Tech (UK) Limited: Unit 5 Management Accounting Report Analysis

This report provides a comprehensive overview of management accounting principles and their application within Tech (UK) Limited. It explores the core concepts of management accounting, differentiating it from financial accounting and highlighting its importance in decision-making. The report delves into various aspects, including cost accounting, inventory management, job costing, and budgetary processes. It examines different types of financial information and managerial accounting reports, such as job costing reports, overhead allocation, life cycle costing, and standard costing reports. Furthermore, the report discusses the significance of management accounting information for departmental managers and how it facilitates effective decision-making. It also covers the advantages and disadvantages of different budget types, the budget preparation process, and the importance of budgeting as a planning tool. The report concludes by comparing organizations using various management accounting techniques to address financial problems and improve overall performance.

UNIT 5
MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A. Management accounting and essentially requirement of management accounting...............1
B. Financial information and types of managerial account report..............................................2
M.1 Benefit of management accounting ....................................................................................5
D.1 Management accounting systems and management
accounting reporting...................................................................................................................6
TASK 2............................................................................................................................................6
P.3 Calculating the costs by using the appropriate methods.......................................................6
M.2 Techniques to be used to increase profit.............................................................................8
D.2 Interpretation of data............................................................................................................8
TASK 3............................................................................................................................................8
A. Budget types and advantages or disadvantages .....................................................................8
B. Budget preparation process....................................................................................................9
C. Importance of budget ...........................................................................................................10
M.3 Planning tools used in budgeting.......................................................................................11
D.3 Planning tool solve financial problem................................................................................11
TASK 4..........................................................................................................................................11
P.5 Comparing the organizations implicating various management accounting techniques to
deal with financial problems.....................................................................................................11
M.4 Financial problem, management accounting.....................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Administration accountancy is a process to manage financial factors in working
environment. In this context of use future decision making is based on financial sectors. On the
other hand, proper financial management is most important with the help of some method to be
used in working environment. This report is based on Tech (UK) Limited organisation. This
company is basically loathed in United Kingdom and provide different services in fill return and
manage account (Wijaya, 2015). Further, it covered income statement and cost analyses
management is help to distribution of income in different field internal working environment.
The payment and deduction of the explanation systems. As the computation cost to set up the
financial gain statement of the cited organisations. In this report focus on budget preparation and
manage cost in working environment. The main aim of this report is improved financial
condition of organisation.
TASK 1
A. Management accounting and essentially requirement of management accounting
Management accounting is help to manage the provision of accounting information and
make some improvement in future performance. It is help to make financial decision in working
environment. In this context management accounting is one of the most important part to all
financial department. It is a process of preparation of management report and manage the
financial information and day to day and short term decision in working environment (Liu and
Kuang 2014). Management accounting is focus on decision making and use budgeting and
costing method is most important at the time of management accounting in internal work place.
On the other side, some essentially requirement of management accounting and financial
management is totally different in work place.
Management accounting Financial accounting
1. This accounting system is provided relevant
information to the manager. It is help to make
new polices and rule is developed in working
environment. (Otley, 2016)
1. Financial management is an accounting
system which is help to manage financial
accounting in organisation.
2. This report is to be prepared as per the need
of the requirement of the organisation.
2. Financial statement is prepared at the end of
accounting period.
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3. Complete and Detailed reports regarding
various information.
3. Summarized Reports about the financial
position of the organization
4. There is no compulsion to prepare
management account reports as per the law.
4. Company Act, 2006 requires preparation of
final accounts of the company.
5. It provides monetary and non-monetary
information for assessing company's
performance. Non-monetary information such
as employees' productivity etc.
5. Financial information in terms of monetary
is provided which guides users of accounting
information to take decisions.
6. There is no specific format to prepare
managerial reports.
6. Format is prescribed by the Act and has to
be followed by organisation to prepare its
financials.
2. Importance of management accounting information for departmental managers
Management accounting is useful for Tech (UK) in order to maintain efficiency of
departments in the best possible manner. It is required that various departments such as finance,
operations, marketing, HR and production should be integrated with each other so that
organisation may be able to achieve goals with much ease. Reports provided by production
department lists down requirements of raw materials and as such, it is forwarded to finance unit
so that it may assess whether sufficient amount is available to purchase raw materials or not.
This in turn affects internal operations of the company. Thus, it can be said that management
accounting information assists departmental managers in taking effective decisions and as such,
requirements are evaluated in advance and as a result, efficiency can be achieved by taking
enhanced decisions.
