Management Accounting and Reporting: A Critical Evaluation

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Management accounting
Student name:
Student id:
Assignment code:

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Table of Contents
Introduction................................................................................................................................... 3
Activity 1:...................................................................................................................................... 4
Part A:............................................................................................................................................4
Explaining the concept of the management accounting..............................................................4
Essential requirement of MA:....................................................................................................6
Different methods used in the process of management reporting...............................................7
Advantages of MAS and its applications and within the business organizations:......................8
Critically evaluate that how the MAS and the management reporting is integrated within the
organization process...................................................................................................................9
Part B:............................................................................................................................................ 9
Annexure A................................................................................................................................ 9
Possible reasons for the variation between the answers of the absorption and the
marginal costing:....................................................................................................................17
Annexure B.............................................................................................................................. 17
Activity 2:.................................................................................................................................... 19
Part A:..........................................................................................................................................19
Disadvantages and the advantages of the various planning tools used in the budgetary control
in the organization:...................................................................................................................19
Uses of the various panning tools and its application for forecasting and preparation of the
budgets:.................................................................................................................................... 21
Annexure C.............................................................................................................................. 21
Preparation of budget for the activity level of 6200 units................................................21
Part B........................................................................................................................................... 25
Comparison how different organizations are adapting the MAS in response to the financial
problems in the organization:...................................................................................................25
How the managerial accounting leads to the organizational success in response to the financial
problems of the company:........................................................................................................25
How the implementation of the various planning tools helps in solving the various financial
problems of the company and achieves the long term goal within the organization:................26
Conclusion:.................................................................................................................................. 27

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References................................................................................................................................... 28

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Introduction
As per the definition of the management accounting, it is the kind of the information which
basically concerned with the accounting information which is useful for the management in
conducting the day to day decision making process within the organization. The provided
assignment will be making the discussion over the importance for the implementation of the
management accounting within the organization. The reporting is also focusing on the various
kind of the system of the managerial accounting which needs to be adopted within the
organization for the smooth and the effective operations of the company. The reporting is also
making the clarification over the difference between the financial accounting and management
accounting. The report is making the deep investigation over the different kind of the cost
techniques which need to be adopted within the organization. The importance in respect of the
implementation of various planning tools along with their limitations is also addressed in the
given report. Lastly the report is also focusing on how the evaluation of the various planning
tools and the management accounting systems and the reporting within the organization helps in
achieving the sustainable growth in future.

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Activity 1:
Part A:
Explaining the concept of the management accounting:
The term management accounting involves the preparation or the development of the timely
statistical and the financial information to the management of the company which helps the
manager or the top management to take the day to day decisions within the organization. This
concept also assists the management to take the short term decisions within the organization
(Adams, 2012). This concept of the management accounting is completely different from that of
the concept of the financial accounting and prepares the report for the analyzing the internal
performance of the company. These reports are not distributed to the outside stakeholders or the
shareholders and thus used by the management for the evaluation of the internal functioning of
the company. Here are the few of the differences which separates the management accounting
from the concept of the financial accounting.
Basis for the comparison Management accounting Financial Accounting
Meaning It is the type of the accounting
system which helps the
management to make the
plans, policies and the
strategic decisions for
undertaking the smooth and
It is the kind of the accounting
system which mainly focuses
over the preparation and
development of the financial
statements for providing the
financial information to the

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the effective operations within
the organization.
outside stakeholders of the
company.
Preparation of the statement No this kind of the reports are
not compulsory to prepare
within the organization.
These are the reports which
are compulsory to prepare
within the organization.
Kind of Information Deliver both the non monetary
and the monetary information
within the organization (Aebi,
et. al., 2012).
Deliver only monetary kind of
information only.
Format for preparation Non Specified format Specified format
Time Frame Prepared as per the need and
the requirement of
management.
Prepared at the end of the
financial or the accounting
year.
Users Only in the internal
management of the company
make use of these kind of
reports.
Both the internal and the
external stakeholders will
make use of this report (Bauer,
et. al., 2012).

