HND Business: Management Accounting Report, Ever Joy Enterprises (UK)

This report analyzes management accounting principles and their application to Ever Joy Enterprises (UK), a leisure and entertainment company. It begins by differentiating management accounting from financial accounting, then explores various cost accounting systems, including direct and standard costing, along with inventory management and job costing systems. The report also covers different types of management accounting reports and the importance of a sound accounting system. Furthermore, the report performs a break-even analysis to determine the number of tickets Ever Joy must sell to break even and achieve a profit target. It also evaluates the role of budgeting as a planning and problem-solving tool for the company's financial challenges and long-term success. The report provides recommendations for optimizing the company's financial performance and decision-making processes.

Management Accounting report for Ever
Joy Enterprises (UK)
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Table of Contents
Introduction............................................................................................................................................................... 3
Task 1............................................................................................................................................................................ 3
Management Accounting systems............................................................................................................... 3
a. Differences between Management Accounting and Financial Accounting...........................5
b. Cost accounting systems (Direct Costs and Standard Costing)..................................................7
c. Inventory Management Systems..............................................................................................................7
d. Job costing systems........................................................................................................................................ 8
e. Different types management accounting reports............................................................................9
f. The need for a sound accounting system and the importance of the department
producing timely, accurate and relevant information.....................................................................10
Task 2......................................................................................................................................................................... 11
a. The number of tickets that must be sold to break even (i.e. the point at which there is
neither profit nor loss)...................................................................................................................................11
b. If we want to make a profit of £30,000.00, how many tickets should be sold? ..............12
c. What profit would result if 8,000 tickets were sold? ..................................................................13
Task 3......................................................................................................................................................................... 14
a. You are to evaluate how budgeting can be used by Ever Joy Enterprises as a planning
and problem-solving tool in dealing with financial problems, but also for leading the
organization to sustainable success.........................................................................................................14
Conclusion................................................................................................................................................................ 20
References................................................................................................................................................................ 21
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Introduction
Management accounting is an integral part of the enterprises which helps them to achieve their
goals and objectives in an effective and efficient manner. This report will be prepared to reflect
and discuss the concept of managerial or management accounting and write a reference in the
context for EVER JOY ENTERPRISES (UK) that operates its business operations in leisure
and entertainment industry in the UK. This report defines the concept of job costing systems,
cost accounting systems and inventory management systems and its usage in the enterprises.
This report will also solve the given problems to assist the Ever Joy Enterprise reviewing its
performance in Manchester region to determine its feasibility by using the break-event point
formula and which present the profits and BEP at which enterprises in the position of no profit
and no loss. This report also gives suitable advice to Ever Joy Enterprises on utilizing the
budgets as planning and problem-solving tools which solve the financial problems of the
enterprises.
Task 1
Management Accounting systems
Management Accounting is the accounting branch which basically deals with providing and
presenting accounting information to the manager in such an organized manner so that it can do
its managerial functions of planning, controlling and decision- making in an efficient and
effective manner. Management accounting acts as a decision-making support system to the
manager of an enterprises (Kaplan and Atkinson, 2015).
As per Certified Institute of Management Accountants (CIMA), United Kingdom,
“Management Accounting is an essential part of the company’s management concerned with
classifying, offering, and understanding information which is utilized for framing planning,
strategy and monitoring and governing activities or events, decision- making, optimal usage of
resources of an enterprise, disclosure to stakeholders and other external to the enterprises,
disclosure to workers or employees and assets safeguarding.
Objectives of Management Accounting
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The main objective of management accounting is to offer important information to the
management for an efficient and effective execution of managerial functions. Various
objectives of management accounting are enumerated as follows:
1. Planning and policy- making: Management Accounting provides or offers important and
accurate information to the management in the process of its policy- making and planning to
attain goals and objectives.
2. Controlling: Management: Accounting applies various essential techniques or methods
such as Budgetary control, Management Audit, Standard Costing, and Responsibility
Accounting to ensure an effective management control over the resources use of the enterprise.
3. Communicating: Appropriate communication of the performance of many departments of
an enterprise to different administration levels is necessary required for planning, decision-
making and controlling.
4. Analysis and interpretation of financial statements: Management Accounting gathers,
analyses and understands the important data from the results shown by the cost and financial
accounting system, and also offers important and appropriate information to the management in
a useful and systematic manner.
5. Decision- making: Management accounting offers important and accurate information to the
management in the process of its decision- making. The growth and success of management
highly and mostly depends upon a perfect decision- making.
6. Tax planning: Management accounting assists to the management in the process of tax
planning by availing various tax rebates and reliefs and, thus, minimizes the tax burden of the
enterprise on the whole.
