BTEC Unit 5 Management Accounting Report: Capital Joinery Case Study

This report analyzes management accounting within the context of Capital Joinery, a woodwork manufacturing company. It is divided into three main parts. The first section explores different types of management accounting systems, including cost accounting, inventory management, and job costing systems, along with their essential requirements and benefits. The second part delves into accounting techniques used to prepare financial reports, such as marginal costing and absorption costing, including practical calculations and variance analysis. The final section discusses how management accounting systems are used to solve financial problems, including planning tools and techniques. The report covers various management accounting reports like inventory management reports, performance reports, and trade-receivables ageing reports. It also discusses the integration of management accounting systems and reports and their benefits for Capital Joinery. The report concludes by summarizing the key findings and the importance of management accounting in organizational decision-making.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
Types of Management Accounting systems along with essential requirements:.........................3
Types of Management Accounting systems:...............................................................................4
Integration of MAS & MA reports...............................................................................................6
TASK 2............................................................................................................................................7
Accounting techniques to prepare financial reports:....................................................................7
Interpretation of data:.................................................................................................................10
Management Accounting techniques used in to prepare and develop the financial reports......10
TASK 3..........................................................................................................................................11
Different tools of planning.........................................................................................................11
MAS to solve financial issues....................................................................................................12
Accounting techniques:..............................................................................................................12
In Resolve financial problems how MA is useful......................................................................14
Planning tool to figure out financial problems...........................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting within organizational context relates to role of a corporate entity
relating to the executives of different finance details and allows all the leaders of the enterprise to
efficiently embrace the fiscal condition of the different aspects in the corporation (Agrawal,
2018). In this study-report, company named Capital Joinery has been taken as the reference
corporation which manufactures a vast array of woodwork, custom-made gates, window frames
and a mid-sized entity. The study will be divided into three parts, the first part of which is the
analysis on core managerial accounting systems and relevant reports. In conjunction, the second
section relating to MA techniques and involve practical sums while third part consists of
explanations about how different corporations adapt MA systems to resolve
different financial problems.
MAIN BODY
TASK 1
Types of Management Accounting systems along with essential requirements:
Management Accounting- This is described as efficient framework, which is principally
employed to accumulate and evaluate all the details/data then covert them to extract
useful information for managerial decision-makings. This is like a mechanism for reporting of all
the relevant and useful data/information to top management. In additament, the process adopted
by the corporation to produce internal records is important for the development and performance
of the enterprise.
Purpose of Management Accounting- MA is an effective mechanism used by managers
to improve the productivity of the enterprise and the different services used by entity.
Management accounting efficiently aim to monitor various reports and to distinguish all the
expenditures associated and specifically relevant to the multiple output of individuals within a
corporation. It essentially serves to improve the effectiveness of human resources when
operating on a task, since there are methods of the management accounting that often help to
evaluate their efficacy (Hutaibat and Alhatabat, 2020).

Types of Management Accounting systems:
Management accounting is structured and efficient management mechanism that is
connected to each component of the corporation. It incorporates a diverse range of distinct
systems; these are as described below:
Cost accounting system- This kind of managerial-accounting system is fundamentally
created by a mechanism of monitoring and managing the total costs that exist in an entity over
the accounting period. This method includes tracking the costs of the items and evaluating
streamlined costs that are convenient to acknowledge, and also the success of the various tasks in
comparison to the costs. In relation to respective company, the management accountants can
collect details or statistics from this accounting framework which is connected to the costs of the
various tasks. The requirements of this cost accounting framework is to maintain, productively
and efficiently, unnecessary costs which as a consequence, enhance the company’s profitability-
level. In the light of respective company, such an accounting system/framework require to
reduce the additional costs and costs of inappropriate activities (Johnstone, 2018).
Inventory management system- It is a sort of MA structure/system that is primarily
attributed to the handling of all forms of business stocks. This involve effectively recording of
each inventory on the premise of WIP, raw materials use, final product and several more as well
as real time monitoring of inventories. In addition, inventory management system is adopted by
top management using FIFO, the LIFO approach of inventory-valuation. In respective
corporation this system is used by managing personnel to track out all
the inventories within manufacturing units and finished product as well as to reduce
unwanted unnecessary costs. It is perceived to be a prominent form of framework that tends to
make sure the precise and convenient management of the existing inventories. In context of
respective corporation, it helps to manage raw materials in a justifiable manner, devoting to
the minimize abnormal inventories costs.
Job costing system: It is considered to be a considerable type of accounting mechanism that
allows to allow appropriate and efficient allocation of costs of to each job-process for
better accountability. In the case of respective company, this can be used in certain areas of
operations of manufacturing of furniture to establish accountability within operations. It is
considered to be another type of accounting mechanism that effectively focuses on monitoring

