Report: Management Accounting Systems and Reporting at Unicorn Limited

This report analyzes management accounting systems and their practical applications within Unicorn Limited, a retail company. It explores various management accounting systems, including traditional cost accounting, lean accounting, throughput accounting, transfer pricing, and price optimization. The report details different reporting methods such as financial planning, financial statement analysis, cost accounting, job cost reports, inventory management reports, debtors reports, and performance reports. The report also discusses the benefits of these systems, such as improved cost allocation, streamlined processes, and better decision-making. It highlights how management accounting helps in managing financial decisions, enhancing business growth, and improving internal reporting to achieve desired outcomes. The report also mentions the importance of internal reports, trend analysis, and cost-effective methods in achieving business success.

Management Accounting

REPORT
From: Management accounting
To: General Manager
Unicorn Limited company
Date: 28th April 2017
Subject: Management accounting, its various systems as well as reporting ways which are
applied in the business of Unicorn Limited
INTRODUCTION
In the current business environment, organization focuses upon tracking performance
which can be done in effective manner with the help of management and financial accounting
system. MA is considered as the provision of managing financial data and thus advice that firm
is using the resources for developing the business (Banerjee and Das, 2017). Thus, it is a
profession that involves partnering in order to involve in decision making process and improving
the performance management system. Management accountants plays a crucial role in carrying
out expertise in financial reporting and thus controlling the business process in terms of
improving business performance. Accountants basically prepares a report format in which all the
decisions regarding business has been mentioned and thus it possesses effective responsibility of
managing all the resources and providing suitable and timely information to customers.
Manager of firm undertakes crucial decisions of day to day transactions and thus results
in performing desired activities. Management accounting carries out the responsibility of
following different rules and regulations regarding collecting data and thus linked with
managerial aspects. Apart from this, it focuses on wide range of systems and approaches
involved in MA and supports for making effectual internal business decisions. In the current
study, it undertakes an SME which operates in either manufacturing, retail, hospitality and
construction sector. Unicorn Limited which operates in retail sector carries out its operations
using different tools and thus helps in making effective management accounting decisions.
Report also discusses benefits and limitations of different types of planning techniques and thus
could be utilized for controlling budgeted information.
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TASK 1
P1
MA is the concept that helps in preparing accounting reports and thus provide accurate
and reliable information in order to make crucial decision making. Management accountants are
required to identify the financial position of firm and thus make effective short term financial
decision in relation to carry out day to day transactions. In regard to this, financial accounting
predicts that producing annual reports is considered as useful for external stakeholders and thus
obtain information from such accounts helps in influencing them to invest within firm (Bhimani
and et.al., 2013). There are different department who carries out financial management activities
and thus generate monthly or weekly reports in relation to identifying the financial performance
of Unicorn Limited. Through preparing reports it helps in reflecting the amount available in cash
in hand, accounts payable, outstanding debts, inventory etc. Thus, all such expenses need to be
recorded so that it comprises of preparing cost-value analysis, variance and other relevant
statistical information. Further, obtaining financial accounting and cost accounting information is
regarded as the main basis of carrying out management accounting. Unicorn Limited carries out
effective operations and thus carries out proper management accounting system so that it results
in carrying out effective information so that suitable outcomes could be generated. Various MA's
systems are explained below:
 Traditional cost accounting- It is one of the effective cost accounting system which
results in carrying out traditional cost approach and thus obtain by various
organizations. Here, Unicorn Limited uses such cost accounting system and thus
calculate different cost i.e. direct or material, labour and overhead expenses. While,
carrying out such method it involves cost driver and thus it helps in identifying different
cost involved while carrying out traditional cost accounting method such as direct
material hours, labour and machine hours (Chenhall and Moers, 2015).
 Lean accounting system- Further, such method is considered as the new concept that
results in executing management accounting and thus helps in identifying the alterations
that need to be made while carrying out management accounting process. It involves
accounting, controlling and monitoring the process so that Unicorn could improve its
performance (Christ and et.al., 2017). Accountants uses such information in relation to
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focus upon lean manufacturing and obtain lean thinking which results in achieving
successful business.
 Throughput accounting- Such accounting system consists of different elements and
thus obtain constraints in the accounting system and thus produces desired results. Also,
it is based upon the principle of carrying ot simple management technique. In such
system it results in carrying out the principle and approach which is related to simplified
management. In regard to this raising the performance in profitability, cited venture is
supported in terms of making effective decisions (Deegan, 2013).
 Transfer pricing- However, such system is considered as effective approach which
results in involving the price in which movement of products and services is being done
and thus calculating the cost of expenses incurred in transfer of products or services.
