Management Accounting Systems, Reports, and Cost Analysis Report

This report provides a comprehensive analysis of management accounting systems and their application within Sam Weller Limited, a UK-based manufacturer. It explores various management accounting systems, including cost accounting, price optimization, and inventory management, detailing their advantages and integration into organizational processes. The report also examines different management accounting reports, such as inventory management reports, performance reports, and operating budget reports, highlighting their significance in decision-making. Furthermore, it delves into cost analysis techniques, specifically marginal and absorption costing, and demonstrates their application in preparing income statements. The analysis includes detailed calculations and comparisons between the two costing methods, providing insights into their impact on financial reporting and profitability assessment. The report concludes with a summary of the benefits of management accounting systems and their role in enhancing the efficiency and effectiveness of Sam Weller Limited's financial management practices.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................7
TASK 3..........................................................................................................................................13
TASK 4..........................................................................................................................................14
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Managing executives needs appropriate business data to make successful decisions. It is a
challenging task to gather data for this intent via various organizational processes. Most
businesses enforce accounting management to conduct such a complicated task as to enable
businesses to grow an efficient framework. Management accounting is almost always seen as
managerial accounting and it can be viewed as an efficacious structure that provides the
executives of inside the organization with financial information for quick decision-making. It is
primarily viewed by executives as an internal mechanism that seeks to maximize overall fiscal
and functional efficiency (Chandar, Collier and Miranti, 2012).
This report demonstrates multiple MA systems and crucial reports in context of Sam
Weller Limited, UK's leading manufacturer of decatising wrapper manufacturers in the world.
Company is working with cloth finishing sector, offering an wide range of services and products
though manufacturing and use of decatising wrappers. In addition, the report explores various
preparation methods and their use in organizational layout and analysis about how these aid to
tackle financial issues. In addition, this study consists of a detailed company comparison
regarding the formulation of systems to overcome distinct financial challenges.
MAIN BODY
TASK 1
P1. MA Systems and Reports:
Management accounting includes the use of specific skills and expertise in preparing
financial details to assist business in the development of strategies as well as the managing and
control of business processes. It offers the methods and procedures needed to select among
alternative organization practices, conducts and evaluation via performance assessment and
evaluation of effective planning. At regular periods, say monthly, quarterly, executives are
provided with fiscal data and non-financial information. This information includes a thorough
evaluation, forecasts and budgets. Thus, it allows managers to plan company activities. It also
requires several graphical graphs, estimates and analytical thinking which can be incorporated
throughout the decision-making process through controlling staff (Fiondella, Macchioni, Maffei
and Spanò, 2016).

Management Accounting Systems: MA contains some specific systems which help companies
like Sam Weller Limited in effective adaption of overall management accounting framework.
Each system of MA contains several significance which are utilised by managers in effective
managerial decision-making procedures. Following is a comprehensive discussion upon different
systems of MA, as follows:
Cost-Accounting System: This is an accounting system sort that is attributed to the procedure of
a coordinated cost prediction. It is attributed to financial department of the corporation in order
to allow them to establish effective controls over costs and expenses. Fundamentally, the main
goal of this accounting system is to define such activities that result in higher business costs. In
fact, it is critically vital for companies to reduce total spending appropriately. These systems are
incorporated in Sam Weller Limited to minimize the burden of manufactured products with the
aim of increasing the general profit margin for each unit manufactured by the corporation.
Because it embraces production executives to assign determinants that are the main trigger of
rising costs and regulating these variables result in decreased production costs.
Price optimisation system: This is another vital system which clearly exhibits liaison or core
relationship among demand and value/price determined for any product within an organisation.
It is significant aspect of cost and financial structure of company as to fix most relevant and cost
effective price for products where demand for product is maximum. Company Sam Weller Ltd is
also framed and implemented this system to analyse existing prices of its products and set most
appropriate with aims to achieve maximised demand and sales (Granlund and Lukka, 2017).
Inventory management system: This provide a framework for effective management of stock
and inventories items. This can be characterized as a style of management system associated
with the coordinated system that focuses on those procedures in a company related to the entry
and distribution of inventories. Usually a significant range of stocks / inventories are obtained
and manufactured along with several other factors in a supplier or distributor business for the
selling of goods. It allow inventory managers to establish routine check on different inventories
items. Corporations which are engaged in manufacturing operations like Company Sam Weller
Ltd, have large volume and distinct-distinct inventories items due to which managing and
controlling of such a large range of items is challenging scenario. Management in respective
corporation utilise this system to develop a organised structure for establishing proper control
overall numerous stock items. This system also enables enterprise to value its distinguish stock

