Management Accounting Report: Jacksons Fencing Analysis

This report delves into the realm of management accounting, exploring its core principles and practical applications within the context of Jacksons Fencing, a leading fencing manufacturer. The report begins by defining management accounting and its essential systems, such as cost accounting, inventory management, price optimization, and job costing, highlighting their importance in managerial decision-making. It then examines various management accounting reporting methods, including budget reports, performance reports, and inventory management reports, and their integration with business processes. The report further analyzes costing techniques, such as absorption costing and marginal costing, used in preparing income statements, providing detailed examples and calculations. Additionally, it covers planning tools and their application in budgeting and financial forecasting. Finally, the report compares how organizations adapt accounting systems to address financial problems, and assesses the role of management accounting in achieving sustained success, concluding with an evaluation of planning tools in responding to financial issues.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
Management accounting and essential requirements of systems.................................................1
Methods in management accounting reporting............................................................................3
Benefits and application of accounting systems..........................................................................4
The aspects in which accounting systems with reports are integrated with processes................5
LO 2.................................................................................................................................................5
Costing techniques for preparing income statements..................................................................5
Accurate application of accounting techniques...........................................................................8
Interpretation of data....................................................................................................................9
LO 3.................................................................................................................................................9
Planning tools...............................................................................................................................9
Analysis and application of tools to prepare and predict budgets.............................................10
LO 4...............................................................................................................................................11
Comparison showing the ways organisations adapts accounting systems for responding
financial problems. ....................................................................................................................11
Analysis of the aspects in which management accounting lead firms to sustain success. ........14
Evaluation of planning tools responding financial issues. ........................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
APPENDICES...............................................................................................................................17

INTRODUCTION
Management accounting is applied technique, concept addition to knowledge in
preparing accounting information that assist managers to formulate policies, controlling
operations, optimising resource usage, safeguarding assets and making critical decisions
(Arunruangsirilert and Chonglerttham, 2017). The motive of management accounting is to
present relevant accounting as well as economic data that further aids in performance evaluation,
making comparisons, forecasting, setting budgets and analysing business position in competitive
market. To realise deep grasp about management accounting, Jacksons Fencing is chosen. It is
leading fencing manufacturing entity having headquarters at Kent, United Kingdom since 1947
(Jacksons Fencing. 2019). The company manufactures diverse range of metal and deluxe timber
fencing products. The reports demonstrates information about management accounting together
with its associated systems and accounting reports, application of techniques to prepare income
statements and usage of distinct planning tools. It also includes comparison among two firms in
context to the ways they uses accounting methods for responding financial problems.
LO 1
Management accounting and essential requirements of systems.
Management accounting: It is described to technique which presents accounting
information for devising managerial policies together with assisting daily activities (Management
accounting. 2019). It describes accounting methods and techniques with special ability to advise
managers in various tasks so that they can maximise profits and reduce losses. Management
accounting's essential role at Jacksons Fencing are to handling taxes, assisting towards strategic
planning, budgeting, managing organisational assets and collecting, recording as well as
reporting necessary data from other units.
Management accounting systems: It is characterised to frameworks followed by
business concerns for providing information as required by managers to make decisions. These
systems involves elements that creates standards for collecting required data. Some of the
accounting systems followed at Jacksons Fencing are as elaborated:
Cost accounting system: One of the system that is applied for accumulation of costs for
organisational products in order to examine profitability, inventory estimation and controlling
costs. It aims to capture overall cost of production through weighing input costs plus fixed costs
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that are involved in production steps. Estimation of exact product costs is important for
profitable operations (Bandy, 2014). Cost accounting system is opted by production managers of
Jacksons Fencing for estimating perfect costs that had occurred while manufacturing deluxe
timber as well as metal fencing products such that profitable operations can be properly
ascertained. The system is essentially required at chosen business entity so that managers can
identify distinct unit costs, reduce additional costs that are involved with per unit output and
forecast future functions for building effective strategies.
Inventory management system: The system which performs functions of making
purchase orders, receiving, checking, relocating, aligning as well as disposing inventory is
named as inventory management system (Seow and Wong, 2016). It helps in understand
existing level of inventory available so that situations in concerned with overstock and
understock can be eliminated. The system combines utilization of barcode scanners along with
printers, mobile devices and software so to streamline management of various inventories.
Inventory management system is essentially required at concerned organisation for tracking
inventory level, preparing documents such as material bills as well as work order bills that
further helps in making inventory decisions for upcoming time scale.
Price optimisation system: Understanding customer perceptions and reactions for
changes in prices of commodities is done with price optimising system. Jacksons Fencing applies
mathematical analysis to ascertain reaction of customers for variations in prices of commodities
like timber fencing products through distinct channels so that they can optimise accurate price
that can grab attention of distant customers (Rudman and Kruger, 2014). It guides managers to
set most suitable rates for products that are manufactured by them. Essential requirement of price
optimisation system is to determine best prices that fulfils objectives of maximising operational
profit. It also helps in optimising pricing structure for promotional pricing as well as mark down
pricing.
Job costing system: Allocation of manufacturing values to individual commodities along
with product batches is done through job costing system (Cooper, 2017). Entities manufacturing
distinct product ranges as per special orders only apply the system. Management administrations
of Jacksons Fencing uses it so that they can accumulate and allocate costs to distinct product
units that they manufactures. Essential requirement of the system at respective institution are to
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reduce risks, improving methods of controlling and segregating expenses according to distinct
jobs performed under certain situations.
Methods in management accounting reporting
Management accounting reporting: Tools or framework that helps in understanding
facts pertaining with business are management accounting reporting. With accounting reporting
mechanisms,exact data or information related to operational activities are gathered and analysed
for understanding ongoing situations within enterprise. Jacksons Fencing uses accounting reports
for ascertaining areas that needs more improvements for acquiring huge output levels. Certain
methods for accounting reports are as follows:
Budget reports: Information about future expenses and gains are presented through
budget reports. It represent variances among standard budgets with that of actual outcomes. At
Jacksons Fencing, the reporting method assist in planning future, evaluation of activities
performed, reviewing profits addition to assumptions in errorless ways. Budget report also helps
in looking various means so that sales can be increased while limiting expenses. It is also used
for maintaining financial spendings as per the manufacturing activities requirements.
Performance report: All entities despite of their sizes formulates reports for recording
information about functional addition to personnels performances (Eckardt, Selen and Wynder,
2015). Business performance reports are used to understand together with discover growth
potentials pertaining with entity. It strengthens managers knowledge for assumed level of
performances in context to sale and income. Jacksons Fencing administrators uses the reporting
method for devising strategic decisions for describing future sustainability.
Account receivable report: The reporting mechanisms that list out customer account
balance considering time outstanding length (Ismail, Isa and Mia, 2018). During audits of the
company, the report plays main role for determining whether account receivable balance are
valued properly or not. In addition, the report is used by finance directors of the chosen
institution so that they can evaluate existing credit policies, estimate bad debts, determining
credit limits for customers and initiate collection procedures in context to overdue accounts.
Inventory management report: It is essential for all business concerns to keep
information about inventory used to execute and carry forward operations. For this, inventory
management report plays significant role as it records information about raw material stock,
work in progress and stock of finished goods available at warehouses. With proper analysis of
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inventory management report, production department of Jacksons Fencing takes inventory
decision for coming duration.
Benefits and application of accounting systems.
Management accounting
system
Application and benefits
Inventory management
system
Jacksons Fencing applies the system for tracking together with
maintaining desired product stock (Gibassier and Schaltegger,
2015). In addition, the system benefits the company in
enhancing inventory accuracy, organisational bottom line and
improving workflow by reducing circumstances of understock
or overstock of goods. It also benefits managers in streamline
procedures through reducing associate stock costs along with
improves capabilities to frame profitable decisions.
Price optimisation system The system is applied for ascertaining accurate prices of
various products such as timber fencing and metal gardening
fencing products that helps in meeting customer expectations
and business objectives. Benefits that price optimisation system
provides to Jacksons Fencing are eliminating error possibilities,
setting prices that customers along with business can afford and
helps in maintaining revenue margins with quickly observing
behaviour and altering prices.
Cost accounting system Jacksons Fencing management authorities applied the system
for acquiring elaborated views about costs that are incurred in
manufacturing final fencing product. In addition, the system
provides benefits of proper cost planning, controlling materials,
framing policies together with measuring efficiency in
standardised manner (Harrison and Lock, 2017).
Job costing system Application of such system is to track and allocate overhead
costs to jobs that are performed within business. It benefits the
selected firm by monitoring manufacturing processes,
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segregating expenses as per the job nature and classifying
commodities in various categories for gaining beneficiary
results.
The aspects in which accounting systems with reports are integrated with processes.
Accounting systems are combination of techniques to prepare reports through pursuing
procedures for gaining success. The systems caters base for devising accounting reports. All
institutions have common objective that is to maximise revenues and for this, they conducts
activities as per predetermined processes in systematic manner (Ismail, Isa and Mia, 2018). The
managers of Jacksons Fencing uses accounting systems including inventory management system
so that they can track available and required inventory level to perform workings as per set
processes for manufacturing metal fencing products. Other than this, numerous accounting
systems like job costing, price optimising in addition to cost accounting systems also helps in
accomplishing tasks with levied processes of entity. Accounting reporting mechanisms provides
confidential data or statistics about operations and procedures for reaching objectives by
implementing strategies which facilitates set processes in direction to institutional goals. For
instance, opting reporting methods such as performance, budget and inventory management
determines actions to improve revenues in set procedures.
LO 2
Costing techniques for preparing income statements
Costs: Cost is termed to monetary value utilised for pricing commodities and delivering
services. Institutions like Jacksons Fencing makes huge investments for acquiring raw materials,
labours as well as equipments. It involves cash amount that is given up for assets.
Techniques for calculation of cost:
Absorption costing: The technique is used to ascertain cost wither of individual unit as
well as whole production by focusing on direct along with indirect costs (Kieso, Weygandt and
Warfield, 2019). With such technique, finance analysts of Jacksons Fencing accumulate relevant
costs interrelated with manufacturing processes as well as apportioning them towards single
commodities. In absorption costing, the product cost is calculated through adding direct labour
cost per unit, Variable manufacturing overhead cost, Direct material cost and Fixed
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manufacturing overhead. In addition, inventory vales are calculated through involving direct
labour, operational overhead and direct material.
Marginal Costing: Another costing technique that find out profitability at distinct
production or sale level. Jacksons Fencing uses the technique to ascertain costs that have fixed
and variable nature. Within the technique, fixed costs associated with products are written off
and variable costs are charged for ascertaining unit costs. Through marginal costing, product
costs are calculated by dividing changes in total costs with changes in quantity. To get inventory
values, total inventory used is multiplied by number of units.
Income statement showing calculations:
A. Income statement through marginal costing method:
Particulars Quarter 1
Metal Fencing
(In £)
Timber
Fencing (In
£)
Sales 2566500 1440000
less: unit variable costs
Direct materials 935250 320000
Direct labour 391500 480000
Prime cost 1239750 640000
less: Variable production overheads 108750 80000
Contribution 1131000 560000
less: Fixed costs 410000 410000
Total profit/loss 721000 150000
Particulars Quarter 2
Metal
Fencing
Timber
Fencing
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(In £) (In £)
Sales 1003000 1719000
less: unit variable costs
Direct materials 365500 382000
Direct labour 153000 573000
Prime cost 484500 764000
less: Variable production overheads 42500 95500
Contribution 442000 668500
less: Fixed costs 482000 482000
Total profit/loss -40000 186500
Working note:
1.
Total variable cost per unit 51.5
COGS
Production cost 257500
Less: closing stock -25750 231750
2.
Per quarter standard production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
Actual cost 68200
absorption 6800
B. Income statement by absorption costing method
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Particulars
Metal Fencing
(In £)
Timber
Fencing
(In £)
Sales 2566500 1440000
less: Cost of sales
Opening inventory - -
Direct materials 935250 320000
Direct labour 391500 480000
Variable overheads 108750 80000
Fixed costs 410000 410000
less: Closing inventory -650 1844850 -4000 1286000
Gross profit/loss 721650 154000
Particulars Quarter 2
Metal
Fencing
(In £)
Timber
Fencing
(In £)
Sales 1003000 1719000
less: Cost of sales
Opening inventory 650 4000
Direct materials 365500 382000
Direct labour 153000 573000
Variable overheads 42500 95500
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Fixed costs 482000 482000
less: Closing inventory -3500 1040150 -2900 1533600
Gross profit/loss -37150 185400
Working notes:
1.
Total variable cost per unit 51.5
COGS
opening stock 25750
Production cost 303850
Less: closing stock -149350 180250
2.
Per quarter standard
production 5500
Fixed production cost 75000
Fixed prod. Cost per unit 13.64
Actual cost 80476
absorption -5476
Accurate application of accounting techniques
Several techniques are available with financial accountants to calculate profits.
Accounting techniques are guidelines that helps institutions to keep financial records as well as
preparing financial reports. It assists in analysing, categorising, recording, maintaining together
with controlling business operations. At Jacksons Fencing, absorption costing technique is used
with the purpose to assist decisions of pricing along with preparing confidential financial
reporting documents. In addition, marginal costing technique is also used for making decisions
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and computing break even production level, controlling cost and abandoning unproductive
business lines.
Interpretation of data
Financial reports helps in analysing results associated with cash flows, business
operations and financial position. With these reports, information about business health are also
analysed by management team. The above income statement interprets that calculation of net
profit via marginal costing method shows that for metal fencing generated net profit are of
721000 £ and for timber fencing the company attained 150000 £ net profits in 1 quarter. In II
quarter, for metal fencing, net loss of 40000 £ and for 186500 £ for timber fencing. With
absorption costing, the company achieved profits in I quarter for metal fencing of 721650 £ and
timber fencing of 154000 £. In II quarter, analysed losses for metal fencing are 37150 £ and
profits for timber fencing are of 185400 £.
LO 3
Planning tools
Budget: The statements or financial plan comprising planned cash flows, sales volume,
expenses, resource quantities and many more for defined period is budget. All organisations
prepares budget as it provides directions to spend the limited funds in distinct activities. Budgets
enables owner of Jacksons Fencing to emphasis more on cash flows so that that can reduce costs
and increase investment returns.
Planning tools with advantages and disadvantages:
Forecasting: It is the tool through which entities forecast future conditions and
accordingly sets budget for upcoming durations. Through this tool, management team of
Jacksons Fencing sets the annual budget for upcoming year through utilising past records so to
make proper estimates about upcoming expenses. Forecasting is said to the tool that helps in
using historical data for making informed estimates which re predictive to determine the
direction for upcoming expenses and incomes. The objective for using this tool of budget at
Jacksons Fencing is to predict overall resources values which are necessary for improving
operational performances.
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