Management Accounting: Cost Analysis, Reporting, and Planning Tools

This report delves into the core principles and applications of management accounting, offering a comprehensive overview of its significance in organizational decision-making. The report begins with an examination of management accounting systems, including inventory management, job costing, and price optimization, highlighting their importance for businesses like Connect Catering services. It then explores various reporting methods such as budgeting, inventory, accounts receivable, and performance reports. The report also provides a detailed analysis of cost calculation methods, including absorption and marginal costing, and demonstrates their application in developing income statements. Furthermore, it investigates different types of planning tools used in budgetary control, including advantages and disadvantages. The report concludes with a comparison of how enterprises adapt management accounting systems to address financial challenges, providing practical insights and recommendations for effective financial management. The report includes the preparation of income statements, calculations related to absorption and marginal costing, and break-even analysis, which are critical for financial performance and profitability assessment.

Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Examine management accounting and various kinds of management accounting system. .3
P2) Determine various methods of management accounting reporting .....................................5
TASK 2............................................................................................................................................6
P3) Calculating cost with the help of using suitable methods of cost examination in order to
developing income statement, marginal and absorption costs....................................................6
TASK 3..........................................................................................................................................10
P4) Examine the advantages and disadvantage of different types of planning tools which are
used in budgetary control..........................................................................................................10
TASK 4 ......................................................................................................................................12
P5) Comparison between how enterprises are adapting management accounting system in
order to effectively solve the financial problem.......................................................................12
CONCLUSION ..................................................................................................................14
REFRENCES.................................................................................................................................16

INTRODUCTION
Management accounting is very important for organisation that help to run smoothly. It is
define to identify the information and resources and these are used to analyse to make strategies
that help company to make plan, take decision and performance of management. The main aim
of management accounting to take knowledge about the income and expenses which help for the
growth and development. Pearl Chartered Accountant of UK has to advice Connect catering
services of management accounting with different kinds with reporting. It is also necessary to
maintain management accounting report so that all details are recorded according to different
department so that it is kept in a proper way (Ahmadian and et. al., 2016). However, these
includes performance, accounts receivable, inventory and budget report, that help accounting
firm solve the problem of their clients. The financial problem can be there in organisation, so it
is important to take measure at right time to overcome the hindrances. In other words, financial
accounting differ from management accounting as they it is used for internal users of company
and financial accounting is used by external stakeholders. They are written on document in
structure or step by step form so that management can take decision in appropriate manner.
TASK 1
P1) Examine management accounting and various kinds of management accounting system
Management accounting is a process where information and resources are provided to
managers during decision making. It is sometimes also known as managerial accounting which
means identify, analysing and communicate whereas this accounting is used by internal
employees of organisation that's why it differ from financial accounting. The main aim is to use
data and interpret to make decision effectively (Charifzadeh and et. al., 2017). In this accounting,
financial information and statement is shared to employees of organisation so it control business
and development. Management accounting only select relevant data from different records
which is useful for organisation. In reference to, Pearl chartered Accountant they can advice to
new client Connect Catering services that management accounting will helpful to keep daily
records as this help to maintain trading, profit and loss and balance sheet. This will benefit client
to take short term and long term decision correctly in order to sale product, analysis etc. There
are different kinds of management accounting which are discussed:-

Inventory management system:- This system deals to monitor or supervise asset and stock of
organisation, these will help to analyse the units available that will be advantage for
company. The management accounting system uses EOQ, JIT approach and ABC analysis
to manage inventory. For effective flow of inventory they can use this method in
organisation at the time of sale. The importance is that it reduces the cost and proper
management of stock and eliminate resource which is not useful.
Job costing system:- This management system to identify need of product to be manufactured,
quality to be produced and at which time. In context to Pearl chartered accountant can
advice to their client to track on products (Drury, 2018). This costing consist of procedure
first to receive enquiry about product from customers, price, received the order, order is
being processed, cost record and in final report is given to accountant. The advantage is to
find customer need and demand for goods and analyse cost for them.
Price optimising system:- It is used to identify and control prices of products and decide the
price of different products on time because this will help when there is fluctuation in
demand at various situation. This can be use by client for their customers to set prices
according to segment at different price level such as initial, discount and for promotional
pricing. The importance of system for company to observe adequate price for products in
market.
Cost accounting system:- This management system is used to estimate price of goods or
services that benefit company to make profit, cost and inventory control. Cost accounting
system include process costing and job order costing. For correct estimate of cost of goods
there should be participation and coordination of executives whereas it is easy to understand
requirements of customers and company.
As we discuss above help the Connect Catering services as they are small or medium
enterprises to take effective decision and earn revenue or enhance competition in the market
(Joshi and et. al., 2016) (Kimmel and et. al., 2018)(Maas and et. al., 2016)(Maelah and et. al.,
2018). It provides information in regard to resources and data available to internal management
to pan accordingly so they can determine appropriate price of product. Therefore, this will help
them to develop their business in catering services.

