Management Accounting Report: Oshodi PLC Business Analysis

This report provides a comprehensive overview of management accounting principles and their practical application within Oshodi PLC, a fruit juice manufacturing company. The report begins with an introduction to management accounting and its essential requirements in a business context, followed by an examination of various methods used to construct accounting reports, such as budget reports, performance reports, accounts receivable reports, and inventory management reports. The core of the report delves into specific management accounting systems, including cost accounting, inventory management, price optimization, and job costing, detailing their benefits and application at Oshodi PLC. It further explores the integration of these systems and reporting within the organization's processes. The report then analyzes costing techniques for preparing income statements and the application of planning tools for budgetary control. Finally, it investigates how management accounting systems are adopted to respond to financial problems and lead to sustainable success, concluding with a summary of the key findings and recommendations for Oshodi PLC.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting along with essential requirement at business................................1
P2. Various methods to produce construct accounting reporting................................................3
M1. Benefits of Management accounting system as well as their application............................4
D1. Integration of management accounting system and reporting within organizational
processes......................................................................................................................................5
TASK 2............................................................................................................................................6
P3. Costing technique to prepare income statement....................................................................6
M2. Application of accounting technique and preparation of financial reporting documents... .7
D2. Interpretation of data.............................................................................................................8
TASK 3............................................................................................................................................8
P4. Planning tools for budgetary control.....................................................................................8
M3. Uses and application of planning tools to forecast budgets.................................................9
TASK 4..........................................................................................................................................10
P5. Ways in which management accounting systems are adopted to respond financial
problems.....................................................................................................................................10
M4. Management accounting to lead sustainable success........................................................12
D3. Planning tools to solve financial problems so to lead sustainable success.........................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is termed to a distinct profession consolidates financial
statements to deliver information that helps in taking effective decisions for the transformation of
enterprise (Bennett, Schaltegger and Zvezdov, 2013). It involves identification, measurement,
interpretation together with communication of financial data to internal users who aids valuable
suggestions while making decisions. It is used to forecast future, understanding variances,
analysing returns of heavy investments and projecting revenue growth. The accounting uses
information to prepare reports from operational department so to provide continuous insights
about performances as well as position of business. To perceive deeper knowledge about
management accounting, selected firm is Oshodi PLC which is specialised in manufacturing of
JOJO fruit juice. The report comprises information about management accounting together with
its systems and methods involved in accounting reports. It also include cost techniques for the
preparation of income statements and pros together with cons of planning tools that are used to
control budgets. At last, it compares the ways in which management accounting is used at
company to respond problems of finance and to lead towards sustainable success.
TASK 1
P1. Management accounting along with essential requirement at business.
Management accounting is featured to usage of information that are concerned with
management as well as evolve decision making. It provides information about earnings, profits,
losses, assets and cost so that future decisions are formulated in present time period. With the use
of management accounting, informations are used to evaluate performances of workforce
together with organisation so to manage regular operations and activities (Blocher, Stout and
Cokins, 2010). It is required at Oshodi PLC to calculate receivable amounts, optimising prices,
inventory valuation as well as keeping records in systematic manner.
Management accounting system: These are affiliated with procedures to collect data
and converting them into purposeful financial statistics. Accounting systems helps in monitoring
functions, operations and transactions so to improve effectiveness of business. Following are few
accounting systems that helps managers of Oshodi PLC to maintain productivity of fruit juices.
Inventory management system: To track sales, deliveries as well as inventory levels,
inventory management system is used by managers of an organisation. It helps in creating
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production related documents such as bill of material addition to work order. The essential
requirement of the system at organisation is to categorise materials as well as managing
inventories at workplace or other locations. It is required to provide demanded inventory at right
time to manufacturing area so that products are produced without any delays. It is used to
organise inventory data and avoiding product outages addition to overstock or understock.
Operating team of Oshodi Plc uses inventory system to track stock, managing reorder point,
optimising inventory and generating reports.
Cost accounting system: To determine suitable product cost, cost accounting system is
used which helps in profit analysis addition to cost controlling. The system is essentially required
at workplace so to control costs and making critical decisions after analysing all the relevant
costs such that efficiency is enhanced along with making more profit margins. It helps in
estimating closing product value, work in progress addition to finished goods inventory in order
to prepare financial statements (Budding, Grossi and Tagesson, 2014). It helps managers of
Oshodi PLC to analysing cost, allocating resources as well as reducing and commutating costs of
distinct products related with fruit juice.
