Management Accounting Report: Williams Performance Tenders

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Unit 5- MANAGEMENT ACCOUNTING
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Table of Contents
LIST OF FIGURES.......................................................................................................................3
INTRODUCTION........................................................................................................................4
TASK 1...................................................................................................................................... 5
P1 ESSENTIAL REQUIREMENTS AND TYPES OF DIFFERENT MANAGEMENT ACCOUNTING
SYSTEMS...............................................................................................................................5
M1 BENEFITS OF MANAGEMENT ACCOUNTING SYSTEMS AND APPLICATION....................7
P2 DIFFERENT METHODS FOR MANAGEMENT ACCOUNTING REPORTING..........................8
P3 INCOME STATEMENT THROUGH DIFFERENT TECHNIQUES OF COST ANALYSIS..............9
PART 2.................................................................................................................................... 13
P4 ADVANTAGES AND DISADVANTAGES OF DIFFERENT PLANNING TOOLS.......................13
M3 APPLICATION OF PLANNING TOOLS FOR PREPARING AND FORECASTING BUDGETS. .15
P5 MANAGEMENT ACCOUNTING SYSTEMS RESPOND TO FINANCIAL PROBLEMS.............19
M4 MANAGEMENT ACCOUNTING CAN LEAD TO SUSTAINABLE SUCCESS.........................22
CONCLUSION.......................................................................................................................... 23
REFERENCES........................................................................................................................... 24

LIST OF FIGURES
Figure 2: PESTLE framework...................................................................................................16
Figure 3: Porter five forces analysis........................................................................................17
Figure 4: VRIO analysis........................................................................................................... 17

INTRODUCTION
In this report, better insights are regarding the fundamental of the management accounting
which can be applied to the wider environment of the business operations and can lead to
effective control within business organisations. This report will also revolve around a range
of management accounting techniques and will effectively apply the planning tools that can
be used in management accounting. At last, the comparison will be done on how the
different organisations apply the management accounting systems and use their financial
information to aid the planning decisions.

TASK 1
As a Management Accounting Office of Williams Performance Tenders that are into Boat
manufacturing, this report will be presented to the General Manager which will
demonstrate a better understanding of the management accounting systems and will also
apply a range of management accounting techniques.
P1 ESSENTIAL REQUIREMENTS AND TYPES OF DIFFERENT MANAGEMENT
ACCOUNTING SYSTEMS
MANAGEMENT ACCOUNTING
According to the Institute of Management Accountants (IMA), this is described as the
profession which involves the partnering with the management decisions by effective
performance management systems, effective planning and controlling the financial
reporting to control and assist the management in effective decision making (The Institute
of Management Accountants, 2008).
BENEFITS OF MANAGEMENT ACCOUNTING
For Williams Performance Tenders the management accounting has certain benefits that
help to enhance the capacity of the businesses by bolstering its financial performance and
the position. Some of the benefits of management accounting are that it increases the
efficiency of the business and helps to ensure the budgetary control which leads to better
profitability and reduces the waste (Surum, 2018). Through management accounting,
Williams Performance Tenders also can simplify its financial statement and can understand
the financial progress of the business. It also helps to ensure control over the cash flows of
the business which guides critical business decisions (Kaplan and Atkinson, 2015).
MANAGEMENT ACCOUNTING SYSTEMS AND ITS TYPES
Some of the main management accounting systems that help Williams Performance Tenders
in attaining the desired goals and ensure the effectiveness of the business are discussed as
under:

Job costing systems
According to the job costing systems, the Williams Performance Tenders comply with
effective monitoring process of the job cost allocation and keeps a track of the cost that is
refunded to the customers (Hood, 2014). Thus through this management accounting
system, effective job costing is ensured. Through this system, the reporting of direct
materials and direct labour of every item is accordingly assigned to the manufacturing
overheads (Henderson, 2017).
Inventory management systems
This is another management accounting system which helps in effective tracking of the
goods via the supply chain of the business. Through this system effective monitoring and
maintained of the stoked goods is ensured which will help Williams Performance Tenders in
controlling the business with greater accuracy (Pontius, 2019).
Price optimisation
This is another system which is employed by Williams Performance Tenders to determine
the responses of the customers to different prices of the products which ultimately helps
the business in meriting the objective of maximising the operating profit (McCormick, 2017).
Cost accounting system
Cost accounting systems is considered to be a framework that is utilised by Williams
Performance Tenders to make an effective estimation of the costs of the products and
ensure profitable operations. The cost accounting systems involve traditional as well as
activity-based costing systems (Hood, 2014).
ESSENTIAL REQUIREMENTS FOR MANAGEMENT ACCOUNTING SYSTEMS
The few essential requirements that the management accounting systems require include
the management style which needs to be followed that creates an impact on the
management accounting system (Saez, 2019). Through the management styles the
information can effectively be extracted that can lead to effective decision making. The
inventory management system requires the effective installation of the systems and

