Management Accounting Introduction and Analysis Report for Jupiter plc

This report provides a comprehensive overview of management accounting, focusing on its application within Jupiter plc. It begins by explaining the fundamentals of management accounting, including different types of systems like job costing, inventory management, and cost accounting. The report then details various management accounting reporting methods, such as budget reports, accounts receivable aging reports, and cost management reports, highlighting their importance in business performance analysis. The benefits of implementing a management accounting system in Jupiter plc are evaluated, emphasizing how it aids in decision-making and strategic planning. The integration of management accounting systems and reports is discussed, emphasizing their role in providing timely and accurate financial information. Furthermore, the report explores absorption costing, providing an income statement example, and analyzes planning tools used in budgetary control. Finally, it compares how different organizations utilize management accounting techniques to address financial challenges, ultimately illustrating how these techniques contribute to sustainable success within Jupiter plc.

MANAGEMENT ACCOUNTING

INTRODUCTION......................................................................................................................2
TASK 1......................................................................................................................................3
1.Explaining the management accounting and different type of management accounting
system.....................................................................................................................................3
2. Explaining different method used for management accounting reports............................4
3. Evaluating the benefit of management accounting system and its application in Jupiter
plc. .........................................................................................................................................5
4.Integration of management accounting system and management accounting reports in
Jupiter plc...............................................................................................................................6
1.What is Absorption costing.................................................................................................7
TASK 3....................................................................................................................................10
1. Expalining the advantage and disadvantage of planning tool used in budgetary control.
..............................................................................................................................................10
2. Analysing the use of different planning tool and their application in preparing and
forecasting budgets...............................................................................................................12
TASK4.....................................................................................................................................12
1. Comparing the organisation are adopting management accounting techniques in
responding to financial problem. .........................................................................................12
2. Analysing how management accounting in organisation leads to sustainable success by
responding to financial problems.........................................................................................13
CONCLUSION........................................................................................................................14
REFERENCES.........................................................................................................................16
INTRODUCTION
Management accounting is an essential process in an organisation that will help in
analysing, interpretation and presenting the accounting information to the management.It will
help the management of the organisation in the decision making process. The present report

will help in understanding the essential requirement of the management accounting and the
management accounting system in Jupiter plc. Further, the report will help in understanding
the different management accounting report and its important in timely decision making
process in Jupiter plc. The report will also include the income statement using the absorption
costing method. The record will also help in discussing the various planning tools used for
the budgetary control as measuring the company’s performance. It will help in understanding
the preparation in planning in preparing and forecasting budgeted. The present report will
help in understanding the comparison between different companies adopting management
accounting in responding to financial problem. The report will help in understanding the
organisational strategies and plans developing with management accounting techniques in
Jupiter plc.
TASK 1
1.Explaining the management accounting and different type of management accounting
system.
Management accounting is the process to analyse, interpret and present the
information to the management in order to make better decisions. it will help the management
to make strategies and policies of the day to day business operations in Jupiter plc which will
help in achieving the business objectives and order to attain the goal and objectives Jupiter
plc.
The management accounting system helps all departments of a business to get
information so that it can be presented to the management in a way that will be helpful so that
they make the decision making the business operations more effectively (Hilton and Platt,
2013). There are many types of management accounting system which will help in making
business operations of Jupiter plc more effective:
1. Job costing system: It is a system in which a manufacturing cost will be allocated to
each product or similar batch of product this system helps in recording the cost or
expenses of each individual product. It will record the direct materials and direct
labour. Job costing system helps the manager of Jupiter plc to monitor the expenses
that are being assigned to the particular product, in order to fix the selling price of the
product. it will help the manager of company to set the price in order to cover the cost
of production and make profit.

2. Inventory management: It is a system which helps in tracking the flow of goods
from manufacturing to the retailers. It helps in ensuring the flow of raw material from
manufacturing to warehouse and to the final customers from retailers. It is an effective
way to manage the inventory and keep recording of the available inventory and the
need of the inventory. There are three methods of valuaing inventory managemenet:
 FIFO: This method refers as first in fist out method of inventory. In this
method the inventory that are first manifactured will be bought first one to be
sold.
 LIFO: This method is referd as the ladst in first out. In this valuing system the
inventory that was last bought will be first one to be sold. This method is
usefull in the case of fluctuations in prices of the product.
3. Cost accounting system: the system which is used by the company’s is oprder to
estimate the expense of the products in order to estimate the profitability analysis,
inventory valuation and cost control (Otley and Emmanuel, 2013). This helps the
accurately cost of the product for the profitable operations. However, it also helps in
knowing the profitability of the product. The type pof cost accounting system are:
 Normal costing: it is used in order to evalkuate the value the manufactured
products with the actual material cists, it includes direct costs and
manufacturing cost thata re based on a predetermined manufacturing overhead
cost.
 Standard costing: it helps in valuing the manufacturing with a predetermined
material cost, a predetermined dorect labour cost and predetermined
manufacturing overhead value.
4. Price optimizing system: It is used in order to control the price of the available
resources. It helps in deciding the prices of the multiple products at a time. This
system will help in determining the changes in demand of the product with the change
in prices of them. It will help the Jupiter plc in organising in determining the pricing
structure for promotional pricing.
2. Explaining different method used for management accounting reports.
Managerial accounting reporting is a process which helps providing accurate and
timely information about the financial and statistical data of the company. It will be essential

