Management Accounting Report: Systems, Costing, Control, and Analysis

This report provides a detailed overview of management accounting practices, focusing on their application within the context of Unicorn Grocery. It begins by examining various accounting systems, including inventory management, job costing, price optimization, and cost accounting, highlighting their essential requirements for effective decision-making. The report then explores different reporting methods such as performance reports, inventory control reports, job costing reports, variable analysis reports, and budgets. The core of the report delves into costing methods, specifically absorption costing and marginal costing, illustrating how each approach calculates costs and impacts profit determination. Furthermore, the report discusses the use of planning tools for budgetary control, problem-solving methodologies, and their interrelation with the overall management accounting framework. Through this analysis, the report underscores the importance of management accounting in supporting business objectives, controlling costs, and facilitating informed decision-making within an organization.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Several accounting systems and their essential requirements...........................................1
P2 Making reports by using different methods......................................................................2
M1...........................................................................................................................................4
D1...........................................................................................................................................4
TASK 2............................................................................................................................................4
P3 Using the various methods of costing to calculate cost....................................................4
M2...........................................................................................................................................7
D2...........................................................................................................................................8
TASK 3............................................................................................................................................8
P4 Using different planning tools for budgetary control........................................................8
M3...........................................................................................................................................9
P5 Solving of problems by using tools.................................................................................10
M4.........................................................................................................................................11
D3.........................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
In business various objectives are there which are set by the organisation and are to be
attained so that success can be ensured (Macintosh and Quattrone, 2010). For this several
processes will be undertaken such as identification, interpretation, measurement and analysation
of the data which will be collected and for this the process which will be used is known as
management accounting. There will be lot of information which will be collected with the help
of various tools that will be used and it will be providing management with the support in
decision making process. In the below mentioned report which is made in context with Unicorn
grocery, there will be many aspects which will be discussed and that will be including different
systems, costing methods and manner in which budgetary control takes place. The proper
understanding of all these will be gained below.
TASK 1
P1 Several accounting systems and their essential requirements.
In an organisation there is the need of various systems and it will be because requirement
of information for the decisions making process will be fulfilled by it only. This will be helpful
in the achievement of different targets that are preset by the company. Managers will be the one
who are responsible for formation of decisions and for that they will be considering the data
which is obtained in respect of static and financial aspects (Ward, 2012). Only internal
management will be allowed to use this information and will not be available for any outside
party. There are many such areas in which it can be considered. The main systems which are
involved in it are described below:
1. Inventory management system: In an organisation there will be need to manage
inventory in proper manner so that the functioning will be carried out effectively. For this
control will have to be established by which the level at which stock shall be maintained
is identified. This system will be used and it will be able to know the quantity of stock to
be ordered by which the optimum volume will be maintained. The main problem which is
faced by company in respect of inventory is of shortage and that will be resolved with the
help of it. The cost of this will be controlled and for this it shall be ensured that no ideal
stock shall be lying with the business. The information in respect of it will be acquired
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from this system and many techniques which will be used in this will include economic
order quantity and many more.
2. Job costing system: The cost will be required to be incurred in respect of several jobs
which will be performed for the production of any product (Shields, 2015). It will be
needed that they shall be controlled so that overall cost in respect of any good will be
decreased and this will lead to increase in profitability of company. All the cost which
will be made will have to be aggregated and then the per unit division will be made. This
will be helpful for the authorities who are responsible for setting final price as they will
be using it to ascertain the best price which will yield maximum returns to company.
3. Price optimisation system: The main motive of any business is to earn maximum profits
and for that it will be needed that price shall be set at that level by which it will be made
possible. In that various aspects will have to be considered and the main is the relation of
it with demand. There is inverse relation among them and that can be defined as that if
the increase in demand is to be achieved then price will have to be reduced. This is
because when price will be low then more customers will be attracted. So it will be
required that such price shall be decided which will be providing benefit to customers and
to business both. In this needs and status of consumers will have to be included.
4. Cost accounting system: Under this the cost will be included and will have to be treated
in the proper manner so that they can be recorded efficiently and then measures can be
taken to control them (Renz, 2016). This system will be classified in various parts. The
inventory will have to be measured and then its value will be determined so that total cost
can be known . The recording will be done to manage it in the most appropriate manner.
