Detailed Management Accounting Report: Creams Limited Cost Analysis

This report provides a comprehensive analysis of management accounting principles, focusing on Creams Limited, a small business enterprise. It explores the essential requirements of management accounting systems, including cost accounting, inventory management, and price optimization. The report delves into various management accounting methods, such as cost accounting reports, inventory management reports, and budgetary reports. It calculates costs using absorption and marginal costing techniques to prepare an income statement. Furthermore, it examines the advantages and disadvantages of planning tools used for budgetary control and compares how organizations adapt management accounting systems to respond to financial problems, with specific reference to Creams Limited. The report concludes with an overview of the key findings and recommendations for effective management accounting practices.

Management
Accounting

Table of Contents
Table of Contents.............................................................................................................................1
TASK 1............................................................................................................................................2
P1 Explaining management accounting and the essential requirements of different types of
management accounting systems.................................................................................................2
P2 Explaining Different methods that are used in management accounting report....................4
TASK 2............................................................................................................................................6
P3 Calculating costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................6
TASK 3..........................................................................................................................................12
P4 Explaining the advantages and disadvantages of different types of planning tools used for
budgetary control.......................................................................................................................12
TASK 4..........................................................................................................................................13
P5 Comparing how organisations are adapting management accounting systems to respond to
financial problems.....................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16
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INTRODUCTION
Management accounting is also known as managerial accounting which is defined as a process
that provide information and records to the managers of a company which helps them in decision
making and developing appropriate strategic plans for the long and short time period in the
future. Management accounting is conducted by the internal team of employees of a company
and it is only factor that makes it different from financial accounting (Cooper, Ezzamel and Qu,
2017). The most important and essential use of management accounting is to take the help of
statistical data developed by the internal staff for making accurate and the best decisions for the
enterprise and the business activities that moves towards success and growth. The report is based
on Creams limited which is a small business enterprise selling ice-creams, doughnuts, waffles
and other desserts in Greater London. The report consist an appropriate discussion about the
management accounting concept along with its requirement in an organisation. There are several
different methods of Management accounting which are also discussed and analysed a long way
calculating the cost of Creams limited with the help of absorption and marginal cost methods and
developing a income statement. Moving further There are several planning tools available in the
market which are used by organisation for budgetary controls these tools are also discussed along
with their advantages and disadvantages. Moreover, at the end comparison is developed amongst
creams limited and the furniture practice in relation with the management accounting systems
their uses for responding to the financial problems faced by the companies.
TASK 1
P1 Explaining management accounting and the essential requirements of different types of
management accounting systems.
Management accounting is a different from financial accounting as it focuses over developing
appropriate records and reports with the help of company’s financial information. The
Information which is used by Management accountants for developing appropriate records is in
decision making and identifying different ways the company in the most efficient and effective
manner. Management accounting system richest into all different business departments of a
company financial, marketing, human resource, IT, operations and sales. the most typical
financial data is used in managerial accounting and sometimes non financial information such as
of sales call per day, current sales report, delivery deadline dates, aging status of accounts
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receivable and payable and current inventory levels of raw materials and other finished or non
finished products also used as all this data forms a basis in front of managers to identify the key
performance indicators and the various parts of business. The nature of a Management
accountant is a forward looking and they use different reports for helping them and developing
their decisions have a use impact on the future of the organisation. Management accountants use
trend lines to forecast the future sales and prepare budgets for the administration of expense
profit planning operation cause and research and Development department. Therefore it is
suggested to every organisation and company that they focus over their management accounting
an application that helps in managing the business and controlling all the related business
activities in the most productive and the most efficient way. Creams limited is a small and
medium sized organisation that is its business by developing and managing appropriate
accounting records and also making use of proper Management accounting systems that are
essential for the organisation in order to create their future plans and develop a future strategic
objectives. These Management accounting systems are as follows which are used by the
management of Creams limited:
 Cost accounting system is potential system that covers all the related data and
information required by managers in relation with the cost of products and services which
are being provided by the entity and which it is going to provide in the future. A cost
accounting system is basically record used by entities for estimating the value of their
products and services for understanding their profitability cost control and inventory
valuation (Ax and Greve, 2017). It is very essential and important for a small or medium
sized businesses to have an accurate data and estimation about the cost involved in in the
products and more importantly it is used while ascertaining the yearly profit of the
organisation. This Management accounting system is used by creams limited for tracking
the cost of their offerings which they have already incurred and of those products which
are going to be e offered to the public in future.
 Inventory management system focuses over the management of the inventory required
