Management Accounting: Planning & Control in Business - BTEC Level 4

This management accounting report focuses on ABC Ltd and covers various aspects of management accounting, including its definition, essential requirements, and different reporting methods. It discusses cash flow analysis, inventory turnover analysis, job costing systems, and price optimization systems. The report also highlights the benefits of management accounting systems, such as increased efficiency, profit maximization, and improved decision-making. Furthermore, it includes calculations of production cost per unit, total production cost, and total cost of sales, along with the application of techniques for preparing budget profit and loss statements. The advantages and disadvantages of different planning tools used in budgetary control are also explained. The report concludes by evaluating how management accounting systems help organizations respond to financial problems and achieve sustainable success. Desklib offers a variety of solved assignments and past papers for students.

Management Accounting

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................4
MAIN BODY...................................................................................................................................4
Defining Management accounting and also the essential requirements to the different types of
management accounting system..................................................................................................4
Different methods used for the management accounting reporting.............................................5
Benefits of management accounting systems..............................................................................6
Critical evaluation of management accounting systems and management accounting reporting
......................................................................................................................................................6
TASK 2............................................................................................................................................7
Calculation of the Production cost per unit, Total production cost and total cost of sales..........7
Application of techniques for the production of the budget profit and Loss statement...............9
Amount £..................................................................................................................9
Reconciliation statement of profit figures......................................................................................10
TASK 3..........................................................................................................................................11
Explaining advantages and disadvantages of different types of planning tools used in
budgetary control.......................................................................................................................11
Explaining use of different planning tools and their applications for preparing and.................13
forecasting budgets....................................................................................................................13
Evaluating planning tools for management accounting respond appropriately for...................14
solving financial problems to lead organizations to sustainable success..................................14
TASK 4..........................................................................................................................................15
Explaining how management accounting system is adopted by organization to respond to
financial problems .....................................................................................................................15
Responding to the financial problems can lead the organization to sustainability success.......16
Evaluation of planning tools for the management accounting for responding to the appropriate
solution of the financial problems..............................................................................................16
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Management accounting is the process which helps the business in the preparation of the
business operations which helps the managers in the short-term and long-term decision-making
with the help of financial analysis. The management accounting is the identification,
measurement, analysation and interpretation and communication of the financial information for
the better decision-making. In this project the chosen organization is the ABC Ltd for which the
management accounting will be discussed. This project helps the business in providing essential
requirements of the different types of management accounting systems. This project will also
provide the discussion of the different methods of management accounting reporting. In this
project the calculation of the costs which are used for the analysation of the appropriate

techniques of the cost analysis and the preparation of the income statement for the application of
the marginal and absorption cost system has been utilized. This project also provides the
advantages and disadvantages of the different types of planning tools which is used for budgetary
control. In this project the comparison of how the organization is adapting to the management
accounting systems for responding to the financial problems.
TASK 1
MAIN BODY
Defining Management accounting and also the essential requirements to the different types of
management accounting system
The management accounting system is that process which helps in the preparation of
different reports about the business operations which help the managers for making short-term
and long-term decisions which helps the business in the pursuing the goals and also the
identification, measurement and analysation of the interpretation of the communicated
information to the managers of the organization (Quinn and et.al., 2018). This is also very
helpful for forecasting the future which helps the business in the management of the upcoming
issues. Management accounting also allows the business in the making the decision related to the
cost and production of the organization which allows the business in understanding the factors of
the purchasing choices of the data from the managerial and accounting empowerment of the
decision-making of the operations in the strategical level. Management accounting is known for
being very important for the analysation of the future cash inflows in the business. The essential
requirements in different types of management accounting system are,
Cash flow analysis :
In the management accounting the performance of the cash flow analysis for the
determination the cash which impacts the business decision of the organization. This
management accounting system helps in the analysation of the inflowing cash which allows the
business of in financial information which is considered to be the best way in which the future
performance of the business can be considered (Alabdullah, 2019.).
Inventory turnover analysis :
The Inventory turnover analysis is the part of the management accounting system which
helps the business in the calculation of how many times the company has sold all the stock which
it purchased. This cycle of inventory getting replaced is known as the turnover of the business

