Analysis of Management Accounting Techniques for Qbic Hotel's Success

This report examines the role of management accounting (MA) in decision-making, focusing on Qbic Hotel. It explores MA tools such as job costing, cost accounting, inventory accounting, and price optimization systems. The report assesses the use of managerial reporting, including budget reports, job cost reports, and accounts receivable aging reports, for effective decision-making. Furthermore, it provides a detailed comparison of marginal costing and absorption costing methods, calculating income statements under both approaches. The report also analyzes the advantages and disadvantages of planning tools used in budgetary control and compares how different organizations adapt MA to address financial challenges. The conclusion emphasizes how MA techniques contribute to sustainable business success and how planning tools suitably respond to financial problems. The report emphasizes the importance of MA in helping businesses achieve goals and gain a competitive advantage.

Management Accounting

Table of Contents
INTRODUCTION .....................................................................................................................3
LO1.............................................................................................................................................3
P1 Explaining management accounting along with their essential requirements ................3
P2 Assessing the use of managerial reporting in decision making .......................................5
LO 2........................................................................................................................................6
P 3 Calculation of Income statement under Marginal costing and Absorption costing
method....................................................................................................................................6
LO 3..........................................................................................................................................12
P 4 Advantages and Disadvantages of planning tools used by budgetary control...............12
LO 4..........................................................................................................................................14
Comparison between different organizations regarding how they are adapting management
accounting for dealing with their financial problems...........................................................14
Managerial accounting leads business enterprises towards sustainable success..................15
Evaluation of how planning tools for accounting respond suitably for solving Financial
problems to lead organizations to sustainable success.........................................................16
CONCLUSION........................................................................................................................16
REFERENCES.........................................................................................................................18

INTRODUCTION
In the context of business, management accounting (MA) plays a significant role in
decision making. Now, managers lay focus on tracking business performance with the motive
to develop suitable or competent strategic framework. This in turn helps firm in attaining
goals and gaining competitive position over others. The present report is based on Qbic hotel
which offers accommodation services to the customers. In this, report will provide deeper
insight about MA tools which business units undertake for reporting purpose. Besides this, it
will shed light on the manner in which MA report aid in profitable decision making. It also
depicts the use of costing system namely absorption and marginal in the assessment of cost
and profitability aspects. Report also presents MA tools that can be used by Qbic for planning
purpose. It also entails how MA techniques assist in responding financial problems.
LO1
P1 Explaining management accounting along with their essential requirements
Management accounting may be defined as a process which lay focus on analyzing
business cost and operations for preparing internal financial report.
“Management accounting is the discipline which deals with the gathering, sorting, and
processing of financial, and non- financial information in order to produce reports that add
value to the business, and provide insight to the managers who make decisions based on these
reports aiming to concrete the organization’s strategic steering”. This provides managers with
suitable framework for decision making and contributes in goal attainment (Cowton, 2018).
There are several management accounting systems which Qbic can undertake for ensuring
smooth functioning of operations from both monetary and non-monetary perspective such as:
Job costing
In MA, this system is highly important which emphasizes on capturing or tracking
cost associated with each task. It presents cost of material, labor and overhead associated with
production aspect. Thus, by summing up all the expenditures total cost of job can be
identified. By dividing total costs from number of units, CPU can be assessed prominently.
Advantages Disadvantages
 Offers detailed information about  Expensive and time consuming

cost regarding material, labor and
overhead
 Profitability of job can be gauged
using this system
 Prevents duplication of work
 Helps in evaluating quality of work
(Job costing: advantages and
disadvantages, 2019)
exercise
 Lack of standardized process