items through different approaches like First-in first-out, Last-in last-out and average-cost
method. Here below is explanation about such approaches, as follows:
Average cost method: Average cost approach attributes a price to inventory-item based
on overall cost of bought or manufactured/processes items over a duration divided by aggregate
amount of bought or processed products.
Last-in last-out: this approach is applied for inventory under which records least-
recently manufacture items are regarded as sold first. This is most widely accepted method of
valuing inventories.
FIFO method: This approach value inventories of business by considering that very-first
manufactured or processed item in inventories are sold first (Hirsch, Seubert and Sohn, 2015).
Job order costing system: This is a distinguishable and exceptional system where different
business activities are recognized as work and collated expenses are allocated to such specific
jobs. This method is interesting as it describes various manufacturing process employment and
increases productivity improvements by operating cost allocation. In Sam Weller Ltd, managing
officials utilise this system to determine the cost of different job processes and optimise them
while defining different job roles.
Management Accounting Reports: Managerial accounting reports could provide corporations
with the data they really want to reduce costs, recompense well-performing workers, cut
floundering products, and spend in products which provide enterprise with finest financial return.
Based on the nature of activities performed by the company and the time-sensitivity of fiscal
reports provided by the company, management in company may demand or produce reports
annually, quarterly, daily or monthly basis. As in company Sam Weller Ltd, management using
different reports of MA which assist company in performing different operations, as follows:
Inventory Management Reports: These sort of reports provides detailed and systematic
record of inventories like raw material, work-in progress, finished products, processes goods,
spare tools and other stock items. This is a classified report which segregates each inventory item
as per their nature and significances. Specially in manufacturing and production firms like Sam
Weller Ltd, this kind of reports are used for effective and real-time tracking of their wider
amount and volume of stock items. It help to evaluate factors which are resulting in increasing
inventory costs. Company can effectively manage and monitor inventories to achieve operating
effectiveness.

Performance Reports: This report allow owners and managing personnel to keep a
proper record of performance in all aspects of all employees. This report involves arranged and
classified data of performance of employees belongs to different divisions. Further reported data
of performance report enables top managers to assign different duties, responsibilities and roles
as per employees' capacities, competences, skills and previous performance in corporation. It
entails a comprehensive assessment of employee performance that is utilised by manager to
apportion duties to employees as well as work according to quality and abilities in results
(Hoque, Covaleski and Gooneratne, 2013). The fundamental objective of such a report is to
strengthen distinct employees' organisational capacities. Decisions also drawn on the basis of the
results of this report enable companies to regulate the turnover of employees in Sam Weller Ltd.
Operating budget report: This report demonstrates the overall operational performance
of company. An operating budget report comprises of all profits and expenditures that a
company or agency uses to schedule its activities over a duration of time (typically one quarter or
one year). In preparation of an accounting period, operating budget-report is defined as a target
or objective to be achieved by the company. In Sam Weller Ltd this report is prepared by
managers to asses the actual operating performance of company as in comparison with stated
budgeted figures in report. It allow company to effectively evaluate the operating effectiveness
of different manufacturing and production processes.
Benefit of MAS :
Name of MAS Advantages/benefits
Cost accounting system Major advantageous thing of this system is that it provide a
managed framework to minimise numerous costs and eventually
lead to enhancement in operational capacity in Sam Weller Ltd.
Price optimisation system This system develops a assistive framework for taking quick
derisions regarding determination of prices of different items with
object to retain or increase demands.
Job Costing System It advantageous for companies to define role of different jobs and
assess the real cost of each job process within organisation.
Inventory management
system
It facilitates corporation with effective valuation of different
inventories items and identify causes of increased abnormal loss