In this report is to be focus on many factors and make some improvement in growth rate
and help to future development. Management accounting information system is most important
part and help to manage information is analysed and summarised information and improve the
function in working environment. There are some function are as follows :-
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 Cost accounting :- In cost accounting system is focus on to manage cost in internal
working environment. It inculcated profitability analyses, inventory valuation and cost
control is most important part for organisation. In this way, estimating the accurate cost
of product as per the need of the organisation and mange cost in working environment
(Otley, 2016). Cost accounting is three different part is actual, normal and standard
costing. On the other hand, cost is to be set as per the standard of the performance.
 Actual costing
This costing system records actual cost incurred on raw materials, direct labour and actual
quantities used in the production to assess cost of product by the managers.
 Normal costing
The normal costing is used to determine cost of product and it calculates components such as
actual cost of labour, raw materials, standard overhead rate etc.
 Standard costing
This costing is used to anticipate i.e. standard cost of activities of Tech (UK). Moreover,
estimated costs are compared periodically to measure deviations occurred in actual costs.
 Inventory management system :- In this system is one of the most important system and
focus on to manage inventory in working environment (Jermias and et.al , 2017).
Organisation is focus on used in manufacturing industry to create work order and bill of
material. Examples of inventory that a manufacturing business may have included raw
materials, such as wood, to make a shelf. Work-in-process inventory, such as an
unfinished cake in a food manufacturing business.
 Job costing method :- Job costing is a method for assigning manufacturing cost to an
individual product and improve growth rate. In this context job costing is to be focus on
assigning overhead cost and improve production department. It is one of the most
important part and manage growth rate and increase the level of carrying into action in
market. For example : job costing is befitting for deriving the cost of constructing a
custom machine, scheming a software programme, constructing a construction, or
manufacturing a small batch of merchandise.
 Budgetary :- It is one of the most important part for each and every organisation is budget
(Fullerton and et.al 2014). To set budget for each and every activity in internal working
environment and focus on estimate towards requirement of the fund in working
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environment. This is help to manage growth rate and future development rate as per the
need of internal work place.
4. Inventory management systems
Inventory is an integral part of company so that desired production may be carried out in
the best possible manner. This help to produce units in adequate way. Tech (UK) also uses
inventory management system so that organisation may be able to manage level of stock quite
effectively. In this aspect, inventory report is prepared by production department in which
requirements are listed down and is forwarded to top management. Then, it scrutinises report and
as such, inventory is ordered to meet demand. This help to reduce wastage of resources in
effective manner. Type of management systems are barcode tracking and Radio Frequency
Identification (RFID). Barcode tracking means that inventory is updated when it is scanned
which allows clarifying level of inventory. While, RFID means every time, an inventory is
passed, software identifies and records the same. Thus, these systems are useful for company.
B. Financial information and types of managerial account report
Managerial accounting system is one of the most important part and focus on
management in growth rate in market. It is one of the most important part for organisation.
Managerial accounting is the mental process of distinguishing, measuring, examine, interpreting
and communication message for the pursuit of an organisation cognitive content (Chenhall and
Moers 2015). This types of accounting are help to manage growth rate and improve internal level
carrying into action in working environment. Managerial accounting is focus on day to day
operation and improvement in daily activity in finance department. It is help to manage work and
improve growth rate in market. To be focus on different types of report are as follows :-
 Job costing :- In this method is to be focus on level of operation make by profit and
make some improvement in growth rate (Chenhall and Moers 2015). It is help to
complete analyses of cost and make some improvement in internal working
environment.
Importance :- It is help to find out the cost of each and every department. On the other side,
increase satisfaction level in working environment.
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 Overhead allocation :- In this accounting techniques is help to improve the growth rate
and future development rate is most important as per the need of the organisation. It is
focus on allocation of fund and overhead expense and in working environment. It is help
to focus on cost analyse for the benefit of growth rate in future performance in market.
Importance :- It is help to determine the cost and other expense in working environment and
make some important in cost analyses.
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 Life cycle costing report :- In life cycle cost is help to analyses the economic condition
used in the selection of alternative impact on both past and future cost. On the other hand,
compare with initial investment option and identify the least cost in working environment
(Klychova and et.al 2015). This kind of cost is to be focus on complete evaluation and
make some changes in internal and external working environment.
Importance :- It is help to determine the particular level of the product and services which is used
from the start up.
 Standard costing report :- In this costing is to be focus on some techniques which is had
improved carrying into action is substitute cost. This is give a difference between
estimate and actual cost is to be used in working environment and make some change in
growth rate. This is focus on actual cost which is use and estimate cost which is give
impact on future carrying into action (Staffor and Karszes 2017). It is most important part
in management accounting and make some improvement in future cost and make some
improvement in costing method.
Importance :- This is beneficial tool in analysing the adequate costs to such operations on the
basis of budgeted and actual costs. This is one of the most important part and reduce exceed fund
from such kind of activity in working environment.
