations which are need to follow by organisation while providing their activities. It provides
the opportunity is effectively fulfil such regulations to bring effectiveness in their operations.

Balance Scorecard approach
The main function of this approach is to improve their internal strength of organisation to
attain desired results. It helps in assessment of the issues which are present within the
organisation to provide strategies to overcome them. The aspects which helps to respond issues
are define below:
 Provide guidance to employees
 Formulation of effective strategies
Four perspectives
 Financial: proper use of resources to attain higher number of profits
 Customer and stakeholder: Fulfilment of the requirements of customers to provide
good quality products
 Internal process: It includes about of improvement of internal process of organisation.
 Organisational capacity or learning and growth: Development of the organisational
structure through improvement of technology, infrastructure etc.
M4
There is huge role is played by the management accounting systems to overcome from
such issues to grab success in future operations:
 Standard costing helps to identify risks (Christ and Burritt, 2013).
 Provides standards for guidance
CONCLUSION
It has been concluded from the above report that management accounting is helpful in
planning, organising and also managing all financial activities in an organisation. Better
execution of management accounting system is helpful for Tech(UK)Ltd. To make improvement
in its internal strengths and increasing their power of decision making. Under this mention report
studied about the different between financial management and management accounting. Balance
score card is a necessary approach which is helpful in minimise all losses as well as generate
more profit from all kinds of business operations. In mention assignment studied regarding
different kinds of management accounting systems.

REFERENCES
Books and Journals
Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control.
Issues in Accounting Education. 26(1). pp.258-259.
Weißenberger, B.E. and Angelkort, H., 2011. Integration of financial and management
accounting systems: The mediating influence of a consistent financial language on
controllership effectiveness. Management Accounting Research. 22(3). pp.160-180.
Ward, K., 2012. Strategic management accounting. Routledge.
Van Helden, G.J. and Northcott, D., 2010. Examining the practical relevance of public sector
management accounting research. Financial Accountability & Management. 26(2).
pp.213-240.
Shah, H., Malik, A. and Malik, M.S., 2011. Strategic Management Accounting-A Messiah For
Management Accounting?. Australian Journal of Business and Management Research.
1(4). p.1.
Qian, W., Burritt, R. and Monroe, G., 2011. Environmental management accounting in local
government: A case of waste management. Accounting, Auditing & Accountability
Journal. 24(1). pp.93-128.
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
Nixon, B. and Burns, J., 2012. The paradox of strategic management accounting. Management
Accounting Research. 23(4). pp.229-244.
Garrison, R.H. And et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management. 32(7). pp.414-428.
Dillard, J. and Roslender, R., 2011. Taking pluralism seriously: embedded moralities in
management accounting and control systems. Critical Perspectives on Accounting.
22(2). pp.135-147.
Cinquini, L. and Tenucci, A., 2010. Strategic management accounting and business strategy: a
loose coupling?. Journal of Accounting & organizational change. 6(2). pp.228-259.
Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
141.
Online:
Management accounting and its importance [Online]. Available through:
<https://www.invensis.net/blog/finance-and-accounting/what-is-management-
accounting-and-its-importance/>