Price optimising system: To understand customer perceptions as well as buying
behaviour so to determine prices of products, price optimising system is used to optimise prices.
The essential requirement of price optimising system is to modify pricing structure for discount
pricing, initial pricing addition to promotional pricing. Administrators of Oshodi Plc analyses the
impacts of demand according to changes in prices of different fruit juices. They consider all the
costs that are indulge in the manufacturing of JOJO fruit juice and allocates prices that are
favourable to customers.
Job costing system: In order to prepare standardised reports related to profitability of a
specified job or product, job costing system is used that helps in assigning job numbers to
individual items. Essential requirements of job costing system at respective business to reduce
risks, improving techniques to control cost addition to enhancing profitability chances. It
involves procedures to systematically determine material addition to labour costs for distinct
products or jobs as well as using the information for the purpose of developing quotes for
customers. Production unit of Oshodi PLC uses the system to track material prices which are
scrapped while producing JOJO fruit juice or performing job services.
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All these management accounting systems are used by the management team of Oshodi
PLC so to manage inventory, determining prices of fruit juices, controlling costs, reducing risks
and improving profit margins.
P2. Various methods to produce construct accounting reporting
Management accounting reports: These reports are collection of financial together with
non financial information which are procured from accounting records of an enterprise.
Accounting reports are legal and confidential documents which are prepared for circumstantial
purposes such as to acquire knowledge of business performance or forecasting budgets for
future. Administrators of Oshodi PLC makes proper usage of accounting reports so to get
complete picture of the ways activities or operations are performed at workplace. Comprehensive
accounting reports are prepared every quarter so to get holistic representation of business finance
(Management accounting reporting. 2017). Described are some methods which helps in
preparation of management accounting reports at respective organisation:
Budget report: Using the report, owners of enterprise understands, allocates as well as
control costs together with budgeting projections for requirements of funds to perform operations
and attain profits. It is a aggregate of costs as well as pays for succeeding time period.
Accountants of Oshodi PLC evaluates expenses and gains of ancient years so to estimate budgets
for upcoming year. These reports are prepared on the basis of forecasted data related to sales and
purchases. It is very crucial to forecast future trends and prepare budget reports in order to
provide information about future gains or losses.
Performance reports: On the basis of performance reports, various performances are
analysed to develop strategic decisions as well as future plans. Departmental heads of Oshodi
PLC produced these reports on routinised manner so to measure achievements of business
together with programmes. These reports comprises performance indicators that helps in
measuring employees performances and providing the same reports to individuals that will help
them to understand which areas required more improvements that will result in enhancing
potentials as well as outputs (DRURY, 2013). As per performance reports, training programmes
are framed that will result in enhancement of skills or knowledge n unique manner.
Account receivable report: To figure out financial health of customers and listing out
credit sales and due payments, accounting receivable reports are used to prepare accounting
reports. The method is used at Oshodi PLC so to determine allowances related with doubtful
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accounts. Managers tabulates invoices so to get quick reference about receivable accounts. The
report demonstrates particular devices to cater discounts to consistent customers. Further,
numerous customers are categorised as defaulters who does not pay money on time. If such
reports shows collection of receivables are slow than normal, then it describes warning signal
that business is taking more credit risks against sales practices.
Inventory management report: To maintain records of physical inventory that has
entered of left workplace, methods used is inventory management report. It enhances usefulness
of statements or statistical data to take decisions in context to placing inventory order as per
production requirements (Håkansson, Kraus and Lind, 2010). Purchase department of Oshodi
PLC is accountable in ensuring that correct inventory levels must be maintained with the
purpose to manufacture and sell packets of JOJO fruit juice. All the transactions associated with
inventory are properly recorded in such reports that states which unit or department was
allocated inventory and what were the outcomes.
Above mentioned methods are effectively used by different departments so to ascertain
performances, estimating budgets, managing inventory and identifying defaulters of business.
With the help of stated reports, information are maintained in systematic manner and can help in
formulating strategies by looking at them so that opportunities are grabbed to attain more
competitive advantages.
M1. Benefits of Management accounting system as well as their application.
Management accounting systems Benefits
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Cost accounting system The system helps departmental management to
eliminate wastages as well as production losses in
order to increase profits through allocating effective
costs to products that will maximise profit margins.