By this the cost will be controlled and this will be the best aspect as increase will be
noticed in level of earnings which are made by company.
P2 Making reports by using different methods.
There are many methods which are present and can be used for the purpose of
management accounting reporting and they are explained in detail below:
 Performance report: The main factor which will be required to be noticed is the
performance level. It will be because the company will be able to identify that whether
the employees are doing their work in proper manner or not. For this various parameters
will be set and according to them the identification will be made. If the targets will not be
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achieved then it can be said that performance of employees is not upto the mark. For this
report is made in which all the findings will be recorded and then company will be able to
know the reasons that why that has happened (Giovannoni, Maraghini and Riccaboni,
2011). According to them the decisions will be made and certain measures will be taken
to overcome it and further improve it.
 Inventory control report: For the measurement of requirement of inventory this will be
needed. An examination will be done so that it can be known that what is the total need
of the company and then that will have to be arranged. All of the findings will be entered
in the report and then that will be considered while order will be placed by company.
This will help in enhancement of the efficiency and also wastage of material will be
controlled. The main methods which will be used in this will be activity based costing in
which all the cost will be ascertained on the basis of the activities which are undertaken.
This will lead to the correct calculation of cost which will be beneficial for any
organisation.
 Job costing report: In this all the cost which will be spend in respect of any particular
job will be identified and that will be recorded. This will be used for the further reference
as when decision will be made in future when the job will be performed again then that
will be used. The whole amount which will be involved in total jobs will be determined
and this will provide assistance in knowing the cost of the final product.
 Variable analysis report: The total cost will be divided into various categories and the
main which will be involved in all the cases will be fixed and variable cost. The one that
will be deviating with the change in other factors such as production volume will be
variable. This report will be incorporating such amounts and they will be analysed and
this will be done as it is very important because profit will be affected by them in the
direct manner. All of them will be variation with the change in even single unit of
production.
 Budgets: This will be the representation of what id to be performed so it can be said that
they will be specifying the manner in which various activities are required to be
performed (Nandan, 2010). By them targets will be achieved and this will be providing
the company with required benefits. In the making of them all the information which will
be present in respect of previous years and also about the coming period will be
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incorporated. They can be said to be plans which will have to be followed in order to
achieve success (Hülle, Kaspar and Möller, 2011). They will also be useful in
measurement of performance of company as well as employees.
M1
The company will be gaining advantage by the use of the various systems as there are
many advantages of it. All the necessary information will be made available by the use of them
and that will be used in the process of formulation of relevant decisions. By the help of them
such measures will be taken that will be reducing the cost and this will be possible as all the
activities which are not needed will be avoided in future. Proper planning will be made by use of
collected data which will be followed by all.
D1
The manner in which the reporting process and systems are interrelated can be
understood by the above discussion. It can be seen that if the systems will not be used then it will
not be possible to make the reports (Banerjee, 2010). This will be because the information which
will be required will be obtained with the use of systems and the that will be recorded which will
be used by the management. This will be helpful in conduction of analysis by which all the
shortcomings will be identified. Then reasons of same will be determined that will be used in the
process of planning to reduce the variances. The targets will be achieved in best possible manner
by this.
TASK 2
P3 Using the various methods of costing to calculate cost.
In the process which is undertaken by company in production there will be various
expenditures which will be made and so it will be needed that they shall be accumulated. For this
different methods are there that can be used and the main among them will be marginal costing
and absorption costing. By the help of them it will be possible to identify total cost and that will
then be taken into account while preparing statements of income. The manner in which they will
be carried out is explained in detail below:
Absorption costing: The classification of expenses is done and then the manner in which they
will be treated is different and will have to be understood so that proper calculations can be
made. Under this together with variable cost, fixed will also be required to be allocated among
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all the units which are made. By this proper distribution will be made and that will be helpful in
knowing the profits which is earned (Taipaleenmäki and Ikäheimo, 2013). The actual will be
compared with the amount which is budgeted and over or under absorption which will be
determined will have to be taken into consideration while determining the amount of profits
made. In this all the variable and fixed overheads which will be related to production will be
considered on priority and the other expenses will be included.