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Essential requirement of MA:
Implementation of the management accounting within the organization is essential within the
organization. Adoption of the different techniques of the management accounting helps the
organizations to make the effective decisions within the business organization. Management
accounting system considers the implementation of the various systems which reduces the efforts
of the management and provides the accuracy in the various operations of the organizations.
Here is the various kind of the management accounting systems which helps the management to
take the effective decisions within the organization.
System of Price optimization: It is the kind of the strategy for calculating the sensitivity that
how the existing customers of the company changes with the changes in the price structure of the
products. Optimal pricing is necessary in the case is the company wants to links the volume of
the production with the profits. This system is also required when the company wants to increase
the profits by maintaining the same level of the customers in the organization. The concept of
price optimization is essential for maintaining the overall pricing structure of the company which
is the important component for maintaining the profitability structure of the company.
Job costing systems: It is the system which needs to be adopted within the organization for
tracking the original costs which is required to be delivered to the particular job or the services.
This process allows the management of the company to charge the correct prices for the
achievement of the targeted gross profit margin of the company (Drury, 2013). This kind of
system need to be adopted in the organizations in which the production of variety of the goods
and the services takes place for allocating per unit cost to different sectors and the departments of

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the company. This system will also prove useful and important in case of tracking the labor and
the other overhead expenses which are allocated to individual departments of the organization.
Cost Accounting system: It is the type of the accounting information which is used in the
companies for collecting and interpreting the financial and the cost accounting information for
making the proper analysis that how the companies earns and make us of the funds generated
within the organization. One of the essential features of the cost accounting system is that this
system provides the vast and more actionable information than from the information which is
delivered by the financial accounting system (DRURY, 2013). The implementation of the cost
accounting system within the organization is that this system tracks the cost structure to develop
the trend line for maintaining the cost structure of the company.
Inventory management systems: This system is useful in the organization for keeping the
control over the movement of the stock at each level within the organization. It also helps the
management to strong control over the proper usage of material at each level of production
within the organization. Adoption of this system will help in reducing the wastage of material
and this also saves the storage cost of material in the business organization.
Different methods used in the process of management reporting:
Account receivable report: This method of reporting is essential and the critical tool for proper
management of the cash flows within the organization for extending the credit facility to the
customers. This report is necessary for keeping the track record of the customers whose payment
is due from long duration (Faleti, et. al., 2014). With the help of this report the manager will able
to find the possible solutions for making the collection from the customers.

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Job Cost report: This report will present the financial report for the expenses incurred by the
companies for incurred for financing the particular projects of the company. Preparation of this
report is essential for evaluating the profitability derived from the specific job conducted within
the organization.
Budget Report: This report will help the management and owner of the business organizations
to make the analysis of the present business performance of the company. By analysis of this
kind of report the manger will be able to evaluate the performances of individual departments in
the organization and develop the cost control strategy within the organization. The manager and
the owners of the small and the big organizations can make use of the budget reports for
providing the incentives and the other benefits to their employees.
Advantages of MAS and its applications and within the business organizations:
The main purpose for the implementation of the MAS within the organization is that it basically
assist the management and the other decision makers like government agencies, investors and the
manager of the company to take the decisions in respect of the benefit of the organization (Fisher
and Krumwiede, 2012). Here are the few of the benefits of application of the MAS within the
organization:
 The process of the management accounting will help the management to develop the
future plans for the operations of the company. The management accountant will develop
the reports which provide the more detailed information in respect of the financial and the
non financial information of the company.
 The system of MAS within the organization helps the top management to develop the
better relations with the labor union of the company.

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 Application of the MAS within the organization will help the management to keep the
better control over the performance of the labor and the worker union of the company.
 Implementation of MAS will also allow the management to gain the maximum benefits
from the capital employed within the company.
Critically evaluate that how the MAS and the management reporting is integrated within the
organization process:
The integration of the management accounting systems and the management reporting will help
top management to develop the plans and the strategy for the effective operations within the
company (Guerra, et. al., 2014). The management accounting system involves the methods and
the process of the budgeting and the other management tool which will help the management to
develop the proper planning and controlling over the future and the present performances of
company. It allows the management to provide the better services to the customers and helps in
supporting, organizing and coordinating the various activities within the organization.
Implementation of the management accounting systems and the management reporting will also
provides the efficiency in the management accounting system within the organization and also
eliminates the wastage of the efforts and the material within the organization. Implementation of
these systems and the management reporting allows the management to makes the changes and
the improvement in the performance of the whole organization.
Part B:
Annexure A
Calculations of the cost of the company using the different techniques:

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INCOME STATEMENT USING MARGINAL COSTING
Elegant furniture Ltd
Period 1
chair table
Particulars Units
chair
price
£ per
unit
value
in £
units
table
price
£ per
unit
value
in £
Sales 19100 90 171900
0
1700 590 100300
0
Less:
marginal cost
of goods
0
direct
material
19100 20 382000 1700 215 365500
direct labor 19100 3 57300 1700 9 15300

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variable
manufacturin
g OH
19100 5 95500 1700 25 42500
total marginal
cost
534800 423300
gross
contribution
118420
0
579700
less: variable
selling&
Admin exp.
19100 5 95500 1700 25 42500
net
contribution
108870
0
537200
less: fixed
cost
fixed
manufacturin
g overhead