P2) Determine various methods of management accounting reporting
Management accounting reports is a process to record and prepare to maintain financial
status that manage all transaction relate to operation of management. It help management to
prepare proper report by giving them appropriate resources and data that make business decision
effectively (Kimmel and et. al., 2018). The information given to them to reduce cost, trim
product line, give reward to employees to perform and invest in product that gives higher return
to organisation. In reference to selected organisation, accounting department focus on important
data provided are recorded in appropriate manner. There are various methods of reports which is
important for organisation to prepare are discussed below:-
 Budgeting Reports:- The report is to measure the performance of small or medium size
organisation. To estimate budget it is mainly based on previous year expenses, the
management use this report to give rewards to employees on their better performance.
The rewards are given as bonus from budget funds that meet the financial goal for
organisation. In context to Pearl Chartered accountant they can advice their client to
maintain that will help to identify income as well as expenses.
 Inventory and manufacturing report:- It is used to maintain inventory or products so
that it become efficient for process. This report include overhead and labour cost that
compare assembly lines because it gives the opportunity to improve which is identified
by employees and departments.
 Accounts receivable report:- This type of report used for those companies which
extends the credit of customer, this will help them to manage account receivable. There
are appropriate segregation are made of customer invoice and analyse organisation credit
policy (Maas and et. al., 2016). In reference to Connect catering services, they will
maintain report of accounts receivable assess the number and amount of product after
purchasing.
 Performance report:- In this report they compare the actual performance with budget
performance to see and analyse information regarding performance of organisation, they
are mainly prepared in monthly, quarterly or yearly basis.

Benefits of implementing management accounting system with reporting
In all organisation management accounting and reporting are related to each other
because it is easy to prepare report with the help of using information and collected data through
accounting to achieve organisation goal effectively and efficiently. As we analysed from above
discussion, it is important for Connect Catering services to prepare and manage report so they
can achieve objectives and work effectively (Maelah and et. al., 2018). There are many benefits
to company such as they can improve performance and accountability, better consistency,
reduces redundancies.
TASK 2
P3) Calculating cost with the help of using suitable methods of cost examination in order to
developing income statement, marginal and absorption costs.
Income statement-: It is most important core financial statements in an organisation in
order to developing income statement which shows result such as profit and loss of company
within period of time. This statement reflects all the financial information in order to achieving
organisation goal and objectives as well as various improvement in financial position. It
considered as organisation performing various business function and activity in order to
enhancing profitability and productivity of company (Maynard, 2017). It includes financial
performance and various business operations performed effectively in order to achieving
organisation goal and objectives. It involves incomes statements are effective tool in order to
analysed business expanses and revenue. It includes most of organisation preparing income
statements in order to company effectively smoothly operating operation as well as management.
There are used various formulas in order to managing and determining income statements as
well as calculation of revenue and follow matching concept. It includes various expanses in
context of revenue and organisation preparing income statement within period of time as well as
next step to developing balance sheet in order to enhancing profitability position of an
organisation.
Absorption cost-: It is another method which are using in management accounting in
order to effectively capturing cost because this are associated with manufacturing particular
product. It is cost which refers to variable costing in order to allocation of fixed overhead cost
for each unit of product produced within period. It considered as this costing techniques

effectively applied by an organisation in order to effectively managing inventory and carried for
the next year. It involves fixed charges for particular part of product cost and effectively
implementing in system in order to properly costing of valuation of inventory (Phan and et. al.,
2017). There are various approaches used in absorption costing method in order to effectively
find out variable costing as well as tracking profit properly.
1 Preparation of income statements:
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Fixed Manufacturing Overhead per unit 6 5
10 9
Income statement under absorption costing
Particulars April may
Sales 16000 16000
Less: Cost of sales 20000 23000
Fixed Manufacturing Overhead 15000 15000
Variable Manufacturing cost 10000 12000
Closing stock 5000 9000
Opening stock 0 5000
Gross loss -4000 -7000
Less: Fixed Non-Manufacturing
Cost -4000 -4000
Net loss -8000 -11000
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Particulars April may
Sales 16000 16000
Less: Marginal cost of sales 8000 10000
Variable Manufacturing cost 10000 12000

Closing stock 2000 4000
Opening stock 0 2000
Contribution 8000 6000
Less: Fixed Manufacturing
Overhead 15000 15000
Less: Fixed Non-Manufacturing
Cost 4000 4000
Net loss -11000 -13000
Reconciliation statement:
Particulars April may
Net loss under absorption
costing -8000 -11000
Less: Closing stock -3000 -2000
Net loss under marginal costing -11000 -13000
2 a
1. Identify which costs are fixed and which costs are variable.
Fixed costs:
Activity Amount
Manager’s Salary 5000
Rent 5000
Insurance 500
Utilities 500
Advertising cost 1000
£12000
Variable cost:
Activity Amount

