Management Accounting Report: Tuffen Mark Ltd. Analysis and Strategies

This report provides a comprehensive analysis of management accounting practices within Tuffen Mark Ltd., a small family company involved in the design, manufacture, and sale of air ventilation systems. The report begins with an introduction to management accounting and its various systems, including cost accounting, inventory management, job costing, and price optimizing systems. It then explores different methods used for management accounting reporting, such as budgets, variance analysis, profit and loss statements, and cash flow analysis. The core of the report involves calculating costs using both absorption and marginal costing methods, followed by the preparation of income statements based on budgeted results. Furthermore, it evaluates the advantages and disadvantages of various planning tools employed for budgetary control, including scenario and forecasting tools. Finally, the report addresses the adaptation of the management accounting system to respond to financial problems, providing a holistic view of financial management within the company.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1.Management accounting and different types of management accounting system............3
P2.Different methods used for management accounting reporting........................................4
TASK 2............................................................................................................................................5
P3.Calculation of cost and preparation of income statements................................................5
TASK 3............................................................................................................................................7
P4.Advantages and Disadvantages of different types of planning tools used for budgetary
control.....................................................................................................................................7
TASK 4............................................................................................................................................9
P5.Adaption of management accounting system to respond to financial problems...............9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is the methods to examine the costs of business and operations
to prepare internal financial accounts, reports and records that assist managers in process of
decision making for accomplishing the organisational objectives (Bagautdinova, Kundakchyan
and Malakhov, 2013). For this report the chosen organisation is Tuffen Mark Ltd which is a
small family company. It deals with the sells, designs and manufactures air ventilation system in
UK market. In this report, management accounting and different types of management
accounting system. Various methods used for management accounting reporting are mentioned.
Calculation of cost and preparation of income system using marginal and absorption costing.
Advantages and disadvantages of various types of planning tools. Along with this management
accounting system responds to financial problems are also mentioned in this report.
TASK 1
P1.Management accounting and different types of management accounting system.
Management accounting is a activity of investigation, presentation and interpretation of
accounting data gathered by using cost-accounting and financial accounting so that it help
management in decision making, formulating policies and regular operations of company.
Management accounting system is a confidential internal reports which assist managers to make
decisions. Assistant Management Accountant of Tuffen Mark Ltd. used management accounting
system to prepare management accounts and reports which facilitate actual financial and non-
financial data to managers in making decisions for short-term and long term. Some various types
of management accounting system that is applied by Assistant Management Accountant of
Tuffen Mark Ltd. Are mentioned below:
Cost accounting system:
Cost accounting system is a structure which is utilised by company to compute the
product costs to analyse the profit, valuation of inventory and control of cost (Barnabè and
Busco, 2012). Essential requirement of cost accounting system to Tuffen Mark Ltd. is to used
this system in decisions making related to costs and also to identify manageable ratio or area that
need to be develop so that cost can be controlled.
Inventory management system:

Inventory management system is a accumulation of technology and method which
oversees to supervise and maintain the stocked goods either that products are raw materials,
supplies, finished products and assets of company. The essential requirement of inventory
management system in Tuffen Mark Ltd. Is for maintaining records of each products and assets
that help to control company inventory effectively and efficiently. For example: FIFO is First In
First Out, it is a assumptions of cash flow that are utilise to remove cost from stock accounts.
LIFO is Last In First Out, this is applied for cost of inventory where recent items are produced
that to be recorded as sold first. AVCO is calculated by dividing inventory cost of goods sold by
goods numbers at any time.
Job costing system:
Job costing system is a method used to combine data regarding cost related with
particular production and job service (Ji, 2017). The essential requirement of job cost accounting
system to Tuffen Mark Ltd is to assign the cost of inventory of each producing products. Also to
check either manufacturing cost exceeds the materials price and overheads this help them to
facilitate profitability for overall process.
Price optimising system:
Price optimising system is a analysis to ascertain that how consumers will react to various
prices for their services and goods through by using different channels. Price optimising system
is essential for Tuffen Mark Ltd as it is used to ascertain prices that will decide by them to attain
their goals like increasing operating profitability.
All the above systems of management accounting helps Assistant Management
Accountant of Tuffen Mark Ltd. To prepare internal reports that are useful for the growth of
company.
P2.Different methods used for management accounting reporting.
Management accounting reports are used to modify, execute, prepare and measure the
performance. This reports is perpetual returns at the time of accounting periods and bookkeeping
as per the requirements (Bennett and James, 2017). Assistant Management Accountant of Tuffen
Mark Ltd prepare this reports to get information that are required to reduce cost, rewards given
for good performance and find out the products which provides good financial returns for their
businesses. The various methods that are used by Assistant Management Accountant of Tuffen
Mark Ltd. For management accounting reports are explained below:
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Budgets:
Budget is a formal statement where income and expenditure are estimated according to
objectives and future plan. This is an internal report utilize by management to equivalent the
approximate, budgeted plan with number of actual performance attained at a given periods.
Assistant Management Accountant of Tuffen Mark Ltd. Used this method to determine
performance of their business and also to control cost.
