University Assignment: Management Accounting Report - Unit 5 Analysis

This report provides a comprehensive overview of management accounting principles and their practical application within an organization, specifically focusing on Williams Performance Tenders. It begins by defining management accounting, outlining its essential requirements, and exploring various types of management accounting systems, including cost accounting, inventory management, job costing, and price optimization systems. The report then delves into different management accounting reports, such as budget reports, accounts receivable aging reports, cost managerial accounting reports, and performance reports, evaluating their benefits and integration within the organization. Furthermore, it examines absorption costing and marginal costing methods, producing income statements using each method and computing break-even analysis. The report also analyzes the application of management accounting techniques, including planning tools for budgetary control, and assesses how these techniques can address financial problems and contribute to the sustainable success of the organization. The report concludes by summarizing the key findings and emphasizing the significance of management accounting in effective decision-making and organizational growth.

UNIT 5 MA

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems...........................................................................................1
B. Explaining Different Management Accounting Reports...................................................3
C. Evaluating the benefits of management accounting systems ............................................5
D. Integration of management accounting system and reports are developed in organization ..6
TASK 2............................................................................................................................................6
A. 1 Explaining absorption costing and marginal costing methods.......................................6
A.2. Producing income statements by utilising costing methods...........................................7
B. Computation of Break-Even analysis................................................................................8
C. Applying the range of management accounting techniques and produce appropriate
financial reporting documents accurately for the scenarios given in the Task 2. ..................9
D. Producing financial reports that accurately apply and interpret data for business activities
shown in the scenarios .........................................................................................................11
TASK 3 .........................................................................................................................................11
A. Advantages and disadvantages of different types of planning tools for budgetary control 11
B. Showing application of the planning tools for preparing, forecasting and analysing budgets
..............................................................................................................................................13
C. Comparing how organization helps in adopting the management information system as
comparison with the financial problems...............................................................................14
D. Analysing how your management accounting techniques could respond to financial
problems and lead the organization to sustainable success..................................................15
E. Evaluating how planning tools could be used to solve financial problems and lead the
organization to sustainable success. ....................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management Accounting is defined as expertise of financial data and advice company to
use for a company and its business development. This assignment is about management
accounting and its significance for an organisation’s success. It will provide the meaning and
essential requirements of various types of management accounting techniques with their benefits.
The present report will study different accounting reports and their implementation in an
organization, i.e. Williams Performance Tenders which is the boat manufacturing company
which was founded in the year of 1979. It would be discussing about various advantage and
disadvantages of its planning tools in efficient manner.
Later, it will provide a profound analysis of marginal and absorption costing methods
with their income statements and interpretations for an insight about company’s overall growth.
The report will present significance of break-even analysis. This assignment will consist of
numerous advantages and disadvantages of planning tools with its applications. Along with this,
the overall impact on the decision-making process of a company.
TASK 1
A. Meaning of management accounting and essential requirements of different types of
management accounting systems
Management accounting includes preparation of managerial reports and accounts serving
to give accurate and precise financial and statistical data to the managers of organizations which
is required for decision-making. The major role played by it includes planning, organizing,
judgement creation, controlling in an organization (Ax and Greve, 2017).
Management accounting provides effective information from Williams Performance
Tenders so that manager can utilize this information and take better decisions to integrate it in
every level of an organization. It is provided only to management as internal decisions are taken
and thus, shortcomings can be eradicated with ease.
Such accounting is a useful tool for company because it serves decision making and leads
to an increased efficiency of functions of management. It also helps in fixing target and prices of
the products (Management Accounting: Meaning, Functions and Characteristics, 2017).
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Requirements of different types of management accounting systems are explained below and
are used by William Performance Tenders:
 Cost Accounting Systems
 Inventory Management System
 Job Costing System
 Price Optimization System
The requirements of each system are listed below:
Cost accounting system
This is used to identify the cost of each product or service. In the process of production,
such accounting system aids to develop efficiency to minimize the cost. This helps in more
production. Therefore, it supports to initiate control over various types of costs such as direct,
indirect, fixed, variable and semi-variable quite successfully.
Inventory management system
This system has many benefits for William Performance Tenders. It reduces over
exploitation of resources to a certain level. Further, with the help of inventory management
system, no excess inventory is ordered that reduces amount of the expenses in operative means.
It is requisite so that business may be capable to attain maximum production and fulfilling
customers’ orders with ease.
Job costing system
It is also an impelling method to examine cost incurred on different manufacturing jobs.
