Management Accounting Analysis for R.L. Maynard Company Report

This report analyzes management accounting practices within the context of the R.L. Maynard Company. It begins with an explanation of management accounting, its types (lean, traditional, throughput, and transfer pricing), and its role in decision-making. The report then details various management accounting reporting methods, including sales reports, cost accounting, and budgetary reports. A significant portion of the report focuses on calculating net profit using both marginal and absorption costing methods, providing income statements for each method and comparing their outcomes. The report also examines the advantages and disadvantages of different planning tools used for budgetary control, and it concludes with a comparison of how organizations respond to financial problems. The analysis highlights the importance of management accounting in financial planning, cost control, and strategic decision-making, with a specific focus on the application of these concepts within the R.L. Maynard Company.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Explain management accounting and its types......................................................................3
P2 Explain different methods used for management accounting reporting................................5
TASK 2............................................................................................................................................6
P3 Calculate of net profit by using various costing methods......................................................6
TASK 3............................................................................................................................................9
P4 Advantages and disadvantages of various types of planning tools .......................................9
TASK 4..........................................................................................................................................12
P5 Comparison how organisation and how they respond to financial problems......................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Managerial decisions are very vital for the organisation that gives the new blood to the
organisation. It manages all the resources, minimizing cost, control budgets and planning regard
to business. It can be possible through the information that are provided in the management
accounting that facilitate them in to making financial decisions regard to finance. The research
project is context to the R.L. Maynard company in which it manager adopt various planning
tools, management accounting system and reporting (Burritt, Schaltegger and Zvezdov, 2011).
There is a mainly discussion on the management accounting and study on the different types of
management of accounting system that easily responding financial problem. Thereafter, it there
is discussion on marginal costing and absorption costing techniques that are adopted by company
to prepared net profit. Further, there is a study on the explanation on advantages and
disadvantages of various types of planning tools that can be used for budgetary control.
TASK 1
P1 Explain management accounting and its types
Management accounting is used by the managers in order to make effective decisions
regard to firm. The information includes in it are helpful for the manager to run their day to day
business operation in effective manner. Thus, it involves a accounting information that are useful
for the management for the main purpose of performance management system, devising planning
and also controlling in formulation of business's strategy. The main aim of these type of
accounting is that to give proper advice to the managers regard to financial consequences of
firms decisions, help in controlling financial aspects, also describe the effects of the competitive
landscape (Elbashir, Collier and Sutton, 2011). Therefore, it is different from the financial
accounting as it is always looking for future rather than historical data. R.L. Maynard company
used management accounting and it provide essential requirements of different type of
management accounting system that are described below-
 Lean accounting- It together brings the control, performance measurement methods and
accounting which supporting the lean manufacturing introduction. It does not support the
lean manufacturing but employed the lean methods. It mainly focusses on minimizing the
cost of goods sold rather than determining the cost that are incur are the time of
manufacturing process. There are several functions in these accounting that are perform
by the lean accounting that includes removing non-value -add procedure in reporting as

well as accounting. Further, give a clear understanding of probability in apposition to
product lines and it generate a real-time report on regular basis. Thus, ignore the months
end as well as historical week reports.
 Traditional cost accounting- It can be defining as a allocating the production expenses
that are produced at the time of manufacturing a goods. It is also known as a conventional
method as it assigning the indirect cost incur in factory at the time of manufacturing an
item. It includes mainly in it are the production machine hours, number of units produced
and direct labour hours etc. R.L. Maynard adopts the traditional costing method in which
it assigns the manufacturing cost and it fails in allocating the non-manufacturing. The
main advantages from it is that to generate the financial reports as it assists them in
providing a value for COGS. Apart from this, with the advancement of computer and
machines now this system becomes outdated. It is bad for the management in their
decisions-making process as it does non-consider the non-manufacturing expense.
 Throughput accounting- It is based upon principle and it is very new in the
management accounting. It is an accounting through it identifies factor that facilitate
them in achieve its goals and objectives in effective manner. It mainly focusses on cash
transaction and ignore the costing as well as cost accounting. It does not assign all the
expenses such as variable and fixed cost as well as it also involves overheads related to
goods that are offer by company (Elbashir, Collier and Sutton, 2011). It is a theory of
constraints through which manager of a company can easily make decisions that are
relate to growth purpose.
 Transfer pricing- It is that price in which a government formulating the rules when one
enterprises transfer any kind of goods across borders. Therefore,it is used by the
management accountant to determine the cost that are incur at the time of transaction
among division. Furthermore, these prices are normally set for the intermediate goods
which are supplied through selling to buying division. The main advantage of this is that
it provides accuracy as well as fairness about the business entities as there are various
regulation are formulated in transfer price.

