Management Accounting Report: R.L. Maynard's Financial Analysis

This report delves into the realm of management accounting, tailored for a company named R.L. Maynard. It begins by defining management accounting and outlining its essential requirements, including job order costing, cost accounting systems, inventory management, performance management, traditional cost accounting, and transfer pricing. The report then explores various management accounting reporting methods, such as job cost reports, sales reports, cost accounting, and budgetary reports. A significant portion is dedicated to calculating costs using appropriate cost analysis techniques to generate income statements, along with a comparative analysis of marginal and absorption costing. The report further examines the advantages and disadvantages of diverse planning tools used for budgetary control, offering a comprehensive overview of financial management practices and decision-making processes within a business context. The report is well-structured with tables and illustrations to explain the concepts.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and give essential requirement of various type of
management accounting system..................................................................................................1
P2 Explanation on different types of method used in management accounting reporting..........4
TASK 2............................................................................................................................................5
P3 Calculate cost by adopting appropriate techniques of cost analysis to prepare an income
statement and also explain difference among marginal as well as absorption costing...............5
TASK 3..........................................................................................................................................10
P4) Advantages and disadvantages of various type of planning tool used for budgetary control
...................................................................................................................................................10
CONCLUSION .............................................................................................................................16

INDEX OF TABLES
Table 1: Difference among marginal and absorption costing method............................................8
Table 2: Variance analysis.............................................................................................................11
Table 3: Responsibility accounting...............................................................................................11
Table 4: Adjustment of funds........................................................................................................12
Table 5: Zero-based budgeting.....................................................................................................12

ILLUSTRATION INDEX
Illustration 1: Income statement through marginal costing.............................................................6
Illustration 2: Income statement through absorption costing system...............................................7

INTRODUCTION
Management accounting is the most important for each and every company as they are
used by managers for the purpose of make decisions regard to business activities. The report are
generated by the accountant on the weekly as well as monthly based that are regard to each
department are finance, marketing, human resource and production. It assists management to
make the effective decisions as it show the company performance and profitability over a
specific accounting period. The present research project report are context to the R.L. Maynard
in which there are less than 50 employees work and they generate profit annul turnover that is
less than £500,000 (Shah, Malik and Malik, 2011). There is mainly discussion on management
accounting as well as also study on the different type of management accounting system that are
essential for the company. Thereafter, there is an explanation on various management accounting
system and discussion on marginal as well as absorption costing. It shows that which techniques
is better to determine the net profit or loss among these two costing. Furthermore, there is also a
discussion on the various type of management system can respond the financial problem.
TASK 1
P1 Explain management accounting and give essential requirement of various type of
management accounting system
General Manager
R.L. Maynard
Management accounting is used by manager to make short-term decisions in which it
involves management report and accounting information that provide accurately on right time
when required. It usually generates weekly or monthly basis reports for the internal audience
within the organisation that involve managers of department and CEO. Thus, in these
managements accounting reports indicate that cash inflow, revenue generated through sales,
account payable, stock, raw material and it also shows variance analysis. It is a just opposite of
financial accounting which produce reports for the internal stakeholder of an organisation. The
information presents in management accounting are used by manager for the purpose of making
decisions are related to future time period whereas, financial accounting are show historical
data. Therefore, it has some advantages that help companies by getting information they analyse
quality of product in which the reduce expenses (Harris and Durden, 2012). The R.L. Maynard
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used this information in which they develop master budget that reduce unnecessary expenses
and enhance cash flow. The main benefits from these accounting they can easily forecast related
to financial that involve impact of prices changes on economy, consumer demand and potential
sales etc. It directly facilitates financial returns from the function and operation of business.
Management accounting is the process which support an organization in analysing and
interpreting the information effectively. With the help of this tool cited firm can manage its
operations well and can make sound business decisions. In the modern business world it is
essential for entities that to compare their performance with other competitors. This is possible
by using management accounting tools. By comparing financial statements of these firm's entity
can identify its loop fall and can improve their performance.
Management accounting is essential for the growth of business. It helps in identifying
the mistakes and making sound business decisions. These tools and techniques support an entity
in making control over cost and improving cash flow in the corporation.