It is fundamentally needed to evaluate costs so that it could be reduced for gaining production at
low cost. It assists Williams Performance Tenders to control costs and supports their
management for suitable distribution of jobs. This efficaciously assist to cut down costs and thus,
business is able to accomplish production timely. Hence, job costing accounting system has
plenty of benefits to company in achieving production and met demand of customers quite
effectually.
Price optimizing systems
It is a system that helps to identify the best possible price to be quoted for production. In
this system, it provides opportunities to concentrate on various goals. Firm takes into account
consideration of customers’ and quote less price for products and services (Cooper, Ezzamel and
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Qu, 2017). Williams Performance Tenders uses this technique for setting the best prices of
goods.
B. Explanation of Different Management Accounting Reports
Management accounting is also known as managerial accounting. It focuses on internal
information of organization which is obtained from their financial accounting. These reports are
used for all the amendable regulations and measurable parameters for the overall growth and
development of Williams Performance Tenders. These reports are generated throughout the
accounting period to assist management in taking decisions.
Some essential reports of management accounting are listed below.
Budget reports
This report of management accounting is generated as a whole for small businesses
especially department wise. Budget reports are critical in measuring the performance of a
company. However, to understand the grand scheme for their business, each organization
implements an overall budget. It is prepared by keeping all the circumstances in mind which may
arise throughout the year. The establishment's budget lists several sources of earnings and
expenditures.
Account receivable aging reports
The Accounts Receivables Aging Reports are vital for this company which relies heavily
on extending credits. These reports are beneficial as they allow specifying the remaining
balances and also to identify defaulters in specific time period. In case of many defaulters, the
company may need a complete transformation of its credit policies (Accounts receivable aging
report. 2018). It is prepared to recover outstanding money from credit customers’ so that
operational tasks can be performed quickly by company. If funds remain outstanding for long
time, then it is required that strict credit policies should be implemented by which amount is
recovered within stipulated time. Thus, it helps company to prepare such report and thus, clarity
is observed for remaining amount to be recovered from debtors.
Cost managerial accounting reports
Cost of articles that are manufactured are computed by the management accounting. All
raw material costs, overhead, labour and any added costs are taken into consideration. This
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report helps managers to classify the cost price of products and services with respect to its selling
price. The margins for the profits are identified with help of these reports.
Performance reports
This report is basically to review the performance of Williams Performance Tenders as
well as employees at the end of accounting year. In large organizations, departments
performance reports are also generated which measures and identifies the performance of each
department of the company (Performance report. 2018). To take the key strategic decisions
about the future of the organization, managers utilize such report. Performance-related
managerial accounting reports also offer an insight into the working of a company.
Other managerial reports
There are some more reports which are essential for business such as order information
reports, project reports, competitor’s analysis etc. (Eldenburg and et.al., 2016). They are either
created internally or outsourced through professionals.
These reports are required for an up-to-date and reliable manner so that decision-making
can be made by relying on such information. Moreover, any deviations are analysed in company
that could be effectively handled by taking corrective actions and as such, overall performance
can be judged in a better way. Management is able to take better decisions by assessing such
managerial reports to enhance performance of firm and increase financial standing by enriching
internal operations.
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C. Evaluation of the benefits of management accounting systems
The benefits of management accounting systems are listed below in table.
Management Accounting
Systems
Benefits
Cost accounting systems  It helps in measuring the efficiency of Williams
Performance Tenders.
 Cost accounting system identifies profitable and
unprofitable activities that put emphasis on economic
activities of a company.
 It is helpful in proper planning about machines and
labour capacity (Saeidi and et.al. 2018).
Inventory management
systems
 The need of inventory management arises in
improvement of accuracy of stock orders i.e. it helps
in figuring out exact inventory needed by Williams
Performance Tenders for production.
 An inventory management system helps in saving time
as well as money because it keeps track of all
information about products and their raw materials.
Job costing system  By comparing actual estimates, it records cost more
accurately and facilitates to control it (Fullerton,
Kennedy and Widener, 2014).
 It helps management to identify by which jobs are
profitable and are unprofitable for business.
 It also supportive of quoting cost-plus contracts.
Price optimization systems  It is helpful in analysing adequate cost over products
and services.
 It identifies appropriate cost for various goods and
services.
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D. Integration of management accounting system and reports are developed in organization
There are various components in integrated management accounting systems that benefit
Williams Performance Tender for effective decision making. It assists in the reduction of
duplication of works, saves time and control unnecessary expenditures. Moreover, such
integration helps in providing data in time so that effective decisions can be done.