by the entity for providing the best quality products and services to their customers. More
specifically inventory management system is a Management accounting tool used by
organisation to manage their inventory their raw materials and finished goods are
properly evaluated and recorded. The inventory management system is a computer based
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system which is mainly used for tracking all the inventory levels sales deliveries and
orders received by the entity. this type of system is also used in manufacturing sector in
few cases for creating a work order bill of materials and product related materials.
Creams limited needs and make use of inventory management system for the very
purpose of tracking their inventors in which they are dealing and more importantly
keeping an appropriate records of their raw materials for smooth running of operations
and potential management of business.
 Price optimisation system is another a a very good example of Management accounting
systems as this tool is important for the firm for optimising their organisational
effectiveness by setting the prices of the products and services according to the
appropriate data and according to all the relevant records available to it. Basically the
price of optimisation system is strategy which is important for the entity as it helps in
getting to know how sensitive the existing consumers and lines are to the entity and how
the changes in products pricing will bring change in there sales units and their
profitability levels. Creams limited is a small business for which their customers are the
ultimate surviving elements and keeping their prices according to them and their
preferences is the main goal so as to bring the best profitability towards them and
therefore price optimisation system is very essential and required by the entity for
surviving and growing in the marketplace.
P2 Explaining Different methods that are used in management accounting report.
Management accounting reports are the documents which are used by the entity for planning,
regulating, decision making and more importantly measuring their performances. These reports
are very important and are continuously being generated by the internal staff of the company
throughout the accounting and bookkeeping period according to the legal requirements. These
reports are important for the form as may be critical decisions depends on The authenticity and
truthfulness of these reports therefore it becomes very important for the management to carefully
develop all these bookkeeping records and for which expertise is knowledge is important
(Schaltegger and Burritt, 2017). These reports are important for creams limited because the
managers of the business will analyse the reports appropriately and then highlight a certain
pattern and use the information for the decision making of future operations of the company.
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There are different numerous reports which are developed and utilised by the managers of
creams limited and they are mentioned below:
 Cost accounting reports computes and record all the cost of raw materials and other
required goods which are essential for manufacturing the products and services which are
being offered by the entity to their potential consumers. All the raw materials cost labour
cost overhead cost and any other added cost are taken into consideration while
maintaining and developing a cost accounting report. This is a kind of a report that offers
a summary of all the cost incurred by the organisation along with their selling prices and
at the end profit margins are also estimated and mentioned in these reports for monitoring
and supervising dam along with providing a clear picture in front of managers in relation
with the cost incurred and the selling price offered by the entity to the public for the
respective product. Creams limited benefits by a cost accounting report as it helps them
to analyse the cost structure of their business and collects all the information relating to
the cost they are increasing for the offerings of the business (Malina, 2017).
 Inventory management reports are those records and reports that a documents all the
records of raw materials which are being ordered by the entity for hair manufacturing
processes and also the Other goods that are used for increasing the organisational
performances. the inventory management report mainly focuses and tracks all the records
and data in relation with the inventory that has been ordered and being brought in by the
entity for smooth and productive running of their operations and for developing
appropriate finished good that is preferred and desired by the consumers. The inventory
management report is essential and used by creams limited managers for knowing all the
records and tracking their inventory for making decisions about future purchase at the
time of unavailability and for the maintenance of the inventory levels according to the
policy of the firm.
 Budgetary reports are considered as very critical and essential document while
measuring companies performance. The budgetary Reports are basically developed into
two form a whole documents for a small business and a department wise document for a
large business organisation. This is done for simplifying the process and providing is to
the people and more specifically to the Management of the specific company. Every
organisation have their overall budgets which allows them to understand the Grand
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scheme of their business as the budget estimates army on the past experiences.
Accompanies budgetary report covers on sources on the list from where they are earning
and of those areas in which they are expending. Budgetary report is basically a
comparison of the assumption made by organisation in relation with their earnings and
their expenses along with the actual data of their earnings and expenditure. Is a small
organisation that four their budget report is created as a whole rather than according to
different departments and it allows them to keep an appropriate check on their expenses
helping them in maintaining their cost and producing extra overheads for maintaining
deposits and not going out of their assumptions (Latan and et. al., 2018).
TASK 2
P3 Calculating costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
 Absorption Costing is a method which is used by songs and organisation to get the
appropriate profit units at the end of the income statements by observing all the cost and
expenses which are incurred by them and by the processes conducted in the organisation.
Absorption costing method helps and supports the organisation in providing the accurate
profit units along with focusing over their cost, income and expenses.
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 Marginal Costing is another costing method which are useful for companies and that are
used management for maintaining profit records by concentrating on the material cost,
labour cost and fixed cost incurred in the process of converting raw materials into finished
goods (Turner and et. al., 2017). The marginal costing method is beneficial and essential for
organisation as it allows the management for evaluating and analysing the profit levels in the
best manner and allows them to take appropriate decisions for the entity.
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