Management Accounting Report: Unicorn Grocery and Financial Analysis

This report, prepared for a General Manager, comprehensively addresses management accounting principles and practices within the context of Unicorn Grocery. It begins with an introduction to management accounting and its significance, followed by a discussion of various management accounting systems including inventory management, cost accounting, and job costing. The report then explores different reporting methods, such as inventory control and budget reporting. A significant portion is dedicated to comparing marginal and absorption costing, along with the preparation of income statements. The report also examines the merits and demerits of budgetary control tools and concludes with a discussion of how management accounting systems can be adopted to respond to financial troubles. The report emphasizes practical applications and provides examples relevant to the retail industry, offering insights into financial analysis and planning.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
P1 Various management accounting system..........................................................................3
P2 Various method for management accounting reporting....................................................6
TASK 2............................................................................................................................................9
P3 Income statement and difference between marginal and absorption costing....................9
TASK 3..........................................................................................................................................13
P4 Merit and demerit of many kind of planning tools which is used in budgetary control. 13
TASK 4..........................................................................................................................................17
P5 Adopting management accounting system for responding financial troubles................17
CONCLUSION..............................................................................................................................18

Report
From: Management accounting officer
To: General Manager
Subject: To write a report to General Manager which is going to cover both management
accounting as well as management accounting system with distinguish costing techniques and
reporting to enable firm implement them.
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INTRODUCTION
Management is an essential component in every business activity through which all goals
and targets get ascertain in an effective manner. Organisation have to relate their management
with accounting process so that they become able to make business operations feasible in nature
and control all sort of cost as well properly (Cokins, 2013). Management accounting define as a
process through which managers of a company make appropriate record of all kind of expenses
which are taking place while manufacturing their products and minimise all risk factor as well
which arise in short term context. This project is based on Unicorn grocery which is one of a
finest association of retail industry. Managers have to keep proper records and analyse books of
accounting in every quarterly, weekly and monthly basis and prepare reports as well so that
unnecessary cost get minimise and control. This report is going to describe difference amongst
marginal as well as absorption costing. Along with this, by using various tools of management
accounting system firm can easily face issues regarding finance and solve them immediately.
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TASK 1
P1 Various management accounting system
In past times, it was easy to do a business for an individual as they need to determine
manufacturer of item and then sell it at marketplace. As time passes, this procedure get complex
because of implementation of new or unique tools and methods in business (Lavia López and
Hiebl, 2014). In recent era, it is required for an enterprise to comprehend significance of
management accounting as this will assist them to manage firm and their activities effectively
and efficiently. Therefore, it is like a process where an employer try to determine as well as
examine both type of data i.e. financial and other is non financial. As a result, company can
utilize their resources in an appropriate manner because this is most essential for them. This will
provide assistance to an enterprise as it helps to arrange finance adequately. It is essential to
avoid clashes; thus, they can attain their coveted targets within limited period of time.
Definition: Costing is considered as a most important aspect of management accounting as with
help of there many tools an organisation can easily decrease their entire production cost. This can
provide influence to revenues in a direct way. To acquire best outcome within relevant time
duration, manager has to take judgements appropriately. To increase interaction at distinctive
level, superior can use system of management accounting. As a result, they can opt best option
for their firm. By utilizing this, employer can comprehend entire policies which are formulated
by regulatory bodies (Weikart and Williams, 2014). Extrinsic surrounding can affect company
positively or negatively. When manager is recording and examining information as well as data,
they never take external environment into under consideration. To neglect issues which are
related to short term, superior needs to manage cash adequately as this can provide impact to
their objectives.
Apart from various pros, there are many cons are there which is connected to
management accounting. Entire judgements which is taken by utilisation of many techniques is
always depend of both sort of accounts i.e. cost and financial. If wrong decision is taken then it
leads to huge losses. Small companies are not able to use this accounting system as this contains
lots of fund. As arguments of many individuals, management accounting only assists key holders
of firm instead of stakeholders. Therefore, there are various requirements of system of
management accounting which is mentioned as beneath:
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Management
Accounting
system
Inventory
Management
System
Cost
Accounting
System
Job
Costing Price
Optimisation

