Management Accounting Report: Strategies for Nisa Ltd's Growth

This report provides a comprehensive analysis of management accounting principles and their application to Nisa Ltd, a small-scale UK retail business. It explores essential requirements of management accounting systems, including job order, processing, and throughput costing, highlighting their role in price determination and operational efficiency. The report delves into various management accounting reporting methods, such as cost accounting reports, budgeting reports, cost variance analysis, and price optimization reports, emphasizing their significance in analyzing business performance and supporting strategic decision-making. Different costing methods, including marginal and absorption costing, are compared and contrasted, with illustrative examples demonstrating their impact on financial statements. The report also examines the merits and demerits of planning tools used for budgetary control, as well as various management accounting systems that can improve the financial position of the firm. The report concludes by emphasizing the importance of management accounting tools for effective business management and expansion, offering valuable insights for small-scale enterprises seeking to enhance their operational and financial strategies.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1) Management accounting and essential requirements of its different systems......................1
P2) Various methods applied for management accounting reporting.........................................3
TASK 2............................................................................................................................................5
P3) Different costing and their differences.................................................................................5
TASK 3............................................................................................................................................8
P4) Merits and demerits of planning tools used for budgetary control.......................................8
P5) Management accounting systems.......................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCE.................................................................................................................................16

INDEX OF TABLES
Table 1: Marginal costing vs. Absorption costing...........................................................................8

ILLUSTRATION INDEX
Illustration 1: Income statement through marginal costing.............................................................6
Illustration 2: Income statement through absorption costing...........................................................7

INTRODUCTION
Management accounting is key component for systematic management of business
operations. In this regard, several accounting systems are included such as financial, cost,
inventory and performance of entity. The present report is based on understanding different
aspects of management accounting tools for expansion of Nisa Ltd. It is small scale retail sector
organization of UK that provides grocery and food items' services. In addition to this,
management accounting tools and systems for increasing quality services of entity can be
understood. However, costing methods to determine price as well presenting financial position of
organization is to express. Moreover, through this assignment, advantages and limitations of
budgetary control tools are to introduced. Apart from this, various management accounting
systems to solving out financial position of firm can be described. Thus, learners are able to
understand significant role of management accounting and its tools for effectiveness of small
scale enterprise.
TASK 1
P1) Management accounting and essential requirements of its different systems
To
General manager
Nisa Ltd
It is essential for Nisa Ltd to expand its business and effective financial management to
carrying out organization effectively. Therefore, proper planning and decision making is
required for operations of business entity. In this regard, management accountant of entity plays
crucial role by price determination and preparing strategies for further implementation (Anwar
and et.al., 2016). However, organization can enhance its efficiency by focusing on different
elements such as costing, budgeting, variance analysis and so on. Therefore, actual business
performance is recognized on the basis of which innovative ideas are generated related to entire
operations of business organization. In this regard, strategic and risk management for firm is
gained to run entity efficiently. Thus, overall organizational functions of small scale enterprise
get managed systematically. However, management accountant of entity analysis current
bruises performance through income statement and other financial statement analysis that leads
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to prepare budget related to preparing budget to gain effectiveness of small scale enterprise.
In this process, costing is benefited for price determination and reporting income
statement to create balance of production and distribution of goods as much increasing its
productivity and profitability at high level. In accordance to this, inventory management and
enhancement of Nisa Ltd can be achieved through this system (Armitage and Webb, 2013). For
increasing efficiency and varieties of tools related to financial and other sectors' growth in
systematic manner. Along with this, management accountant of organization prepares budget
for further business operations as well remains helpful for enlargement of entity with increasing
service qualities of business organization. Thus, management accounting and its tools are
essential to achieve entity's effectiveness through systematic planning procedure and decision
making process.
Essential requirements of different management accounting tools:- Some
management accounting tools such as; job order, processing and throughput costing are
involved in management accounting tools that is useful for effective price determination and
further business operations to increasing efficiency of small scale enterprise (Management
Accounting, 2016). Some important man accounting tools can be described as follows:- Job order costing:- Under this costing method, expenses incurred on manufacturing of
products are analysed. It includes raw material price and costing for creating products.