Cost accounting
This system of MA may be served as a framework which firm’s undertake with the
motive to make appropriate estimation about product price and performing profitability
analysis. Cost accounting system includes fixed, variable, direct and indirect expenditure
incurred by the firm. Profit attainment is the main motive of an organization for the purpose
of survival and gaining competitive position. In this regard, using such system charge per unit
can be assessed by the manager of Qbic using this accounting system. Hence, by adding
profit margin in per unit charge manager of Qbic can set price for the products or services
offered.
Advantages Disadvantages
 Assist in identifying cost per unit
and price
 Facilitates better monitoring and
controlling of labor costs
 Ensures profit maximization by
eliminating waste, losses and
inefficiencies (Cost accounting:
advantages and disadvantages,
2019)
 Leads problem in relation to under
or over absorption of overhead
 Focuses on past performance,
whereas management is concerned
about future
 Imposes more expense due to high
maintenance associated with the
installation of cost accounting
system
Inventory accounting
This system of MA includes several tools which help in taking appropriate decision
about stock such as LIFO, FIFO, economic order quantity (EOQ), just in time (JIT) etc. In the
context of business unit, effectual inventory management is highly required for controlling
cost and enhancing profitability aspect (de Campos and Rodrigues, 2016). Thus, Qbic should
employ EOQ which clearly entails stock that need to be maintained within the firm for
meeting customer’s requirements. By using this tool firm can avoid unnecessary cost
associated with holding and ordering aspects.

Advantages Disadvantages
 Helps in reducing cost and
improving profitability
 Ensures better stock management
 Time consuming exercise
 Requires detailed assessment
Price optimization system
This system or software enables Qbic to evaluate customer’s responses at different
price level pertaining to the services offered. By this, manager of Qbic can set suitable price
of the services and thereby would become able to attract large number of customers. Hence,
such system of MA helps in setting competent pricing framework and thereby ensures
competitive advantage (Malina, 2018).
Advantages Disadvantages
 Facilitates price fixation
 Helps in building and sustaining
competitive position
 Imposes cost in front of company
regarding maintenance, training &
development of personnel
 Requires highly skilled personnel for
such mathematical analysis
P2 Assessing the use of managerial reporting in decision making
Managerial reports include budget, job cost, accounts receivable aging, inventory etc
which provides information about departmental performance. In the recent times, managerial
reports are highly significant from the perspective of decision making in relation to trim cost,
rewarding best performing employees as well as resources. There are several managerial
reports which can be undertaken by Qbic for the purpose of decision making such as:
Budget report: Manager can make assessment of departmental performance using this
report. Moreover, it clearly exhibits deviations which take place in departmental
performance. Hence, considering this report manager can assess reasons behind deviations
and thereby would become able to take corrective measures on time (de Campos and
Rodrigues, 2016). In other words, budget report helps Qbic in making appropriate estimation
about income & expenses pertaining to proposed budget. Further, with the help of such report
manager can provide employees with suitable incentives. Through this, training &
development need of personnel can also be assessed.
Job cost report: This report provides high level of assistance to the manager in
evaluating profitability. In this, actually generated revenue is compared in against to the

actual one. By this, manager of can Qbic identify areas where resources should be used
instead of wasting time and money on low or unprofitable projects.
Inventory report: Manager of Qbic can make manufacturing process more efficient
by using stock report. Moreover, such report provides information stock wastage, hourly
labor and overhead cost etc. Thus, referring this, different assembly lines can be compared
effectually and best performing departments identified (Managerial accounting reports,
2019).
Accounts receivable aging report: By taking into account this report hotel unit can
manage its cash flow more effectually. Moreover, such report gives clear indication to the
firm that whether credit should be extended to the customers or not. It clearly highlights
customer balances and thereby helps in assessing amount they owed. Through this, manager
of hotel unit can track days within which debtors are making payment. By using this
company can find out problems exist in cash collection process. In the case of high defaults,
firm should tighten its credit policies. Referring all the aspects it can be stated that account
receivable aging report helps in assessing or evaluating company’s debt level.
LO 2
P 3 Calculation of Income statement under Marginal costing and Absorption costing method
Cost can be defined as the total expenses incurred by the company in order to know
the cost incurred in the production of goods. The cost consists of various expenses such as
raw material cost, labor cost and overheads cost (Pearce, 2016). Cost analysis relationship is
defined as the relation between cost of input by company and output of goods.
On the basis of level of activity cost can be divided in two parts i.e. Fixed cost and
variable cost. Fixed cost remains at every level of activity in the company and does not
change with the change in the level of activity (Nas, 2016). Variable costs are defined as the
change in the variable costs with the change in the level of activity in the company. Normal
costing can be defined as the actual cost occurred in the company at the time of production of
goods. Standard costing is the method of setting up set targets by the management in order to
achieve those budgets and then compare with the actual cost of the company.
Meaning of Marginal costing and Absorption costing