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 Financial account :- In this kind of techniques is help to focus on recorded each and every
transaction incurred in given period in internal and external working environment. This is
focus on summarised each and every information which is used in internal working
environment (Schaltegger and Burritt 2017). Moreover, it is help to manage internal work
and stakeholder and business planning is most important in working environment.
Importance :- This financial account is most important to analyses the income and expenditure in
working environment. Financial account is help to focus on framework and operation of working
environment.
There are all about the financial information to be used in internal and external working
environment and make some improvement in growth rate in market.
M.1 Benefit of management accounting
Management accounting is one of the most important part and help to increase internal
financial execution. It is help to make financial decision in working environment. In this context
management accounting is one of the most crucial part to all financial department (Uyar and
Kuzey 2016). The practical example is when Tech (UK) wants to reduce costs on production of
mobile gadgets, it may analyse cost accounting report to assess and minimise expenditures.
 Improve Cash Flow: Budget will be the most important aspect of the management
accounting system. As the cash flow of the firm will be efficaciously improve with the
application of proper direction explanation system.
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 Business Decision: it is the another benefits of the direction accounting which help to
take better concern decisions. According to the business concern decision, management
will analysis the chance to implement to form various modification in the organisation,
D.1 Management accounting systems and management accounting reporting
In this context is to be focus on management accounting system and management
accounting reporting both are total different in working environment. Management accounting
system is to be focus on manage day to day account in organisation and report to head of the
department (Uyar and Kuzey 2016). Just for them having their own particular significance and
reason to be incorporated into this report and to settle on the future choice with respect to
benefits, stock, deals and cost of the firm. Job cost report help to determine cost of products and
as such, pricing strategies may be made by Tech (UK. )
TASK 2
P.3 Calculating the costs by using the appropriate methods
Marginal Costing:
Income statement for the Tech (UK) Limited organisation as per marginal
costing
Particulars Details Details Amount
Sales revenue 1500*35 52500
Less: Marginal Cost of Goods sold
Direct Labour 2000*5 10000
Direct material 2000*8 16000
Variable production overheads 2000*2 4000
Less: Closing inventory
Direct Labour 500*5 2500
Direct material 500*8 4000
Variable production overheads 500*2 1000 22500
30000
Less: Other variable costs 52500*15% 7875
Contribution 22125
Less: Fixed Costs selling and administrative 15000+10000 25000
Net loss -2875
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Interpretation: From the above calculation as per the marginal costing techniques can be
easily determine that organisation in loss which is around negative -2875. This method precede
replicated with the utilisation of variable cost into operations. It shows that company is not in
demand of fixed cost to bring the measurements. Hence, the organisation closing inventory is
adopted from the operation is around 7500 which referred only variable cost. The fixed cost
selling administrative of the organisation is 25000 which can be impact on the firm cost.
Absorption costing:
Income statement for Tech (UK) Limited organisation as per absorption costing method
Particulars Details Details Amount
Sales revenue 1500*35 52500
Less: Cost of Goods sold
Direct Labour 2000*5 10000
Direct material 2000*8 16000
Variable production overheads 2000*2 4000
Fixed overhead costs 2000*5 10000
Less: Closing inventory
Direct Labor 500*5 2500
Direct material 500*8 4000
Variable production overheads 500*2 1000
Fixed overhead costs 500*5 2500 30000
22500
Less: Under-absorption on overheads 5000
Gross profit 17500
Less: Total production cost 17875
Net loss -375
Interpretation:From the above calculation of the income statement for Tech limited
organisations as per absorption costing which can be interpreted that company in loss at the end
by covering all the cost of the entity which can be labour material etc. but the firms closing
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inventory bring the cost around 10000 which can be included all the variable and fixed cost
involved in the organisation overall cost.
Working Notes:
WN 1:
WN 2 :
M.2 Techniques to be used to increase profit
In intercourse with instant the fruitful data set which reverberate the higher lucrativeness
as well as pat allocation of the expenditure. There are peripheral and absorption cost method
which will assistance the entity in terms of distinguishing the adequate net income. This kind of
techniques is assistance to increase growth rate and make some changes in market (Bariamis and
et.al 2017). Marginal costing techniques is aid to consideration of all the cost is to be used in
working surroundings. On the other side, absorption costing is focus on production cost and
indirect expanse to be used in work place.
D.2 Interpretation of data
As per the above data marginal cost techniques is to be focus on to be had loss of – 2875
and absorption costing techniques is had loss on – 375. Both techniques are most important and
focus on improve internal and increase the growth rate in market. This kind of data is help to
manage the future performance and make some changes as per need of structure (Lavia López
and Hiebl 2014). This interpretation is help to manage the growth rate and make some
improvement to increase net profit.
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