Management Accounting and its Application in Business Environment

This report delves into the application of management accounting within Delight Bakery, examining the integration of management accounting systems and reporting within the bakery's processes. It evaluates the benefits of these systems and explores the concept of management accounting, including essential requirements and reporting methods. The report includes a marginal costing analysis and a flexible budget calculation for cost analysis. Furthermore, it assesses various planning tools for budgeting and forecasting, comparing and evaluating different management accounting systems adopted by Delight Bakery to address financial challenges and achieve sustainable success. The report emphasizes the importance of management accounting in monitoring expenses, maintaining profitability, and making sound financial decisions within the competitive business environment.

Application of Management Accounting to wider Business Environment

Table of Contents
Introduction......................................................................................................................................1
Task 1...............................................................................................................................................2
An evaluation of how management accounting systems and management accounting reporting
are integrated within Delight Bakery’s processes and their benefits for Delight Bakery and
Evaluation of the concept of the management accounting and the essential requirements of the
different management accounting systems and the methods used for reporting.........................2
Task 2...............................................................................................................................................7
2.1 Calculation of the minimum number of units that Mr. Smith needs to sell per year (for one
of his products Fresh Cream cakes) for him to make a profit using the formula method...........7
2.2 A Flexible budget for Delight Bakery and calculation of the cost analysis..........................9
Task 4.............................................................................................................................................10
Executive Summary.......................................................................................................................10
Introduction....................................................................................................................................11
3.1 An evaluation of the use of different planning tools and their application for preparing and
forecasting budgets and the advantages and disadvantages of these planning tools in terms of
budgetary control.......................................................................................................................11
3.2 Comparison and evaluation of the use of at least two management accounting systems
adapted by Delight Bakery in responding to financial problems and leading to a sustainable
success.......................................................................................................................................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
Application of Management Accounting to wider Business Environment Page 1

Introduction
Effective management system of an organization keeps each and every records of the
organization. Keeping the records management also analyze the information to make different
accounting records, find the cost of different section and also categorize those. In the age of
global competition, organization like Delight Bakery Ltd has to face huge competition. To cope
with this competition and enjoy competitive advantages Delight Bakery has to maintain god
accounting records and management accounting to manage the whole the organization
effectively and minimize different costs. In these report different managerial sides, advantages
and necessity of management accounting and management reporting have been discussed.
Task 1
An evaluation of how management accounting systems and management accounting
reporting are integrated within Delight Bakery’s processes and their benefits for
Delight Bakery and Evaluation of the concept of the management accounting and
the essential requirements of the different management accounting systems and the
methods used for reporting.
Management accounting and Management recording are the core part of accounting which help
to take decisions in every situations or part of the process. Delight Bakery has an established
process for production or managerial control. While keeping the records and tracking those
successfully of Delight Bakery, it would find the best management systems and achieve the
managerial goals. Management accounting and Management recording are the parts of an
organization which help to analyze the every part of process, cost and factors to report the
management and thus it also help to minimize the cost while efficiency would be increase
automatically (Thomas, T. F., 2016)
Management Accounting Systems and Management Accounting Reporting are integrated
within Delight Bakery’s processes:
Production Management: Different factors like operation, finance, labor, marketing etc. are the
part of the production systems. Every steps of the process needs perfect decision to gain
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efficiency. Management accounting and Management recording help management to the right
decision while the analyzed data is available to the management recording those. Finance, man
power engagement, process management of the production system depends on the managerial
data and decision to make it effective.
Management and Operation process: Management needs may change. The needed man power
for Delight Bakery may increase or fall. For example, large volume orders may cause the
increasing need in human power. Again, individual department or part of the process may need
more man power while another one’s need may fall. Management accounting and Management
recording help to find the operational and management needs for the effective systems of Delight
Bakery Ltd.
Human Resource Management Process: Every organization needs the best team player to
perform effectively and gain efficiency. Managerial records help to find the lacking of the human
power. Different records on the HRM may help to find the training necessity and developing
needs of the human power. Again effective human resource would help to minimize the cost
cutting the unnecessary man power. Trained and skilled human resource also helps to get the
maximum benefits from the employees (Investopedia, 2019)
Marketing process: In the age of global completion and online market age, Marketing is must.
Marketing has been helping achieving the goals of the organization from the very early of the
marketing age. Analyzing the data of Delight Bakery, it would be clear the perfect place to
invest. The best market place should be providing needed factors and the weak zones would be
developed.
Other benefits by Management Accounting Systems and Management Accounting
Reporting for Delight Bakery:
Apart from the above facts, Management accounting and Management recording also provide
some optimal supports to Delight Bakery. These are:
Monitoring Expenses: Management accounting and Management recording have different parts
of Delight Bakery activities. The recordings would show the costs of every factors and sense of
over cost.
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Profitability Maintain: Achieve profit from any venture or project the primary condition is to
cut the unnecessary costs or minimize the cost. Profitability is automatically would be
maintained while expenses are within the boundary (Smith, M., 2019)
Financial decision making: Making financial decisions Delight Bakery has to depend on
different needed information from Management accounting and Management recordings.
Making the right decision would be easy while good management records are available to the
management.
Management Accounting:
Management accounting is the part of accounting where the raw data is the internal and external
managerial data of an organization. Management of an organization uses this accounting system
to find the managerial data and support to manage the organization. Generally the management is
the major user of the management accounting (AccountingCoach.com, 2019)
So we can say that, management accounting is the accounting which is prepared by management
using monetary and non-monetary information of the organization to make decisions by the
management.
Figure 01: Management Accounting
Requirements of the different management accounting systems:
System’s design: While trying to maintain managerial accounting systems, it needs a formal
structure or design to start type process of accounting. System has to design in such a way that
Application of Management Accounting to wider Business Environment Page 4
Management
Accounting
Monetary and
Non monetary
Information
Internal Users
Help in Decision
Making