Role and functions of Management Accounting
Management accounting plays very critical role in managing the operations of the
business. As specified management accounting is the key in any organisation which have the
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records of every function of the organisation. The roles and the functions of the management
accounting are discussed below:
 Forecasting and planning: One of the most important function that the management
accounting play is to provide the necessary information and data for the decision making
in the organisation. The management accountants uses the techniques and the statistics,
so as to use the data collected for the planning the business objectives.
 Organizing: This helps the management accountant in organising the resources available
within the organisation. They organise the accounting and the finance functions of the
business on the trends that are followed in the modern market
 Coordinating: The management accountant uses this function to enhance the efficiency
of the organisation and to maximise the profits by making coordination among the
employees. It helps the management by reconciling the cost and finance accounts and by
preparing the budgets and setting the targets.
 Financial analysis and interpretation: The function of the management accountant is to
provide the data and make this available to the management along with the comments
and suggestions. This will help the managers to take the decisions and make the policies
accordingly.
a. Differences between Management Accounting and Financial Accounting
Points of Difference Financial Accounting Management Accounting
Objective Objective is to account for the
day-to-day financial
transactions, and determine
the financial health of an
enterprises (Maynard, 2017).
Main objective is to report to
the management information
so that they can take proper
decisions (Weygandt, et. al.,
2015).
Purpose Beneficial both for internally
as well as stakeholders to
assess the financial
performance of the company.
Beneficial mostly for internal
management for making
decisions, for instance,
budget, or spending plan etc.
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Frequency Generally, it is prepared as
per statutory requirements:
yearly statement, quarterly
and half-yearly.
Mostly prepared as per
management requirements.
No fixed interval at which
the management accounts
should be prepared.
Compliance Statutory compliance
required.
Statutory not required.
Focus Financial reports are prepared
on the basis of historical
information and reports are
prepared for a fixed period of
time.
Management accounting
focuses mainly on present
data and forecasting future
reports.
Users External and internal parties Only internal management
Auditing and Publishing Compulsory to be published
and audited by statutory
auditors.
Neither published nor
audited by statutory auditors.
Scope The scope of financial
accounting is narrow.
The scope of management
accounting is broad.
b. Cost accounting systems (Direct Costs and Standard Costing)
The cost accounting systems can assist the company in so many ways. It provides an exact
product cost, delivers valuable operational and financial information, and also evaluates the
performance. The cost accounting includes measuring, recording, and reporting of product
costs. This system assists to the Ever Joy Enterprises to estimate the cost of their products for
profitability analysis, valuation of inventory, and control the cost. The Ever Joy Enterprises can
utilize this framework to assess the productivity in the procedures and this framework likewise
helps in making the upgrades in the up and coming procedures of the enterprises. It will
likewise help the enterprises in value obsession of the item and limits the wastages in the
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assembling procedure (DRURY, 2013). It additionally gives helpful data to the administration
bookkeeper for the further arranging of the items.
Types of costs
Direct Costing: It is a type of costing method which uses only variable manufacturing costs are
allocated to cost of goods sold and inventory. This method can be used internally and not for
external purpose. While preparing the financial statements both fixed cost and variable cost are
considered and assigned to the products (Weygandt, et. al., 2015).
Standard Costing: In standard costing some standards are fixed by the manufacturer regarding
product or service. The manufacturers identify the variances in between actual and standard
costs. If the enterprises had incurred more than the standard costs, then the enterprises will not
meet its projected or estimated net income (Maynard, 2017).
c. Inventory Management Systems
The stock administration frameworks will allude to the way toward bookkeeping in which
inventories including the completed merchandise and work in advancement will be overseen
and revealed properly and convenient for making progress in the creation limits. The stock
administration will be vital for the venture with the end goal to accomplish the ideal dimension
of stock to be held in the organization which will result in opportune accessibility of stock and
will likewise help with accomplishing least expense of stock held in the organization (Holm,
2018). The essential points of executing stock administration framework in the enterprise are:
 Attaining an ideal stock level of stock that must be kept up in the enterprise with the
goal that no requests are postponed and the expense of support is least for the enterprises.
 Identifying the ideal level of placing the orders for buying of different materials and
building the concept of just in time inventory.
The inventory management system will use different kinds of methods which are summarized
as below:
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 First in first out method: This is the method used by the organisation in which the
inventory that has came first is sold out first. This method is useful for the organisation that has
high ratio of turnover and the products are not durable. This will help the organisation in
maintaining the products expiry and removing the old stock first.
 Last in first out method: In this method the stock that has came last in the store is sold
out first. This type of method is used in the industries which uses the market trends to sell their
product. As the organisation has to sell the products as per the current demand of the customers.
This will help the organisation in maintaining the stock and selling the products with the current
price trends.
d. Job costing systems
Job costing systems is a system for assigning the production or manufacturing costs to a specific
batches or products. Basically, this costing system is utilized only when the products produced
are different from each other. Job costing includes the accumulation materials, labor and
overhead costs for a particular job. For instance, a job costing is useful in the designing a
software program, manufacturing a small batch of products, constructing a custom machine
(DRURY, 2013). This costing system will help the Ever joy company in defining the prices of
the products of the company in useful manner. As the company is dealing in service sector so it
will help them to specify the cost of the task in the proper and efficient manner. The company
would be able to know the specific cost of the service and will be able to determine the price of
the different services that it provides.