Marginal Costing can be defined as the method in which only variable expenses are
charged at the time of calculation of marginal costing per unit (Yu, 2016). For the valuation
of net profit or loss all the variable costs are deducted to calculate contribution and then all
the fixed costs are deducted in order to know the net profit or net loss of the company.
Absorption costing is the method in which fixed cost per unit and variable costs per
unit are accounted at the time of calculation of absorption cost per unit. Closing inventory is
valued at the absorption cost per unit (Mussati, and et.al., 2016). All the fixed and variable
production is deducted to calculate gross profit or loss for the company. Net profit or net loss
is calculated by deducting all the fixed and variable selling expenses from gross profit.
Calculation of Net profit and or net loss under marginal costing
Under marginal costing
Particulars Workings Amount (£) Cost per unit
Direst Material 8
Direst Labour 5
Variable O/H 3
Marginal cost per unit 16
Selling price 50
-Marginal cost per unit -16
-variable selling price -2.50
Contribution per unit 31.50

Particulars Workings Amount (£) May
Sales (300*50) 15000
Cost of sales:
Opening inventory 0
Material (500*8) 4000
Labour (500*5) 2500
Variable o/h (500*3) 1500
8000
-Closing inventory (200*16) -3200.00
-4800
10200
-Variable selling cost -750
Contribution 9450
-Fixed costs -10000
Actual Net profit/(Net Loss) -550

Particulars Workings Amount (£) June
Sales (500*50) 25000
Cost of sales:
Opening inventory (200*16) 3200
Material (380*8) 3040
Labour (380*5) 1900
Variable o/h (380*3) 1140
9280
-Closing inventory (80*16) -1280
-8000
17000
-Variable selling cost -1250
Contribution 15750
-Fixed costs -10000
Actual Net profit/(Net Loss) 5750
Under Absorption Costing
Particulars Cost per unit
Direst Material 8

Direst Labour 5
Variable O/H 3
Fixed o/h 10
Total absorption cost per unit 26
Particulars Workings Amount (£) May
sales (300*50) 15000
Cost of sales:
Opening inventory 0
Material (500*8) 4000
Labour (500*5) 2500
Fixed o/h 10000
Variable o/h (500*3) 1500
18000
-Closing inventory (200*26) -5200
-12800
Gross Profit/Loss 2200

-Variable selling cost -750
Actual Net profit/(Net Loss) 1450
Particulars Workings Amount (£) June
Sales (500*50) 25000
Cost of sales:
Opening inventory (200*26) 5200
Material (380*8) 3040
Labour (380*5) 1900
Fixed o/h 10000
Variable o/h (380*3) 1140
21280
-Closing inventory (80*26) -2080
-19200
Gross Profit/Loss 5800
-Variable selling cost -1250
Actual Net profit/(Net Loss) 4550
Company is having the higher net profits under absorption costing than the net profits
under marginal costing in the month of May. It is because of calculation of closing inventory
under absorption costs considers fixed cost per unit whereas marginal cost account total fixed
cost. In the month of June, net profit under marginal costing method is higher than the net

profit under absorption costing. It is because of low closing inventory which leads to lower
costs under marginal cost and higher profits.
Calculation of Actual performance of the company with the budgeted performance of
the company
Budgeted and Actual cost of metal generating the Product “A”
Budgeted material cost per unit of the product 2 kg at 10£/ kg
Actual Output 1000 units
Actual material purchased and used 2200 kgs
Actual material cost £20,900.00
Budget of Production
Actual output in units 1000
Kgs Budgeted per unit 2
Cost in £ per unit (each 2 kg. ) of material 10
Actual material purchased and used in £ 20900
Total cost of material a budgeted in £ 20000
Actual Costs in £
20900
Total variance
-900

