Comprehensive Management Accounting Report: IMDA TECH Analysis

This report provides a comprehensive analysis of management accounting principles and their application within the context of IMDA TECH, a company producing mobile chargers. The report begins with an introduction to management accounting, emphasizing its role in sustainable business objectives and the use of various tools for achieving higher productivity. It then delves into the different types of management accounting systems, including cost accounting, job costing, price optimization, and inventory management systems (LIFO, FIFO, and average costs). The report also covers diverse methods used for management accounting reporting, such as budget reports, account receivable aging reports, and performance reports. Furthermore, the report explores the application of marginal costing and absorption costing techniques to prepare an income statement, calculating costs and determining profitability. The report includes calculations for break-even analysis and margin of safety, providing a detailed financial analysis of IMDA TECH's operations and financial performance. The report concludes with a discussion of how management accounting systems can be integrated with management accounting reporting to achieve sustainable development efficiently.

Management
Accounting
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INTRODUCTION
Management Accounting is the most effective tool for making the business objectives in
a sustainable manner. Here are so many tools which can be used by the organization for gaining
higher productivity. By implementing management accounting tool, company could use an
efficient strategy that can be used by the organization for making the business sustainable and
reliable. Here are various kinds of business objectives that can be used by the organization for
making the business objectives. Here are various management accounting reports that can be
used by the organization for gaining sustainable development in an effective manner (Amoako,
2013). Various budgetary planning tools are used for measuring the expected results with the
actual one and gain the sustainability in an effective manner. This report is based on the IMDA
TECH company which main operations are to produce the business mobile chargers of various
segments. Here are so many tools that can be used by IMDA TECH for making the sustainable
development.
TASK 1
P1 Management Accounting and its different types of management accounting systems:
Management accounting system is a kind of process under which organisation for
identifying, summarizing, assessing and evaluating the non- financial information that can be
implemented by the organisation for making the business objectives in an efficient manner.
Management Accounting encompasses whole kinds of information which are related to the
business operations. Management Accountants implement information linked to the costs of
goods or services purchased by the organisation. Budgets are likewise implemented as a
quantitative expression of the organisation’s plan of operation (Management Accounting, 2017).
Individuals in managerial accounting implement performance reports to note deviations of actual
outcomes from budgets.
Here are various kinds of management accounting systems which are mentioned as
under:
Cost Accounting system: This is the system which is used by the organisation for
making the business development in an effective manner. Now, management of IMDA TECH
would require to make the product in a cost efficient manner that could reduce the cost of the
product. By using this tool, cited organisation would require to make an efficient strategy which
would be used by the organisation for gaining the strategy in an effective manner. By using this
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technique, IMDA TECH would reduce per unit cost by removing wastage cost efficiently
(Vinayagamoorthi and et. al., 2012).
Job Costing System: This is elaborated as the tool of recording costs of manufacturing
job, instead of process. Along with the Job costing systems, a management accountant could
track of cost of each job, handling data that are usually highly concerned to operations of the
organisation. Job costing normally said that the particular accounting tool are used to track
expense of producing a product. This is the best tool that can be implemented by the organisation
for making the new product efficiently.
Price Optimization System: Under this system, consumer perspective would be assessed
regarding the company’s product price in an effective manner. This is the tool via which the
price of the product is identified in an effective manner which can be used for making the
business objectives in an effective manner. Via this tool, organisation is totally relied upon the
management accountant, who by using various tools, make the price of the product in an
effective manner. Now, this can be simply said that the management of IMDA TECH would
ultimately leads to gain the sustainability.
Inventory management system: This is the system which is implemented for making
the inventory efficiently. Via Inventory management system, firm would track products through
whole supply chain of it an organisation operates in. Which comprises each from manufacturing
to retail, warehousing to shipping, and whole movements of stock and parts between. Inventory
is managed via LIFO, FIFO and AVCO method (Macinati and Anessi-Pessina, 2014).
LIFO method: This stands for “Last in, First Out”. Which is implemented to place an
accounting value on the inventory. LIFO method operates as per the assumption that the last item
of inventory purchased is firstly sold out. On the other hand, this is rightly said that the new
inventory assets are entered firstly and then it is sold firstly.
FIFO method: This is the inventory valuation method, under which firstly goods are
purchased, are sold out firstly. Various organisation uses this method to optimise the value of the
inventory in an effective manner. On the other hand, the last inventory asset is recorded as sold
firstly.
Average Costs: Average cost method would emerge total costs of goods which are
available for sales and divide it by the total sum of the product from starting inventory and
purchases.