for the Jupiter plc’s management for taking decisions and strategies for the future growth and
development of company. As there are many different kind of reports which are valued for
company’s smooth business operations, but management accounting reports helps in
analysing the business performance of the business (Wickramasingh and Alawattage, 2012).
The following are the different types of management accounting reports:
Budget reports: this reports are fundamental reports that are crucial in every organisation.
These reports helps in measuring Jupiter plc overall performance in a specific year. A budget
is being prepared on the basis of the past year performance of the company. It is an useful
reports for the manager to analyse the performance of the company on the basis of the past
year performance. This helps in controlling the management to understand the company’s
operations and helps in cost controlling process. budget report will help the management of
the Jupiter plc in order to find any variances in their actual performance with the budgeted
performance.
Accounts Receivable Aging Reports: These reports are crucial for the business organisation
that offers credit facilities to its clients and distributors. This report helps the management in
providing information regarding about the defaulter of the company. It helps in identifying
the company’s credit policy and the need in improvement in the company’s collection
process. An Analysis can be made the company’s credit policy and the need to tighten the
credit policy of the company.
Cost managerial accounting reports: It helps in reporting the cost of the product that are
manufactured. It helps in knowing the manager of Jupiter plc, the actual expenses of material
cost, overhead, labour and any added cost in production of a product (Murthy and Rooney,
2018). A cost report helps in knowing the manager of operations in managing the cost of
production and the selling process of that particular product.
Job cost reports: this reports help in show the expenses of a specific job or project. It helps
in revenue earned by the product and the estimated cost of the production of the product. It
will help in knowing the profitability of the product manufactured by Jupiter plc. The report
help in listing each of the allocating project exoenses in oeder to trac=k the effivciency and
profitability of the product.
3. Evaluating the benefit of management accounting system and its application in Jupiter plc.
The management accounting system is essential for Jupiter plc’s management in
getting the information of financial and non-financial data of the business operations in the

company. It will help the manager in decision making process and making strategies for the
further growth and development of the company ad attaining the organisational goal. The
benefits of the management accounting system in Jupiter plc are as follows:
Job Costing System: it helps the management of Jupiter plc in understanding and keeps
records of the individual product that are manufactured. Jupiter plc can use this system in
order to keep tracking the expenses which will help the management of the Jupiter plc to set
the selling price of the product.
Price optimising system: this system is used for the pricing structure of the product (Yoder,
2017). Price optimising system help the Jupiter plc in managing initial pricing and the
discount pricing. This system helps in consider the factors that will help in deciding the prices
of the products. This system is very essential for deciding the prices for the customer
preferences in the changing price of the products.
Cost accounting system: it helps the Jupiter plc in estimating the expenses of a product that
will help in providing profit to the organisation and help in controlling the cost of the
production. Cost accounting system helps the manager in getting apperoapriate infotrmation
of production expeneses which helps them in planning, implimenting and controlling.
4.Integration of management accounting system and management accounting reports in
Jupiter plc.
An integration of management accounting system is a process which helps in
standardizing the procedures that helps in recording transactions and the financial
information. It helps in interconnecting the reporting the activities of different areas o the
Jupiter plc such as point of sales, back office and front office. It helps in managing the input
and output f the management accounting and financial accounting function. The integrated
management accounting system helps in increasing the speed, accuracy and efficiency of the
proper processing in financial information.
The management accounting report will help the management of the Jupiter in getting
the timely and accurate information about the proper operations of each function in the
organization. It will help the management in taking all the decisions regarding the decision
making process and strategies for the success of the organisation (Schaltegger and Burritt,
2017). Budgeting reports helps the Jupiter plc in actual performance with the estimated
performance to make the organisation a path on targeting the estimated performance in order
to achieve the goal.

TASK 2
1.What is Absorption costing.
It is a cost accounting method that is helped in calculating the full cost of absorption.
In absorption costing all the expenses of the manufacturing a product, all the fixed and
variable cost are being considered while calculating the cost of manufacturing a product. It
helps proper valuation of the cost including direct, like material cost, and indirect cost like
overhead cost. Absorption costing is helped in providing an comprehensive and accurate cost
of the production which considered all the cost of material. It helps the manager to ensured
that all cost are being considered which helps in accurately recovered all the cost from the
selling price of the product (Schaltegger, Burritt and Petersen, 2017). The absorption costing
helps the management in utilising the cost of the information easily in order to make the
decision making process. It helps in considering the cost that is being associated with the
manufacturing of the product.
Income statement as per absorption costing:
Particulars Figures
(in £)
Figures
(in £)
Direct labour 20 18000
* 20 360000
Direct material 10 18000
* 10 180000
Variable
overhead 5 18000
* 5 90000
Fixed overhead 5 18000
* 5 90000