Costs variance per unit in £
-0.9
Percentage (%) of variance
-4.50%
Budgeted
material cost
per unit of the
product £
Differential
per unit in £
Actual cost
per unit
10 0.5 9.5
Material price
variance=
Differential in
cost per unit
in £ *
Actual usage
in kgs
Material price
variance= 0.5 * 2200
Material price
variance= 1100 Favourable
Material usage
variance
Actual output
(units) *
Actual usage
(2 kg per
unit ) *
Budgeted
price

Material usage
variance 1000 * 2 10
Budgeted use kgs. 2000
Actual use in kgs. 2200
Differential -200
Differential in £ -2000
Unfavourable
Galway Plc material cost is been increased due to the increase in the consumption of
raw material by the company. Company absorbed more units of raw material than the
budgeted units of raw material (Song and et.al 2017). Company’s per unit cost has been
decreased but overall cost is increased due to the over consumption of raw material.
Calculation purchases and raw material (metal) during the month of May by using
LIFO method-
Inventory ledger record for May under the LIFO valuation method
Date
Refere
nce
Purch
ase Issues
Balanc
e
(Inven
tory)
Units
£/
Units
£
Total Units
£/
Units
£
Total Units
£/
Units
£
Total
37012 Previo
us
balanc
50 3 150

e
(inven
tory)
41030 50 3 150
Bought
25
units at
£ 3.60
each 25 3.6 90 25 3.6 90
42125 25 3.6 90
Issued
36
units 11 3 33 39 3 117
43952 39 3 117
Bought
20
units at
£ 3.75
each 20 3.75 75 20 3.75 75
45047
Issued
10
units 10 3.75 37.5 39 3 117
10 3.75 37.5
46508 10 3.75 37.5 24 3 72
Issued
25
15 3 45

units
11079
Issued
5 units 5 3 15 19 3 57
Inventory calculations
Opening inventory 150
Purchase 1 90
Purchase 2 75
Issue 1 123
Issue 2 37.5
Issue 3 82.5
Issue 4 15
Balance 57
Galway Plc uses the LIFO method for calculation of closing inventory. LIFO can be
defined as the method in which it is assumed that the last purchased goods are sold first (Gao
and et.al., 2017). According to the assumption, the closing balance after every sold unit is
calculated at the price of the goods which were purchased first.
Calculation of inventory as per weighted average method
Inventory ledger record for May under the AWC valuation method

Date
Refere
nce
Purch
ase Issues
Balanc
e
(Inven
tory)
Units
£/
Units
£
Total Units
£/
Units
£
Total Units
£/
Units
£
Total
37012
Previo
us
balanc
e
(invent
ory) 50 3 150
41030
Bought
25
units at
£ 3.60
each 25 3.6 90 75 3.2 240
42125
Issued
36
units 36 3.2 115.2 39 3.2 124.8
43952
Bought
20
units at
£ 3.75
each 20 3.75 75 59 3.39 199.80
45047
Issued
10
units 10 3.39 33.86 49 3.39 165.94

46508
Issued
25
units 25 3.39 84.66 24 3.39 81.27
11079
Issued
5 units 5 3.39 16.93 19 3.39 64.34
Inventory calculations
Opening inventory 150
Purchase 1 90
Purchase 2 75
Issue 1 115.2
Issue 2 33.86
Issue 3 84.66
Issue 4 16.93
Balance 64.34
LO 3
P 4 Advantages and Disadvantages of planning tools used by budgetary control
Budgetary control is the method used by the company in order to know the extra cost
allocated by the company (Mahal, 2015). These are the set budgets by the management in
order to compare the budgeted performance of the company with the actual performance of
the company. The budgets help the company in achieving the targets by the company in order
to eliminate the extra cost and maximizing the profits for the company. The different
planning tools used by budgetary control to control the costs are-

Activity Based Budgeting
Activity Based Budgeting is the tool used to scrutinize each and every activity in the
company in order to allocate in the department as per the need of department (Wildavsky,
2017). This tool of budgetary control is rigorous process as compared to the other planning
tools because it scrutinizes each and every activity in the company. It is the planning tool in
which past year’s budget is not considered at the time of preparing current year budget. This
tool first analyzes and then records each and every activity after properly scrutinizing all the
activities in the company.
Advantages Disadvantages
 The tool helps in the cost control and
cost elimination in the company by
scrutinizing each and every activity in
the company.
 It also allocated the activity in the
company as per the need of the activity
in the department.
 It takes a lot of time in scrutinizing
each and every activity in the company.
 It needs the professional managers in
order to scrutinize each and every in the
company.
 It is not economical tool and can be
applied only in large firms.
Zero Based Budgeting
Zero Based Budgeting is the tool in which manager has to justify each and every
expense in the company. Under this method, manager has to justify that what is the need of
expense in allocating in particular department (de Campos, 2016)t. It also defines that what
will be the benefits from allocating of the expenses in that particular department. This tool
starts from the “Zero Base” which means that the manager has to justify all the expenses
needed to be allocated in the department and their need of allocation.
Advantages Disadvantages
 This tool is very easy to calculate and
simple to understand.
 This tool helps the company in
eliminating the extra cost from the
company because the tool justifies each
and every activity in the company.
 It takes a lot of time in justifying all the
expenses of the company.
 It is very expensive method to apply in
the company and can be applied in
large firms only.
Incremental Budgetary Control
Incremental Budgeting is the tool where a small percentage is been added to previous
year budget to calculate the upcoming year’s budget. Current year budget is based on the

previous year budget. This method can be applied in the companies where only seldom
changes occur in the company (Tinkelman, 2018). This method is very simple to calculate by
adding a percentage of amounts in previous year. Generally, current year budget is either
higher or lower than the previous year budget.
Advantages Disadvantages
 It is very easy to calculate and simple
to understand by the company.
 It can be applied in small or medium
companies where the seldom changes
occur in the company.
 It is very economical tool and can be
applied by every firm in the
organization.
 The tool does not help in cost control or
cost elimination of the company.
 It cannot be applied in the large firms
where the big changes occur in the
organization.
 The tool does not take into account the
various expenses such as inflation rates,
interest expenses.
LO 4
Comparison between different organizations regarding how they are adapting management
accounting for dealing with their financial problems
Identification of financial issues:
Financial problems starts taking place in an organization when there is no proper
planning regarding the costs and expenses of the business, when there are no adequate and
effective internal control measures through which cost efficiency in the operations could be
achieved, when there is not any sound financial governance policy through which
transparency in the financial information could be maintained. Lack of all these variants
results into financial crisis for the company in the form of lower sales, lower cash inflows
within the business, reduced confidence of investors and lower profitability (Malina, 2018).
Different organizations are identify their financial issues with the help of various
management accounting tools and techniques. Below is a comparison between different
companies in the context of their adaptation to management accounting for confronting their
financial issues:
Bench-marking: Key performance indicators:

(Rocco Forte Hotels) (Qbick Hotels)
The term bench-marking refers to the
procedure of comparing business
processes, policies, financial
performances, employee’s & product’s
performance with the standard
performance set as a benchmark by the
best performing business entity in the
industry. Such standards helps the
company in identifying the loopholes in
their processes, polices or performances
through which it becomes able to
formulate more enhanced strategies for
dealing with the future business problems
and dynamics. Rocco Forte Hotels
which is one of the competitor of Qbick
Hotel employs this technique for
identifying and responding to its financial
problems. By the way of this method, the
manager of Rocco Forte Hotels assesses
the efficiency of their own performance
and identifies the gap between the bench-
marks set and actual performance
(Cowton, 2018). The problem with this
method of evaluating the performance is
that it does not reveal the underlying
conditions under which such bench-
marks were set by the leading company
in the industry. Thus, the basis it provides
for comparison does not qualitatively
entails the actual reasons why the
company has failed in achieving its
desired goals and targets.
The meaning of the term key
performance indicators refers to a set of
quantifiable measures that a business
orgnasiation applies for the purpose of
gauging its performance over time.
Qbick Hotels employs this technique for
assessing the operational efficiency of the
business in relation to attainment of its
intended targets.The company develops
and set its KPIs in the SMART manner
wherein the objective is specified,
measurable, attainable, relevant and time
framed. By the application of SMART
KPIs within the business, it allows the
manager of Qbick Hotel in effectively
evaluating and re-evaluating the
performance. For instance, if the hotel
has surpassed the its revenue target in the
current year, then it compels the business
manager whether it has set company’s
goal too low or such performance is a
result of some other contributing
factor(Usenko and et.al., 2018).
Very good, you are one of the few people who have made a
real comparison between two management accounting tools.
Please, tell why each one used a different tool.
Financial governance:
Financial governance is a term which can be referred to a manner wherein a business
entity ,collects, records, analyze, tracks and reports its financial transactions. The purpose of
financial governance is to aid the managers of Qbick Hotels in managing, monitoring and
controlling the activities of the business enterprise. Moreover, it also makes sure that
preparation of the financial reports has undertaken by taking into account all the needed legal
necessities and all the compliance have been adhered to.In the event of lack of strong

financial governance, different risks could be developed within the business such as theft,
data manipulation, inappropriate recording of the financial information, inadequate
disclosures etc. The collective effective of these things results into reduced confidence of the
various stakeholders of the business that ultimately reflects into lower profitability of the
company (Weetman, 2019).
Managerial accounting leads business enterprises towards sustainable success
The application of effective managerial accounting tools and techniques contributes
towards the sustainable success of the organization. This branch of accounting is mainly
concerned with the optimum allocation of business resources within the various activities of
the Qbick Hotel. It allows the management of the organization to assess the internal and
external factors which has the potential of affecting the business in a either ways. Techniques
of managerial accounting like Key Performance Indicators, bench-marking,financial
governance when optimally applied by the management accountant of the hotel, it enables it
to formulate better and quality strategies and procedures for the business entity by which it
can cope up with its financial issues and can head towards sustainable success.
Evaluation of how planning tools for accounting respond suitably for solving Financial
problems to lead organizations to sustainable success
Planning tools like fixed budgeting, zero based budgeting, activity based budgeting
assist the manager of Qbick Hotel in dealing with their financial issues in the sense that these
budgetary tools offers a spending system or a framework within which the operations of the
business are to be conducted for the purpose of eliminating the possibility of over
expenditure, the consequence of which would be high production cost and redundant
financial burden on the organization (White,2019). Further, technique of budgetary control
helps the business in evaluating and analyzing its performance through which it gets to know
about its weaknesses for which more effective decision making could be undertaken. Thus, it
can be said that effective application of planning tool within the business can lead the Hotel
toward the sustainable success.
CONCLUSION
From the above project report, it can be concluded that managerial accounting’s primary
motive is to assist the internal management of a business organization in its process of
decision making. The report summarized about various types of managerial accounting

systems such as price optimization system, inventory management system,job costing system
and cost accounting system. Cost accounting system is required in the business since it aids
the managers in ascertaining the cost of each of the product manufactured by the enterprise. It
also helps the manager of Qbick Hotels in controlling the business operations. Moreover,
several kinds of planning tools were highlighted in the project report for example, zero
budgeting in which budgets are created from the scratch. The biggest advantage of such
budgeting is that allows the room for budget inflation. Lastly, it was concluded that
managerial accounting helps the hotel in confronting to the financial problems and in heading
towards sustainable growth.