The requirement of various management accounting system used by R.L. Maynard that
are as follows-
 Job order costing system: In this costing system, management accountant records
expenses incurred in manufacturing process. It includes expenditures on purchasing raw
materials, labour and additional overhead (Kaplan and Atkinson, 2015). However, by
analysing these costs, price determination ideas are generated that affect production and
distribution system of R. L. Maynard. Therefore, decisions are made regarding all
expenditures and by which budget for further business operations is made affect further
implementation. Cited firm can use this management accounting tool, it can help entity
in meeting with its objectives. Purpose of the company is to enhance its sales revenues
which can not be possible until cited firm manage its records well. Job order costing is
the great tool that helps in identifying overhead expenses. By this way company will be
able to allocate resource well that will assist in minimizing unnecessary costs. Thus, it
wil be able to gain high profit.
 Cost accounting system: in this process system, all incurred expenses and gained
revenue on business operations are identified. It impacts on profitability and
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competitiveness of R.L.Maynard by which further decisions are made in terms of cost
effectiveness and increasing revenue of the enterprise. Therefore, cost accounting
system is useful for effective costing and decision-making for production and
distribution of its goods and services efficiently. For example if R.L. Maynard is
planning to expand its business. For that entity will have to manage its cash well it is
possible by cost accounting system. Cost accounting will help in making sound
decisions about the various expenses and it will be able to manage its operations well.
By this way entity will be able to meet with its objectives.
 Inventory management system: Management accountant of R.L.Maynard analyses
inventories and their management regarding production and supplement of its goods and
services. Similarly, it is useful for managing inventories and reducing their wastages
therefore their optimum utilization can be done affect further implementation. Thus,
inventory management system is helpful for managing entire business operations
adequately. It is another tool of management accounting, there are various expenditures
which needs to be manage by the company., IF cited firm manage its inventory well
then it will help R.L. Maynard in reducing wastage and increasing business revenues.
By managing inventory cited firm will be able to meet with its objective and this will
help in gaining competitive advantage to business unit.
 Performance management system: As management accounting is multidisciplinary
approach also plays vital role in performance management of its workers. In this regard,
report on performance of employees' performance is prepared by which their efficiency
and work abilities are identified. Thus, performance of the small scale enterprise can be
managed efficiently by which their personal and professional development can be done.
 Traditional cost accounting: It is conventional method relate to accounting in that
there are variety of procedures that are applied by R.L. Maynard in their production
department. For this, it facilitates them to easily track the various cost and management
adopt job cost method that are based mainly used to measure the allocation of cost. The
cited company used in which they allocate the various cost that involve manufacturing
expenses, direct material and direct labour. The organisation adopt job order process
method in which they track each factor that produces expenses and various cost in
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manufacturing process. Along with that, the process can be define as a those cost that
are incurred in production process of similar type of goods or services. Thus, it is not
useful in identifying cost when the production process are done continuously.
 Transfer pricing: In the transfer pricing is that price in that there is a division of an
organisation when they make transaction across boarders. Along with that, in
management accounting in which it is that prices in which company transact in different
division. It is used by firm for the purpose of determining cost and there are some
regulation for transfer pricing (Burritt, Schaltegger and Zvezdov, 2011). The rules that
are applied in these prices that shows fairness as well as accuracy. The regulation apply
when company transfer any kind of products such as service, intangible product, loan
and tangible across boarders.
P2 Explanation on different types of method used in management accounting reporting
R.L. Maynard Limited adopt the various methods for the purpose of management
accounting reporting that has been described below-
 Job Cost report: It is most important in accounting report that are managed by company
so, they can easily know their financial performance in terms of profit and loss. Along
with that, the report is given to the internal affairs that are needed by top level
management so, they can easily made effective decisions related to changes. The
decisions that are taken by manager regard to modifications which are made present
firm's condition due to which they made adjustment regard to expenses and revenues in
desired manner.
 Sales report: It is that type of report in which there is detailed information available
regard to sales of product or services of a company (Shah, Malik and Malik, 2011). The
report consist of sale volume per items and also cost that are occur at the time of
promoting firm's sale. It indicate the sales volume of product or services over some
specific time period in which there is a increment or decrement of sales. Therefore, the
top level management used sales report in which they identifying the market
opportunities through which they can increase sales volume. It also used to know the
several problem regard to product demand.