P2 Explain different methods used for management accounting reporting
The R.L. Maynard adopts the various types of management accounting reporting that are
as discussed below-
 Sales report- The report is based upon the sales activities that are carried out by each and
every business firm for some particular time period. It summarizing the sales of products
or services to a customers, performance of salesperson and profit of a company etc.
Furthermore, there is an also information of e-mail,customer meeting, conversation,
outbound calls that are created on daily as well as weekly and monthly basis. The main
advantages of sales report is that it can be used by company for the purpose of knowing
financial performance (Garrison and et.al., 2010). It is possible through comparison
among past financial performance with the current profits. For this, they can make
marketing plan accordingly to deliver the product or services as per the customer’s
expectation. The sales report is used by the managers to finding out the market
opportunities and trends so, they can easily increase sales volume of product or services
in the particular area.
 Cost accounting- It is useful for the management in order to provide a accurate amount
on financial statements as it determined the cost of projects, process and products etc. It
is also assist the manager in taking decision in effective way, controlling the organisation
functions etc. Therefore, it is best management accounting system that are used by most
of the manufacturing companies in computing the unit cost of products that are
manufactured (Ward, 2012). For the purpose of reporting the inventory cost on its B/S
and COGS on the income statement. R.L. Maynard used cost accounting to determine
cost, control cost and give the future decisions related to cost that are based upon
historical cost data.
 Budgetary report- It is a detailed information that are mainly comprised into two
columns are the budgeted outlays and actual. It facilitates them in determine the budget
variance among budgeted and actual amount over an accounting period. It is a internal
report in which it can easily designed budget for a future through comparison estimated
and comparison budgeted. The report has a two uses one is that when any issues arise
within the workplace regard to finance that are be easily reviewing through budget report.

Furthermore, it has a one more purpose in which they can easily make prediction and
evaluating the company's financial performance.
TASK 2
P3 Calculate of net profit by using various costing methods
Income statements is a financial position of a firm that can be categorised into two parts
revenue and expenditure. It is a financial statement of a company that are prepared in specific
accounting period that can be judge firm's financial performance based on net profit or net loss.
The accountant put all the activities that are related to operating and non-operating activities on
the debit and credit side (Zimmerman and Yahya-Zadeh, 2011). It can be prepared by company's
accountant by adopting management costing techniques either marginal and absorption costing.
R.L Maynard management accountant prepared income statement by adopting both techniques to
finding out the net profit or loss of firm. It has been shown in the table 1 and table 2 in which Net
profit/ loss prepared by both management costing techniques are as follows-
TABLE 1: Income statement prepared by marginal costing
In these marginal costing, there is a change such as increment or decrement in the
opportunity cost that can be produced at the time manufacturing an additional unit. It is that type
of technique in which fixed expenses cannot be charge in the production as it is written of to the
profit and loss account. The main advantages of the marginal costing is that it can be simple as
well as easily to understand and it is useful in a competitive environment. Furthermore, it shows
the relationship among the price, volume and cost.

TABLE 2: Income statement prepared through absorption costing
Absorption costing can be defining as all the cost relating to manufacturing are absorbed
through units produced. It can be said in the other words in which cost of goods sold include
direct material, labour, consider both variable and fixed expenses. Thus, it can be resultant into
full costing that can be referred as a absorption costing.
INTERPRETATION: According to the above calculated data from using both marginal
as well as absorption costing method. In preparation of income statements through using
marginal costing with 600 units total sales generated from this is 21000. with production units
of 6, 5, 2 which are used in production of 21000 of sales. They are able to achieve a profit of
9300. (Kaplan and Atkinson, 2015). Whereas, in the table 2 income statement has been
calculated through absorption costing in which it takes same units to produce those 600 units and
700 units. The fixed cost are included under this process which changes profitability with those
units. This method of costing is more effective as it generate maximum profit of 9600. it also use
to analysed under and over absorption with the changes in extra units production. Thereafter, at
the time of calculating net profit it takes all the expenses are the fixed and variable under this
costing. It has been interpreted from above data in table 2 the net profit is calculated by
deducting cost of goods sold and total expenses that is £ 9600. It has been asserted the net profit
in marginal costing is lower than the absorption costing as it ignores the fixed expenses.
The several has been done on it in which it has been concluded that the absorption
costing is the most appropriate techniques for the purpose of calculating the net profit. It is due to
because it takes both type of expenses such as fixed and variable cost at the time of computing
net profit / loss of a company in the financial year. The important thing is that while calculating

