Analysis of Management Accounting at Bentley Motors Ltd: A Report

This report provides an in-depth analysis of management accounting practices at Bentley Motors Ltd. It begins with an introduction to management accounting, emphasizing its role in maintaining financial records and facilitating effective business actions. The report then delves into the essential requirements of different management accounting systems, including cost accounting, inventory management (with discussions on AVCO, FIFO, and LIFO methods), price optimization, and job order costing systems. The analysis extends to methods used for management accounting reporting, such as budget reports, performance reports, inventory management reports, and accounts receivable reports. The report highlights the benefits and applications of these systems and reports within Bentley Motors Ltd, demonstrating how they aid in strategic decision-making, cost control, and overall financial performance. Finally, the report includes an assessment of accounting reports and systems, offering a comprehensive overview of how management accounting contributes to the financial health and operational efficiency of the company.

Management
Accounting

INTRODUCTION
Management accounting is used to deals with presentation and accountancy data for the
purpose of maintaining the proper records of accounts and profits. It is used by all business
industries to execute the business action in effective manner. In addition, managerial accounting
is the systematic process of determination, accumulation, measuring, interpretation, readying and
communication of financial information which is used by management to make plan for
organising and controlling the organisation (Chan, and Hsu, 2016). The main purpose of this
report is to know how it is used within organisation and helps to remove the financial issues. For
knowing the value of management accounting Bentley motors Ltd is selected that is British
engineering company. It was founded in 1919 by H.M. Bentley in London. The present project
discusses about management accounting system and its essential requirement within industry,
different methods which is used for accounting reporting and planning tools that can be utilized
in budgetary control. Additionally, report discuss about costing techniques in order to prepare the
income statement and how it helps to solve the financial problems.
ACTIVITY 1
PART A
Essential requirement of different systems of management accounting
Management accounting: A procedure in which business entities try to pull off,
supervise and analyse its functional and operational procedures in a proper manner is known as
management accounting. For all the companies it is very important to conduct it every year so
that it can be assessed that the organisation is performing appropriately. Managers in Bentley
use it for the purpose of formulating strategic decisions for betterment of the company. For the
purpose of forming various strategies various systems are used by management of the entity (Hsu
and Lin, 2016).
Management accounting systems: All the systems which are used by managers to
analyse and observe timely statistical information of company in order to form decisions for
regular operational processes. Management in Bentley Ltd use various kinds of system to keep
detailed information regarding actual status and executional efficiency of the organisation. All
such system guides management to keep detailed and well structured records so that it can be
used in future for betterment of enterprise. Detailed analysis of them is conducted below:
1

Cost accounting system: The system which is mainly used by managers to estimate
expenses which are related to various items or cars which are produced by the entity is known as
cost accounting system. It guides them to keep an estimation of accurate costs that have faced in
the process of executing business operations and performing production activities. In Bentley
Motors, managers use it to analyse the cost which is related to each and every car engineered by
the organisation. This system is needed for the company as it helps management to determine
actual costs of production (Charifzadeh and Taschner, 2017).
Inventory management system: This type of system is principally used for production
activities by those organisations which are manufacturing different products for the purpose of
keeping detailed information of goods which are used for production activities. It helps
managers analyse that there is stock in their warehouses or not. Managers of Bentley, are using it
to assess that company is able to meet the production expectations of clients with sufficient stock
for vehicles. It is required for business enterprise as it helps to monitor that actual status of stock.
It has various types and companies used them according to their requirements. All of them are as
follows:
AVCO (Average Cost Method): The companies which are using it use the goods on
average basis for the operational activities.
FIFO (First In First Out): This inventory manage is used by such organisations which are
using earlier received goods for production related procedures. It is used by managers of
the company to manage the inventory appropriately as it will helps to use all the
resources properly.
LIFO (Last In First Out): In this method currently purchased goods are utilised for the
engineering procedures of vehicles.
In Bentley Motors Limited FIFO method is used by managers in order to manufacture
different ranges of vehicles because this system can help in holding up productivity of all the
cars which are engineered by the company.
Price optimisation system: It is used by management of business entities to set right
rates for the products to meet expectations of clients. It can help the of the organisations attempt
to make the products pocket friendly for their target market. Managers in Bentley are currently
using it to analyse responses of clients on various prices which are set by it for the cars. It is very
important for the company as it helps management to decide the appropriate rates for all the cars
2

which can help to fulfil requirements of customers and meet organisational objectives such as
profit maximisation. For this purpose, companies choose best pricing strategy so that success can
be acquired by the business (Dai and et. al., 2017).
Job order costing system: It can be defined as a method which is implement by small
as well as large companies for the purpose of analysing and assigning costs to various operations
according to their nature. In Bentley Motors Limited managers are using to assess expenses of all
the processes which were conducted on the basis of specification of customers. It is very
important for the company to use it as it helps to determine actual costs of every job which is
performed by organisation. This system is mainly used by those enterprises which are conducting
their business activities according to specific customer orders.
All the above described system are used by managers of Bentley Motors Limited for the
purpose of analysing performance of the organisation and formulate strategies decision for
betterment of it.
Methods which are used for reporting of management accounting
Management accounting reporting: It can be defined as the procedures which is
followed by managers to create different reports which are having information of management
accounting. For managers it is vital to use appropriate methods for it so that accurate records
could be generated and detailed information regarding internal status of organisation can be
analysed. Management in Bentley Limited conducting this procedure every year so that it can be
determined that all the plans which were formed for future are appropriate or not and resulting
positively or not. Managers in Bentley Limited are using different kinds of it to formulate
various reports. All of them are discussed underneath
Budget report: It is a type of insider document which is utilised by management for the
purpose of comparison of actual and standard plans. One of the main use of it is to analyse that
all the funds which are used in operational activities are utilised properly or not. Managers in
Bentley Motors Limited generate it to measure that financial execution of business is good or
not. In every accounting year, a new budget report is created to compare that company is close to
its financial targets or not. Different activities such as production, sales, marketing etc. are
recorded in it and information of all of them is used to allot monetary resources to all the
operational divisions on the basis of their estimation of future expenses. It is advantageous for
3

