Management Accounting and Financial Analysis of Prime Furniture

This report delves into the management accounting practices employed by Prime Furniture, a growing organization in East London. It covers essential management accounting systems, cost calculation methods, and techniques for formulating income statements. The report also examines the a...Read More

Management Accounting
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Covered in PPT...........................................................................................................................3
TASK 2............................................................................................................................................3
P3 Cost calculation and formulation of income-statement.........................................................3
TASK 3............................................................................................................................................5
P4 Advantages and Disadvantages of different planning tools used for budgetary control.......5
TASK 4............................................................................................................................................7
P5 Compare between organisation to adopt accounting system for respond the financial
problems......................................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
The term management accounting refer to different practices which is used for
identifying, analysing, measuring, interpreting and communicating the financial information to
the managers for accomplish of organisation goals and objectives. This varies from the financial
accounting as the primary role of management accounting is to the assist make well-informed
management business decisions. The selected organisation for this report is Prime furniture and
this is one the developing or growing organisation which is established in the region of East
London (Alhatabat, 2020). The report highlights on management accounting system which is
essential requirements and also different methods related with management accounting. Along
with this cost calculation and appropriate techniques for formulation of income-statement will
also included focus in the report. In the last, advantages and disadvantages of different planning
tools will also learn from the report.
TASK 1
Covered in PPT
TASK 2
P3 Cost calculation and formulation of income-statement
COST- The term cost is explained as an expenditure which is required for manufacture
and sell the product or to get an asset ready for their normal use. In simple terms, this is
explained as an amount which is paid by the manufacture for collect and utilise resources that
make a product (Bobryshev and et. al., 2015). From the perspective of Prime-furniture cost is
explained as an expense which helps for manage cost with profits.
COST ANALYSIS- In economic terms, cost analysis refer to the calculation and
measure of the cost-output relationship. The economists are concerned with determine all cost
perspective which is incurred for hiring inputs and how they are arranged for maximise the
organisation productivity.
Basis Cost Cost-Analysis
Approach To determine the cost organised and
systematic, cost-accounting
approach is implemented which is
For cost-analysis price of
competitors products is also
monitored so this is a

simple and effective. complicated approach to
implement.
Method to perform At the time of cost management
perform work with induce all those
task that are engaged in company
operations.
For cost-analysis certain
conditions which exists in
external environment is
considered and this governs it
relates with different factors.
COST VOLUME PROFIT- CVP analysis is explained as the method of cost-accounting which
monitor or look on the impact of different level of cost and volume (Cleary, 2015). The main
motive of cost-volume method is to identify the number of operating profits.
FLEXIBLE BUDGETING- The major importance of flexible budget is to generate and induce
changes for make adjustments in actual revenue levels. Actual revenue and all other activities
measures support Prime-Furniture for formulate an effective flexible budget.
COST VARIANCE- A cost variance is explained as the difference between the cost which
actually incurred and the planned amount of cost. This is one of the most common track for
manage and monitor company expense, but it is also be tracked at the time of project level.
Prime-furniture use cost variance method for constant tracking.
Marginal and Absorption Costing
 Marginal Costing- The term marginal costing refer to the method or technique which is
used for monitor the marginal cost. Number of units are calculated and this helps for
manage cost by writing off the fixed cost from all production (Fiondella and et. al.,
2016). Moreover, the primary role of marginal costing is to calculate profits and expense
of business.
 Absorption Costing- It explain about the techniques which is used by organisation to
calculate all cost that is engaged with production process. Prime-furniture induce
absorption costing because this helps for control the overheads related with business.
Calculations:



TASK 3
P4 Advantages and Disadvantages of different planning tools used for budgetary control
Budget- The term budget is explained as a plan which is used for manage the income and
expenses related with business. From the perspective of Prime-furniture budget is used for
calculate the expenses related with the month which is expend in a decided time-period.
Capital Budgeting- This is explained as an accounting principle which is used by the
organisation for determine all projects which is pursue by management to complete work in
proper manner.
 Pay back period- The pay-back period method is one of the simple and flexible way for
complete the new project (Fuzi and et. al., 2019). This helps for measure the amount of
time which helps for earn enough cash flow to recover invested amount.
 ARR- Average rate of return method is also identified as returns related with investment
specifically, to calculate ROI. This utilise accounting information which is obtained from
financial statements for measure the profitability with induce possible investment factors.
Flexible Budgeting- A flexible budget is explained as a budget which is used for amendment
changes within different level of activities. From perspective of flexible budget all variable and
sliding scale budget is calculated for manage changes according to different level of activities.
Further, the budget figures are changed as they relates with various level of activities and it
depend on the size of business.
Planning tools used for budgetary control
Cash Flow Budget- One of the most important tool to resolve issue which is related business is
use of cash flow budget. The major perspective related with business define about all those
factors which helps to make sustainable results. Cash flow budget is explained as a part of
activities and this is used for manage all part according to the number of accounting activities.

Advantage of cash flow budget
 To minimise the debt- The major benefit of cash flow budget is to avoid the debt related
with business through avoid the unessential expenses and this also helps for perform
work according to decided-budget (Grishanova, Tatarinova and Kirina, 2016).
 To manage resources- With use of cash budget this is important for management to
complete all work by arrange all resources in a proper manner. Moreover, this helps for
reduce the waste from budgets.
Disadvantage
 No monitoring of cash- The respective organisation face difficulties because this is
complex to monitor the cash due to which there is high probability exists for protect the
saving amount.
 Control spending expense- Various organisation utilise digital method for receive and
make payment. Therefore, sometimes it is difficult for Prime-furniture to make expenses
related with business.
Cost-accounting- This help the organisation for present and determine all cost which is related
with the products. From the perspective of Prime-furniture all cost is calculated and this enable
organisation for perform all work with implement of appropriate techniques. With enable the
cost-accounting methods all decisions related with business is implemented and it helps for
manage company operations in an appropriate manner.
Advantages
 Increase company efficiency- With cost-accounting Prime-furniture store all
information to calculate the overall efficiency of organisation (Hiebl and et. al., 2015).
Standard costing method support management for manage all task according to
controlled expenses.
 Price-Reduction- Economic conditions generate challenges and this results it is
complex for management to survive. So to overcome cost-accounting method is used and
this helps to control and manage production cost.
Disadvantage
 High in cost- Different individuals are engage in company so this explain about
company position and number of operations performed by management. It results this is
difficult for make budget with engage of all perspectives.

 Complex- Accounting systems are complicated and due to this they are difficult to
understand. So this also work as the negative perspectives that create challenges for
management.
TASK 4
P5 Compare between organisation to adopt accounting system for respond the financial problems
Financial Governance- This mention to different kinds of movements that are expected
by the authorities and this enable the organisation for manage all task related with economic
alternations (Hoozée and Mitchell, 2018). In simple terms, the main role of the financial-
governance is to ensure that management has sufficient amount for overcome from financial
problems and this helps for identify methods that resolve company position.
Compare between two organisation
Base Prime-furniture Wooden Bourgeois
Financial-problem The major problem face by
authorities is to control the
organisational expenses that
incurred in a month.
Budget formulation is one of
the major problem and this
create complexity to complete
work with decided cost.
Method to overcome KPI is one of the most
important technique and this
helps the management for
complete work with control
their expenses (Modell, 2014).
Process indicators is used for
manage the task with straight
forward approach.
Management is focused to
perform the whole work with
decided-budget. Therefore,
benchmarking method is used
because this helps for manage
work according to decided-
standards.
Method to adopt Manager are responsible of all
departments to induce the KPI
technique for solve financial
problems related with
business.
The current techniques of
Benchmarking is induce by the
organisation through giving
responsibilities to finance
manager.

CONCLUSION
With the analyses of above report it is concluded that management accounting perform an
important role for improve the decision-making and financial position of the organisation. Along
with this management accounting improve overall effectiveness and the efficiency of the
organisation functions by induce appropriate costing methods such as marginal costing and
absorption costing. Along with this the budget formulation and there is use for appropriate
income and control of expenses is included to manage whole work with decided cost. In the last,
adoption of financial-accounting methods such as KPI and benchmarking is understood form this
report to overcome from monetary problems and challenges.

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