In a job costing it includes the following activities which are listed below:
 Materials
 Labor
 Overhead
Job costing assists to the Ever Joy Enterprises by providing useful information regarding
particular job in an accurate manner. The management easily accumulated the price of job and
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estimated how much cost involved in this job. The whole data are stored in the database of the
company which provides relevant information to the management and its customers.
e. Different types management accounting reports
Reports Description Use in Ever Joy Enterprise
Cost and revenue reports The cost and revenue reports
give data with respect to cost
engaged with different
procedures and income
created there from. It
empowers the administration
to dissect the operational
productivity of the business
(DRURY, 2013).
It will empower the
administration of Ever Joy
Enterprises (UK) to plan
future business
methodologies and
furthermore follow if there is
any wasteful procedure.
Performance reports Performance report is an
explanation that evaluates the
result of an action over a
predefined time allotment. It
is set up to survey the
execution (Kaplan and
Atkinson, 2015).
Performance report can be
instrumental in Ever Joy
Enterprises (UK) to evaluate
its arrangements dependent
on their execution/result and
it can outline the future
systems appropriately.
Inventory reports Inventory report condenses
different things having a
place with a business,
industry, association. It gives
a record of inventory level in
an organization including raw
material, finished goods, etc.
(Holm, 2018).
Inventory reports can be
utilized in Ever Joy
Enterprises (UK) to monitor
stock and different things.
Budgetary reports Budgetary report is a report
that empowers the
administrator to think about
the projections made toward
the start of the year with real
execution. It is intended to
decide concerning how close
be the real execution with the
planned execution (Maynard,
2017).
Ever Joy Enterprises (UK)
can utilize Budgetary report
to dissect the productivity of
the business. In the event
that there is any deviation
between the genuine
execution and planned
execution it can discover the
purpose behind a similar
which will empower it to
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frame better business
methodologies in future.
f. The need for a sound accounting system and the importance of the department
producing timely, accurate and relevant information.
A sound accounting system is a precise method for gathering and recording of the monetary
exchanges with the goal that it can empower every one of the partners to survey the execution
of the enterprise. Bookkeeping should be possible either physically or through mechanized
projects. However, a sound accounting system enhance the profits and efficiency of the
enterprise and also enhances the goodwill or reputation of the enterprises (Vanderbeck, 2012).
Following are benefits of a sound accounting system which are discussed as below:
Assists in decision making: A sound bookkeeping framework helps the administration to settle
on better choices for the business. Since the data given by the bookkeeping framework is
precise so it empowers the administration to painstakingly evaluate and examine every single
viewpoint and shape the future systems likewise.
Compatibility: It gives a system to the business to effectively share money related information.
Assume an organization buys another organization and the two are having a sound bookkeeping
framework set up then it would be anything but difficult to coordinate the records and would
spare part of time and exertion.
Improves the proficiency of a business: A sound bookkeeping framework annihilates any
odds of inconsistency and presents data convenient and precisely which thus builds the
profitability of the business. Presently days with the appearance of electronic bookkeeping
frameworks different reports can be produced with the dash of a catch which empowers the
administration to take the choices opportune that helps in the development of the business.
High level of accuracy: A sound bookkeeping gives a high level of precision in the
introduction of the last records. It limits the odds of any theft and uncovered the shortcoming
assuming any. Sound bookkeeping disposes of odds of blunders and introduces all the monetary
information definitely and precisely.
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Task 2
a. The number of tickets that must be sold to break even (i.e. the point at which there is
neither profit nor loss)
Calculation of Contribution per ticket
Particulars Amount (£)
Fixed Costs 60,000
Proposed ticket price for the concert 20
Variable Cost per ticket 10
Contribution per ticket 10
Calculation of Break Even Point (per ticket)
Break Even Point= Fixed Cost/Contribution per ticket 6000
Interpretation: By applying the break-even point formula which is stated above, Ever Joy
Company will have to sell at least 6,000 tickets in order to cover its variable and fixed costs. It
is the situation where the company faces no profit or no loss.
b. If we want to make a profit of £30,000.00, how many tickets should be sold?
Calculation of the ticket to be sold in order to achieve the desired profits
Particulars Amount
(£)
Desired Profits 30,000
Fixed Costs 60,000
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Contribution per ticket 10
Ticket to be sold in order to achieve the desired profits
(Fixed costs + Desired profits/Contribution per ticket)
9000
Interpretation: Above calculation shows that Ever Joy Company will have to sell 9,000 tickets
or sales will be £ 1,80,000 (9,000 x £20) to meet the desired profit of £ 30,000.
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