In recent times, computerized accounting is proved beneficial to firms which is time-
saving. Both systems provide a systematic data of organizations which is obtained from financial
accounting. The integration is required so that management may be able to effectively ascertain
reports and calculate decisions to enhance the overall performance with ease (Kihn and Ihantola,
2015).
TASK 2
A. 1 Explaining absorption costing and marginal costing methods.
Absorption costing
It is a method of accounting for valuing inventory. It adsorbs all cost which is used in
manufacturing of goods and services including fix and variable cost. It offers exact view of cost
that how much it relies in the production of goods and services. It is contrasted by direct costing
or variable costing. It is a technique which is used for recognizing cost and profits. Hence, it is
also known as a full costing technique. It determines all the practices under which fixed and
variable cost are converted into processes and operations. These techniques collect cost which
are associated with production and distribute them in an individual part. It accumulates the cost
of process of manufacturing.
Marginal costing
To find out the total cost of production, management uses marginal costing techniques for
decision-making (Fullerton, Kennedy and Widener, 2014). This technique differentiates both
fixed and variable cost. For managerial decision-making, it presents the data where fixed and
variable cost are shown individually. The marginal cost is the cost of one additional unit. While
valuing the finished goods and work in progress, variable cost is taken into consideration at the
time of valuation of stock. Behaviour of cost leads the concept of marginal accounting. It is also
known as variable costing because it takes only variable expenses into account at the time of
production.
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A.2. Producing income statements by utilising costing methods
Marginal costing
Particulars Amount Amount
Revenue 33000 33000
Material 5600
Labour 4800
Variable Production Overhead 1600
Variable Sales Overhead 800 12800
Less: Ending Inventory
Direct Material 1400
Direct Labour 1200
Variable Production Overhead 400
Variable Sales Overhead 200 3200
COP (Per Unit) 9600
23400
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500
5900
Net Income 17500
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Absorption costing
Particulars Amount Amount
Total Sales 33000 33000
Direct Material 5600
Direct Labour 4800
Variable Manufacturing
Expenses 1600
Variable Revenue Expenses 800 12800
Less: Closing Inventory
Direct Material 1400
Direct Labour 1200
Variable Sales Expenses 200
Less: Variable Sales Overhead 600 3400
Less: Absorption Of Overheads
(Fixed)
Cost Of Production 9400
Per Unit Contribution 23600
Less: Fixed Cost
Overheads (Production) 3200
Fixed Administrative Expense 1200
Fixed Selling Expense 1500 5900
Net Income 17700
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B. Computation of Break-Even analysis
Break-Even Analysis
Particulars Formula Figures
Selling Price Per Unit 40
Variable Cost Per Unit 18
Contribution Per Unit
Selling Price Per Unit - Variable
Cost Per Unit 22
Fixed Cost 6000
BEP (In Units)
Fixed Cost / Contribution Per
Unit 273
BEP (In Value Or Monetary Terms)
BEP (In Units) * Selling Price Per
Unit
10909.0909
090909
C. Applying the range of management accounting techniques and produce appropriate financial
reporting documents accurately for the scenarios given in the Task 2.
From: Memorandum of association
To: General Manager
Subject: Providing information about the favourable management accounting technique which
are to be implicated.
Sir,
With reference in giving the productive information which could present high creativity and
effective allocation of cost. For Williams Performance Tenders, to generate the sufficient profit,
two techniques of management accounting such as marginal costing and absorption costing will
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help the system. Therefore, in this case the technique of absorption costing proves to be
beneficial because it consists of those all the cost incurred in the process on production.
Moreover, there are more methods which are proven to be beneficial for the Williams
Performance Tenders like
 Cash Flow Statements with Historical Checking
 Analysing Financial Accounts
 Financial Accounting
 Communicating Information
 Review of Accounts
On comparing both the methods, it is seen that profit obtained from the marginal costing
technique is comparatively lower than other costing. It is highlighted that in absorption costing,
Williams Performance Tenders had a profit of $17700 than in marginal costing which was of
$17500. Hence, it can be concluded by saying that absorption costing will be more fruitful than
marginal. As it is a full costing method and shows the relevant profit for organization by
absorbing all costs. In marginal costing, it only takes fixed expenses into account to ascertain
the profits.
There are some reporting techniques which management should adopt like -
 Cash Flows
 Start-up Costing
 Balance Sheet
 Budget and Forecast Table
Thank you
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