Variance analysis:
Variance analysis is a quantifiable research among planned and actual behaviours. This
method is used by Assistant Management Accountant of Tuffen Mark Ltd. As it assist them to
maintain the expenditures of their projects by monitoring deviations related to actual and
budgeted financial performance.
Profit and loss:
Profit and loss is a financial statements which is used to state the costs, expenditures and
income that are occurred at a specified time periods generally a financial quarter or year.
Assistant Management Accountant of Tuffen Mark Ltd. Used this method of management
accounting reports as it assist them to interpret their net profit which will be useful to make
effective decisions.
Cash flow:
Cash flow refers to the gross amount of cash and cash equivalents that are usually
transferred within and out of company (Flamholtz, 2012). Assistant Management Accountant of
Tuffen Mark Ltd. Applied this method of management accounting reports as it help them to
manage the cash position so that further it can be used for rent, stock, raw materials and so on to
increase production for more profitability.
Management performs its activity on the basis of planes that are developed from past
experiences and future goals. For planning various tools are used by management of Tuffen
Mark Ltd. So that planning can be done effectively. Strategic forecasting in planning helps to
predict future and design all the activities that can be achieved as per future activity. On the basis
of forecasting budgets are prepared by management team. These budgets creates basis for
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decision making and helps in calculating variations. Effective actions are taken to reduced
variations and reasons for these variations are noted by management team.
TASK 2
P3.Calculation of cost and preparation of income statements
Cost of Tuffen mark Ltd. Are calculated by using various techniques are mentioned
below:
Standard cost per ventilation system using absorption costing:
Calculation of Standard Cost per Ventilation System
Using Absorption Costing
Particulars Amount (￡)
Direct Materials Cost 12
Labour Cost 18
Variable Manufacturing Cost 9
Fixed Manufacturing Cost (Note 1) 7.2
Selling & Administration Cost (Note 1) 2.61
Total Standard Cost Per Unit 48.81
In the above table standard cost per ventilation system are calculated by using absorption
costing, so total standard cost per unit is £48.81.
Standard cost per ventilation system using marginal costing method:
Particulars Amount (￡)
Direct Materials Cost 12
Labour Cost 18
Variable Manufacturing Cost 9
Variable Standard Cost Per Unit 39
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In the above table standard cost are calculated by using marginal costing so, variable
standard cost per unit is £39.
Income statement of the budgeted results using absorption costing and marginal costing.
Income statement is one of the essential financial statement that shows income and
expenditures of company in a specified periods (Gibassier and Schaltegger, 2015). This
statement is used by Assistant Management Accountant of Tuffen Mark Ltd. So that they get
information about company's profit of a given time periods.
Calculation of Income Statement of the Budgeted Results
using Absorption Costing
Particulars Amount (￡)
Production units (A) 25000
Sales units (B) 23000
Sales Revenue(£) 1840000
Less: Cost of goods sold
Direct Material 276000
Direct Labour 414000
Variable Manufacturing Cost 207000
Fixed Manufacturing Cost 165600
Total Cost 1062600
Gross Profit 777400
Less: Selling & Administration Cost 60000
Net Income 717400
In the above table income statements of budgeted results are calculated by using
absorption costing so, the net income is £ 717400.
Calculation of Income Statement of the Budgeted
Results using Marginal Costing
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Particulars Amount (￡)
Production units (A) 25000
Sales units (B) 23000
Sales Revenue(£) 1840000
Less: Cost of goods sold
Direct Material 276000
Direct Labour 414000
Variable Manufacturing Cost 207000
Contribution Margin 943000
Less: Fixed Manufacturing Cost 180000
Selling & Administration Cost 60000
Net Income 703000
In the above table income statements of budgeted results are calculated by using
marginal costing so, the net income is £ 703000.
TASK 3
P4.Advantages and Disadvantages of different types of planning tools used for budgetary
control.
Budgetary control is a ongoing methods that assists in preparing and coordination and
also it facilitates the methods to control (Gibassier, 2017). This helps Tuffen mark Ltd. to assure
that limits of expenditures are appropriate. The various key planing tools used by Assistant
Management Accountant in management accounting to assure the performance and financial
stability are mentioned below:
Scenario tools:
Scenario planning tools of budgetary control used Assistant Management Accountant of
Tuffen mark Ltd. To assembles some approx future outcomes which is differ from usual
assumed scenario. Thus, they create a contingency plans to handle the various forms of
upcoming scenarios.
Advantages Disadvantage
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 Results from scenario tool is used for
process of budgeting and also to
manage risk.
 Having future scenario helps to
perceive advance signals related with
future and gives more productive
results.
 Using this tool it is difficult to develop
matrix of future scenario as future is
not certain.
 It is difficult for management
accountant to modify both underlying
and usual assumptions related to
business strategies directions.
Forecasting tools:
Forecasting tools is applied to approximate the future direction, results of Tuffen Mark
Ltd. Through analysis of historical information. In circumstances of budgetary control, company
use this budgetary planning tool to ascertain allocation of budgets for approximate future
expenditures (Grabner and Moers, 2013). In the last forecasting stage, after analysis of
information and assumptions are ascertain then done the verifications. Verification are done
among forecasted outcomes and actual results for effective quality.