processes which through technological aid helps in the effective processing of the
information which leads to informed decision making (Henderson, 2017).
M1 BENEFITS OF MANAGEMENT ACCOUNTING SYSTEMS AND APPLICATION
Benefits of management accounting systems
Job costing systems
Some of the benefits of the job costing system are that it renders the scope for better
control of costs by separating the cost earned from each job accordingly. It also helps in
estimating the cost of a job from records (Shuvakina, 2015).
Inventory management systems
For Williams Performance Tenders, the inventory management systems help in attaining the
productivity in operations and help to attain the efficiency of operations. This system also
helps to render the benefit of integrating the entire business and maintaining customer
satisfaction (Cho, 2018).
Price optimisation
Few benefits of the price optimisation system are that it helps Williams Performance
Tenders in maximising the operating profit and helps in gaining better insights about the
benefits of the different pricing strategies adopted by the business (Shuvakina, 2015).
Cost accounting system
Through a cost accounting system, the efficiency can be better measured and improved that
helps to avoid the unnecessary cost and high prices paid by the business. It also helps in
fixing the prices that will lead to the profits (Achary, 2017).

P2 DIFFERENT METHODS FOR MANAGEMENT ACCOUNTING REPORTING
MANAGEMENT ACCOUNTING REPORTING AND ITS IMPORTANCE
Management accounting reports are the vital part of the management accounting which
ensures that the businesses have a complete picture of the business performance through
comprehensive accounting reports. Through the management accounting reporting,
Williams Performance Tenders derive important strategic insights which foster the
performance of the business (Crowther, 2018).
DIFFERENT METHODS OF REPORTING
Job costing reports
This is a report that allows Williams Performance Tenders to gain a side-by-side view of the
total cost that is accrued in a single product as compared to the revenue yield by the
project. Through the job cost report, the profitability is evaluated related to the specific job
types which optimise the operations (Crowther, 2018).
Accounts receivable aging report
This report is the one that forms a vital element for Williams Performance Tenders as it
offers credit to customers based on the credit balance overview (Pande, 2018). The
overview is rendered by this report by the age of items that are usually, 30 days, 60 days
and 90 days late. Through this report, the credit policies are aligned with consumer’s
repayment capabilities (Shuvakina, 2015).
Operating budget reports
The budget report is the one that helps in managerial accounting of Williams Performance
Tenders. Through this report, the effective understanding and controlling of the costs across
various enterprises are ensured and it helps in the unification of the organisation with
different departments (Crowther, 2018).

Inventory and manufacturing reports
The business such as Williams Performance Tenders produces physical products with low
fault tolerance (Cho, 2018). Inventory and manufacturing report thus helps in centralising
the data on inventory costs and labour overheads and thus the raw data is optimised (Hood,
2014).
P3 INCOME STATEMENT THROUGH DIFFERENT TECHNIQUES OF COST
ANALYSIS
MARGINAL COSTING
Marginal costing is termed as the costing which ascertains the effect on profit due to the
changes in volume. This costing is the elementary tool that helps to make effective decisions
by accurately understanding the cost structures (Surbhi, 2018).
ABSORPTION COSTING
Absorption costing is the method which includes direct labour, direct materials and the fixed
as well as variable manufacturing overheads in the product costs. This is an effective costing
method which involves the fixed and variable costs per unit in addition to an allocated share
of fixed overheads (Surbhi, 2018).

INCOME STATEMENT USING MARGINAL COSTING METHOD
Nov Dec
Particulars
Amount
(£)
Amoun
t (£)
sales revenue 500000 600000
The marginal cost of sales
material cost 216000
18000
0
Labour cost 48000 40000
Variable production overhead 36000 300000 30000 250000
Contribution 200000 350000
Fixed costs
Fixed production overhead 99,000 99,000
Fixed selling overhead 14,000 14,000
Fixed administration overhead 26,000 139000 26,000 139000
Net Profit 61000 211000

INCOME STATEMENT USING ABSORPTION COSTING METHOD
Nov Dec
Particulars Amount (£) Amount (£)
Sales revenue 500000 600000
The marginal cost of sales
Material cost
216000 180000
Labour cost
48000 40000
Administration cost 26,000 26,000
Selling and distribution costs 14,000 304000 14,000 260000
Gross Profit 196000 340000
Variable production overhead 36000 30000
Variable selling overhead (working note
1) 50000 86000
60000 90000
Net Profit 110000 250000
Working notes:
1] Calculation of variable selling overheads (10% of sales price)
Particulars November December
Sales Price 500000 600000
*10% *10% *10%
variable selling overheads 50000 60000

CALCULATION OF OVER/UNDER ABSORPTION OF FIXED PRODUCTION OVERHEADS OF
OSHODI PLC
A] CALCULATION OF BUDGETED FIXED PRODUCTION OVERHEAD
Particulars Amount (£)
Budgeted fixed production overhead £ 99,000
Budgeted Units 11000
Fixed production overhead / Unit £ 9
B] CALCULATION OF OVER/UNDER ABSORPTION FOR NOVEMBER
Particulars Amount (£)
Absorbed overhead
[Actual units x FOAR]
=12000 * 9
108000
Actual Fixed production overhead 99,000
Over Absorbed overhead 9000
C] CALCULATION OF OVER/UNDER ABSORPTION FOR DECEMBER
Particulars Amount (£)
Absorbed overhead
[Actual units x FOAR]
=10000 * 9
90000
Actual Fixed production overhead 99,000
Under Absorbed overhead (9000)
PART 2