the expense of the job-processes along with the function associated in the course of performing
the job-process in an appropriate sense (Laela and et. al., 2018). The key purpose of this system
for workforce is to determine costs of job-process, which would ultimately enable to take
efficacious decisions for the potential. In regards to respective company, this type of accounting
method is implemented in order to define the expense and purpose allocated to the specific
process in an adequate mode. It is crucial for the senior leadership of the corporation to introduce
a structure for job processes as it helps to define the role allocated to the execution of a specific
activity. In additament, this also allows the corporate organization to assess the expense within
each and almost every procedure.
In this regard following are certain key requirements of above explained MA systems, as
follows:
Accuracy of information: This is primary requirement of MA systems, as per this requirement
information used in these different systems must be accurate. This is crucial as accurate
information enable managers to take more efficient decisions.
Up-to-date information: Old or obsolete information used in MA systems can lead to ambiguous
results thus this is another prime requirement of systems.
Relevance: Information should be selected and used as the decision require, since irrelevant
information used in system can lead to inappropriate managerial decisions.
Reliability: creditability or reliability is critical aspect of information to be used in systems, since
if information is reliable then there may be trust or creditability issues.
Management accounting reporting:
Management accounting processes are primarily the method of creating and compiling
various forms of structured reports that contain details relevant to different divisions of the
corporation. It is observed that different reports are produced by the managers of an organisation
that can efficiently enable them render informed decisions. Here, below are certain main
reports used under MA mechanism, as follows:
 Inventory management report- This report exhibits all details relating to all facets of
inventory levels in a comprehensive and acceptable manner. In conjunction, details

relating to the amount of raw materials consumed, the necessary materials, additional
materials and so forth are also included. All such reported information are used by upper
leadership to make informed decisions. In the background of respective company,
the managers and higher authority shall draw up a stock levels managerial report in
attempt to better gather all details on its processed goods (Pasch, 2019). Performance report: It is perceived to be another type of report which contains details
related to the performance level of workers and the financial status of the company. This
form of report help management to ensure that Human resources are utilized efficiently.
In respective company is used by managers to determine rewards and responsibilities of
different personnel within enterprise. This report offers comprehensive details about all
the employees and staff of enterprise.
 Trade-receivables ageing report: they are another form of accounting report that is
employed by a corporation to communicate with its credit clients. It allows the
corporation to recognize those consumers who are trade-debtors to the organization and
the organization to collect the payments. Trade debtors of a corporation are classified into
different categories, like 30, 60- or 90-days credit periods. There are various credit
schemes in industry with all different types of consumers, and buyers who miss payments
or late-payments are often paid accordingly with varying borrowing costs.
Benefits of MAS:
MAS Benefits
Cost accounting system Advantage of this system for Capital Joinery is that this
optimize overall-production costs and thereby improve
profitability.
Inventory management system This system is advantageous for Capital Joinery in
minimize overall inventory costs and eliminate abnormal
inventories costs (Saeidi and et. al., 2018).
Job costing system Maintaining accountability within production processes is
key benefit of this system which make it feasible for

managers to take rational decisions.
Integration of MAS & MA reports.
There is a range of managerial accounting schemes and managerial accounts reports that
allow a company to accomplish results in the right way. The study discusses the various types
of accounting systems which support the finance team of a specific organization. In turn,
managerial accounting offer prime reports related to the inventory’s management and relevant to
the manufacturing process. Convergence of both MA-systems and MA explicitly instructs higher
management to take informed choices/decisions and sustain the competitive position over a
prolonged period.
TASK 2
Accounting techniques to prepare financial reports:
Marginal Costing: Marginal cost is difference in the overall cost as the amount generated is
changed by one. Such that, it's cost of making another one item of product. Marginal costing
approach is used to assess the effect of variable costs on amount of input or products. Break-even
measurement is a valuable and substantial aspect of the marginal costing. The contributions of
each item or division is a cornerstone that acknowledges the viability of product or division. The
incorporation of variable costs and contribution benefit is proportional to the sale price (Cooper
Ezzamel and Qu, 2017).
Absorption Costing: Absorption costing is costing approach that covers both production costs—
direct products, direct labor and all contingent and fixed production overheads at the expense
of unit of output. Absorption costs are often alluded to as maximum cost process. Since the
costs of absorption involves all costs of processing as cost of the item.
Marginal cost per unit:
May June
Direct Material Cost 6000 4800
Direct Wages 4000 3200

Variable production overhead 2000 1600
Variable selling overhead 500 375
Total cost of sales 12500 9975
Per unit cost 125 125
Income statement under marginal costing
May June
sales 25000 18750
Less: marginal cost of sales 12500.00 9350.00
Direct Material Cost 6000 4800
Direct Wages 4000 3200
Variable production overhead 2000 1600
Variable selling overhead 500 375
Closing stock 0.00 625
Opening stock 0 0
Contribution 12500.00 9400.00
Fixed production overhead 2,000 2,000
Fixed selling overhead 1,000 1,000
Fixed administration overhead 3,000 3,000
Net profit 6500.00 3400.00
Absorption cost per unit: May June
Direct Material Cost 6000 4800
Direct Wages 4000 3200
Variable production overhead 2000 1600

Fixed production overhead 2000 1600
Total cost of sales 14000 11200
Per unit cost 140 140
Income statement under Absorption costing
May June
sales 25000 18750
Less: COGS 14000 10500
Direct Material Cost 6000 4800
Direct Wages 4000 3200
Variable production overhead 2000 1600
Fixed production overhead 2000 1600
Closing stock 0 700
Opening stock 0 0
Gross profit 11000 8250
Less/add: Over/under absorption of fixed
cost 0 400
Less: Fixed selling overhead 1,000 1,000
Less: Fixed administration overhead 3,000 3,000
Less: variable selling overhead 500 375
Net profit 6,500 4,275
Reconciliation statement
May June
Profit/loss under marginal costing 6500.00 3400.00
Add: Closing stock 0 875
Profit/loss under absorption costing 6500.00 4275.00

Variances:
Material price variance SP-AP*AQ
Standard price £6/kg
Actual price £9.33/kg
Actual quantity 2400
Material price variance -7992
Material cost variance SC-AC
Standard cost £6/kg
Actual cost £9.33/kg
Material cost variance -3.33
LIFO
Date Receipts Issue Balance
Quantity Unit
cost Amount Quantity Unit
cost Amount Quantity Unit
cost Amount
1-Jun 10 35 350
9-Jun 15 38 570 15 38 570
15-Jun 12 38 456 10 35 350
15-Jun 3 38 114
20-Jun 10 32 320 10 35 350
20-Jun 3 38 114
20-Jun 10 32 320
23-Jun 10 32 320 10 35 350
23-Jun 3 38 114
27-Jun 3 38 114 10 35 350
30-Jun 2 35 70 8 35 280

Weighted average costing
Date No of units
Cost per
unit
Total
cost
1-Jun 10 35 350
9-Jun 15 38 570
20-Jun 10 32 320
35 1240
Weighted average unit cost= 1240/35= 35.43
Units in ending inventory = Total units available for sale – Total units sold during the period
Units in ending inventory= 8
Interpretation of data:
Form the analysis of above income statement of respective company prepared under
absorption costing this has been found that Net profit figure in June month is 14375 while in
May is 20625. On other hand, Profit figure under Marginal Costing are 14500 and 10400
respectively during June and May month. There is difference among profit figure derived under
different methods due to over and under absorption of fixed overheads.
Management Accounting techniques used in to prepare and develop the financial reports.
It is determined that these are different forms of accounting methods employed by an
organisation to file financial records in a reasonable and acceptable way. Essentially, these
methods serve as a mechanism for consumers to pursue a structured process that contributes
directly to productive and desired results. The two related methods alluded in above portion will
be followed by finance management to create a marginal costs report and absorption
costing process. It is studied that these accounting methods are primarily used by organisations
to produce reports which are helpful to corporate success.

TASK 3
Different tools of planning
The different planning tools/methods employed by finance division of the corporation
within managerial decision-making are as follows:
Budgetary controls: the principal objective of budgetary control strategy is to schedule the
budgets for the upcoming cycle by matching the current results with the projected ones. It is
decided that in order to retain a consistency in the financial results of the organisation, this
strategy would benefit, as it is explicitly connected to all types of institutions. In additament, it
also assists in the analysis for different forms of variation (Hall, 2016). In respect to Capital
Journey, the tool may be deployed as follows:
Capital budgeting; this is conducted as an appropriate method to budgeting and is intended to
evaluate the strength of the planned financial plans. It is decided that the projects aligned with
this strategy are carried out using various approaches, like net present benefit, payback
periods and so forth. One of reason for implementing this method of budgeting process is to
inform upper administrations to take sufficient measures to spend or invest extensively as well as
to prepare and forecast budgets.
Advantage – One of key benefit of this strategy is to help businesses defend themselves from any
financial danger that might happen in the future. It implies that upper authorities should pick the
best and viable solution from different approaches. In addition, it supports corporate
organisations in fostering leverage of investment-related expenditures.
Down sides – It is evaluated that the capital budgeting approach is specific to big ventures only
to large businesses since this does not treat smaller businesses and activities too though. In
additament, this method tests the productivity of the project, that are mostly based on
expectations that often contribute to the detriment of the company organisation.
Cash budget—Another method that includes details relevant to all actions that are aimed at both
monies inward and monies outwards in a given accounting cycle. In reference to the respective
organisation, this budget is often implemented to manage capital inflows and cash outflows by
aid in developing budgets.

Advantages-This approach is intended to enable businesses efficiently allocate their cash-
funds such that no losses are sustained in the foreseeable future.
Drawback – This is evaluated that the output of an agency is influenced by external variables and
so as a result, cash budget would not have an accurate estimate for cash collections and payments
made too though. As well as this, cash-funds will be used owing to defined plans.
Balance score card: A balanced scorecard is management mechanism that delivers guidance to
both internally and externally business procedures in order to maximize strategic success and
results over time. A balanced scorecard promotes quality development at the corporate success
and progress stage by putting together assessments around organizational operations and external
consequences.
Advantages: Different units within an organization may have own methods for assessing results
and determining what metrics are essential to them. Different leaders and teams will also
personalize their output assessment with balanced scorecard, however it all comes into a fixed
framework that everyone can understand.
Disadvantages: Balanced scorecard commonly intended to offer a guideline for working, but it
would also need to be tailored for each company that uses it. It could take a long time, and while
illustrations are useful, these can't be replicated precisely because each company has its own
range of requirements.
Variance analysis: The study of differences from a corporation's budgeted and real financial
results is known as variance analysis. Reasons for the discrepancy among actual result
and budgeted results are explored in order to identify places that the business can change.
Advantages: Management wants to see smaller variations from projected expenditures, so
variance analysis helps for effective budgeting. Managers who choose a lower variance normally
make precise and forward-looking financial choices.
Disadvantages: Variance analysis does have a huge downside in that this takes longer time to
assess the impact of variance, delaying corrective steps. As a consequence of the tracking tool's
substantial timing lag, the implementation of control mechanisms would be substantially late.

CVP: Break-Even Study, also regarded as CVP Analysis, is a strategy for businesses to calculate
how shifts in prices (respectively variable as well as fixed) and revenue volume impact a
corporation 's profit.
Advantages: The primary benefit of CVP study would be that this assists in decision-making.
This assists businesses in determining how many quantities of their item they can produce, how
they can handle finite capital to increase profits, including whether should import their own
products or purchase them from any third party.
Disadvantages: The analysis only considers two categories of costs namely: fixed costs and
variable costs. While, other costs categories, like semi-variables and semi-fixed costs are ignored
which sometimes affects decision making.
SWOT analysis: SWOT analysis is key forecasting approach that aids organisations in
developing strategic plan to achieve their objectives, strengthen activities, and remain
competitive. Entity use SWOT analysis for determining strengths, shortcomings, prospects, and
risks in relation to corporate development, products, company goals, and marketplace
competition.
Advantages: The SWOT approach is a technique that can be used to organize brainstorming
workshops. As a consequence, an issue or mechanism tackled using SWOT framework can be
conceived of in stages or as life cycle.
Disadvantages: The results of SWOT analysis are four separate lists of capabilities,
shortcomings, openings, and risks. However, there is no way to rate the importance of one
variable versus another within list using the method. As a consequence, determining the true
effect of any single aspect on the target is challenging.
Planning tools for forecasting budgets
It is necessary for the upper managerial to prepare and project the budgets in an organized
manner. In additament, it is observed that it is only possible to use forecasting instruments like
capital expenditure and cash budgets details relevant to the assessment of financial assets. It
is analyzed that respective can make usage of the multiple budgets listed, which relate
in effective way directly to regulate and drive monetary information (Hopper, and Bui, 2016).

MAS to solve financial issues.
There are different financial challenges and concerns affecting big corporations due to
inefficient administration. This is impossible to classify certain businesses that have not faced
any financial difficulties. The financial problems which respective corporation facing are set out
as below:
Unneeded Higher Expenditures- Certain financial difficulties are encountered by such
organisation that are incapable of handling the total costs properly. It is believed that such
problems exist in organisations due to absence of expertise, unskilled personnel, inadequate
budgeting processes and so forth. In regards to Capital Joinery, the existence of such problems
directly impacts the selling of the business in a detrimental way.
Decline in net revenues-This financial problem is due to a shift in sales income that occurs as a
result of higher competition as well as increased internal costs. It is believed that this financial
problem decreases the degree of progress and performance of the organization. In respect to
the Capital Joinery, it is assessed that the corporation is actually facing this problem owing to its
inadequate pricing policy (Jansen, 2018).
Accounting techniques:
Key Performance Indicators-This is the sort of MA technique that includes financial as
well as non-fiscal elements that can be calculated in an acceptable way by the corporate
organisation. Information relating to spending, losses, gains and returns may be included in the
financial facets. In regards to non-financial factors, all details pertaining to political situation,
turnover and working practices are used. It can help us determine the main source of financial
issues that occur at workplace.
Bench Marking-This is perceived as an appropriate method followed by the financial unit
of an enterprise in attempt to allow a distinction between the present and real results of the
corporation. It is examined that such a distinction is taking place at workplaces in order to obtain
an understatement of the difference and as a outcome, contributes to the use of successful
methods contributing to the achievement of incentives in compliance with the specifications. It is
decided that bench-marking are both efficious and convenient for the finance division and also
assistance in fixing areas which need increased effort (Otley, 2016).

Comparison:
Basis for
comparison
Capital Joinery limited George’s drinks limited
Financial
issues
Corporation facing two fiscal issues
one is increased higher unneeded-
expenses and other one is declining
net revenues. These issues affected
company’s aggregate profitability
level.
Company George drinks is facing issue
of increment in costs of inventories
and loss/theft of inventories. This issue
affected corporation’s gross-
profitability.
MA
technique
Capital Joinery should apply
benchmarking approach to assess
and identify core elements which
are main cause of these issues.
George’s Drink should apply KPIs to
minimize determine actual reasons for
increase in inventories costs and
processes leading to increase in
abnormal losses in inventories
(Langfield-Smith, Thorne and Hilton,
2018).
MA system To handle these issues company
should apply Cost-accounting
system which allow managers to
track all the costs of company and
manage costs to enable managers in
minimizing costs and thereby
increase sales.
To deal with this issue managers of
company should apply inventory-
management system to effectively
track-out all the stock items and
eliminate factors increasing abnormal
costs.
In Resolve financial problems how MA is useful
There have been multiple accounting systems which integrate with the firm's procedures
and activities. It helps the corporate organisation in addressing financial problems in an accurate
and efficient way. For example, in above section several financial issues are overcome with the

aid of cost accounting process. This illustrates clearly the significance of managerial accounting
system to coping with fiscal problems.
Planning tool to figure out financial problems.
MA provide the supervisors and administrators with accurate reports on the projected sales
and expenditures. It shall be decided, in order to address financial problems, that this information
is advantageous and used by administration. For instance, the business organization mentioned
above uses planning tools like cash budgeting approach, budgetary control, and capital-
budgeting. In conjunction, such strategies would also allow businesses to overcome financial
challenges and hurdles (Nitzl, 2016).
CONCLUSION
From the aforementioned study-project, it is established that in business management
accounting structure is an efficient tool that allows a company to continue its activities over a
longer period of time. In additament, it is inferred that managerial accounting and systems plays
an essential part in the organizational performance of the company. In addition, it is decided that
various financial strategies are essential factors for an organisation to achieve both faster growth
and progress. In addition, it is examined that there have been numerous financial problems
occurring in an enterprise that can be handled by higher leadership under MA system.
\

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