managers can get the needed information from the reports to take the immediate decisions. The
report has to be categorized and maintain in different parts to know different partial condition of
Delight Bakery.
Management accounting has a formal structure. The structure of the accounting would be
maintained while implementing to the organization. Designing the system, the structure should
be followed by the management. The structure is to develop in such a way so that the
management can get the needed information while need.
Information: Information is the core part of the accounting. Without information Management
accounting and Management recording cannot record. Again the recorded information should be
solid and authentic. If any of the recorded information is not accurate the result of the
management accounting would not be accurate. So getting the accurate result from management
accounting listed data should be authentic.
Management style: Management style affects the management accounting directly.
Management accounting uses the managerial data. Effective management systems provide the
needed all authentic data to make reports but autocratic management may not provide the actual
data hiding some data that may cause negatively to them. So, democratic management practice is
needed to make the management accounting accurate.
Organizational culture: Organizational culture is also a factor of management accounting.
Organization culture varies from organization to organization. Delight Bakery should develop
the culture of sharing information honestly. Friendly work environment is needed to practice this
fact. Delight Bakery should always concern of the cultural development and friendly work
environment.
Overhead costs: Indirect labor and material cost are referred as overhead cost. Finding the
accurate result from management accounting overhead cost also needed to include to the
recordings. While recording process is completed without the overhead cost the result would be
fail to provide the actual view of the managerial cost and others. The absorption method of
accounting process can be used to include this cost finding the effective result.
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Inflation: Inflation is the factor which has intensive power to affect the result of the
management accounting. An ideal management accounting considers the inflation. The inflation
should be considered as the rate of inflation.
Methods of reporting:
Delight Bakery Ltd can follow different forms and methods to present the management reporting
to the management and internal users. According to the presentation styles reporting style can be
categorized into two major categories. These two methods can also be categorized into different
parts. These methods are:
Figure 02: Methods of Reporting
Written Methods: Written methods are the methods where the reports are presented in written
report formats. Written formats can be presented in different sub categorized types of Delight
Bakery Ltd.
Annual report: Limited liability companies alike Delight Bakery Ltd prepare annual report
showing the accumulated overview of the financial conditions. Liability, assets, cost, profit-loss
and different part of profits are shown in this report. Management can easily get the knowledge
of the financial condition of Delight Bakery Ltd from this report (Appelbaum & others, 2017)
Application of Management Accounting to wider Business Environment Page 6
Reporting
Writtern
Verbal