Applying cost accounting system, production unit of
Oshodi PLC control materials and restocking,
calculating ideal re order level, reducing prices in
critical situations and distinguishing unproductive
activities (Hilton and Platt, 2013). In addition, cost
accounting system benefits Oshodi PLC managers to
calculate appropriate product cost by eliminating
wastages and removing unproductive activities.
Inventory management system The system provides benefits to manage inventory
levels at multiple locations with accurate
bookkeeping. It helps Oshodi PLC to figuring out the
requirements of inventory at different manufacturing
levels and preventing material shortages through
optimising inventory at organised warehouses. It also
help in forecasting product demand and planning
inventory requirements so that products are produced
at demanded time without any shortages of materials.
Inventory management system benefits the selected
company by carefully recording all the inventory
stock and providing the details to managers for taking
further inventory based decisions.
Price optimising system The system help enterprises to gain immediate
benefits through analysing buying behaviour together
with perceptions of customers so to make quick
decisions to optimise appropriate prices of demanded
products (Järvenpää, 2009). Managers of selected
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enterprise gains advantages by using the system as to
optimise prices, proper planning work activities,
expanding production and controlling materials. Price
optimising system benefits respective firm by
optimising prices as per customer perceptions so that
proper activities are planned for achieving profits.
Job costing system Using the system, organisational managers are
benefited to record actual material as well as expenses
and accordingly calculating earned profits that will
helps in ascertaining aspects to pursue with current
jobs. It benefits Oshodi Plc managers to control costs
as well as enhancing efficiency. It is also used to
allocate costs for separate items or jobs which
determines desirability of jobs or products to gain
revenues in upcoming period. Job costing system
benefits Osholi PLC managers by preparing
profitability reports in accurate manner regarding
individual operations and setting employee
performance benchmarks.
D1. Integration of management accounting system and reporting within organizational processes.
Management accounting systems combines various methods to prepare reports in order to
follow procedures to gain success. For instance, inventory management system when used with
reports can help in tracking required inventory which helps in performing organisational
procedure to manufacture final products. Other then this, different systems that are opted at
Oshodi PLC are job costing system, price optimising system and cost accounting system that
helps in perform procedures according to defined criteria. On other hand, methods of reports
provide crucial informations to work with operations that involves procedures to accomplish
targets addition to implementing strategic decisions that aids in organisational procedures to
meet business objectives (Moser, 2012).Management accounting reporting is integrated with
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organisational processes as management accounting reports are prepared by managers with
effectively using the systems as per the set activities and includes set of actions that are executed
for accomplishing all the predetermined objectives. Adopting methods of reporting such as
budget, performance and inventory management helps in determining crucial aspects to
implement actions that provides advantages in improving profit margins. Thus, methods of
accounting reporting and systems are integrated with defined procedures of Oshodi PLC.
TASK 2
P3. Costing technique to prepare income statement.
Cost: It is another name for amounts that are involved in getting something. Monetary
value which is spent on manufacturing final products are termed as costs. It is recorded as
expense in book keeping.
Marginal costing: It refers to costs involved in producing additional output units.
Finance team of Oshodi PLC uses such technique to allocate prices for fruit juices at the time
when customers demand to lower prices that are possible for specific orders. Calculation of
income statements using marginal costing technique are as follows:
Particulars November ( In £) December ( In £)
Sales 500000 600000
Less: Cost of sales
Direct Material Costs -180000 -216000
Direct Labour costs -40000 -48000
Variable Production Overheads -30000 -36000
Contribution 250000 300000
Less:
Variable selling overheads (10% sale value) -50000 -60000
Fixed selling expenses -14000 -14000
Fixed Administration Overhead -26000 -26000
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Fixed production overheads -99000 -99000
Net Profit 61000 101000
Absorption Costing: It is an aggregation of indirect expenses together with direct costs.
Using such costing tool, production department of the company assigns fixed overhead costs to
individual unit of JOJO fruit juices (Kaplan and Atkinson, 2015). It considers fixed cost addition
to variable costs while ascertaining profits. Income statements of Oshodi Plc using absorption
technique is as elaborated:
Particulars November ( In £) December ( In £)
Sales 500000 600000
Less: Cost of sales -340000 -408000
Gross profit 160000 192000
Variable selling overheads (10% sale value) -50000 -60000
Fixed selling expenses -14000 -14000
Fixed Administration Overhead -26000 -26000
Under/over absorbed production expenses 9000 -9000
Net Profit 79000 83000
M2. Application of accounting technique and preparation of financial reporting documents.
Organisational managers of any entity uses several accounting tools or techniques to
calculate profitability. Managers with the techniques carefully analyses, records and control
several operations. Financial reports are appropriate produced with utilisation of costing
techniques such as absorption as well as marginal techniques so that exact net profit figures are
ascertained properly by selected entity managers. Production team of Oshodi PLC makes usage
of absorption and marginal costing technique while producing financial statements and reports
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(Otley and Emmanuel, 2013). Such reports or statements helps in understanding and interpreting
current financial position of the company. Various provisions are formulated on the basis of
financial reports so to strengthen competitive position together with accomplishing huge
revenues.
D2. Interpretation of data.
Financial reporting documents ate the records of financial activities as well as business
position. Few of such documents are income statement, balance sheet as well as cash flow
statement. All these are prepared with effective use of management accounting systems as the
information presented through the system is further analysed, monitor and evaluated so that
proper financial statements of the entity are prepared. Financial reports are another name of
annual reports that are confidential and prepared at end of each budget period. Such reports
provides accurate results of profits or losses that the business has attained in financial period.
From the income statements, it can be interpreted that Oshodi PLC has attained net profit of
79000£ in November and 83000£ in December through absorption techniques. In contrary,
attained profits during November was £61000 and £101000 in December by using marginal
techniques. The company has attained more profits in the month of December through both
costing techniques.
TASK 3
P4. Planning tools for budgetary control.
Budgets: The overall estimates of revenues or expenses that are to be incurred during
financial period. It is used to state business performance in terms of currencies. By analysing
prior budget, future estimates are set are financial managers. Planning spendings is known as
budgets in which total gains and losses are estimated by managers of business (Renz and
Herman, 2016). Analysts of Oshodi PLC examines current financial performance of business so
to set future budgetary estimates. Budgets improve communication, resource allocation as well
as translates strategic plans towards actions.
Budgetary control: These are controlling procedures which emphasis on distinct
business divisions so to analyse differences among potential addition to standard factors
pertaining with organisation. Distinct tools are used to identify variances through comparing
actual results with set budgets. Using budgetary control mechanisms, accountants of Oshodi PLC
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controls actions as well as revises actual budgets as per the actual circumstances. Planning tools
that are used to facilitate budgetary control are mentioned below:
Purchase budget: Amount of inventory which is purchased during budget period are
recorded in purchase budget in systematic manner. It matches accurate number of products that
are anticipated to be sold in the financial period. Additional anticipated aspects such as
beginning balance, service levels, product terminations and cash usage are considered by Oshodi
PLC accountants during preparing such budget (Purchase Budget. 2019). It is used at respective
entity in order to determine inventory requirements as well as anticipating material usage to
produce fruit juice.
Advantages: It is considered as forecasting tool that benefits managers of Oshodi PLC to
plan business costs, coordinating activities as well as controlling materials. It further helps in
avoiding holdings of excessive material level so to reduce wastages while producing fruit juices.
Disadvantages: Future estimates of purchase budgets are based on past performances or
forecasting that may be prove wrong due to changing circumstances which can impact on
strategic decisions of Osholdi PLC.
Master budget: Another planning tool that is used to direct, judge and control
performances of responsibility centres or departments that exists within boundaries of
organisation (Master Budget. 2019). It helps managers of Oshodi PLC to ensure that distinct all
functions work in coordination to accomplish objectives.
Advantages: It benefits in identifying problems as well as planning ahead to run business
in continuous manner. Master budget helps in making proper adjustments related to excess
spendings and plans to control spendings within set budget amounts.
Disadvantages: Such budget lack specificity due to which numerous problems are faced
by accountants while making financial analysis. It also fails to provide exact information so to
make future decisions due to various complexities.
Cash budget: It encompasses assessments of cash flows over particular time period. It is
used by financial department of Oshodi PLC to make assessments that there are sufficient cash
available to operate daily activities without any obstacles. It provide accurate views regarding
present cash position and to frame critical decisions such as using excess cash in prudent manner
or making arrangements for estimated cash shortages.
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