Comprehensive Management Accounting Report: AstraZeneca PLC Analysis

This report provides a comprehensive analysis of management accounting, focusing on AstraZeneca PLC and TPG Processing. It begins with an introduction to management accounting, its systems, and its differences from financial accounting. The report then delves into various management accounting systems like cost accounting, inventory management, and price optimization, highlighting their benefits. It covers management accounting reporting, including the importance of accurate, relevant, and trustworthy data. The report further explores cost and costing methods, differentiating between direct and indirect, fixed and variable costs, and analyzing marginal costing and absorption costing. It emphasizes the support of financial reporting to business growth and success. The report also examines budgetary control and planning tools, including fixed budgets and flexible budgets, and analyzes their use for preparing and forecasting budgets. Finally, it addresses financial problems and financial governance, evaluating management accounting's role in responding to financial challenges and achieving success.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management Accounting System:....................................................................................1
P2 Management Accounting Reporting:................................................................................3
Conclusion and critical evaluation:........................................................................................4
TASK 2............................................................................................................................................5
P3 Cost and Costing Methods:...............................................................................................5
Support of financial reporting and statements to business growth and success:..................10
TASK 3..........................................................................................................................................10
P4 Budgetary control and Planning tools:............................................................................10
Analysis of the use of different planning tools for preparing and forecasting budgets:.......13
TASK 4..........................................................................................................................................13
P5 Financial Problems and Financial Governance:..............................................................13
Evaluation of management accounting in responding financial problems and achieving
success: ................................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
In today's competitive era, managing external affairs is not enough to survive in the
industry, it also requires managing and having control over internal operations and activities. The
framework that has been evolved for this purpose is known as management accounting.
Management accounting is an effective process to assess, manage and control the internal affairs
of an organization (Qian, Burritt and Monroe, 2018). It is important to study the overall process
of management accounting in order to defeat internal core issues.
The organization which has been chosen for preparing this report is AstraZeneca PLC
which is an English-Swedish multinational pharmaceutical company situated in Cambridge,
England. The company was established in 1999 by the merger of Astra AB and Zeneca Group
Plc (AstraZeneca PLC, 2019). The other organization which is opted for project B is TPG
Processing which is an American investment company founded in 1992 by David Bonderman,
James Coulter and William S. Prince III. This report is including an enhanced knowledge of
management accounting systems and reporting. It is also considering various types of cost and
proper use of these costing techniques. It is explaining different planning tools and budgetary
control, various financial problems, financial governance and other techniques to solve financial
problems.
TASK 1
P1 Management Accounting System:
Management Accounting: Management accounting is an entire process of assessing,
analysing, collecting, summarising, classifying, recording and presenting financial and non-
financial data and information so that management can make effective decisions in order to
operate the internal operations of the organization. The process which is also known as
managerial accounting was come into the existence at the beginning of the nineteenth century
and was developed to provide assistance to the internal administration to manage and have an
emphasis over internal components and operations of company. The main role of management
accounting in an organization is to prepare and present financial and non-financial data for the
use of management and administration so that they can plan strategies and make decisions for
achievement of the organizational objectives and aims in an effective manner. This accounting
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concept has some significant differences from financial accounting concept which are mentioned
below:
Financial Accounting Management Accounting
Financial accounting is mandatory by the law
therefore follows a specific format to present
financial reports.
Management accounting is not statutorily
mandate and hence it can prepare reports
according to the convenience.
Financial accounting reports are prepared to
provide data and information to the external
stakeholders of the organization such as tax
authorities, investors, creditors, etc.
Internal stakeholders such as shareholders,
owners and especially the managers are the
user of reports prepared by the management
accounting.
Management Accounting Systems: Managerial accounting system is developed to assist
the management in evolving such a process that can derive financial and non-financial
information and data from the internal operations and activities and provide them for managerial
reporting so that administration can plan strategies and make decisions in an impressive manner
and achieve the goals of the company (Puasa, Smith and Milda Amirul, 2018). Some of the
management accounting systems that are used by manufacturing firms like AstraZeneca are
given below:
Cost Accounting System: This accounting system helps the management in evaluating
the cost which have been incurred during the entire production. Cost accounting system tracks all
the data related to the products and calculated expenditures absorbed during the manufacturing
process. AstraZeneca PLC use this system to calculate the cost of their products effectively.
Inventory Management System: Inventory is the main source of cash inflow in the
organization hence it is essential to keep an eye on the movement of organizational stock.
Inventory management system uses various techniques to have a proper record of inventory from
the production line to sales and distribution of the products and even after the sales also. It helps
the respective company in deciding optimum method for evaluation of inventory from;
LIFO: Recently manufactured products will be sold first.
FIFO: The products which have been produce first must be sold first.
AVCO: All the production will be sold at the average cost of production.
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The AstraZeneca has opted LIFO for inventory evaluation.
Price Optimisation System: This system helps in deciding the product prices by
analysing the customer behaviour for different prices for the various products and fixing
optimum price according to the consumers. Price optimisation system is used by the selected
organization to set the optimum price for its medical and drugs products which can satisfy the
customer and maximize the profit of the company as well.
Benefits of management accounting systems:
Managerial
Accounting Systems
Benefits
Cost Accounting
System
 This system of accounting helps in evaluating the cost of
production which is important to calculate the profit margin for
products.