 Cost accounting system- Through using such system it helps in carrying out effective
framework so that it helps in estimating product cost for the profitability analysis and
valuation of inventory. Unicorn helps in providing assistance in regard to minimize their
product cost and helps in making sure that business could attain profitability (Bhimani
and et.al., 2013).
 Price optimisation system: This is another system through which firm makes decisions
for charging specific amount of the retail items from customers. Key need of this system
for Unicorn Limited is for making profitable kind of the pricing decisions in the
workplace.
 Job costing system: A firm when produces or sales different range of the products then
required to compute cost of each batch or job products. Further, Unicorn Limited
considers this system for assessing total cost associated with each job in the workplace.
 Inventory management system: By using this method, stock level is managed and
reduced in the firm which is sign of enhancing inventory turnover ratio. Further, methods
involved in this are LIFO, weighted average and FIFO.
P2
It involves several methods which are being used in terms of management accounting
reporting and record daily transactions so that decision making could be done in an effective
way-
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 Financial planning- It is considered as one of the best method through which financial
planning helps in offering effective decision making in regard to carry out business
activities. Through developing sound decision making power it helps in achieving
profitability within firm (Quattrone, 2016).
 Analysing financial statement- Through carrying out comparative financial statement
analysis it results in identifying the profit and loss statement and balance sheet in regard
to gain insight to obtain financial statement of firm. Through analysing the financial
statement it helps business to evaluate the outcomes on yearly basis and identify the
profit or loss obtained by firm in an accounting period (Saladrigues and Tena, 2017).
 Cost accounting- Such method is being used by management accountant in relation in
order to report or determine the cost related information. It helps in revealing the data that
is related to cost of product, department fees, process charges etc. Thus, it results in
identifying the actual cost obtained by organization and compare it with the budgeted
one. It helps in identifying the deviation in regard to improve the performance of firm in
market (Zimmerman and Yahya-Zadeh, 2011).
 Job Cost Reports: A method of reporting in which costs or expenses related to each job
are recorded is known as job cost reports. Further, sum of this expenditure is transacted in
the books of profit and loss.
 Inventory Management Reports: Under this, level of stock is recorded in two ways
which are such as units and amounts. Moreover, inventory of Unicorn Limited at the end
of year and beginning of the financial year are recorded in proper direction.
 Debtors / Accounts Receivable Ageing reports: As per this reporting method, amount
of credit sales is recorded properly. Through this, payment which will be received from
credit customers are mentioned. Total of this report is part of balance sheet where in
terms of debtors transacted.
 Performance Reports: At the last, this specific report is prepared in order to analyse and
discuss performance of the Unicorn Limited at the end of financial period. For this,
basically variance analysis tool is undertaken by the management.
M1
Through using different management accounting system it helps in providing benefits
which are as follows-
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 Traditional cost accounting- Main benefit of using traditional cost accounting system
helps in easily implementing the particular system so that it aids in directly determining
the cost of goods sold by Unicorn Limited. Thus, it helps in benefiting an effective
allocation of cost and thus linked with material, labour and overheads. Such system helps
in obtaining crucial information in regard to identify the final price of Unicorn products
that will be sold to consumers (Marginal and absorption costing. 2016).
 Lean accounting- Further, benefit of using lean accounting which results in assessing
that it is less complex and obtains crucial information in relation to compare the same
with traditional accounting. Also, carrying out such application results in obtaining
required information within Unicorn and thus improve the performance of firm in market.
 Throughput accounting- Moreover, such system of accounting provides benefit in
relation to control the actions which takes place in regard to carry out production within
Unicorn Limited. It involves inadequate level of material, labour or product capacity so
that helps in facilitating business. Further, it also helps in minimizing the cost and
improves the profitability of firm in market (Romano, 2015).
 Transfer pricing- With the help of such type of management system it helps in
benefiting business in terms of determining the cost that is related to movement of
products. However, such system helps in identifying the total cost of product
manufactured by Unicorn which involves all the expenses related to producing the
product.
Systems or methods of MA like cost accounting is highly beneficial for calculating total
cost of production and operation incurred in the workplace. Using inventory system, Unicorn
Limited able to analyse stock and make strategies for utilising it in optimum direction. When
looking at the price optimisation then it helps to the retail organisation in order to make decisions
for charging price of the products. From job costing, it is supportive for computing total
expenses included in each job.
D1
Through carrying out management accounting system it is beneficial for Unicorn to
integrate and carry out effective results so that financial activities within firm is being managed.
However, it helps in managing business decision and thus enhance growth and success in market.
Unicorn management uses effective management accounting system which results in managing
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financial decision so that appropriate decision could be taken in relation attain desired outcomes.