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 Cost accounting: It is provide a detail information regard to cost through which they can
evaluating the alternative action to control cost. It help the managers to help in providing
analysis of operational budgeting, standard costing, transfer pricing and activity based
costing etc. Apart from this, it also useful in making decisions that are beneficial in
making modifications in the cost structure. The main advantages of these accounting is
that it help in identifying efficiency and it have to manage and make improvements in it.
It also provide detailed information due to which they can effectively manage the
inventory and provide materials when it required.
 Budgetary report: It is that type of report that are necessary for a company to make
budget report that provide information regard to planning. The organisation adopt budget
report that facilitate them to effectively allocate the funds and it is also used to make plan
through which management set target. It also help the company to performance standard
that attain by the staff workers at a particular time period (Elbashir, Collier and Sutton,
2011). The manager make various type of decisions by comparison on performance of
previous year profit according to which they make plan. It also help in finding out the
deviations that can be finding out the difference among actual and expected standard.
Therefore, according to which they can take corrective measure so, that company run
their business function smoothly.
TASK 2
P3 Calculate cost by adopting appropriate techniques of cost analysis to prepare an income
statement and also explain difference among marginal as well as absorption costing
Income statement help the company to know its financial performance in a accounting
period. It is a summarizing into two revenues and expenses by both non-operating and operating
activities. R.L. Maynard measure its performance relate to finance that indicate net loss or profit
in an accounting period.
It has a two methods through which company can able to prepared it income statement
are the marginal and absorption costing (Burritt, Schaltegger and Zvezdov, 2011). In the given
case, there is a need to calculate cost by preparing income statement that are based upon these
two costing. Therefore, it is can determine and explain below in various ways:
1: Income statement that are based upon marginal costing
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It is that type of costing that can be define as a there is either increase or decrease in the
total cost of production that can be occur at the time of producing additional unit. It can be
calculating below-
2: Income statement that are based upon Absorption costing
It can be define as those cost that are related to production process and it is required at
time of generating inventory valuation that are stated in the balance sheet.
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Illustration 1: Income statement through absorption costing system
Interpretation: The income statement is prepared through marginal and absorption
costing in the above table that presents data that can be explained further. In the table 1 in which
income statement is calculated on the basis of marginal costing by the R.L Maynard company. It
indicates that the cited organisation show cost that is £12600 over the specific accounting period.
In the another table 2 in which the statement are prepared on absorption costing in which it has
shown the profit amount of company that are made at the end of accounting period is £9300. It
has been asserted that in both the costing method in which there is difference in the profits but it
describes that organisation made a large amount profit (Garrison and et.al., 2010). Therefore, the
income statement that are made on the marginal costing is found 9600 whereas absorption
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costing is found 9300. Further, in these total amount of expenses occur in income statement is a
£1800. Whereas, in the absorption costing method the profit is less than the marginal costing
method is due to because they consider both expenses are variable and fixed that are occurred at
the time of production. The procedure that are used to calculate net profit or loss is differed from
each other.
Most of the author said that in the business situation is has been evident that most of the
companies think that the absorption costing method is better to calculate profit. It is due to as
they take fixed and variable expenses at the time of calculating that show the accurate as well as
reliable information. It has been also said that from these it shows a true financial position of
company in effective manner.
Table 1: Difference among marginal and absorption costing method
Basis Marginal costing Absorption costing
Definition It is that type of tool that are
used for to ascertained cost of
production by take into
consideration variable that are
occurred within the
organisation (Elbashir, Collier
and Sutton, 2011).
In the absorption costing
method in which it can be
determined cost of production
on the basis of fixed as well as
variable expenses.
Cost recognition In this method, they only
consider variable expensed
under the cost of production.
In the cost of product they
take both type of expenses are
fixed and variable.
Calculated profitability The profit can be determined
that are based upon profit-
volume ratio.
In the calculation of profit of
company they consider fixed
cost due to which there is a
fluctuation in the result of
company profit.
Impact on unit cost The unit cost of product have In these methods there is an
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