and theft of inventories (Horton and de Araujo Wanderley, 2018).
Integration of MAS and reports to organisational process:
All systems are strongly connected to different business structures in delivering data to
and from these discussed systems. The managers also attempt to incorporate MA reporting and
systems into business procedures for efficient system execution and reporting. Since accounting
procedures include vital data used in programs such as expense accounting and stock control,
and this division produces knowledge that is utilised by accountants to file financial reports.
TASK 2
P3.Assessment of costs utilising core techniques of costs-analysis with aim to frame income
statement though absorptions and marginal costs:
Marginal Costing: This is most relevant approach of costing under which variables costs are
charged to each unit produced. Here marginal cost involve only those costs which changes
simultaneously with change in production volume.
Absorption Costing: Under it all productions and manufacturing including fixed and variables
are classified as cost of sales to assess gross profit. It is simple approach where are all the
production costs are assigned to produced unit (Kastberg and Siverbo, 2016).
Income statement under absorption and marginal costing:
Absorption costing:
Absorption Costing Statement calculator
Unit Selling Price 8
Unit Cost (FC+VC) 5
Fixed Manufacturing Expenses 150
Non Manufacturing Exp 50
Budgeted Activity 75

Period 04/19 05/19 06/19 07/19 08/19
01/09/
19
[£'000] [£'000]
[£'000
]
[£'000
]
[£'000
]
[£'000
]
Sales 75 60 90 75 70 80
Production 75 75 75 75 85 70
Opening inventory
Closing inventory 0 0 15 0 0 15
0 15 0 0 15 5
Period 04/19 05/19 06/19 07/19 08/19 09/19
[£'000] [£'000]
[£'000
]
[£'000
]
[£'000
]
[£'000
]
Sales 600 480 720 600 560 640
Opening inventory 0 0 75 0 0 75
Add: Variable Cost[Production] 375 375 375 375 425 350
Less: Closing Inventory 0 75 0 0 75 25
Marginal Cost of Sales 375 300 450 375 350 400
Gross Profit 225 180 270 225 210 240
Adjustment for Overheads 0 0 0 0 -20 10
Less:Non Manufacturing Cost 50 50 50 50 50 50
Net Profits 175 130 220 175 180 180
Marginal costing:
Marginal Costing Statement calculator

Unit Selling Price 8
Unit Variable Cost 3
Fixed Manufacturing Expenses 150
Non Manufacturing Exp 50
Budgeted Activity 75
Period 04/19 05/19 06/19 07/19 08/19 09/19
[£'000] [£'000]
[£'000
]
[£'000
]
[£'000
]
[£'000
]
Sales 75 60 90 75 70 80
Production 75 75 75 75 85 70
Opening inventory
Closing inventory 0 0 15 0 0 15
0 15 0 0 15 5
Period 04/19 05/19 06/19 07/19 08/19 09/19
[£'000] [£'000]
[£'000
]
[£'000
]
[£'000
]
[£'000
]
Sales 600 480 720 600 560 640
Opening inventory 0 0 45 0 0 45
Add: Variable Cost[Production] 225 225 225 225 255 210
Less: Closing Inventory 0 45 0 0 45 15
Marginal Cost of Sales 225 180 270 225 210 240
Contribution Margin 375 300 450 375 350 400
Less: Fixed Manufacturing Cost 150 150 150 150 150 150
Less:Non Manufacturing Cost 50 50 50 50 50 50

Net Profits 175 100 250 175 150 200
Reconciliation statements:
Period 04/19 05/19 06/19 07/19 08/19 09/19
[£'000 ]
[£'000
]
[£'00
0 ]
[£'00
0 ]
[£'000
] [£'000 ]
Sales 75 60 90 75 70 80
Production 75 75 75 75 75 75
Opening inventory 0 0 15 0 0 15
Closing inventory 0 15 0 0 15 5
Period 04/19 05/19 06/19 07/19 08/19 09/19
[£'000 ]
[£'000
]
[£'00
0 ]
[£'00
0 ]
[£'000
] [£'000 ]
Net Profits under Absorption Costing 175 130 220 175 180 180
ADD : Fixed Overheads in opening 0 0 30 0 0 30
LESS: Fixed Overheads in closing 0 30 0 0 30 10
Net Profits under Marginal Costing 175 100 250 175 150 200
Problem 2a
1. Calculation of followings:
(A) BEP in units and revenues-

BEP (in units)= Fixed cost / contribution per unit
= 180000/ 12
= 15000 units
BEP (in revenues)= Fixed cost/ PV ratio
= 180000/ 30*100
= £600000
Working Note:
Contribution per unit- Selling price per unit- variable cost per unit
= 40-28
= 12
PV ratio= Contribution/ sales per unit*100
= 12/40*100
= 30%
(B) Contribution margin ratio
= 12/40*100
= 30%
2b If machine is installed:

2 c
Scenario 1. Machine is not installed: