Comprehensive Management Accounting Report: Unit 5, Analysis

This report delves into the intricacies of management accounting, focusing on its essential requirements and various reporting methods. It explores cost analysis techniques, including marginal and absorption costing, to prepare income statements. The report evaluates the advantages and disadvantages of different planning tools used for budgetary control and assesses how organizations, such as The Berkeley Partnership, are adopting management accounting systems to address financial challenges and achieve sustainable success. It examines the integration of management accounting systems and reporting within organizational processes, highlighting the benefits of inventory management, job costing, and price optimization systems. The analysis includes a comparison of financial and management accounting, and the report concludes by evaluating how planning tools contribute to solving financial problems and driving organizational success.

UNIT 5 MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................4
LO 1.................................................................................................................................................5
P1. Explanation on management accounting and its essential requirement for different types
of management accounting system.........................................................................................5
P2. Explaining different methods of management accounting reporting...............................7
M1. Evaluating benefits of management accounting systems and its application within an
organisational context.............................................................................................................8
D1. Critically evaluating how management accounting system and management accounting
reporting is integrated within organisational process.............................................................9
LO 2...............................................................................................................................................10
P3. Calculating cost by using appropriate techniques of cost analysis for preparing an Income
..............................................................................................................................................10
Statement using Marginal and absorption costs...................................................................10
M2. Applying a range of management accounting techniques and producing appropriate
financial................................................................................................................................13
reporting documents.............................................................................................................13
D2. Producing financial reports that accurately apply and interpret data for a range of business
..............................................................................................................................................13
activities................................................................................................................................13
LO 3...............................................................................................................................................14
P4. Advantages & disadvantages of different types of planning tools used for budgetary
control...................................................................................................................................14
M3. Different planning tools and their implications for preparing and forecasting budgets.18
D3. Evaluating how planning tool for accounting respond to solve financial problems to lead
..............................................................................................................................................18
organisational sustainable success........................................................................................18
LO 4...............................................................................................................................................19
P5. Comparing how organisations are adopting management accounting systems for
responding financial problems.............................................................................................19

M4. Analysing how management accounting helps in responding to financial problems
leading organisation to sustainable success..........................................................................21
REFERENCES..............................................................................................................................24

INTRODUCTION
Management accounting is the process which used by managers in order to find the
provision which relates to accounting information so that effective decision will get develop for
better organisational operations. This is an accounting process which also include non-financial
information which helps in identifying the key performance indicators for various parts of
businesses. For this report selected medium size financial consultancy organisation is The
Berkeley Partnership which deals in providing the best commercial services. In this report,
explanation will be provided on managerial accounting and its essential requirement with
different methods of management accounting reporting. Further, calculation will be provided by
using appropriate cost analysis technique. Moreover, advantages and disadvantages of different
types of planning tools which used in budgetary control will also be discussed in this report with
the ways by which entity will use management accounting in for solving financial problems.
LO 1
P1. Explanation on management accounting and its essential requirement for different types of
management accounting system
Management accounting is the process of analysing costs which relates to businesses and
operations in order to prepare internal financial report, records and account so that managers of
the organisation will able to develop decision for achieving business objectives and goals. In
other words it is the process of analysing data which relates to financial and costing so that it can
be translated into useful information (Kaplan and Atkinson, 2015). Generally this is the process
which look into the events and transaction which happens in and around the business. These are
the type of accounting records which are often used for internal purpose and are confidential too.
Calculation of such accounting will only be based on the managerial need only. Therefore, it can
be said that management accounting considered as profession which plays role in decision
making process of the management, devise proper planning and performance management
system and will also provide expertise financial reporting and control in order to develop
effective organisation strategy. It is the process which provides effective way for communicating
the plans of management which is through upward, downward and outward process. However,

this is the process of identifying reliability of the plans which has been set up by the management
of organisation.
Distinction between management and financial accounting:
Financial accounting Management accounting
It is an accounting method which mainly
conducted for providing information to users
of the organisation.
It is an accounting method which provides
information to people and management within
an organisation (Otley, 2016).
There are specific standards and formates
which entity needs to follow in order to
prepare its books of accounts.
It is not specific. It does not require by law.
Its essential requirement of different management accounting system are as follows-
Inventory management system:
This is the discipline primarily process which helps in specifying the placement of
inventory of goods in the organisation. It is a method of controlling and overseeing the stock
which used in the production department of the entity. Thus, through this management
accounting method, managers of the organisation will able to understand present inventory level
and requirement of minimise and maximise the situation of the stock. Through this accounting
system, entity will able to improve its bottom line which will enhance accuracy of the inventory
for better production activity. It is a management system which helps in tracking the goods
through entire supply chain or about the portion of business operations. This is the process which
mainly covers everything which is from production to retail, warehousing to shipping anything
which relates to business operation.
Job costing system:
It is the type of system which allocates and manufacture cost for an individual item or
products of the organisational batches (Maas, Schaltegger and Crutzen, 2016). This is the
management accounting method which involve the process of analysing and practising data
which relates to cost of the particular products and services. Managers needs information related
to production job for determining the accuracy and capability of the entity in order to generate

efficient income. This is the accounting system which used by organisation in order accumulate
information which associate with the cost about specific production or regarding the service job.
Mainly such information gets used by organisation in order to provide information to customer to
whom entity is under the agreement of cost.
Price optimization systems:
This is the process which involve mathematical analysis in determining the reaction of
consumers regarding the prices of goods and services which offered to consumers through
different types of channels. It also helps in determining the price which will be best of the entity
for earning its growth and maximise the operating profit.
This is the process by which management analyse internal areas which needs to improve
for earning better profitability. With its analysis managers of organisation creates budget so that
proper control will get develop on expenses of the entity. By analysing break-even-point,
managers will able to maintain profitability of the businesses (Cooper, Ezzamel and Qu, 2017).
This process used by organisation in order to analyse the willingness of customer in order to pay
for goods and services. It is the type of mathematical program which mainly helps in calculating
the demand which varies at different level of price.
Thus, these are the essential requirement of management accounting by which managers
of the Berkeley Partnership will able to develop effective strategies which will help in achieving
organisational objectives and to in meeting future goals with appropriate and sound business
operations. Through this costing techniques entity and users of organisation gets the information
which is relevant, reliable and also accurate by which they may able to develop economic
decision regarding investment in the capital of company.
P2. Explaining different methods of management accounting reporting
Management accounting generally focuses on generating internal information. This is an
accounting method which applied in the process of controlling, planning and in decision-making.
This mainly depend on the financial statements which generally consist of balance sheet, income
statements and cash flow statement. However, management accounting also applies in other
forms of accounting reports which are as follows-
Cost reports-
In this report of accounting management accounting helps in calculating costs which of
the items which relates to manufacturing (Accounting reports, 2018). This process generally

done by analysing raw product overhead, costs, labour and any other costs which take into
consideration in business operations. Sum of all these cost further divided into amount which has
been charged on goods purchased. Through this way all the data will get summarised into cost
report. Through this report of management accounting, management of organisation will able to
view the value of product cost in comparison to its selling price so that proper measures will get
developed on control of expenses and also on profit margin.
Budgets-
This is the term which is considered as one of the key element while preparing
management accounting statements. In this process of accounting, budget will get established by
comparing it with previous year and to adjust it with future forecasts. In this statement
management will list down all the expenses and sources of revenue (Quattrone, 2016). Further,
with this report entity will conduct its business operation in order to analyse money has been
incurred during the process of production and money which has been saved.
Performance reports-
This is the another method of management accounting reporting in which management
apply in order to compare actual revenue with the expenditure which is also to the set budgeted
amount. The difference amount which computed with comparison will further evaluate in next
process of creating budget. This is a management accounting report through which managers of
the entity will able to create efficient planning for increasing products demand in future with the
increase in cost.
Account receivable aging report-
This is the another type of management accounting report which mainly concerned with
managing account receivable for the types of entities who engaged in extending credit of the
consumers. This is the process where proper segregation has been with customer balance of
invoices in order to find out the problem which has been associate with entity's collection
process (Chenhall and Moers, 2015). This helps management of entity by reducing bad debt and
by maintaining its liquidity.

M1. Evaluating benefits of management accounting systems and its application within an
organisational context
Management accounting system helps The Berkeley Partnership business in such a way
that it will able to conduct business in a very smooth flow and also with greater efficiency. Each
management accounting system has its own importance in terms of revenue generation which are
as follows-
Management accounting systems Benefits with organisational context
Inventory management system  This management accounting process
helps Berkeley Partnership organisation
in improving its warehouse
management with transparency and
efficiency in complex system.
 It also helps in maintaining inventory
management in terms of supplier so that
entity will maintain enough supply of
goods for offering to their customers
(Granlund and Lukka, 2017).
Job costing system  It will help the Berkeley Partnership
organisation for estimating types of cost
which applied throughout the process of
manufacturing.
 It will also help in developing work
with good quality.
Price optimization system  Berkeley Partnership organisation will
able to measure the efficiency of the
process which currently has undertaken
and will also able to develop strategies
by which business operations will get
improved.
 It also helps organisation in providing

necessary information which required
in the process of planning.
D1. Critically evaluating how management accounting system and management accounting
reporting is integrated within organisational process.
Budget report:
With the help of this management accounting report the Berkeley Partnership
organisation will able to concentrate on its production process. It also helps in establishing a
proper path in order to target consumers and to earn income for the entity.
Cost report:
This integration of management accounting will help in calculating cost of items which
are manufactured in the entity so that capability of organisation for generating business profit
will get analysed. Management generally evolute this process through labour costs, overhead and
other cost of consideration. This is the process which helps in analysing the cost value of product
with the selling price.
Performance report:
This integration of management accounting will help managers to develop plan for the
future productions by which cost of production process will get reduced and entity will able to
achieve higher profitability (Dekker, 2016). This report will also help manager in analysing the
performance of the organisation in business market.
Account receivable aging report:
This integration in management accounting will help Berkeley Partnership organisation
in making efforts in order to develop timely collection of the account receivable and to create
proper collection policy by which flexibility and accuracy will get developed in business
operations (Malina, 2018).
LO 2
P3. Calculating cost by using appropriate techniques of cost analysis for preparing an Income
Statement using Marginal and absorption costs.
Income statement of TSR Pvt. Ltd as per marginal costing technique (10000 units)

Particular
Amount
(£)
Amount
(£)
Sales 250000
Less: Marginal cost
Direct material 50000
Direct labour 30000
Variable manufacturing overheads 20000
Variable selling and administration expenses 30000 130000
Contribution 120000
Profitability statement of TSR Pvt. Ltd according to absorption costing technique
(10000 units)
Particular
Amount
(£)
Amount
(£)
Sales 250000
Less: Marginal cost
Direct material 50000
Direct labour 30000
Variable manufacturing overhead 20000
Fixed manufacturing overhead 40000 140000
Gross profit 110000
Less: Selling and administrative overheads
Variable 30000
Fixed 30000 60000
Net profit 50000
Calculation of cost per units
Particular Amount (£)
Direct material 5
Direct labour 3
Variable manufacturing overheads 2

Variable selling and administrative overheads 3
Unit sold 5000
Marginal costing technique: Profitability statement with regards to 5000 units
Particular Amount (£) Amount (£)
Sales 250000
Less: Marginal cost of sales
Direct material 25000
Direct labour 15000
Variable manufacturing overhead 10000
Variable selling and distribution overheads 15000 65000
Contribution 185000
Profitability statement of TSR Pvt. Ltd. using absorption costing technique (5000 units)
Particular
Amount
(£)
Amount
(£)
Sales 250000
Less: Marginal cost
Direct material 25000
Direct labour 15000
Less: manufacturing overhead
Variable 10000
Fixed 40000 90000
Gross profit (GP) 160000
Selling and administrative overheads
Variable 15000
Fixed 30000 45000
Net profit (NP) 115000
Computation of variance for TSR Ltd.

Particulars
Budgeted
Figures Actual figures
Variance
(budgeted –
actual) Variance %
Material cost
variance 20900 22000 1100 (adverse)
5.26 %
(adverse)
Material price
variance 2000 2200 200 (Adverse) 10% (adverse)
Direct labour
cost 15000 17680 2680 (adverse)
17.86%
(adverse)
Direct labour
hours 3000 3400 400 (adverse)
13.33%
(adverse)
M2. Applying a range of management accounting techniques and producing appropriate financial
reporting documents.
Management accounting techniques used are as follows:
1. Marginal Costing - The Marginal Cost is defined as the cost of one additional unit of output
produced. Marginal Costing helps the manager in making important business and management
related decisions such as purchasing of a new machinery or replacement of any plant and
manufacturing units. It helps in making profit plans for future with the help of break even
analysis (Holopainen, Niskanen and Rissanen, 2019).
2. Absorption Costing - It is a costing technique basically used for valuing inventory and stock. It
ensures that all the cost related to production and manufacturing process are properly absorbed
by the number of units produced. It considers both the variable and fixed cost as a product cost.
It ensures that product cost calculated is accurate and fair.
D2. Producing financial reports that accurately apply and interpret data for a range of business
activities.
From the above calculation it can be interpreted that TSR Pvt. Ltd. is using Marginal Costing
method and Absorption Costing method as management accounting techniques for evaluating the
net profit earn by the company at different production level of 10000 and 5000 units. The
company by using Marginal Costing is earning more profit than Absorption costing method at