Management Accounting Report: Cost Analysis and Financial Strategies

This report provides a comprehensive analysis of management accounting principles, focusing on their application within the context of Unicorn Grocery, a daily products retailer. The report begins with an introduction to management accounting and its significance in organizational decision-making, emphasizing the importance of financial information and reporting. Task 1 explores essential requirements, including traditional and lean accounting, and transfer pricing. Task 2 delves into different methods of management accounting reporting, such as budgetary reports, aging reports, and inventory reports. Task 3 covers cost calculation techniques for preparing income statements, differentiating between fixed, variable, direct, and indirect costs. Task 4 examines the advantages and disadvantages of various planning tools used for budgetary control, and Task 5 discusses the use of management accounting to respond to various financial problems. The conclusion summarizes the key findings and recommendations for Unicorn Grocery, highlighting the importance of effective management accounting practices for financial stability and growth. The report provides practical insights into financial analysis, cost management, and strategic planning within a business environment.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirement of management accounting..................1
P2 Different methods used for management accounting reporting.............................................3
TASK 2............................................................................................................................................5
P3 Cost calculation using appropriate technique for preparing income statement.....................5
TASK 3............................................................................................................................................7
P4 Advantages and Disadvantages of various planning tools used for budgetary control.........7
P5 Use of management accounting to respond to various financial problems...........................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
.......................................................................................................................................................12

INTRODUCTION
Managerial accounting are the provision of financial information and suggestion to a
company for use in the organisation and its evolution. This process get done through managers of
an entity by interpreting, analysing and communicating the information to top authority. In such
relation, senior management take conduct adequate steps which are beneficial for long term
existence. On the basis of such information, all problems get resolve which aid in conducting
operations properly. A major purpose of this assignment is to make the understandability of
management accounting more easy to an organisation who want to employ them. This
assignment is based on Unicorn grocery who used to deal in daily products and want to resolve
all problems which might arise in their business. Managers and leaders of a company have to
make a proper report for the use of management accounting and its various type of reporting
system 1. As these are beneficial in taking appropriate decision and measure all deviations and
differences. Along with this budgetary control is helpful term in business consent for utilising the
resources properly. There are several number of advantages and disadvantages are find out which
enable the Grocery management to respond to financial problems.
TASK 1
P1 Management accounting and essential requirement of management accounting
In accounting terminology, an essential thing which provide support in taking decision
for short term basis is management accounting. According to this concept, many small firms
dealing in operations on regular basis as many problems get arise in such situation. Management
accounting leads to combine the management, accounting and finance of a company together so
that an appropriate decision can derive 2. In management accounting several number of topics
have to include the manufacturing product cost which is really required for external financial
statement. This concept is completely based on cost factors in which various cost related topics
are identified: product vs period cost, job order costing, process costing, allocation of
manufacturing and many more.
1 Baldvinsdottir, Gudrun, Falconer Mitchell, and Hanne Nørreklit. "Issues in the
relationship between theory and practice in management accounting." Management
Accounting Research 21. no. 2 (2010): 79-82.
2 Cinquini, Lino, and Andrea Tenucci. "Strategic management accounting and business
strategy: a loose coupling?." Journal of Accounting & organizational change 6. no. 2
(2010): 228-259.
1

Managerial accounting is a short analysis of business statement which prepared on
weekly, monthly and quarterly basis. Hence, this method is helpful in proper planning and
controlling of the business and all its concern activities. Thus, taking of financial decision
become easy and management can work in right direction as well.
Apart from all such facts and things which are related with management accounting,
objectives are also related with managerial accounting. A basic objective of management
accounting is to guide the whole departments and division in performing the functions properly.
Planning, organising, directing and controlling are the several number of functions which are
perform in an organisation. By using all necessary information, management become more
capable to deal with every concern which took place in an entity.
Unicorn grocery have to prepare their reports on weekly basis so that they can provide
quality goods and services to their users. Moreover, their preparation of financial statement
become easy as well as they can deal with uncertainty which impact negatively on business. A
proper plan for future concept can frame by Unicorn grocery management for organising the
management properly. Through their customer satisfaction is ultimate thing for the business in
expansion.
Management accounting is essential concept in business for effective planning and
controlling. According to this perspective, it's requirement in business is must for making the
work effective and appropriate. Unicorn grocery have to apply this concept in business so that
they can deal with every deviations of a company properly. There are various kinds of
management accounting system are used by the company in relation to conduct all operations
successfully which are as follow: Traditional accounting:There are various sort of accounting is used by a company out of
them traditional accounting system consider as appropriate one. Management focus more
on such things which are really urgent expenses for the company. Once they all get paid,
management can conduct their operations properly. Traditional accounting is a part of
managerial accounting which further divided into two cost segments which are; job order
costing and process costing. Job order costing is for the products which are unique in
nature and manufacturing of product is for an individual product or for the same unit. In
this process, more and more cost get incur on the project 3. On the other hand, process
3 What is job order costing?. 2017. [Online]. [Accessed on 1st September 2017].
Available through :<https://www.accountingcoach.com/blog/what-is-job-order-
2

costing is for the large production of products which are similar in nature and identical
form. Lean accounting:A major objective of lean accounting is to eliminate the wastage which
is associated with project as well as speed up the process of working, reduce errors which
arise in business and make the process clear and understandable. It also aid in motivate
change and improvement in business along with this make the decision process effective
by taking suitable actions.
 Transfer pricing:In management transfer pricing refer to as such situation when one
upstream division sale products to the other downstream division. In such relation, some
more value get added according to departments which lead to increase the price of
products.
P2 Different methods used for management accounting reporting
Reports are the useful fact in business which enable management to take adequate
decision in relation to resolve all problems. It facilitates a procedure under which senior
authority have to inspect them and take decisions. In accounting sense, various number of reports
get framed on the basis of financial information of an entity. Management reporting is a helpful
toll for a company so that they can provide appropriate information to each level. By using such
data, effectiveness of such divisions get measure in relation to their responsibility and corrective
measure can use for that 4.
In management accounting context, reports get framed for short period of time on the
basis of weekly, monthly and quarterly basis. As these information provide a platform under
which proper decision and plan get done. A clear picture derive by managerial accounting so that
management can reframe their strategies, goals, objectives and targets. A healthy entity is one in
which optimum utilisation of resources, lack of deviations, motivated workforce measure.
Managers of a company are helpful in setting a clear picture for a company so that they can work
in an adequate manner.
In every retail sector business, it is mandatory for them to prepare their reports so that
they can fulfil the demand of every product which is requires in store. Supervisor or managers of
costing>.
4 Fullerton, and et. al. "Lean manufacturing and firm performance: The incremental
contribution of lean management accounting practices." Journal of Operations
Management 32. no. 7 (2014): 414-428.
3

Unicorn grocery have to analyse their reports on daily basis so that every time they can fulfil
demand and requirement of their users. On the basis of such reports, management have to work
according to demanded products 5. Moreover, several other reports are also require in which
entity have to tighten their recovery policies so that they can collect money from such person
who failed in meeting their obligations. Along with this, they also have to formulate budget on
the basis and according to that they lead to work as per that. In such relation, there are various
number of managerial accounting reporting are find out which are as follow: Budgetary report: This report is usually used for attain all the goals and targets of the
departments so that they can reach towards positive. In such report all the expenses and
incoming cash flow of a company have drawn out so that evaluation of performance
become easy. Unicorn grocery have to use budget report in their account so that they can
maintain their expenses and use all resources properly. As this aid them in fulfil the
demand of every user in an adequate manner 6. Account receivable aging report: This report is helpful in measuring the debts of a
company. In case company debts are more than it is a duty of manager to cut them down
and focus on reserve more and more. Management have to focus more on debts which
might affect their goodwill and reputation. Thus, by meeting with all old obligations,
company have to tighten their policy and work properly. Collection personnel have to
identify all such dues which are remain unpaid from long time. Inventory and manufacturing: Stock have to determine by management as per time which
is essential. All the inventory have to underpin by supervisor and managers for daily
fulfilment in store. Management have to purchase only at such time when it is essential.
This lead to reduce the over production and over storage which is a major factor of
increment in price. Managers have to purchase only at such time when whole stock is
about to finish.
 Job cost report: It is a duty of manager and authority to overlook on such area which are
high profit generating. This looking of project is beneficial to use all resources properly
5 Garrison, and et. al. "Managerial accounting." Issues in Accounting Education 25. no. 4
(2010): 792-793.
6 Giovannoni, and et. al. "Transmitting knowledge across generations: The role of
management accounting practices." Family Business Review 24. no. 2 (2011): 126-150.
4

and wastage get decline. Company have to adopt only such projects which facilitate them
higher return and for this they have to keep eyes on them.
These are the several number of reporting system are identified which can be used by a company
in the stream of conducting operations properly 7. Managerial accounting is a system through
which management can take adequate decision which are related with short period of time. All
these methods are helpful in relation to make business sustainable. Unicorn grocery have to use
inventory and manufacturing report in maintain stock of everything which they want to sale. As
this is helpful in execute the demand of every user in same manner in which they demanded.
Also, they deal on regular basis and for this, proper budget have to allocate. This process support
them in purchasing of products at right time in appropriate quantity.
TASK 2
P3 Cost calculation using appropriate technique for preparing income statement
Cost is define as the amount which has to be paid or given up in order to procure
something. In accounting sense, cost is define as the value which is in terms of money for the
asset which an individual or an organisation want to consume. It includes whole cost which incur
at the time of production. Determination of cost is essential in setting a perfect price for the
product. Unnecessary elements and wastage have to deduce which is must for manufacturing and
delivering a right quality value good and service 8.
There are various types of cost are defined which are beneficial at the time of operation.
All these cost are helpful in selling of products at right price which can be acceptable by every
consumer. These type of cost are as follow: Fixed cost:Manufacturing of product and services is a part of business. Every business
have a cost which do not get changed and remain fixed. As these cost are stable and do
not vary with every production unit. Management have to take such cost in account and
adequate steps have to derive on them. Variable cost:At the time of production, many of the times it get identify that cost get
vary according to time. This type of cost made a negative impact on product
7 Lukka, Kari, and Sven Modell. "Validation in interpretive management accounting
research." Accounting, Organizations and Society 35. no. 4 (2010): 462-477.
8 Macintosh, Norman B., and Paolo Quattrone. Management accounting and control
systems: An organizational and sociological approach. John Wiley & Sons, 2010.
5

manufacturing due to getting changed with time. Controlling of such type of cost is
essential part of business and managers play an adequate role in such relation. Direct cost:A direct cost is a price of product which is directly lead to attributed on the
manufacturing of specific goods and services 9. It is traceable for a specific product for
example a cost of material which incur on production of product. Raw material, labour,
equipments are several things which are consider as direct cost in business. Indirect cost:Few cost are not directly incur on the object and are difficult to assign to
specific project. Thus, these are consider as indirect cost of the product. These type of
cost are hard to assign which is very difficult to determine. Depreciation, administration
expenses are several type of indirect cost of a product.
 Operating cost:These cost are directly related with the operation of a project. It is related
with the operation and existence of the administration for the day to day operations. It is
compulsory for an organisation to control their operating cost so that they can generate
more and more profit 10. Less the operating cost more accurate products get manufacture.
These are the several sort of cost are determine but there are two types of cost are identified
which are: marginal costing and absorption costing.
Absorption costing: Absorption costing is defined as the process in which all the cost which are
associated with product are included. In this process direct as well as indirect cost are included
so that accurate price of good get derived. Absorption costing is one in which all expenses of a
good and services are treated as cost on the place of fixed and variable overhead.
Income statement as per absorption costing :
Particulars Amount Total
Sales value (35*600) 21000
less:
9 Nixon, Bill, and John Burns. "The paradox of strategic management accounting."
Management Accounting Research 23. no. 4 (2012): 229-244.
10 Operating Cost. 2017 [Online]. [Accessed on 1st September 2017]. Available
through :<http://www.investinganswers.com/financial-dictionary/businesses-
corporations/operating-cost-6793>.
6

Particulars Amount Total
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
Less: over absorbed fixed production overheads -100 -1800
Net profit 9600
Marginal costing: It is a change in the total cost when the quantity produced get incremented
with the production of another one. This process is used to know about the impact of variable
cost on the volume of production. Along with this, profitability of department and product is
must in relation by using marginal costing (Cost Accounting - Marginal Costing, 2017). Income
statement by using the marginal costing is as below so that net profit get identified for the
Unicorn grocery.
Particulars Amount Total
Sales 21000 (600*35)
Less: Variable cost
Direct material
Direct labour
Variable production overhead
Variable sales overhead
3600 (600*6)
3000 (600*5)
1200 (600*2)
600 (600*1) 8400
7

Contribution 12600
Less: Fixed cost
Production overhead
Administration cost
Selling cost
2000
700
600 3300
Net profit 9300
The net profit from the above income statement is £9300 which signifies that profit is
appropriate in nature. As a major advantage of marginal costing is that it is easy to operate and
understand. It also facilitate a firm in controlling the variable overhead and production so that
products get deliver at appropriate price. Since, by this management have to keep focus more on
variable cost because fixed cost do changed in short period of time. Sales of the company is
appropriate as their actual sales in of 21000 and their contribution is 12600. By using this
contribution, management become able to analyse their net profit which provide strength to a
business in further future.
TASK 3
P4 Advantages and Disadvantages of various planning tools used for budgetary control
Planning is an essential concept which aid in conducting all the operations in an
appropriate manner. Without planning nothing can be done properly and in an entity it is a one of
a major function 11. Planning provides a guideline under which all internal stakeholders become
capable to deal with many issues which might arise in business. Tools are defined as the
supportive system which work as a road map on which operations and interventions have to
operate. Planning tools are described as the guide which aid an organisation to conduct and
implement all of their interventions in an adequate manner 12. They also provide a descriptive
steps which are related with the implementation and how the action plan has developed. Planning
tools encounter various facts and things in account which are as follow:
 Organisation timeline
 Sample meeting agenda
11 Renz, David O. The Jossey-Bass handbook of nonprofit leadership and management.
John Wiley & Sons, 2016.
12 Scapens, Robert W., and Michael Bromwich. "Management accounting research: 20
years on." (2010): 278-284.
8

 Action item checklist
 Things to do checklist
Following are the several number of examples are defined which defined the planning tools in
more developed manner. Some of them are team decision making action plan, father engagement
meeting agenda etc.
A footprint of planning tool is budgeting and budgetary control which aid a firm to use all
of their resources in an appropriate manner. All the expenses and investment have to take place
according to the budget so that unnecessary wastage can de reduced. Budgetary control is formed
with combination of two specific words which are: budget and control. Control is keeping a
focus on the things which are taking place on the other hand budget is expenses and investment
which lead to took place in an entity 13. Budgetary control is termed as capability of manager in
relation to utilising all the resources properly and control operating cost which incur on the
project. It helps in comparing the actual result with budgeted figures. As this is helpful in
evaluating the performance 14.
Organisations use various number of budget through they can manage all of their
expenses in an appropriate manner. A perfect plan or budget is one in which all the expenses
whether they are related with short term or long term are included. Various number of budget are
as follow: Operating Budget:It is an estimation of the income and expenses which leads to get incur
in a specified period of time. It enable an organisation to expand according to operating
budget so that whole process get done properly. It is for the short period of time in which
capital outlays are deducted from it. Financial budget:It is a type of budget which is prepared for the entire year so that
management can work accordingly.
 Non monetary budget:Non monetary budget are such budget which are not in the form of
money and based on profit of a company. In case management found that their sales
budget is more than they have to cut it down over their expenses.
13
Vaivio, Juhani, and Anna Sirén. "Insights into method triangulation and “paradigms” in
interpretive management accounting research." Management Accounting Research 21.
no. 2 (2010): 130-141.
14 Van der Stede, Wim A. "Management accounting research in the wake of the crisis:
some reflections." European Accounting Review 20. no. 4 (2011): 605-623.
9

Budgetary control is a process where managers have to monitor all the expenses over the period
and compare the actual result with expected result. Managers and leaders formulate several goals
and objectives and it is their major duty to perform them properly. Along with that if they found
that they are not attaining their expected result for any sort of deviations, so they have an
opportunity to reframe their strategies according to time 15.
All these budgetary techniques are helpful in formulate a plan under which all revenue
and expenses are included. They have lots of advantages but at some places several
disadvantages and limitations are also found out. Hence, the below description is for the
advantages and disadvantages for these planning tool which have to take in account by Unicorn
grocery so that they can manage everything in an appropriate manner.
Advantages Disadvantages
Provide guideline on which whole firm can
operate their business.
All the things get identified in advance but
future forecasting is not so easy.
A major aim is to use all resources properly.
This is consider as major advantage of budget in
planning context.
A successful budget is one in which top
management support most and also take care
about operational management.
Helpful in making the process centralised on the
place of decentralisation.
Budget preparation is not easy and financial
and master budget include all things under
one roof. As this is lengthy to understand.
Guidance is helpful in attain all targets in a well
defined period of time. Budget is work as a
usher for encounter all projects and remove
differences from business.
Promote uncertainty as many organisations
predict everything in advance which is tough
for every organisation.
Increase the chances of sustainability and
delivering of good quality products by
investigating all things in short time period.
Make the work of managers to hard as this
lead to lack of focus on business by leaders
and managers.
15 Ward, Keith. Strategic management accounting. Routledge, 2012.
10

P5 Use of management accounting to respond to various financial problems
Problems and issues are a part of business which arise in any situation. If an individual or
an organisation find several issues in working then they are moving towards right direction.
Managers and leaders of a company have to work properly so that they can deal with all issues in
an appropriate manner. If all the issues get identify in short period of time then proper and
adequate actions get taken 16. For this purpose, managerial accounting work as appropriate
technique or accounting process. Financial crises occur due to lack of money and reserves.
Financial problem will lead to affect the health of a business which is not appropriate in
nature. Various type of financial problems arise in a business which are described as below:
 Low income
 Less profit generation
 Not inspecting the books properly
 Long term assets are more but less cash reserve
 Lack concentration on budget and planning tools of a company
 Inappropriate preparation of financial statement
All these problems are defined as the financial problem or issue of a business on which
management have to take adequate steps. Managerial accounting is a process by which company
can work on all these issues and problems. Management accounting enable a firm to work on
short term deviations and differences through which firm can operate all things in an appropriate
manner. Hence, Unicorn grocery have to determine all these problems in advance and work on
them by using managerial accounting process. The use of this procedure or technique in
reference business is as below:
 Reports are prepared on short term basis as this is helpful in dealing with all issues. Low
income might be a problem for a business which can deal by investigate the reports
properly.
 Less profit generation can deal by delivering more quality products. As their quality
goods and services are the major thing.
 Optimum utilisation of resources is also be a part of management accounting. Hence, it
provide a guideline on which company have to work properly. As by optimum use of
resources will lead to deliver more quality products.
16 Zimmerman, Jerrold L., and Massood Yahya-Zadeh. "Accounting for decision making
and control." Issues in Accounting Education 26. no. 1 (2011): 258-259.
11

 Wastage of resources is also a part of business which hamper the operations very badly.
As for this, lean accounting have to use by company so that they can deal with such issue.
 Maintain proper cash reserve so that frequent actions can be take for all the financial
problems which arise uncertainly. Reduce the number of long term assets because they
can not get converted in cash easily.
 Prepare proper budget so that all expenses can made according to requirement. As this is
helpful for them in operating the things properly which are associated in a business.
 Prepare financial statement properly so that they can take beneficial decision in long term
as well. This is a major step which have to take by the company for betterment and
development.
Unicorn grocery have to use this approach for their business in relation to make their business
more appropriate. As they can respond top every financial problem in very well manner without
any difficulty. Development can restrict by not responding to financial issues and crises as their
major impact will negative. Uncertainty have not to bear by business in any circumstances
because they always lead to make organisation move backward. Proper steps and actions have to
derive by use of statement and managers. They are the one who directly link with business in
operating all things properly.
CONCLUSION
It get concluded from the above report that, management accounting is a systematic
approach through which company can respond to all problems and issues which arise in short
period of time. For such purpose, proper actions and steps get derive so that entity can sustain at
market for long term. There are various type of reporting system in managerial process are
defined so that issues and problems get resolve on frequent basis. Along with this, income
statement also get prepared so that proper actions can be take on the basis of marginal costing
and absorption costing. Moreover, with these costing, there are various number of cost are also
defined which are associated with the production of goods and services. Proper planning
formulation is also must in which budget plays a crucial role. Budgetary control get done with
support of managers in which they are more likely to keep focus on all operations and activities.
By proper planning, all financial problems have to resolve. In such context, management have to
respond to all problems and issues of a business so that they can sustain at market for long term.
12

Managerial accounting is beneficial for such group of entities which have small scale work and
deal in daily basis operations.
13

REFERENCES
Books and Journals
Baldvinsdottir, Gudrun, Falconer Mitchell, and Hanne Nørreklit. "Issues in the relationship
between theory and practice in management accounting." Management Accounting
Research 21. no. 2 (2010): 79-82.
Cinquini, Lino, and Andrea Tenucci. "Strategic management accounting and business strategy: a
loose coupling?." Journal of Accounting & organizational change 6. no. 2 (2010): 228-
259.
Fullerton, and et. al. "Lean manufacturing and firm performance: The incremental contribution
of lean management accounting practices." Journal of Operations Management 32. no.
7 (2014): 414-428.
Garrison, and et. al. "Managerial accounting." Issues in Accounting Education 25. no. 4 (2010):
792-793.
Giovannoni, and et. al. "Transmitting knowledge across generations: The role of management
accounting practices." Family Business Review 24. no. 2 (2011): 126-150.
Lukka, Kari, and Sven Modell. "Validation in interpretive management accounting research."
Accounting, Organizations and Society 35. no. 4 (2010): 462-477.
Macintosh, Norman B., and Paolo Quattrone. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons, 2010.
Nixon, Bill, and John Burns. "The paradox of strategic management accounting." Management
Accounting Research 23. no. 4 (2012): 229-244.
Parker, Lee D. "Qualitative management accounting research: Assessing deliverables and
relevance." Critical perspectives on accounting 23. no. 1 (2012): 54-70.
Renz, David O. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley
& Sons, 2016.
Scapens, Robert W., and Michael Bromwich. "Management accounting research: 20 years on."
(2010): 278-284.
Vaivio, Juhani, and Anna Sirén. "Insights into method triangulation and “paradigms” in
interpretive management accounting research." Management Accounting Research 21.
no. 2 (2010): 130-141.
Van der Stede, Wim A. "Management accounting research in the wake of the crisis: some
reflections." European Accounting Review 20. no. 4 (2011): 605-623.
Ward, Keith. Strategic management accounting. Routledge, 2012.
Zimmerman, Jerrold L., and Massood Yahya-Zadeh. "Accounting for decision making and
control." Issues in Accounting Education 26. no. 1 (2011): 258-259.
Online
What is job order costing?. 2017. [Online]. Available through
:<https://www.accountingcoach.com/blog/what-is-job-order-costing>. [Accessed on 1st
September 2017].
Operating Cost. 2017 [Online]. Available through :<http://www.investinganswers.com/financial-
dictionary/businesses-corporations/operating-cost-6793>. [Accessed on 1st September
2017].
Cost Accounting - Marginal Costing. 2017. [Online]. Available through
:<https://www.tutorialspoint.com/accounting_basics/cost_accounting_marginal_costing.
htm>. [Accessed on 1st September 2017].
14