 This system also helps the respective organization in
controlling the costs and eliminate unrelated costs during the
manufacturing process (Kalkhouran and others, 2015).
Inventory Management
System
 The utilization of this system saves time, space and funds of the
organization that can be used in other activities.
 The customer service management team also can take help of
the system in solving customer queries regarding the products.
Price Optimization
System
 The respective company maintain and increase its profitability
by adequate utilization of this accounting system.
 The stress of management related to the price consistency can
be set aside with the help of this system.
P2 Management Accounting Reporting:
Managerial accounting reporting is the branch of management accounting that is related
to the recording, analysis and presentation of data and information. The management accounting
systems helps in recording these data and upper management uses these reports to identify the
variances in various processes and activities so that these can be prevented in upcoming
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accounting periods. The data provided by these accounting reports must contain some features or
qualities which are as under:
 Accurate: Information ans data provided by the reports must be accurate and up to date
so that estimations will be calculated with maximum accuracy.
 Relevant: Data should be materialistic and related to the purpose for which it is being
provided (Anghelache and others, 2019).
 Trustworthy: The sources or origin of the informations must be reliable and trustworthy
and approaches should not be changed continuously.
There are different types of reports generated by the AstraZeneca PLC in order to provide
information to its management. Some of them are being described as under:
Inventory management report: These reports are generated to make the production
process more effective as this system helps in find out the variances in various production and
assembly lines. The management of AstraZeneca PLC uses this method to improve activities,
operations and procedures taken into consideration for the production of medicines and vaccines.
Accounts Receivable aging report: This report helps in creating detailed knowledge of
debtors, due receipts, mention recovery dates and managing cash flow. The administration of
selected establishment prepare this report and update it on time to time so that it can improve
debtor turnover and review & strengthen its credit policies (Brînză and Bengescu, 2016).
Performance Report: Performance reports are generated for various employees and
activities or tasks so that their performance and profitability can be evaluated and variances can
be detected. Respective organization creates performance reports for its key employees and
activities and try to fix the deviations by adopting remedial actions.
Conclusion and critical evaluation:
With the help of above report it can be concluded that management accounting system is
very crucial for the management to provide the information for management accounting
reporting. These systems and reporting provide necessary information that helps the management
in managing and controlling daily transactions to operate the business successfully and also helps
in planning long-term strategies and making decision according to the organizational efficiency.
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TASK 2
P3 Cost and Costing Methods:
Cost: Cost is the sum of those expenditures that have been incurred during the process
from production to sell of the organization products. These costs can be divided into various
types which are mentioned below:
 Direct cost: Direct costs are those expenditures that can be directly and completely
assigned or allotted to the process of production like direct labour, direct material, etc.
 Indirect cost: Indirect costs are the expenditures which are emerged due to the
production but can not be seen directly in the production process like depreciation,
processing charges, etc.
 Fixed cost: Fixed costs are the expenses which do not get affected by the number of unit
produced. These costs emerged even when there is no production take place in the
company such as rent, salary of staff etc. Variable cost: Variable costs are the expenses that fluctuate with the production level
and remains nil when there is no production in the factory such as bonus, wages, etc.
Cost Analysis: Cost analysis can be defined as a method of comparing the budgeted cost
with the actual cost or a periodic cost with the another period cost so that revealing and reporting
on conditions can be improved (Soderstrom, Soderstrom and Stewart, 2017).
Cost Volume profit: This analysis method is a tool that measure the consequence of
costing have on the operating profit. It is also known as break-even analysis which is used to
determine the break-even point of sales and cost structure so that management of the selected
firm can make short-term economic decisions.
Marginal Costing: Marginal costing method is used to calculate the cost that have to be
incurred for producing an extra unit of the product. This method assigns all variable cost to the
production process and all fixed costs are recovered from the contribution.
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Income statement using marginal costing
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Absorption Costing: Absorption costing consider that all the expenditures related to the
manufacturing process must to absorbed by the production and other costs either they are
variable or fixed must be signed off from the gross profit (Schaltegger, Lüdeke-Freund and
Hansen, 2016).
Income statement using Absorption Costing
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By analysing the solutions presented under different methods, it can be seen that profits
at the end of the years are different. The main reason behind these variances is the calculations of
opening and closing inventory. The calculation of opening and closing stock is different because
the evaluation of the per unit cost is different due to the process of absorption of the costs.
Support of financial reporting and statements to business growth and success:
Financial reporting provide data and information to the administration to prepare
financial statements which are reflective documents to understand the financial condition of the
company. These statements provide an overall view of the organization and helps in allocating
valuable funds in an appropriate manner. These documents and reports are also analysed for
finding the variances and resolve the issues on time so that they can't be bigger. With the help of
these statements and reports, efficiency and performance of the establishment can be maintained
that is essential for the business growth and sustainable success.
TASK 3
P4 Budgetary control and Planning tools:
An analysis of planning tools and budgetary control is being presented regarding TPG
Processing company which is including following points:
Different types of Budgets:
Fixed Budget: Fixed budget is a budget in which all incomes and expenditures are pre-
determined can don't change with the situations. This is a static budget that ever remains same.
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