Managers of Unicorn need not to focus upon bringing improvement within the operational areas
and thsu results in minimizing the cost involves in operating the business so that high return
could be obtained (Banerjee and Das, 2017). However, using effective management accounting
system results in reporting within firm and thus improving the performance of firm in relation to
prepare appropriate budget and thus evaluate the outcomes that results in improving success.
Furthermore, management accounting reporting results in preparing job report, cost
report and budgeting etc. which helps in evaluating the business performance in regard to create
appropriate planning so that desired results could be attained. Thus, it is the best way which
helps in evaluating the perceptions of business and thus creates appropriate planning in order to
report the transactions and create crucial decision to manage the business operations (Bhimani
and et.al., 2013).
Through carrying out internal business reports within Unicorn Limited it helps in
identifying the business functions and accomplish the same within specified time duration.
Management accounting consists of different reports that presents specific information about
Unicorn daily transactions so that preparing trend analysis results in forecasting the same
information that is going to be occur in future (Chenhall and Moers, 2015). It also results in
obtaining useful information and thus carry out trend analysis so that it results in reducing the
wastage of resources and thus obtain cost effective method so that business success could be
achieved.
TASK 2
P3
Through determining cost it helps business to improve the managerial decision and thus
results in carrying out the business functions which results in identifying the cost involves in
business operations. Also, identifying inaccurate costs results in adversely affecting Unicorn's
pricing decision (Deegan, 2013). It involves distinctive techniques which are being used by firm
in relation to determine the cost and identify marginal costing, absorption costing and other
methods in relation to calculate the costs which are discussed underneath-
 Marginal costing- A technique which comprises with only those costs which are in
nature of the variable and change in accordance to the production level. Further, level of
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net income in accordance to this method is high as compared to another costing methods
(Christ and et.al., 2017).
Advantages
 It eliminates under or over absorption of fixed cost and thus results in avoiding necessary
adjustments so that outcomes could be attained.
 Business charges fixed expenditure in regard to obtain periodical cost.
 Further, assists in obtaining short term organization planning and carry out effective
decision within Unicorn (Quattrone, 2016).
Disadvantages
 It creates issues in relation to segregate fixed and variable cost. It assesses that in real world scenario, it identifies the semi variable cost which reduced or
eliminated.
Application of marginal costing
Calculation of production cost Budgeted Actual
Direct material 3600.00 4200.00
Direct labor 3000.00 3500.00
Variable production overheads 1200.00 1400.00
Total cost of production 7800.00 9100.00
Add: Beginning inventory
less: closing inventory 1950.00 1300.00
Cost of sale 5850.00 7800.00
Cost of sale/unit 13 13
Marginal costing profitability statement
Particulars Budgeted Actual
Sales 14000 21000
less: Cost of sales (see above) 5850.00 7800.00
Variable sales overheads 450 600
Total variable cost (TVC) 6300.00 8400.00
Contribution 7700.00 12600.00
Less: Fixed expenditures
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Administrative overheads 800 700
Selling cost 400 600
Total fixed cost (TFC) 1200 1300
Net profitability 6500.00 11300.00
Profitability per unit 14.44 18.83
Difference between marginal & absorption costing
 A method in which only variable expenses considered is known as marginal whereas
absorption comprises with all kinds of costs associated with the firm.
 In marginal costing, direct wages, direct material, variable overheads etc. are included.
However, in the absorption along with these all the costs fixed expenses like
administration, distribution, rent, insurance, tax etc. are also involved (Marginal and
absorption costing, 2016)
 Total expenses in accordance to marginal of the production are lower whereas total costs
in absorption method is higher due to using all expenditures. When looking at the net profit level then marginal provides higher income and absorption
gives low net margin at the end of fiscal year.
Application of absorption costing
Calculation of production cost Budgeted
Act
ual
Direct material 3600.00
420
0.00
Direct labor 3000.00
350
0.00
Variable production overheads 1200.00
140
0.00
Fixed production overheads 1800.00
200
0.00
Total cost of production 9600.00 111
00.0
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0
Add: Beginning inventory
less: closing inventory 2400.00
158
5.71
Cost of sale 7200.00
951
4.29
Cost of sale/unit 16
15.8
6
Absorption costing profitability statement
Particulars Budgeted
Act
ual
Sales 14000
210
00
less: Cost of sales 7200.00
951
4.29
Gross profit 6800.00
114
85.7
1
Less: indirect expenditures
Variable sales overheads 450 600
Administrative overheads 800 700
Selling cost 400 600
Total indirect expenditures 1650
190
0
Net profitability 5150.00
958
5.71
Profitability per unit 11.44
15.9
8
Income statement using marginal costing
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