which is considered important factor that helps the business in the management of the
organizations importance and other operations.
Job costing system :
This is that part of the management accounting system which manages the accounts
receivable report of the organization that is considered to be categorized to have a very positive
effects on the company's bottom line (Zandi, 2019). The management of the accounts receivable
ageing report is said to be categorized in the AR invoices which helps the business in the length
of time of how outstanding this business can be.
Price optimization system :
Preparation of the budgets is very essential for the organization as it creates the
quantitative expression of the company's plan on what it wants to implement in its operations
that will allow the business in the utilization of the performance reports for noting the deviation
of the actual results from budgets and positive or negative deviations from the budget.
Different methods used for the management accounting reporting
Different types of management accounting reporting which this business needs to
consider in the management accounting are,
Budget Reports :
The managerial reports of the organization is directly related to the creation of the budget
managerial accounting reports that is considered to be very critical for the measurement of the
company's performance (Wahyuningsih and et.al., 2021.). These reports are prepared with the
help of the estimation of the previous experienced budget which can create an unforeseen
circumstance that might arise in the organization.
Account Receivable Ageing Reports :
The preparation of these reports is considered to be very dependent over the breaking
down of the customers remaining balances of what the business will receive. The corporate
culture of the organization is decided with the help of business to estimate how much the
business will receive.
Cost managerial accounting Reports :
Management of the cost reports is very essential for the business as it help the busies in
the estimation of how much expenditure it will for the generation of a certain revenue. This is the

reason why it is considered that with the help of this cost managerial accounting the business is
able to fix a selling price which contains the margin of profit in the organization.
Inventory Reports :
In an organization which deals with a certain type of product it is important for the
business to manage its inventory which is considered to be the essential factors which helps the
business in the management of organizational performance. It also helps the business in gaining
fasted turnover (Astuty and Pasaribu, 2021).
Benefits of management accounting systems
The benefits of the management accounting system and their application for the business
are,
Increases Efficiency :
The management accounting system is considered to be one of the most effective way in
which the business can increase its efficiency. This happens as the business plans its expenses
according to the analysed reports of the company finances.
Maximization of profit :
The management accounting's budgetary control and capital budgeting tool helps the
business in the development of a plan which can be used by the business for creation of the
reduced costs and increasing the profit maximization.
Controlling Cash flow :
Controlling cash flow is very essential part of the management accounting as it helps the
business in creating a control of cash flow and also help it in the management of the cash which
is considered to be better with the foxed properties (Javed and Malik, 2021).
Decision-making :
Management accounting system is very important for this organization to develop a
decision-making process. Which is essential for the organization in the management of the
organization and also the development of a reliable management that is essential for the decision-
making of the business.
Simplification of financial statements :
In this business it is very important that the organization is able to manage the financial
statement as it is useful for the business to create comparison with other competitors that can
allow the business to grow.

Critical evaluation of management accounting systems and management accounting reporting
The management accounting system is the generates the information which helps in the
satisfaction the needs of the management which is towards the reporting of its financial
accounting and managerial accounting. It is that process which is essential for the preparation of
the reports and accounts required for the management of the business decision-making. It is that
branch which allows the business in the management of the accounting of the brand containing
the accounting information in a presented form towards the interested parties. Management
accounting system is very essential for the management of the financial information of the
managers for planning and controlling the different activities (Korhonen and et.al.,2020).
Management accounting reporting is the development of a dual role which performs in
the organization as the strategic partner towards providing the strategic based financial and
operational information. The management accountant plays a very prominent role in the
preparation of financial reports, risks and also the regulatory reporting for the aggregation of the
financial information. These reports also contain the performance cost analysis which is helpful
for the production and division which includes the variable and fixed costs.
TASK 2
Calculation of the Production cost per unit, Total production cost and total cost of sales
calculation of production cost per unit
Particulars January
Direct material 10
Direct labour 20
Variable production overhead 5
Fixed production overhead 5.5555555556
Total production cost 40.56
Total production cost
Particulars January
Direct material 180000
Direct Labour 360000
Variable production overhead 90000

Fixed production overhead 100000
Total production cost 730000.00
Cost of good sold
Budgeted Actual
Particulars Amount £ Amount £ Amount £ Amount £
Opening
inventory
Add Production
18000×40.5
6 730080
19000×40.5
6 770640
Less
Closing
inventory 2000×40.56 81120 3000×40.56 121680
COGS 648960 648960
Production cost per unit :
The per unit cost of production is said to be the one which helps the business in the
management of the organization as the total cost of production cost is divided by the total
numbers of units produced. It is essential for the business to provide a different number of units
which can be considered to be productive and also be in relation to the concept that is
understands in the accumulation of the costs.
Total Production costs :
This project helps in the determination of the unit cost of the production which
helps the business in the understanding the to total cost it incurred in the manufacturing of its
products. The total production cost of the organization is considered to be the one which is very
important for the organization in the understanding what is the total cost which it incurs for the
production of a certain amount of units (Gomez-Conde, Lunkes and Rosa, 2019). This cost is
very useful in the preparation of the budget as it helps the business in understanding how much