In this process, management accountant of Nisa Ltd analysis expenses on producing and
manufacturing process. Therefore, it is input process of organization to setting up prices
for providing goods and services to customers (Berman, 2015). Hence, job order
costing is considered as basis for deciding price of product related to expansion of small
business unit and increasing service qualities of firm efficiently. Processing costing:- It is next further process for price determination of product under
which management accountant of Nisa Ltd focuses on production and processing tool.
Under this system, quality used in product making are also obtained for setting price.
Therefore, on the basis of quality used in production process, cost of finished goods is
determined. Including this, processing costing proceed to deciding price for goods
obtained for outcome (Bucci, 2014). In this regard, several ideas are generated for
production and distribution of products services to gain effectiveness of small scale
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enterprise. Therefore, as per processing costing, different determinants are gained for
systematic management of products systematically.
 Throughput costing:- It includes cost incurred on advertisement and developing product
in market. Therefore, it is related with output and costing for finished goods. On the
basis of expenses incurred in manufacturing, processing, production and launching
products in market, this costing is determined. Hence, actual revenue gained and profit
earning capacity of Nisa Ltd is gained through this process system. In this regard,
several tools and techniques are used for promoting products in market that impacts on
company’s market value and its efficiency to face competition (Burke, Corman and
Story, 2016). Thus, accurate price determination is done through applying throughput
costing that presents income statement and financial performance of organization to
provide affordable products to customers efficiently.
P2) Various methods applied for management accounting reporting
To
General manager
Nisa Ltd
There are several methods of management accounting which are used for reporting
relating to analyse business performance of Nisa Ltd. In this system, cost effectiveness, balance
of production and distribution of products, performance of business organization is created.
However, reports are prepared on the basis of current business activities that generates various
ideas for implementation in future time (Kreibich and et.al., 2014). Therefore, different reports
to be prepared and maintained for management accounting reporting are as follows:-
Cost accounting reports:- It is key component for analysing actual production and
distribution system of organization linked with financial position of Nisa Ltd. Therefore, by
using this tool, systematic approach is generated for increasing profitability and expansion of
entity at maximum level. In accordance to this, management accountant of small scale
enterprise prepares this report and further makes decision for further business operations. It is
helpful for optimum allocation of resources analysing management accounting report. Hence,
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cost accounting system is considered as one of the great component for recognizing profit
earning capacity of firm to increase its business and competitive strategies for expansion of
small business entity and enhancing service qualities at maximum level (Lavia and Hiebl,
2014).
Budgeting report:- Management accounting tool as budgeting is related to forecasting
and decision making for implementing further business operations. Under this system,
management accountant of Nisa Ltd analyses all business operations and prepares budgetary
report to present organisation's performance. Further, as per current position of entity, budget is
prepared and strategic plans to made for in further years' operations systematically. Thus,
control over excess of production and wastage of raw materials is managed through this
process. It is determined that budgeting report is one of the great tool for reducing risk occur at
workplace (McLaughlin and et.al., 2014). Similarly, various tools and techniques are obtained
for further business operations at high level. It is a systematic reporting process that remains
helpful to gain optimum allocation of resources and fund. Thus, management of entire business
activities is gained through this system procedure.
Cost variance analysis report:- It is related to cost effectiveness which remains helpful
for sustaining product value in market at maximum level. Through this reporting, differences
between standard and actual cost is recognised and further planning procedure is implemented
for further years’ business operations. However, it affects productivity and profitability of firm
to increase its business and competitive strategies at large scale (Moriarty and et.al., 2015). It is
obtained that cost variance analysis report is beneficial for analysing cost incurred on business
operation as well several ideas are generated for enlargement of small business unit adequately.
Therefore, systematic management of all business operations can achieve through this reporting.
Thus, management accounting tool as cost variance analysis is able to understand comparison
between standard and actual price for production and distribution of services provided by entity
at high level.
Price optimizing report: It is one of the great management accounting reporting that is
suitable for optimizing price on expenditures of operations for Nisa Ltd. However, effective
cost can be utilized for creating balance between production and distribution system for
producing services. In addition to this, several ideas are generated for further business
operations. Moreover, preparing and maintaining report related to pricing optimizing is
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benefited for organisation to create innovation efficiently.