Inventory management system: Inventory management system is a helpful element or a
system through which every business become able to manage their stock by making appropriate
information about them. This support in managing and controlling the cost and minimise wastage
and elimination risk.
It will be difficult for a firm to determine exact inventory which will be kept by them into
their storage (Fullerton, Kennedy and Widener, 2014). If they are storing more items then
carrying cost will get enhanced. But if they have less stocks then they will not be able to fulfil
requirements of their users.
Example: It is must for Unicorn grocery to decrease their wastage; thus, they can maintain their
profits in an effective manner. As per present era, manager of firm can use distinctive kind of
software to keep up their accounts adequately. This will consume less period of time. Along with
this, some manual methodologies can be utilized by them which takes less fund. Overall details
related to goods movement is fundamental for them while company is applying this system.
Another example of inventory management system is TESCO they are the leading retail store
and manage all their material information properly. This enables them in facilitate their demand
and supply properly along with that they also become able to eliminate risk of wastage of their
offerings for customers that they have 21.92 days inventory as compared to Unicorn grocery they
maintain only 5 days inventory in their consideration.
Cost accounting system: Another major source for enhancing profitability of business is
cost accounting system. It is a framework which used by a firm to estimate the cost of their
products for profitable analysis, inventory valuation and cost control. It is a critical and different
thing but, management have to work on this factor properly.
With assistance of this, superior of firm can easily decrease their production cost effectively.
This will cater success as well as growth to association because if they reduce their cost then
organisation can easily improve their revenues. Records which are associated with stock and in
additional entire output is considered as a fundamental aspect of management accounting system.
Example: Unicorn Grocery can apply cost accounting system in their consent effectively through
which they become able to maximise their profitability. Thus, their managers have to work
effectively on this consent and critically examine all such cost which will lead to incur on their
project.
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TESCO applied cost accounting system properly as their managers have good and effective
working skills. Through this, they become able to enhance their profit margin and generate more
and more revenue as well.
Job costing: It is a method of recording cost of manufacturing job rather than process.
With this, managers keep the track of each cost for the jobs maintaining data which is more often
related with business.
In recent era, this approach is much famous as it aids to determine revenues which are provided
by each occupation. With help of this method, manager can find out cost which can be incurred
by a single job. If Unicorn grocery is utilizing this methodology then, this will be easy for them
to determine profits which they gained through a particular job. Along with this, many
information related to distinctive company's operations is required to apply this tool (Maiyaki,
2011).
Example: According to TESCO their managers estimated their job costing value for production
is around 40% but its actual value determines at 32% which is close but Unicorn grocery
managers estimated the production cost around 50%. Small business association do not get
increase their production cost at such level and thus, their actual value remains at 15% which is
very low. Hence, managers need to make more focus on this consent so that they are going to
maximise their profitability.
P2 Various method for management accounting reporting
Employer needs to formulate various kinds of report to present plan to higher authority;
therefore, they can use some techniques which are described as below:
Inventory control reporting: Inventory controlling reporting described as a report which
is helpful in preparing and maintaining proper records of inventory. This enables them in
increase their profit margin as well as maximise the chances for gaining market opportunities.
There are major issues arise in business due to overstocking and under stocking but for
controlling this fact, inventory controlling system get uses.
Fundamental aim of assignment is to determine those issues which are associated with
management of stock. As Unicorn grocery is include in small association; thus they will face
problems related to overstocking as this will occur high expenditures. But if there is under
stocking then they can lose their clients because they can purchase products from another place.
To solve this kind of issues they can utilize method of management accounting system, for
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example EOQ, with help of this, manager can find out exact amount of item which they can keep
there in storage. As a result, it will decrease their carrying cost (Burritt, Schaltegger and
Zvezdov, 2011).
Example: Unicorn grocery maintain only 5 days inventory but their stock get finished in 7 – 8
days. This affect their working and operations which is not appropriate in nature and thus
chances of customer satisfaction get reduce. On the other hand the estimated number of days for
inventory in TESCO is 21 days which is appropriate.
Budget reporting: Budget is an essential factor for every business which support in
making things correct and appropriate in nature. Budgeting report is a report which frame by
managers of a company by estimating expenses and investment of prior year in advance. The
major aim of preparing budget report is to maximise the profitability of business through
allocating each and every resources properly.
Primarily target of present assignment is to record as well as analyse their income as well as
expenses. This assists to cover entire division; thus, employer always want to prepare this. If
each unit has a thought about their budget then, they can spend fund accordingly. This helps
reduce wastage and clashes amongst all departments. Along with this, they will accomplish their
work within provided period of time. Spending plan will aid firm to find out their actual position
at marketplace (Financial Reporting Center, 2017).
Example: Unicorn grocery prepare their budget report properly in which managers utilise their
skills in an appropriate manner. Under that department managers priorly identify all risk factor
and implement the projected investment properly as well. £21 lakh is a initial investment for
them which enables them in bringing new changes and expansion in other localities.
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Illustration 1: Financial reporting
(Source: Financial Reporting Center, 2017 )
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TASK 2
P3 Income statement and difference between marginal and absorption costing
Most fundamental aspect of management accounting is costing. With assistance of this,
an association can easily decrease their cost which is related to their business; as a result, this
helps to improve their revenues. Therefore, marginal as well as absorption costing can be
described as beneath:
Marginal costing: This kind of expense occur when an organisation is do production of
additional product (Renz, 2016). This can be classified into two segments, one is manufacturing
and another is non – manufacturing cost. Three types of expenditures are going to consider in
this assignment, such as labour, material and in addition overhead. Apart from production, it
likewise concentrates on some extra expending, for example: period cost. When firm is adopting
this costing method then, they have to consider that closing stock need to be treated in similar
year. It will reduce revenues of firm which is gained by them. Most essential part of this method
is know as Break even examination as it represents that entire variable cost is covered. Along
with this, association is at stage where they are facing circumstance of no profit or no loss.
Additionally, work in progress need to be taken into under consideration in this sort of costing.
Absorption costing: When a company is using this method into their business then, they
have to considered some expenditures such as labour, material, overheads and so on. Association
need to be include closing stock while they are using this methodology; as, this helps them to
gain more profits (Aminbakhsh, Gunduz and Sonmez, 2013). If products are not sell out in same
year then, firm will ignore their fixed expenses. Absorption costing covers entire areas which is
associated with production procedure. This is the main reason why it is known as full costing.
Hence, there are some difference amongst marginal and absorption costing which is
stated as beneath:
Basis Marginal Costing Absorption Costing
Level of inventory If closing stock of firm is
minimum then, this will show
maximum revenues.
Closing stock can provide
influence to level of profit of
an association.
Cost As per this method, fixed
expenses never include into
If an organisation is using this
method then, they have to
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