Marginal costing: The manner in which cost will be calculated under this is different from the
one explained above. In this all the variable cost whether they are related to production or to
administration or selling all will be included firstly and will be deducted from amount of sales
revenue. By this the amount which will be calculating will be representing the contribution. This
will be used to know the position of company and then in order to derive final profit all other
expenses which are fixed will be reduced from it (Hiebl, Feldbauer-Durstmüller and Duller,
2013). The cost will be related to production so it will be fluctuating and therefore will have to
be considered as profits will be greatly affected by it. if the production of company will be
increasing then the overall cost which will be related to them will also be enhancing and the case
will be reverse in other situation.
This was the description of how the treatment will be given to various cost. Below is the
difference that is present in between them and shall be known by all.
Basis Marginal costing Absorption costing
Meaning The cost which will be
fluctuating I.e variable will be
considered in this method.
The consideration will be
given to all the cost which are
incurred in the business.
Identification of cost The cost that will be variable
will be identified as period
cost and other will be product
cost.
The whole cost which will be
incurred will be considered to
be product cost.
Profitability measurement In order to measure the profits,
profit volume will be taken
into use.
The consideration will be
provided to fixed cost as that
will be the one by which
earnings will be affected.
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Categorisation of expenses The whole cost will be
classified in two heads which
will be fixed and variable
overheads (Kotas, 2014).
The main heads under which
division will be made are
selling, administration and
production cost.
Cost of unit There will be some or other
variance which will be present
in the closing and opening
values and that will be not be
having any impact on cost of
one unit.
The effect can be seen on the
cost of one unit by the change
in value of opening and
closing stock.
Income statement as per marginal costing
Amount
Sales value (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable overheads -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
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fixed cost -2000
Admin & selling cost (700+600) -1300
-3900
Total 9300
Income statement as per absorption costing :
Amount
Sales value (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
Less: over absorbed fixed production overheads -100 -1800
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Amount
Net profit 9600
M2
In the business it is very important that knowledge shall be gained in respect of various
techniques which are present and by that only they will be able to make many decisions which
will be beneficial for the company. Such techniques will be called as management accounting
techniques and by the use of them accounts of company will be managed in appropriate manner.
The tool that is used most commonly by all will be budget and by that planning is made. By this
all the activities which will be undertaken in business will be done in prescribed manner and this
will lead to achievement of various goals and targets which are specified.
D2
The manner in which profits are calculated under the above mentioned methods are
different and due to this the profits which will be derived will be changing. So it will be needed
that in order to take proper decisions, interpretation will have to be made. It can be noticed that
profits are more in case of absorption and this will be because of reason that in this allocation has
been considered in respect of fixed overheads by which they will be taken only for the units
which are made in current period (Ajibolade, Arowomole and Ojikutu, 2010). The earnings are
9600 in case of absorption while in marginal they are calculated at 9300. so the profits are
declined due to non apportionment of fixed expense in variable method.
TASK 3
P4 Using different planning tools for budgetary control.
Budgets are prepared by all the businesses and this is because by them the manner in
which operations shall be carried out will be determined (Agbejule, 2011). The expense which
will have to be made for any particular task will be identified by this and that will be used by
management in conduction of that activity. In this research will be conducted and by that
required data will be accumulated and that will then be used in preparation of it. The
responsibilities of all will be defined by it and that will be useful in business to carry out all the
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tasks. The cost which will be spend will be controlled by this and that will be the main objective
which will be attained with the help of budgets.
Merits of budgets:
 The manner in which budgets are made will be requiring various data and for that all the
departments will have to communicated with each other. So it can be said that proper
system of communication will be established and also coordination will be maintained.
 All the wastage which takes place will be controlled as the activities will be identified
that are leading to this. So measures will be taken in this regard.
 This will also be treated as the tool to measure performance as targets will be mentioned
which will have to be achieved and by that motivation will be provided to all the
employees.
Demerits of budgets:
 The process which will be involved in it will be requiring high amount of expenses to be
made.
 In this it will be required that proper cooperation shall be established which is very
difficult.
 The time which will be needed in this will be more which could have been used in some
other activity.