TASK 2
P3) Different costing and their differences
Managing Director
Nisa Ltd
Costing: It is one of the most essential tool of management accounting for price
determination of products. Under this process, proper report is prepared for reporting expenses
incurred for manufacturing and production process. Including this, income earned is also
determined as per which, different ideas are created for deciding cost of goods (Nishizaki,
Matoba and Nitta, 2014). In this regard, costing is considered as a technique to gain cost
effectiveness as well increasing in demand for product that impacts on productivity and
profitability of firm effectively. There are several costing methods applied such as; marginal
and absorption. Their description can be expressed as below:-
Marginal costing:- Under this costing method, for measuring net profit margin, gross
profit is deducted to variable cost of goods only. Therefore, it is suitable for short decision
making process due to profit variation. In accordance to this, marginal costing is benefited for
deciding pricing and cost effectiveness tools for further business operations (Sugimoto and
et.al., 2015). Thus, marginal costing is interrelated with decision making tool for effectiveness
of small business unit to increase its efficiency in market.
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Interpretation:- After evaluating gross profit same as through marginal costing method net profit
margin is measured. Under this costing tool, gross profit is subtracted with total variable cost
incurred on business operations. Therefore, net profit is determined as 9600 which quite
effective and favourable for entity's effectiveness. Thus, it is interpreted that this costing
method is suitable for on term period because of addition of fixed assets cost to variable price.
In this regard, short term planning procedure is obtained for further business operations
effectively.
Absorption costing:- Through this costing method, for evaluating net profit margin,
gross profit is subtracted with total expenses incurred on business operations of Nisa Ltd.
Hence, management accountant of organization recognizes income statement prepared through
this costing method regarding long term decision making process (Tang, 2015). Along with this,
it is believed through absorption costing is useful for planning procedure related to long term
sustainability in market to face competition and making place in market efficiently.
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Interpretation: As per calculated data, it is determined that Nisa Ltd has incurred expenses as
9600. For providing services to customers. Further, the small scale enterprise gains revenue as
21000. Therefore, gross profit is measured as 13200. Thus, it can be foretasted that entity will
increase its profitability in further years and also can expand business by operating new
branches. Furthermore, by determining net profit through absorption costing, it is obtained that
gross profit will be deducted to variable overhead of firm that impacts on productivity and
profitability of entity. On the basis of this marginal costing, management accountant of entity
can make decisions for short term period.
Differences between marginal and absorption costing methods:-
The main difference between marginal and absorption costing is related to profit
variation. In this regard, for absorption costing, net profit margin is evaluated by deducting
gross profit income to total overhead (Turner and et.al., 2016). While, on the other side, for
marginal costing, net profit is measured by calculating difference of gross profit to variable
expenses only. Therefore, on behalf of income statements’ analysis through both costing,
further decisions are made related to business operations. In accordance to this, short term and
long term planning procedure is obtained for marginal and absorption costing respectively.
Table 1: Marginal costing vs. Absorption costing
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Bases Marginal costing Absorption costing
Net profit evaluation Net profit is measured by
deducting gross profit to
variable expenses.
Net profit is calculated
through subtracting gross
profit to total cost including
fixed and variable.
Time periodicity Suitable for short term
period
Appropriate for long time
decision making process.
TASK 3
P4) Merits and demerits of planning tools used for budgetary control
Managing Director
Nisa Ltd
Budgeting is a technique or forecasting and decision making for further business
operations. It is considered as planning tool to gain effectiveness of small business enterprise. In
this regard, management accountant of Nisa Ltd recognizes performance including financial,
production of goods and services, cost efficiency and business performance. However, different
tools and techniques are applied for expansion of entity as well remains useful for systematic
management of entire business operations (Wodchis and et.al., 2013). Therefore, advantages
and limitations of budgeting and budgetary control system can be described as below:-
Merits of budgeting:- Management accountant of small business enterprise prepare an
agenda for implementing action plans in further years. Thus, some main significance of
budgetary control system are as below:-
 Actual business performance is analysed.
 Useful for systematic management of all business operations.
 Helpful for enhancing productivity and profitability of firm
 Generates different ideas for enlargement of small business unit.
 Effective for optimum utilization of resources and fund.
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