cost it needs to spend in the organization. It can also allow the business in understanding the
management of the organization.
Total cost sales :
The total cost of sales is the actual cost which is incurred in selling of the products of the
organization. It can be considered as the actual cost which includes both the direct and indirect
expenses of the organization. It includes the production cost and also the administrative cost
which are considered to be very essential for the organization in the management of the
organization (falih Chichan and Alabdullah, 2021).
Application of techniques for the production of the budget profit and Loss statement
Income statement as per marginal costing technique
Particulars Amount £
Amount
£
Amount
£
Amount
£
Sales ( Revenue) 800000 800000
Less: COGS
Opening inventory
Production 730080 770640
Closing inventory 81120 648960 121680 648960
contribution 151040 151040
Income statement as per absorption technique.
Budget Actual
Particulars Amount £ Amount £ Amount £ Amount £
Sales ( Revenue) 800000 800000
Less: COGS

Opening inventory
Production 720000 760000
Closing inventory 80000 640000 120000 640000
Gross profit 160000 160000
Working note for absorption technique:
Particulars January (Budgeted)
Direct material 180000
Direct labour 360000
Variable production overhead 90000
Fixed production overhead 90000
Total production cost 720000.00
Reconciliation statement of profit figures
Budgeted (January)
Actual
(January)
Profit under absorption 160000 160000
difference in units of
inventory* fixed production
overhead 8960 8960
Profit under marginal 151040 151040

The income statement of the organization the following methods are used such as,
Marginal costing :
This method of marginal costing is known as the method in which the cos are considered
to be the production cost and fixed cost that allow the business in the analysation of the cost for
the given period. It is the technique which allows the business in assuming the variable costs and
production cost to be effective in the preparation of the income statement of the organization.
This method of preparation of the income statement is considered to be very essential for the
production cost and also the fixed cost of the organization that can allow the business in
assuming the cost for the given period. In this technique of management of the cost of the
organization. Both the fixed costs and the variable costs are considered that can allow the
business in the calculation of the income of the organization (Hertati and Safkaur, 2019). This
method also has the utilization of the P/V ratio which is the profit value ratio which is used by
the management to understand the efficiency of the organization. It helps in the determination of
the cost of the next unit as it allows the business in the management of its overheads. The
management costing method of this business is said to be very effective as it provides more
emphasis on the change on the opening stocks and the closing stocks which affects the per unit
cost of production. In this method the organization is able to understand the total contribution to
the per unit production. Contribution is shown as the main emphasis to the total production cost
in this method. The preparation of income statement which uses marginal costing utilizes the
total contribution of the organization.
Absorption costing :
On the other hand the absorption costing system is said to be yet another method which
allows the business with yet another method that utilizes the consideration of both the fixed costs
and variable costs that can be used as the production cost. In such a method of costing the
business considers it to be an effective way in which the purpose of the business can be
considered to be the essential factor for the reporting and inclusion of both the financial reporting
and tax reporting. It is that technique which is assumed to be the essential for both the fixed costs
and variable costs of the production. It can also be said as the technique which assumes both the
fixed costs and variable cost as the total production costs. In this method the overhead in the case
of absorption costing and also being able to be effective in a very uncertainty of the production
and distribution of the selling & administration of the organization (Pavlatos and Kostakis,

2018). This also helps the business in the analysation of the fixed costs of the product which also
allows the business in the getting the profit which is very essential for the generation of the
reduction of cost. It can be said that the cost of each unit of the product can be understood with
the help of this analysis of the organization. This method also help in the management of the
operations as it allows the business in providing emphasis over each unit which in charge of the
operation of the organization.
TASK 3
Explaining advantages and disadvantages of different types of planning tools used in budgetary
control
It becomes essential for the organization to pay attention on getting different types of
planning tools so that effective road map for carrying forward business practices can be derived.
ABC Ltd as being medium-sized enterprise require using planning tools of budgetary control so
that ability to plan strategically can become possible. Each technique of budgetary control has
few advantages and drawbacks which area as follows:
Cash Budget
It is widely taken into consideration by companies irrespective of their scale of
operations. Cash budget basically provides details regarding in & out flows which helps in
assessing the information regarding liquidity position of company (Cash Budget, 2021). ABC
Ltd can obtain following benefits and drawbacks which are as follows:
Benefits
It helps in assessing details regarding available cash which aids in conducting significant level of
evaluation of current financial status of firm so that appropriate sources for raising funds can be
identified.
Allocating, managing and controlling resource with help of cash budget can be exerted by ABC
Ltd in effective manner.
Identifying potential lacking areas to make significant evaluation of deficits functions of ABC
Ltd can be done to make identify appropriate course of action in order to make improvements.
Drawbacks
Cash budget as planning tool possessing few lacking areas which are essential to
recognize for gaining ability to make significant decision. ABC Ltd should pay attention on
following parts: