Management Accounting Report: Cost Analysis and Reporting

This report provides a comprehensive analysis of management accounting principles, focusing on their application within Jaguar Land Rover. It begins with an introduction to management accounting and its distinctions from financial accounting, emphasizing its role in internal decision-making. The report delves into various management accounting systems, including cost accounting, inventory management (LIFO, FIFO, AVCO), job costing, and price optimization, outlining their advantages and disadvantages. Furthermore, the report explores different methods used in management accounting reporting, such as accounts receivable aging reports, budget reports, and performance reports. It also includes a calculation of costs using cost analysis techniques to prepare income statements based on marginal and absorption costing. The report also examines tools for budgetary control and how management accounting systems respond to financial problems, culminating in a concluding summary of the key findings.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ACTIVITY 1 ...................................................................................................................................1
P1 Management accounting and different management accounting system .............................1
P2 Different method use in the reporting of management accounting........................................5
P3 Calculate cost by adopting cost analysis technique to prepare income statement by using
marginal and absorption costing.................................................................................................7
ACTIVITY 2 .................................................................................................................................16
P4 Tools for budgetary control.................................................................................................16
P5 Management accounting system respond to financial problem .........................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................22

INTRODUCTION
Management accounting is also called as cost accounting which is operation of
determining, activity, rendering & interacting data to administrator for the following objectives
of company. The leading difference among managerial and financial accounting which is aimed
at aiding managers to make decisions within the company. Managerial accounting includes all
areas of account which purpose of informing management of financial operation of business
(Merchant and White, 2017). Report is based on Jaguar Land Rover. It is the British
multinational automotive organization in the UK. Organization has six main services for research
and development, manufacturing and vehicles assembly. Organization has invested total of
£1,411 million in research and development. The key activity of company is designed,
developed, manufactured and sold of vehicles. Study will explicate management accounting and
various methods for management accounting system. It will calculate the different costs by
utilizing suitable technique as well as to make income statement of marginal and adsorption
costs. It will also examine the advantages and disadvantages of various kinds of planning
techniques utilized for budgetary control. Furthermore, report will compare ways of adopting
management accounting system to respond to financial problems.
ACTIVITY 1
P1 Management accounting and different management accounting system
Management Accounting:
Management accounting is utilization of professed abilities as well as knowledge in the
formulation of financial and accounting data in effective way. It can help the internal and
administration in preparation of policies, planning & control of activities of organization. It can
only utilized through internal team of company (Meaning and Definition of Management
Accounting, 2019). The aim of management accounting is to utilize statistic information and take
better and accurate decision, controlling of firm, business action and development. Management
accounting is presentation of fiscal information and business action for inside management of the
Jaguar Land Rover.
Different Management Accounting System:
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Management accounting system aids in improving the productiveness of the firm in
relation to accomplish large profits and market share for upcoming development of organization.
The mainly concentration on preparing different reports that aid to make judgements
strategically. Management accounting system can be further divided into:
Cost Accounting System:
It is the system that aids Jaguar Land Rover in estimating the costs of actions for profits
analyse, cost control and inventory valuation. This kind of accounting system aids in effective
manner defining cost of different production divisions (Kaplan and Atkinson, 2015). This can
help to financial management of the company which includes define the cost of goods for
profitable operations. It aids to define the work-in-progress, material inventory and end products
to make financial statement.
Advantages
 Effective cost accounting system
remove wastes, losses and inefficiency
through set up standard for everything
in the Jaguar Land Rover.
Disadvantages
 Costs accounting disappoint to solve
the difficulties relating to work
research, time, motion and operation
study.
Inventory Management System:
It is management accounting method that aids in following levels of inventory, gross
sales, orders and deliveries. This kind of administration system aids direction of company to
describe the needs and reordering products without any delay. It aids in making judgements
effectively relating to order and handle manufacture in effective manner (Ellul and et.al., 2015).
This kind of aids in handling the supply chain that aid in positioning in relation in effective
manner. Inventory management system aids in gathering of extra material and controlling the
orders as per the production level in effective manner.
LIFO: It stands for last in first method which assumes that unit bought latest will be issued first.
FIFO: It refers to first in first out method which assumes that stock of bought first will be first
issued.

AVCO: It means average value of cost method which is necessary that nature and utilization of
units is similar and interchangeable.
Advantages
 Inventory management involve
assuring that business does not spend
money on unneeded goods orders and
following that goods are selling and
which are not.
Disadvantages
 It needs continuous attention as goods
constantly requirement to be updated,
restocked and reordered.
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Job Costing:
It is the effective procedure that aids in examining and anticipating the cost connected
with each job carried out at time period of production. It directs on accounting value to each
single person unit of production. It directs on collecting cost top each single unit of the
production. It aids to directions of Jaguar Land Rover to support appropriate record and track
expenditure of each good (Taleizadeh, Noori-daryan and Cárdenas-Barrón, 2015). This aids in
defining cost of the project in appropriate way. It is the very essential to assess the costs that
outcome in impressive estimation, fiscal reporting as well as strategic decision eventually.
Advantages
 The costs can be determined at any step
of accomplishing of job in the Jaguar
Land Rover.
Disadvantages
 There is no standardization of job in job
costing (Advantages and Disadvantages
of Job Costing, 2019). Therefore, there
is need of close supervision.
Price Optimization:
It is an impressive technique that ids in defining the price of goods and facilities
delivered through the company. Price optimization aids management to meet objectives of the
firm in relation to increase profitability and revenue. This aids in examining the attitudes of
consumers with the modification in costs and define the request as well as supplying of specific
goods (Ferreira, Lee and Simchi-Levi, 2015). This aids in compounding data of costs & stock
level to define the costs that fellows to larger profits and development in enterprise. It can be
utilized through management of Jaguar Land Rover to adapt the price for consumers and
examine their attitudes with the modification in the price levels of goods and facilities.
Advantages
 It is approach where Jaguar Land Rover
arrive at ways through which they can
acquire within determined profits levels
after intended sensitive their existing
Disadvantages
 It prevents poor people from getting the
things they require. Prices significantly
ration products on the basis of ability to
pay.
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consumers.
M 1 Benefits of Management Accounting:
Management accounting is very advantageous for the firm in terms of improving the
quality of decisions of company. It helps to make decision in the form of accounting in which
Jaguar Land Rover utilize the techniques from all fields like costing, economies, statistics and so
on. Also, this can aid to determine the business problems areas (Meaning and Definition of
Management Accounting, 2019). Through effective management accounting, Jaguar Land Rover
easily improve their financial position and increasing profitability as well as productivity.
P2 Different method use in the reporting of management accounting.
The managerial reports are generated via managers of a company in order to make reports
which provide right to interior involved users of company. The effective decision-making in
business is performed by help of these reports. These reports are focuses on internal data which
is accepted by auditors by financial accounting. It is an essential report because it helps in
organizing, planning and decision-making of an organization.
The managerial reports are also helpful in measuring execution of employees which is
worked in the company. In, managerial accounting this report is provided as this helps the
company to provide information to the internal users of the company.
Different managerial reports is prepared in companies like Jaguar Land Rover are
following :
Account receivables ageing report – It is the report which involves extending credit in their
business. The account receivable ageing report focuses on credits which is offered to customers
in a specific time. The defaulters are also identified under this report as these people are unable
to pay money. The account receivable report is also availing different benefits to Jaguar Land
Rover as they able to ascertain all the defaulters along with it the managers of Jaguar Land Rover
able to changing as well as altering the relevant credit policies and strategies. The certain
benefits this report offers to Jaguar Land Rover are as follows :
 The internal interested users of Jaguar Land Rover execute effective decision as the credit
policies changed by analysing this report.
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 The report provide aid to managers of Jaguar Land Rover in deciding the policies of
credit and decisions regarding restructuring. The account receivable ageing report lay Jaguar Land Rover in determining period of
collection for the credit they avail to customers.
Budget report – This document is very important because it provides helps to business in
appraising budget as well as execution that is prepared on various division of company to
undertake functional actions of business effectively. The functions of Jaguar Land Rover are
effectively assessed expenses of every department.
The budget document provide way to an organization like Jaguar Land Rover in
comparison existent execution of company with planned execution in report. The company also
take bettering assesses to eliminate deviations discovered after comparing actual with planned.
By the help of Budget report, Jaguar Land Rover is also capable to handle their expenses and
income. Also, another beneficial component of this report is to inform internal involved users of
Jaguar Land Rover like employees, managers, etc. for cash inflow and cash outflow. The budget
document also lay certain advantages for the company which will be discussed as follows :
 Budget report enables Jaguar Land Rover managers to assess presentation of every
division such as production, sales, marketing, etc. Therefore, it is an effective tool.
 The corrective measures are also taken by the managers after evaluating the deviations in
the company.
 It also provides access in identification of financial risk for the company Jaguar Land
Rover by the preparation of budget report. The budget report enables investors in deciding investment which is based on
performance of the Jaguar Land Rover.
Performance reports – This report is prepared for reviewing and analysing business
performance. The members of staff execute decisions in accordance with appraisals aligning
with their performance. The performance report is generally prepared under large organisation
such as Jaguar Land Rover as this organisation have employed numerous staff. Performance
report assists the company in performing right decision and also corrective measures taken by
managers to eliminate planned and actual performance of staff members working in the
company. There are some benefits which this performance report offers the company Jaguar
Land Rover are as follows :
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 The Jaguar Land Rover company by getting assist in executing comparison of employees
current performance with planned ones able to categorise employees according to their
capabilities.
 By analysing performance report, managers of Jaguar Land Rover able to guide
employees working in the company to accomplish their tasks and also execute decisions
regarding termination and promotions of employees.
 Performance report of Jaguar Land Rover is helpful in conducting training and
requirement of skills among employees to perform their task in efficient manner.
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P3 Calculate cost by adopting cost analysis technique to prepare income statement by using
marginal and absorption costing
Cost – The cost is monetary value which a company expends to make something. The
term cost denote sum of money that is spent by company of production of goods as well as
services. There are many kinds of cost in accounting system. They are majorly classified as
indirect cost, direct cost, Fixed cost and variable cost. These cost helps in accessing efficient
decision making process by allowing company to calculate, monitor and evaluate their costs.
 Direct cost - The direct cost is ascertained with production of goods as well as services.
The direct cost included cost of labour, expense, material or distribution with the product.
This cost can be traced with an ease.
 Indirect cost _ The indirect cost is different from direct cost. This cost can not be tracked
easily because it does not relate with production of goods and services of a company.
This is the additional costs which is not at all related with production but it is included in
final cost. Some examples are electricity bill, telephone bill, stationary costs, etc. are the
indirect costs.
 Fixed cost – This cost remains same all over a period and the number of goods and
services does not vary this cost. This cost is not associated with production but remains
same for whole production process. One of the example of this fixed costs are cost of
lease which remains unchanged for the whole period and does not affect with production.
 Variable cost -The variable cost is different from fixed cost as these fluctuates with the
level of production. The change in output tends to change the variable cost. The variable
cost increases with increase in production and decreases with decrease in production.
ANNEXURE A
Question 1 – Profit assessment under absorption and marginal costing according to the
table attached below :
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Period 2
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In absorption costing
The absorption costing method considers both fixed and variable cost as the cost of product. In
this, both the process of production and apportionment to individual product is executed. The
cost of products includes direct materials, direct labour, variable manufacturing overhead and
fixed manufacturing overhead. This is a method of accounting for inventory valuation. This
gives an accurate and comprehensive view on cost for producing inventory other than variable
method of costing. It indicates all the manufacturing cost which have assigned for the produced
unit. It is helpful in determining accurate calculation of profit as the production is executed the
future sales. This costing also provide aid to managers in calculation of net profit and gross profit
of the company in come statement separately.
Period – 1
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