Bentley Motors Limited as it helps managers to assess business performance of company (Qian
and Schaltegger, 2017).
Performance report: This type of report is created by business entities to document
accurate and appropriate information of performance of organisation as well as employees. It is
used by most of the companies to offer incentives and bonus to work force on the basis of their
efforts which are showed by them to attain organisational objectives. In Bentley Motors Limited,
it is generated by managers to observe that the activities which are performed by them are
resulting positively or negatively. It is advantageous for business entities such as Bentley
because it can guide through out the way in which employees could be motivated because they
get reward for their good performed with the help of it.
Inventory management report: In order to keep detailed record of goods which are
utilised by organisations to making sure that the stock which is used for business operations is
managed properly or not. It helps to analyse that the company is able to keep appropriate amount
of inventory so that the processes for engineering of cars could be performed in systematic
manner. having sufficient stock to conduct its operations or not. Managers in Bentley Motors
Limited formulate this report for the purpose of keeping detailed information regarding inventory
which is used to produce different models of cars. It is beneficial for the organisation because
with the help of it management can order stock before the warehouse goes out of stock. If a
company is not able to record accurate data in it then it will become difficult for it to execute
operational activities in appropriate manner (Dayanandan and et. al., 2016).
Accounting receivable report: A report which is generated by managers for the purpose
of keeping record of all the credit sales which are made in a specific time period is known as
account receivable report. Enterprises who are allowing credit to buyers create such types of
report. It helps to list all the unused credit memos and unpaid customer invoices according to due
date. In Bentley Motors Limited it is created by managers in order to analyse the amount which
is owed by clients. Main purpose of making this report is to record information of those
patronages who are not able to pay whole amount and promise to pay remaining after a certain
period of time. It is beneficial for the organisation because with the help of it management can
determine actual outstanding amount of different clients. Managers can tighten credit policies of
organisation by analysing account receivable report because it helps them to assess that buyers
4

are able to pay the owed amount on time or not. Moreover, the manager of Bentley can keep
records of unpaid customer with the help of this report.
All the above described management accounting reports are generated by managers of
Bentley Motors Limited in order to keep detailed information of the organisation which is used
by them to take future decisions. All these reports are also used to show stakeholders so that they
can analyse actual status of company and their interest in business can be maintained. Internal
stakeholders such as managers and employees to monitor actual status and performance of the
company for a specific time period.
Benefits and application of management accounting systems
Several accounting system Goodness
Price optimisation Primary advantages of such system is to set the prices of
production and services that help to maintain the profitability.
With the help of this system managers can analysis the
perception of customers.
Bentley motors Ltd utilize such system to fix the prices of
products and influence customers.
Job order costing system It is related with assigning the work among employees that help
to increase the productiveness and profits.
Through such system manager of Bentley motors Ltd can divide
the specific role of employees by analysing the cost of various
activities.
Inventory management It is beneficial for all manufacturing organisation to keep the
proper records of inventory and place order accordingly.
It helps to maintain the inventory within organisation that leads
to gain more profitability.
Moreover, Bentley motors Ltd reduces the wastages by using
this system and increase the production.
Cost accounting This is advantageous as it offers proper records and management
of costs.
It helps Bentley motors Ltd, to define the cost and control
5

excessive production.
Moreover, manager of Bentley motors Ltd can calculate direct
and indirect cost.
Assessment of accounting report and system
Reports and system are integrated within enterprise process which is evaluated by
managers by knowing the performance. It assist to keep the records of all transaction which is
done by Bentley motors Ltd. The organisation firstly uses management accounting system then
prepares accounting reports with the help of system that is used in organisational processes.
Without system accountant cannot prepare the management report and cannot make effective
business decision. The system such as cost accounting, inventory management, job order costing
and price optimisation system are integrated with different report such as inventory report,
account receivable and performance helps Bentley motors Ltd to manage different types of
activities with the help of system and report helps to give detailed information about business
activities. Moreover, it helps to defines how organisation can achieve goals and objective by
using effective management system and reports.
Cost calculation with the help of appropriate techniques
Cost: It involves price which is acquired by a individual to produce, accomplish and
merchandising something. This is the monetary valuation of resources, material, time, efforts and
opportunity in production and delivery of goods and services. A person who buys something and
paid consideration is known as cost.
Marginal costing: Such costing method involves fixed and variable cost. By this
technique fixed cost for period is considered as written off completely against the contribution
and variable cost is charged to the cost of units. In this technique, single variable cost assumes as
product cost and provides profits.
Absorption costing: It is considered as costing technique that states both variable and
fixed cost will regard as product costs. Its primary purpose is to give the report and calculate
accurate profit within organisation. It is the accumulation of direct labour, material, variable and
fixed cost in order to set the final cost of products and services.
PRACTICAL
6

7

Interpretation: According to above calculation it can be understand that organisation
can calculate profit from absorption and marginal costing method. Such as by using marginal
costing method profit is 150750 GPB and by using absorption costing method organisation is
getting 157550 GPB as profit.
8

(a) Labour hour: This means working hours of labour in which period they work. This is relates
with labour who works in an organisation and get earning according to hour. Workers works
within organisation by deciding the time and rate period that help to increase the productivity.
9

10