profit is that the expenses that are taken must be validate and reliable data. Furthermore, most of
the manufacturing organisation adopt absorption costing methods in preparation of income
statement.
Difference among marginal and absorption costing
Basis for comparison Marginal costing Absorption Costing
Definition  Marginal costing there
is a change such as
increment or decrement
in the opportunity cost
that can be produced at
the time manufacturing
an additional unit.
 It is the management
accounting system that
consider only fixed
expenses for
ascertained of cost of
goods sold or net profit
in the income
statements that are
known as marginal
cost.
 At the time of
calculation is take
variable expenses and
it consider fixed cost as
a period expenses that
are to be written off in
the profit and loss
statement.
In the absorption that can be
known as full costing method
in which it takes both fixed
and variable expenses at the
time of calculating net profit
(Modell, 2010).

Cost recognition It take variable expenses as a
product cost and fixed cost as
periodic that are to be written
off in P/L account
It takes both fixed and
variable expenses in the
product cost.
Division of expenses It divides the expenses into
fixed and variable cost
(Macintosh and Quattrone,
2010).
In these it has been divided
into selling & Distribution
administration and production
etc.
Profits Profit can be measured
through profit-volume ratio
Profits get affected due to
intuitionism of fixed cost.
Cost per unit There is no impact on cost per
unit due to change in the
closing and opening inventory.
It influences the cost per unit if
there is an any change in the
closing and opening stock
Objectives The objectives of marginal
costing is that to make an
effective decisions that are
used by the internal member
It provides an information to
the external parties that are
outside the organisation that
are managed the organisation
activities in effective way.
Highlights Contribution per unit ( CPU) Net profit per unit( NPU)
TASK 3
P4 Advantages and disadvantages of various types of planning tools
Budgetary control it is process which shows the actual outcome by make comparison
among standard budget and actual budget over an accounting period. It provides the budget
variance due to which they can easily finding out the deficiency due to they can easily take
remedial actions. They can easily control with the help of various planning tools that are adopted
by the R.L. Maynard which has been described below-
 Variance analysis- It is a variation among the standard and actual performance of a firm.
It can be known as a deviation that are categorised into two parts that is favourable and

unfavourable variance. It has some advantages and disadvantage that are described
below-
 Advantages  Disadvantages
 The benefits from the variance analysis it
to identifying the variation which
improves the firm by taking corrective
measures at proper time.
 It will facilitate them in minimization of
financial risk (Lukka and Modell, 2010).
 It describes the relationship of variation
among each other for overcoming the risk
that are taken place in the organisation.
 The detailed information of variance
analysis assist the management in control
the cost.
 It is also used to designed the sales as well
as profit plan from the variance analysis.
 It provides the better results by reducing
the cost in the variance analysis.
 The main demerits of this is that it take
more time in calculating the variance
analysis.
 It requires a high money to hire the
expertise in calculating the financial
experts.

 Zero-based budgeting- It justified the each expenses that are incur in each in each
business function. It can easily be identifying the firm's expenditure and essential
requirements of financial resources. Therefore, it has merits and demerits that are discuss
as follows-
Planning tools used by the company in order to analyse budgets:
 Financial budget: In every small and medium organisation it has been important to
manage its operation with effective use of cost and control there expenses those are
incurred by the company in production process. So company use to prepare a financial
budget which consist of income statements and balance sheet.
 Static budget: It refers as an total budget estimation which is use at every level in order
to perform different activities in an organisation. It summarise with actual budget and
standard budgeting those are received during the production of product and services.

Illustration 1
(Sources: Mark P. Holtzman, 2013)
TASK 4
P5 Comparison how organisation and how they respond to financial problems
In an organisation there are various financial issues which are associated with
management and controlling of financial transaction which are done on regular basis. The
company are facing problem of inventory controlling because they do not have any kind of
software which they can used to manage there daily stocks. Other other related with regulation of
cash and investment that are done by various investors before making any planning in the
company. Operational problem which are arises during production process. As they are directly
related with the production and profitability of the company. In the mean while they are not able
to make the company to achieve there aims and objectives. So in order to overcome above
mentioned financial problems company need to adopt a new techniques which can help them to
overcome these issues.
R.L. Maynard adopts the management accounting system for the purpose of finding out
the financial problem occur within the workplace that are as below-