Different budgets to be made:
 Master budget: In this the summary will be provided in respect of all the jobs which are
undertaken and will be including the data in respect of various departments (DRURY,
2013). As all will be covered that is why it is known as master budget. All the heads are
connected to one another and by the help of it information in relation to all will be
provide d at one place. The examination will be made easier by this and that will be an
advantage of it as requirement to make various budgets will be eliminated which will be
saving lot of costs.
 Zero based budget: Here all the information will be taken from the starting point so no
need will be there to use past data. In this extra time will be required as all the data will
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be collected from initial position. The actual position will be presented in it as all the
expenses which are made will be recorded.
 Variance analysis budget: There is always some difference which can be noticed in the
actual and budgeted figures and it will have to be determined. After identification it shall
be recorded in this budget which will be used for the making of future budgets and
shortcomings of current will overcome in coming plans.
 Cash flow budget: The manner in which cash will be obtained and utilised will be
specified in this budget. By the help of this proper management of cash will be made and
the problems which are associated with it will be solved in most effective manner. So all
the transactions which are performed and in which cash is involved will be undertaken in
manner that will be best.
M3
In the making of budgets there will be use of various tools which are present and by that
targets will be achieved. By this communication will be improved and this will lead to increase
in the efficiency of the business. The proper system will be established for this purpose.
P5 Solving of problems by using tools.
In the business there will be many such problems which will be arising and then it will be
needed that they shall be resolved in most effective manner. Some of the tools which will be
used for this purpose will be involving budgets. Also the various systems which are there will be
used so that budgets can be made as all the required data will be provided by them only. It will
be helping in identifying the problems which will be incorporated in the company and then
measures will be taken to overcome them (Hiebl, 2014). It will be a plan according to which
operations will have to be carried out and that way targets will be accomplished. Other than this
there are certain other techniques also which can be used by the enterprise in order to deal with
the issue. Some of commonly used will be including benchmarks, financial governance and
benchmarks. They are explained in better manner below:
Key performance indicators: They are targets which are set and according to which employees
will have to carry out the activities as it will be the tool by which their performance will have to
be evaluated. Staff will be intimated regarding goals to be acquired and then if they will not be
attained then it will mean that operations are not performed in the most effective and efficient
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manner (Hopwood, Unerman and Fries, 2010). By this all the tasks will be finished in
appropriate manner and within the specified time so all problems in respect of it will be resolved.
Benchmarks: In this company will be evaluating its work by comparing itself with others in
market who are successful and established. There will be difference in manner by which work is
performed in all so all the methods which are used will be checked and the one that will be most
beneficial to company will be adopted by it.
Financial governance: Here all the issues which will be specifically related to finance will be
considered. Money will be governed in such manner that no problem in relation to it will have to
be faced by organisation. Various policies will be made that will be used so that all the decisions
in respect of cash will be dealt in proper way. The needs will be identified before and then they
will be arranged so that work will not be hampered and this way all the objectives will be
achieved as problems will be resolved.
ABC Ltd. Unicorn grocery
There are many resources which are to be used
and so they are to be allocated in manner by
which most effective conduction of work will
be made possible.
The main tool which is used in this
organisation is budget in which all the task that
should be performed will be identified and the
manner in which they shall be carried out will
also be specified.
It is very important that identification shall be
made of the differences which are present and
so it will be possible to take steps in that area
where maximum losses will be determined.
There are various methods which can be taken
into consideration for the fixation of price and
so systems are used by it in order to set the
best price.
M4
In order to achieve sustainability it will be required that all the risk which is present in
business shall be identified. For this analysis will have to be conducted and that will be done
with the help of systems as all the relevant data will be accumulated with the use of them only.
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D3
The performance of company will have to be evaluated and for that many such tools are
there that can be undertaken and then it will be enhanced. The overall development will be made
as all the available funds will be utilised in manner that will yield maximum returns.
CONCLUSION
From the report presented above it can be concluded that the main concept which will be
considered in business is management accounting. This will be due to the reason that all the
information will be collected and then on that basis decisions will be made. Also all the problems
are taken care off by the use of tools and techniques which are available. The concept of
marginal and absorption costing has been provided by which determination of profits is made.
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