Advantage Disadvantage
 Assistant Management Accountant of
Tuffen mark Ltd. applied this tools in
financial data and also facilitates
adaptability in a manner which can be
done for longer or shorter periods
according to requirements.
 It provides some basis on which
decisions can be made in current
situation.
 Assistant Management Accountant
need to up to date on a regular basis
whenever few modification incurs that
consumes more time as well as
resources.
 Many times anticipation may be
considered in different condition which
vary as per time and improper
outcomes.
The above planning tools of budgetary control is applied by Assistant Management
Accountant of Tuffen mark Ltd. So that these tools help them to provide knowledge about
financial stability and performances.
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TASK 4
P5.Adaption of management accounting system to respond to financial problems.
Tuffen Mark Ltd. Faces various problems related to systems of management accounting.
This bear critical conditions to handle resources of finance within business. There are many
kinds of issues related to finances like growth promotion with minimum interest rates and also
improving new and reliable revenue sources. These problems can be solved by applying some
tools are explained below:
Benchmarking:
Benchmarking is a tool that is utilised to equivalent one business with other to identify
the manner to increase competitive advantages (Jakobsen, 2012). The key metrics to used to
operate business of Tuffen Mark Ltd. Are compared with Ever joy enterprises Ltd. Through
benchmarking over performance and underperformance areas are identified. Different models of
business are adapted to raise and speed up modification for effective growth. With the
application of bench marking accountant are able to develop new and reliable revenue sources as
they analysis there past records and formulate strategies and set benchmarking standards for the
same.
KPI:
Key performance indicators are quantity value which ascertains effectualness to
accomplish goals of Tuffen marks Ltd. In method to attain objectives, Tuffen mark Ltd. Apply
this indicators at various levels. At high level, it shows overall performance of company and low
level are related with individual workforce of different sections. The company want to do
promotion of growth with low interest rate so to overcome from this issues they apply KPIs as it
evaluate whole performance of business.
In today's competitive scenario organisations are facing financial issues at large scale. To
resolve issues related to finances management techniques like budgeting and forecasting is
highly recommended. Through forecasting future is estimated to some extend and on the basis of
which budgets are prepared. These tools helps in estimation of finances required in performing
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various activities in future. Estimation of finances in advances provides sufficient time to make
arrangent of funds on time whenever required.
Comparison between two company
Tuffen mark Ltd. Ever joy enterprises
 This enterprise use job costing system
as it assist them to trace the cost
records. Financial issues related with
unmanageable cost, in appropriate cost
allocation and other problems can be
solved by KPI's as it help them in
decision making process.
 Giving more emphasis on managing
cost of various operations in the
company helps them to resolve issue
related to miss-utilisation of funds.
 This company use inventory
management system to manage their
process of manufacturing. In this
various financial problems are occurs
so to resolve this they use bench-
marking tools.
 Reducing storage cost related to
inventory helps in minimising overall
cost allocated to product and also
proper availability of goods can be
managed.
CONCLUSION
From the above report it is concluded that it is essentials for company to know about
management accounting. Requirements of different management accounting system within
company. Various methods used for management accounting reporting. Standard cost per unit
are calculated by using absorption and marginal costing and also income statements are prepared
with the use of marginal and absorption costing. Different advantage and disadvantage are of
planning tools of budgetary control are discussed. Organisations are compared according to
adaption of management accounting system responds to the financial problems.
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REFERENCES
Books and Journals
Bagautdinova, N., Kundakchyan, R. and Malakhov, V., 2013. Development of management
system of manufacturing companies on the basis of management accounting elements.
Barnabè, F. and Busco, C., 2012. The causal relationships between performance drivers and
outcomes: Reinforcing balanced scorecards' implementation through system dynamics
models. Journal of Accounting & Organizational Change. 8(4). pp.528-538.
Bennett, M. and James, P., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
Flamholtz, E. G., 2012. Human resource accounting: Advances in concepts, methods and
applications. Springer Science & Business Media.
Gibassier, D. and Schaltegger, S., 2015. Carbon management accounting and reporting in
practice: A case study on converging emergent approaches. Sustainability Accounting,
Management and Policy Journal.6(3). pp.340-365.
Gibassier, D., 2017. From écobilan to LCA: The elite’s institutional work in the creation of an
environmental management accounting tool. Critical Perspectives on Accounting. 42.
pp.36-58.
Grabner, I. and Moers, F., 2013. Management control as a system or a package? Conceptual and
empirical issues. Accounting, Organizations and Society. 38(6-7). pp.407-419.
Jakobsen, M., 2012. Intra-organisational management accounting for inter-organisational control
during negotiation processes. Qualitative Research in Accounting & Management. 9(2),
pp.96-122.
Ji, X. D., 2017. Development of accounting and auditing systems in China. Routledge.
Online
Inventory management system, 2018[Online]. Available through
<https://www.camcode.com/asset-tags/what-is-an-inventory-management-system/>
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