Process costing: Process cost is one of the major knowledge of financial and managerial cost of
the organization. Process cost shows the cost of every process of Delight Bakery Ltd. Process
management is necessary to find the best way cut the cost and increase efficiency.
Budget report: Budget reports show the budgetary conditions and the optimal ways to make the
best budget for Delight Bakery. Management can present the best budgets of process, internal or
external costs, and production budget and so on using the budget reports. This report helps to
manage the cost and gain the goals using minimum resources.
Job cost report: Job costs record is the record of the cost of the man power of the organization.
The most efficient human resources should be rewarded according their performances. Job cost
report shows the cost of the employees which help to revise the HRM cost cutting unnecessary
cost of the HRM (TechRepublic, 2019)
Fact sheet: Fact sheet shows the core parts of the financial reports. Core factors and the parts
should be effective and efficient as it shows the overall condition of the organization. Delight
Bakery can get the overall view of the financial conditions by this report as it shows the financial
condition of the organization in one or two pages.
Verbal methods: Along with the written methods some verbal methods are used to present the
management reports. These methods are:
Presentation: Presentation methods is the methods where the management of Delight Bakery
and other related internal parties get the financial conditions view from the presentation by the
accounting department of Delight Bakery.
Exhibit: Different exhibitions can also be organized by the management to provide financial
conditions knowledge to its related internal parties like management team or business
development team.
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Task 2
2.1 Calculation of the minimum number of units that Mr. Smith needs to sell per
year (for one of his products Fresh Cream cakes) for him to make a profit using the
formula method.
Marginal costing:
Delight Bakery’s Ltd.
Particulars Year-1 Year-2 Year-3
Sales(Selling price*Units sold) 26100 34800 31900
Costs of goods sold =(Direct labor + Direct
material+ Variable manufacturing overhead)*Units
sold
(9000) (12000) (11000)
Fixed manufacturing overhead (9000) (9000) (9000)
Net operating income 8100 13800 11900
Cost of goods sold (Per unit):
Direct labor 3 3 3
Direct material 5 5 5
Variable manufacturing overhead 2 2 2
10 10 10
Absorption costing:
Delight Bakery’s Ltd.
Particulars Year-1 Year-2 Year-3
Sales(Selling price*Units sold) 26100 34800 31900
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Costs of goods sold =(Direct labor +Direct
material+ Variable manufacturing
overhead)*Units sold
(9000) (12000) (11000)
Fixed manufacturing overhead=(units
sold*Per unit manufacturing cost)
(6750) (8307.69) (7920)
Net operating income 10350 14492.31 12980
Per unit manufacturing overhead=(Fixed
manufacturing overhead/Units produced)
7.5 6.923077 7.2
Minimum Units to sell:
Here,
Target gross profit is £300000, Fixed cost=£50000,
Price=£30, Variable cost=£20
Units sold to reach profit = (Fixed cost+ Target profit) ÷ (Price-Variable cost per unit)
= (50000+300000) ÷ (30-20)
= 35000 units
So, Mr. Smith needs to sell 35000 units to fresh cream cakes to reach profit.
2.2 A Flexible budget for Delight Bakery and calculation of the cost analysis.
Particulars Budget for: Actual: Favorable/Adverse: Variance:
Materials 815,720 904,640 Adverse 88920
Labor 200,170 205,209 Adverse 5039
Production 119,825 132,480 Adverse 12655
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Total cost of
sales
1,201,255 1,341,360 Adverse 140105
Marketing 63,000 75,000 Adverse 12000
Administration 135,000 160,000 Adverse 25000
Directors salaries 84,000 84,000 Favorable 0
Depreciation 97,500 97,500 Favorable 0
Total overheads 379,500 416,500 Adverse 37000
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Task 4
Different budgetary control planning tools and management accounting systems using by Delight
Bakery Ltd have been discussed here.
Executive Summary
The management of Delight Bakery Ltd should be aware of the overall financial conditions.
Budgetary controls and management accounting systems are the major types of financial
conditions measuring tools. Delight Bakery can use different tools to do so as different methods,
tools and ways are available for the budgetary control and management accounting. These
methods are needed to get the financial conditions and solve different financial issues arising
while managing the organization effectively. These all factors are already discussed in the report.
Introduction
Modern accounting has different parts and ways that has been developed to solved any particular
part of the financial issues. Management accounting is one of the major components of
accounting and very much needed to get the managerial costs and factors. Management
accounting is the part of accounting systems which provides accurate managerial financial
knowledge by analyzing the managerial costs and other factors affecting the financial condition
of Delight Bakery Ltd.
3.1 An evaluation of the use of different planning tools and their application for
preparing and forecasting budgets and the advantages and disadvantages of these
planning tools in terms of budgetary control.
Budget is an essential part of management accounting. Different important planning tools of
budget and management accounting system used in organizations are discussed in this task.
The term budgetary control means managing the budget of an organization by segregating it into
different parts through different tools. It also makes evaluation between the actual financial
outcomes with the budgeted outcome of a company. There are different types of planning tools
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