Total
manufacturing
cost per unit
40 18000
* 40 720000
Budgeted P&L as per absorption costing
Particulars Per unit (in £) Figures (in £) Total (in £)
Sales 50 800000
Cost of
production
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 5 90000
720000
Opening stock 0
Less: Closing
stock
80000
Less: COGS 640000
Standard profit 160000
Less: Under
absorption
10000
Budgeted profit 150000
Actual P&L as per absorption costing
Particulars Per unit (in £) Figures (in £) Total (in £)
Sales 50 800000

Cost of
production
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 5 95000
40 760000
Opening stock 0
Less: Closing
stock
120000
Less: COGS 640000
Standard profit 160000
Less: Under
absorption
5000
Budgeted profit 155000
Income statement on basis of marginal costing
Marginal costing: Budgeted P&L for Sep 2018
Particulars Per unit (in £) Figures (in £) Total (in £)
Sales 50 800000
Cost of
production
DM 10 180000
DL 20 360000
VOH 5 90000
35 630000

Opening stock 0
Less: Closing
stock
70000
Less: COGS 560000
Contribution 240000
Less: fixed
overhead
100000
Budgeted profit 140000
Marginal costing: Actual P&L for Sep 2018
Particulars Per unit (in £) Figures (in £) Total (in £)
Sales 50 800000
Cost of
production
DM 10 190000
DL 20 380000
VOH 5 95000
35 665000
Opening stock 0
Less: Closing
stock
105000
Less: COGS 560000
Contribution 240000
Less: fixed
overhead
100000
Budgeted profit 140000

TASK 3
1. Expalining the advantage and disadvantage of planning tool used in budgetary control.
A budget is the estimation of the revenue and expenses over a specified future plans
and objective of Jupiter plc. Budgeting is the process which helps in making the budgets for a
specific year. A budget is used as a tool to measure the performance of the business activities
of business activities. Jupiter plc can establish budgets for different activities of business
organisation (Miller, 2018). Budgetary control is the process which helps in evaluating the
variances between actual results and budgeted figures for the Jupiter plc. Planning tool for
budgeting helps in controlling and estimating the performances of the company as per the
budgeted performance of the company in the specific year. Following are the advantage and
disadvantage of the planning tool for budgetary control are:
Activity based budgeting: In this type of budgeting, all the activities are being examined in
order to prepare the current year budgets. It is tool which do not consider the past year
performance but all the activities are being evaluated in order to prepare the budgets. All the
activities that are incurred the cost are deeply evaluated and the most profitable activities as
well as the waste activities are being considered.
Advantage of Activity based budgeting:
 ABB helped in evaluated each and every cost driver. It helped in analysing all the
activity.
 It assists the management of the Jupiter plc to evaluate all the waste activities and
eliminate it in order to save the cost of the company.
 ABB helps the management to consider all the business activities or function and not
the department in the organisation.
Disadvantage of Activity based costing:
 Activity based budgeting is complexes and time consuming process as each activities
in the organisation has to be evaluated.
 The ABB process requires a deep understanding of every function and activities of the
organisation which helps in ascertaining the performance of each activity.

 It required high trained employees, in order to recruit the skilled employees which can
create more cost burden on the company (Saeidi and Othman, 2017).
Zero based Budgeting: This is a budget tool that does not consider the previous year
budgets. It starts with the zero base. In zero based budgeting each and every expense of the
organisation are evaluated and on the basis of that the new budget for the current year are
calculated (Smith, 2017). It helps in cutting the cost of the waste expenses. It helps in
justifying all the expenses of the organisation which helps in preparing the current year
budget without considering the past year budgets (What is Zero Based Budgeting (ZBB)?
,2018).
Advantages of zero based budgeting:
 ZBB helps manager to find cost effective ways to improve activities.
 It helps in increasing staff motivation as it gives them more initiative and
responsibility in the decision making process.
 It helps in increasing the coordination and communication within the organisation.
 It helps in eliminating the waste activities from the business operations.
Disadvantages of Zero based budgeting:
 It is very time consuming process.
 ZBB requires high efforts from all the employees as analysing all the activities
requires involvement of all the employees.
 Zero based budgeting can be done by effective employees, proper training have to
provide to implement the ZBB in organisation.
2. Analysing the use of different planning tool and their application in preparing and
forecasting budgets.
Planning tool for budgetary control is an effective way of controlling the performance of the
business and helps in proper allocation of costs. Budgeting, planning and forecasting is the
process which helps in determining and detailing the goals and objectives of long term and
short financial goals of the company. There are two types of budgeting that are present in
managerial accounting. They are:
 Flexible budget: it is the budget that prepared for the different production levels, it
changes as according to the activity level.