Direct material costs per Pizza 3.50
Direct labour costs per Pizza 1.50
Direct overhead costs per Pizza 0.50
£5.50
2. Show the Break-even point using a Break-even graph.
BEP (In units): Fixed cost/contribution per unit
Contribution per unit: Selling Price-Variable cost per unit
= 9.50-5.50
= 4.00
BEP: 12000/4
= 3000 Units
BEP (In revenues): Fixed cost/PV ratio
PV ratio: Contribution/selling price*100
= 4/9.50*100
= 42.10%
BEP (In revenues) = 12000/42.10%
= £ 28503
3. What would be the Margin of Safety if the organization managed to sell 2500 Pizzas?
Margin of safety= Sales units-BEP in Units
= 2500-3000
= -500 Units
4. If the manager’s salary is increased to £6,000, how will this affect the BEP in units and in
sales value?
If manager’s salary will increase than it will affect to fixed cost and revised fixed cost will be of
£13000.
New BEP (In units): 13000/4
3250 Units
New BEP (In revenues): 13000/42.10%
= £30878

2 b Preparation of graph:
Activity Amount
Total Costs (12000+55000) 67000
Revenues per Unit (95000-67000)/10000 2.8 Per unit
Total Fixed Cost 12000
BEP point 28503
Variance analysis report:
Actual units sold= 12000
Budgeted units sold= 10000
Budgeted price per unit= 9.50
Sales volume variance= (Actual units sold - Budgeted units sold) x Budgeted price per unit
= (12000-10000) *9.50
= 2000*9.50
= 19000 Favourable
Flexible budget
Items Actual Budgeted Variance
Sales price 10 9.50 .50 Favourable
Sales units 12000 10000 2000 Favourable
Revenues 120000 95000 25000 Favourable
Fixed cost 15000 12000 3000 Adverse
Variable cost 5 5.50 .50 Favourable
TASK 3
P4) Examine the advantages and disadvantage of different types of planning tools which are
used in budgetary control.
There are ample numbers of methods which are helpful for planning budgetary control
method. It is an important function in order to organisation used various tool and techniques to
preparing budget due to effectively achieving organisation goal and objectives. It includes
organisation properly estimation of cost and expanses in order to enhancing profitability of
company. It is essential tool for an organisation in order to effectively performing business

activity (Shafieezadeh and et. al., 2020). There are ample numbers of method which are utilised
be Pearl Chartered Accountants so discusses below.
Capital Budgeting-: It is tool and techniques which refers to investment proposal in order
to select particular project. It includes organisation decided to purchase or replace machinery
because started new plant, machinery, new product and accordingly making investment. In
relevance of organisation, it considered as organisation using this techniques in order to take
right decision in order to investing money as well as increasing profitability and developing
brand image in the market.
Advantages:
 It includes organisation using this capital budgeting in order to effectively planning
regarding budget of particular project and managing risk effectively because risk are
associated. It is process which refers to organisation has ample numbers of options are
available in order to managing risk (Smith, 2019). It is important concept because return
on investment on capital budgeting for the new project.
 The main benefit for this concept in order to developing comparison between the two
products and project which result as various options are available to the organisation. It is
effectively identify the best possible result for any projects.
Disadvantage:
 It includes capital budgeting concept used by most of organisation which are helpful for
decision-making process in order to managers take effective decision. It is helpful to
measuring the long term goal and profit but not properly analysed the business challenges
and risk which are present in the business environment.
 It is numerical concept so only make decision on the basis of numbers so it is difficult to
evaluating circumstances in order to situation are changes so accordingly take decisions.
Cash budget-: It is another important method which refers to analyse the inflow and
outflow of cash in order to achieving organisation goal and objectives (Solovida and et. al.,
2017). It is process which refers to managing cash as well as maintaining proper record of
budget so effectively maintain record inflow and and outflow due to effectively determine proper
action. It is helpful to maintain to organisation liquidity.
Advantages:

 It considered as cash budget in order to maintain liquidity due to effectively managing
cash requirement and organisation smoothly operating business activity.
 Maintaining cash budget effectively and efficiently in order to enhancing profitability
and productivity of company. It includes developing cash budget for each and every
department in order to fulfil their needs and task at specific period of time.
Disadvantage:
 The main disadvantage of cash budgeting in order to organisation make a lot of evidence
such as transaction and entries. In context of organisation, it includes there is no
advanced techniques or software are used so all the calculation on manually in order to
maintain all the evidences properly.
 Cash budget is process which refers to limitation regarding money spent because all the
transaction recorded properly has spending less amount or money.
Therefore, it includes used various different approaches and tool in order to effectively
implementing budgetary control (rofimova and et. al., 2019). It is process which are helpful to
maintaining record properly as well as analysed the requirement of investment in order to
achieving organisation goal and objectives as well as maintain liquidity and smoothly run the
business operations.
TASK 4
P5) Comparison between how enterprises are adapting management accounting system in order
to effectively solve the financial problem.
In present context, it includes management accounting is wider and broader concept
which refers to business successfully operating as well as satisfying the needs and wants of
customers. It is essential to developing brand images in the front of stakeholders as well as
goodwill in the market.
There are various accounting policies in order to smoothly run the business operations
such as effectively preparing financial statements for stakeholders and efficiently make
comparison. There are ample numbers of financial problem which are faced by organisation in
order to various measures are helpful for successful survive the business in the market. There are
various important resources which are used by organisation so discussed below.
In relevance of Pearl Chartered Accountants, it includes effectively follow the procedures
of management accounting and achieving profit (Warren and et. al., 2020). Organisation find out

the many solution for problems in order to effectively and efficiently run the business
organisation as well as various small businesses are facing financial problems. In context of
organisation, it considered as using various performance indicators under budgetary control due
to developing solution for problems. There are various issues of financial governance is faced by
the organisation as well as developing many problem for business. Small business are work
effectively and efficiently in order to developing brand image but they cannot managing
financial process in proper manner. In present scenario, it includes environment changing very
first so most of business facing ample numbers of problems and issues. It includes various
method to dealing in this situation so which are mentioned below.
Method Pearl Chartered
Accountants
Lost Withiel
Liquidity, solvency and debt
ratio
It includes using this approach
in order to effectively applied
liquidator solvency and debt
equity ratio method which are
helpful to fulfil the financial
obligation and it is essential to
calculate the proportion of
debt in relation to equity of an
organisation (Xiong and et. al.,
2018). It is process which are
helpful to solve the financial
issue so effectively used the
various ratio such as solvency
ratio, liquidity ratio and debt
equity ratio as well as
organisation to know about the
financial situation and
condition. It is essential to
developing liquidity position
It is differently used all this
ratio in order to analysed the
performance in the market and
effectively applied the
different factors because to
know about the financial
situation of organisation. It is
essential to make payment of
all liabilities in order to
effectively maintain goodwill
in the market. It is important
process which refers to
evaluating liquidity and
solvency ratio in order to
conversion of cash in short and
long term. It considered as
organisation effectively
measuring different ratio in
order to effectively solve the

in order to measuring task and
work accomplished effectively
in order to liquidate the stock
as well as meet the debtor's
requirement.
financial problem which are
faced by an organisation.
Profitability ratio It is another ratio which are
used by most of organisation
in order to evaluating
profitability condition and
situation of an organisation. It
includes companies analysed
the revenue as well as match
the financial obligation which
are faced by organisation. It is
ratio which refers to calculates
all kinds of profit and
effectively know the real
picture of company
(Shafieezadeh and et. al.,
2020). It is tool and techniques
in order to measuring
profitability ratio in order to
analysed the profit and loss of
company.
The main goal and objectives
of this business in order to
small or larger organisation
effectively earn profitability
(Phan and et. al., 2017). In
context of organisation, small
business focused on
profitability of business and
productivity. It is essential to
predefined organisation goal
and objectives and accordingly
performing and use financial
ratio as well as applied in
proper manner. It considered
as involving various task and
activity in order to used this
ratio and measure the
profitability of company.
Hence, it includes various functions are utilised by organisation in order to achieving
success and growth of an organisation. It includes utilisation various tools and techniques in
order to maintaining transparency and book of accounts due to properly managing business
activity as well as accomplished fair book of accounts for all the stakeholder. It includes
organisation used all the business function in appropriate manner in order to attained success as
well as effectively comparison with the competitors which are available at marketplace. It

includes organisation used various measures in order to make improvement various areas. It
includes comparison with Lostwithiel and Pearl Chartered Accountants in order to managing
accounts effective and efficiently (Smith, 2019). It involves various ratio which are calculated in
proper manner in order to providing various information as well as used various important
concept for an organisation due to fulfilling goal and objectives.
CONCLUSION
From the above report, it has been concluded that management accounting is greatest
important in the context of finance of company. It includes organisation effectively and
efficiently managing business function and account in order to various information provided to
stakeholder as well as achieving organisation gaol and objectives. It includes various method and
activities in order to organisation developing plan due to business achieving success and growth.
There are various advantages and disadvantages of financial method in order to effectively
applied in an organisation. It considered as importance of management accounting and systems
which are implementing in business because enhancing profitability of company. There are
various financial sources which are utilised by company in order to attained future success.

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