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P2 Diverse methods used for management accounting reporting:
Reporting is the best tool which can be used by the organisation for doing the business
objectives in an effective manner. Managerial accounting likewise related to the inner
information that can be used for planning, regulating, decision making and calculating
performance. These kinds of the reports are consistently produced via accounting and book-
keeping period, as per the needs. As, various managers assess these reports to highlight specific
patterns and convert them into an effective information for the organisation. Here are some of the
reports are mentioned hereunder:
Budget Reports: This reports are mostly complicated in assessing organisation
performance and are produced as a whole for small organisations and, department wise, for
broader companies. Although, each organisation forms an entire budget to know grand scheme
of their firm. Although, each organisation forms an entire budget to know about the business.
Budget forecast is formed which is relied upon the earlier experiences, via huge budget always
supplies for the unexpected situations which could emerge. An organisation’s budget lists whole
of the sources of income and expenditures. An organisation tries to attain its targets and mission
at the time of staying throughout the budgeted amount.
Account Receivable Ageing reports: If the organisation totally based upon extending
credit, then account receivable aging reports are crucial to it. By breaking down, remaining
balances of the client into the particular period which enables the managers to determine
defaulters and identify the issues in the company collection process (Lim, 2011). In this, there is
always few bad debts which are required to be written off. Although, organisation must need to
know who owes from the organisation and who owes you what.
Performance Reports: This is formed to review the performance of the organisation as a
whole and every employee at the end of the team. Divisional performance reports are likewise
produced in the big firms. Managers implement these kind of performance reports in order to
form key strategic decisions about the future of the firm. Individuals are usually awarded for
their commitment to the firm and under performers are dealt with as needed. This reports
likewise offers depth investigation into the working of the organisation.
M1
Management accounting systems are the best tools for gaining the productivity in the
IMDA TECH company. By implementing various management accounting systems, company
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produce its products in lowering the product costs by removing the wastage costs from the
product. The product cost is minimised by way of using various accounting systems that can be
helpful for making the business sustainable and reliable (van Helden and Uddin, 2016). Now,
this is the most crucial tool that can be used for gaining the sustainability in an effective manner.
D1
Management accounting systems are useful which further able to make the diverse kinds
of accounting reports. IMDA TECH would ultimately help to integrate the management
accounting systems with the management accounting reporting which would assist to gain the
sustainable development efficiently.
TASK 2
P3 Calculate costs using appropriate techniques tools of cost analysis to prepare an income
statement using marginal and absorption costing:
Marginal costing method – This is the tool which consider all the variable costs while
calculating contribution. This is the most effective tool that could be used for selling or
production expenses against contribution. Marginal costing covers measuring of marginal cost
that is sum of whole direct costs like direct material cost, direct labour costs, variable
manufacturing and selling costs, any changes in the variable costs or units which are directly
influence income of the organisation. Marginal costing is the decision making tool that are
implemented to form an efficient decision about the diverse expenses which occurred by the
organisation.
The calculation of ascertaining net profit using marginal costing is:
Sales revenue + Marginal Cost of goods sold (opening stock + production – closing stock) =
Contribution - Fixed cost = Net profit
Absorption costing method – This is likewise recognised as an entire costing as it
includes whole production related expenses either variable or fixed. On the other hand, all the
manufacturing costs which comprises variable and fixed costs, are considered while calculating
net profits as per absorption costing.
Manufacturing expenses or cost of goods sold involves all direct expenses such as direct
material, direct labour, variable or fixed manufacturing expenses, these expenses are charged to
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ascertain gross profit and all fixed costs are charged against gross profit to determine income or
profit of the organisation (Gates, Nicolas and Walker, 2012).
Absorption costing gives more accurate and reliable view on how much costs are
incurred and what profit is earned by the organisation, absorption costing is a method where all
manufacturing costs are absorbed to produce gross profit and then net operating profit or income.
The formula of absorption costing is:
Sales revenue – cost of goods sold = gross profit (actual sales * total expenses per unit) – selling
and administrative expenses = Net profit
A 2: Prepare an Income statement using Marginal and Absorption costing method
Marginal costing method -
Particulars Amount
Sales revenue = (selling price * no. of goods sold = 55 * 600) 33000
Marginal Cost of goods sold: 9600
Production = (units produced * marginal cost per unit = 800 * 16) 12800
closing stock = (closing stock units * marginal cost per unit = 200 * 16) 3200
Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
Absorption costing method -
Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales + 3300
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selling and administrative cost = 1 * 600 + 2700)
Net profit/ operating income 15675
The number of products to be sold to break even
Break-Even: Break-Even is a point where organisation is experiencing the state of no
profit and no loss, or a state where all incomes and expenditures are equal.
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
The break-even point in terms of sales revenue
sales per unit 40
variable costs VC = DM + DL 28
contribution 12
fixed costs 6000
Profit volume ratio PVR = Contribution /
sales * 100 30.00%
BEP in sales 20000
The number of products that need to be sold to make profit of 10,000
Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
Sales 1333.33
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d. The margin of safety if 800 products are sold
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
M2
Management accounting tools like marginal costing and absorption costing are
implemented to determine net income or profitability of the company here net income identified
by implementing marginal costing tool which is more than the net income measured using
absorption costing (Hiebl and et. al., 2015). By applying the absorption costing and marginal
costing tools, IMDA TECH company would enhance the profits accordingly which is the major
tool for knowing the business operations in an effective manner. Cited company’s net profits is
optimised by way of applying marginal and absorption costing tool.
D2
Here, the net profits is measured by using absorption and marginal costing method that
are effectively used for effectively optimising the profits. The net income calculated using
absorption costing method is the best tool that can be used by the organisation for knowing the
business in an effective manner. Net profit calculated according to marginal costing method is
17500 which is more than the profit which is calculated as per the absorption costing method.
The net profit as per the absorption costing method is calculated is 15675. However, this is
rightly observed that the management would provide an efficient strategy in order to optimise the
earnings efficiently.
TASK 3
P4 Advantages and disadvantages of different types of planning tools used for budgetary control:
Budget is the tool which is used by the organisation for forecasting of revenues and
expenses for a certain time period. By using this tool, organisation could make the business
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objectives in an effective manner so that they could make an efficient business decision in an
effective manner. Budget is the tool that can be used by the firm for making the business
objectives effectively. Although, this is rightly said that the management would effectively
implement an efficient strategy that can be helpful for the organisation for making the business
objectives in an effective manner. With the help of various budgets, organisation would require
to form certain objectives in an effective manner. Here are so many budgets which is used by the
organisation for making the business organisation.
Cash budgets: This is the budget under which all the cash related expenses and incomes are
calculated for a particular period of time (Jalaludin, Sulaiman and Nazli Nik Ahmad, 2011).
Now, management of the cited firm would consider all the cash related items. Cash budgets is
the most efficient tool which is used for knowing the future requirement and availability of the
cash for a certain period of time.
Advantages:
 Cash budget is the most effective tool which helps to identify the cash related revenues
and expenditures for a certain period of time. This assist the management to focus their
attention on the crucial matters which is not proceeding as per the plan. This also assist to
improve communication, sound understanding and effective link among employees.
 This budget assist to co-ordinate activities of whole division in a firm.
 This assist the management to think ahead and devise an efficient manner of maintaining
resources.
 This assist in lowering the costs of the product and optimise the profits in an effective
manner.
Disadvantages:
 The feasibility of this budget is totally relied upon the operation of staff.
 This is made on subjective forecasting.
 This is too costly to operate a budget.
 This might emerge a more time to attain.
 This could limit the morale and productivity if the pre-set objectives are not genuine.
Master Budget: This is the budget which acts like the summary that form its component
functional budgets and that are totally approved considered and employed. This comprises
budget which becomes the master budget (Zang, 2011). Although, summary budget is considered
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and approved, this becomes the master budget. Master budget is made by the budget committee
and renders instructions for each operation of a company.
Advantages:
 Under this functional budgets are produced in a capsule form.
 Whole functional budgets are available in the one report.
 Whole functional budgets could be checked along with cross verification of information
rendered in the master budget.
 This renders forecasted profit of the company.
 This renders information which are linked to the firm.
 This renders information that are connected to estimate balance sheet.
Master budget is more useful to the top level managers of the organisation. Henceforth, useful
information is presented in the capsule form.
Disadvantages:
 Rigidity: Divisional staff is forced for the attainment of the pre-set target instead of
having practical difficulties in attaining the same. This is because of the pressure from the
top management. This leads to have low revenue forecasting and more expense
forecasting. Managers might not adopt advance opportunities for development of the
company.
Difficult to update: Master budget does not easy to modify. To add, modify or delete small
alterations needs more steps in the whole budget (Vakalfotis, Ballantine and Wall, 2013). This
covers lengthy descriptions and charts. Although, a master budget can’t be known to the layman.
Planning tools for budgetary control
Budgets can be prepared or analysed using various tools, that is forecasting and
contingency which helps an organisation to forecast the future events so that they can be
prepared for future circumstances, some of the applications and benefits of these tools are:
Contingency tool – Contingency planning is a tool of developing prevention measures in
advance for the events which can result in extreme loss, a good contingency plan should involve
good events too. From the help of contingency planning, an organisation can minimise the losses
incurred from events like natural disasters such as flood, fires etc. and organisational crises such
as strike, lock outs etc.
Forecasting tool– Forecasting planning is a process of prediction of future events, this
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tool helps an organisation to pre determine future demand so that production can accordingly be
altered. Forecasting is a tool which anticipate future in order to expand business.
M3
There are various planning tools which are used for making and forecasting of the
budgets. Some of them are mentioned above. But, this is rightly said that the management
accounting systems are effectively used for making the business objectives in an effective
manner. Various budgets are implemented in the organisation for knowing and making the
variance analysis so that they would get to know about the in an effective manner. however, this
is simply said that the management of the cited organisation would requires to make an efficient
strategy that could help out to gain the sustainability in an effective manner. Apart from that,
organisation would implement an effective strategy which will make the business objectives
sustainable
D3
Accounting is an important concept that helps management in carrying t different operations of
business in an effective manner. It assists in maintaining proper records and transparency in the
working of an enterprise (Bodie, 2013). There are range of tools that are implemented in
business like cash flow statement, balance sheet etc. Which has their own significance. Through
same the current position of business can be identified at any point of time which is useful in
taking the future decisions for business. When the judgments are taken on the basis of previous
records and performances there are higher chances that the expected result are achieved. Apart
from this from the different planning tools like fund and cash flow statement gives a clear detail
of area in which the resources of firm are invested and shows how much returns were earned
from them. This way it is identified that what all went wrong and which areas were not
profitable. Budgetary tools are the major mode that are part of the planning. In this limits are set
for distinct department and therefore overall cost of the firm is controlled. Furthermore, it also
helps in providing guideline to the working staff which they have to keep in mind while
operating which is important to minimize the deviations in business. Cost accounting is widely
used in the refereed business which helps management in getting the record of cost as per the
product, department process and branch (Lukka and Vinnari, 2014). This way the management
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can evaluate the difference between the final results and the predetermined values which is
important to take corrective actions for future so that the differences can be reduced to minimum.
TASK 4
P5 Management accounting systems for responding financial problems
Financial problems are the most crucial thing that can be used for making the business
sustainable. Here are so many management accounting methods that will help out to overcome
the financial problems in an effective manner. business situations have emerged over the past
few years where information has been adopted as the most crucial resource for calculating
performance of the organisation, determining financial issues linked to the variance which are
found in the standardised set of performance indicators. This has led to the implement of diverse
management accounting tools which set the benchmarks, uses financial and non-financial key
performance indicators for assessing performance of the organisation which reflect way it tends
to focus on the long term sustainable development aspect (Hilton and Platt, 2013). For attaining
the cited company’s pre-set targets, company would require to implement budgetary controls in
planning and completing various organisation activities.
Now, this can be rightly said that the management of the cited company would need to
implement undermentioned tools which can be help out to redress the financial problems in an
effective manner:
Key Performance Indicators: This is the accounting technique which are useful for
measuring financial and non- financial information that many of the organisation implement to
expose their success in completing their pre-set targets. Here are some of them which are
elaborated as under:
Financial Indicator:
BASIS KPI RESPONSES OR USE IN
DETERMINING
FINANCIAL PROBLEMS
AND VARIANCES
Liquidity, Solvency, Debt
ratio
Current Ratio Indicators that could pay short
term debts along with short
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Quick Ratio
Working Capital
Debt to Equity
term assets.
Sufficiency of Liquid assets
along with short term debts.
Ability of organisation to
consistently stay solvent
implemented for availability
of routine needs
Capital structure of the
organisation instruct
proportion of debt and equity
used for financing of the
assets.
Revenue ratio Sales Renders tracking of part of
sales equation via CRM
system that renders knowledge
required to influence it.
Non-Financial Indicators
Management of human
resource
Nowadays, environment organisations have introduced viewing
staff as a crucial asset and adopts it as the crucial factor for
guarantee the success of the organisation. This comprises staff
turnover, % of job offers accepted, competence surveys etc.
Product and service quality This is rightly observed that issues identified in the good or
service quality of the organisation influence its long term
sustainability and leads to consumer dissatisfaction and loss in
future sales. Henceforth, this should be compared with
contenders and consumer’s satisfaction. Performance on these
associated dimensions requires to be merged to reflects an
entire image.
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M4
Sustainable success in the organisation by using various management accounting techniques
which could be summarised as under:
Manager is need to help strategic and sustainable goals along with the strategies and policies
which are to be developed (Wickramasinghe and Alawattage, 2012).
 Management Accounting tools would assist to integrate the sustainable matters into the
diverse decision making procedures.
 Management accounting assist in generation of the reports which comprise information
on sustainability impacts that would assist in knowing pricing and budgeting decisions.
 Assist in emerging of reporting strategy which would integrate sustainability related
problems that would enable reporting of the financial and non- financial information.
CONCLUSION
From the above mentioned report, this is rightly said that various management accounting
principles which assist the firm to adopt and retrieve information attained by the managers of the
organisation for running out their business functions. IMDA TECH requires to implement
accounting information in order to form strategy for their survival and growth in the production
sector. Under this report, absorption and marginal costing methods are used by the organisation
for optimising the profits in an effective manner. Various planning tools are used for budgetary
planning which ultimately helps to gain the sustainable development. Apart from that, various
accounting information are used for redressing the financial problems in an effective manner.
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REFERECES
Books and Journals
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