Management Accounting Report for Babcock International

This report provides a comprehensive overview of management accounting, focusing on its role in decision-making, planning, and control within Babcock International Ltd. It explores various management accounting systems, including job costing and price optimization, and their impact on internal reporting. The report delves into different management accounting reports, such as budget reports, accounts receivable aging reports, and performance reports, highlighting their significance for internal stakeholders. Furthermore, it presents detailed income statements under both marginal and absorption costing methods for two periods, along with interpretations of the financial data. The analysis includes discussions on the advantages and disadvantages of different costing techniques and their implications for financial performance. The report also covers different planning tools and management accounting tools that can be utilized to solve financial problems and ensure financial stability. Annexes provide supporting data and calculations, making this a valuable resource for understanding the practical applications of management accounting principles.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
ACTIVITY 1....................................................................................................................................3
Management accounting and requirements of different management accounting system.........3
Different methods for management accounting reports..............................................................5
Integration of management accounting system and management accounting report sin the
organisation.................................................................................................................................6
ANNEX A........................................................................................................................................6
ANNEX B......................................................................................................................................12
ACTIVITY 2..................................................................................................................................13
Different planning tools and its advantages and disadvantages................................................13
ANNEX C......................................................................................................................................17
Different tools of management accounting system used to solve the financial problems........18
CONCLUSION..............................................................................................................................19
REFERENCES...............................................................................................................................21
Online........................................................................................................................................22

INTRODUCTION
Management accounting is the accounting which helps the managers in decision making
and it includes planning, decision making. management accounting system helps in preparation
of reports which is used by the internal stakeholders of the company.
Babcock International Ltd is the multinational business or corporation which is UK based
company . The company is specialised in managing the complex infrastructure and assets. this
also provides the skilled and engineering services which helps customers to improve their
performance with reduction ion costs.
The present study includes different types of Management accounting system and reports
which helps the managers in aiding decision making. Computation of income statement using
different costing techniques will also be explained in the report.
Furthermore, the report will include different planning tools and management accounting
tools which will helps the organisation in solving their financial problems and ensuring financial
stability.
ACTIVITY 1
Management accounting and requirements of different management accounting system
Management accounting is considered to be the accounting which involves partnership
of the management decision making, planning and performing the management systems and it
also leads in providing the expertise in the financial reporting and controlling in order to assist
management in the formation and implementation of the organisation strategy(Yigitbasioglu,
2016).
Management accounting system helps in efficiently preparation of the internal reports
which helps in aiding the managers of Babcock International Ltd to make effective and efficient
decisions. This system involves different systems of accounting which generally involves cos
accounting, job costing system, price optimisation etc( van Helden and Uddin, 2016). which
helps in making different decisions related to different activities in the organisation.
Management accounting plays essential role in the organisation as it performs different
function which includes effective and efficient planning, organisation, controlling and the
decision making . These are considered to be the most important role performed by mangers and
are possible with the efficient implementation of the management accounting systems.

Some different management accounting system are as follows:
Job costing system
This system is considered to be the method of recording and accumulating the cost or
recording of the cost of a each product or manufacturing job rather than the entire process. With
the help of this method and system , mangers and accountant of the organisation' are able to track
the cots which incurred on each job in order to maintain the data which is used to be relevant
data in the operations of the business(Temelli,2018).
It is the system which helps in monitoring the costs and expenses which are assign to the
manufacturing cost to each of the product and also enables the managers to keep the track of the
job expenses.
Price optimization system
This method is the program or tool which helps the mangers in calculating that how much
demand varies at the different price levels which helps in combing the data and the information
on costs and the level of inventory which helps in recommending the best price to charges in
order to earn improve profits and also to make the most useful and efficient decisions in the
organisation. This method is generally used by the mangers to find out the best price of the goods
and service son order to generate good amount of profit( Sutheewasinnon, Hoque and Nyamori,
2016). This also use the mathematical analysis to determine that the customer's response to
different prices for the company's product and services through using different channels. Price
optimization also helps the business organisation in determining the best price which will help
them in achieving their objectives of maximising operating profit.
Management accounting reports are the reports which are generated by using the data
through financial accounting and is also used for making decisions , controlling and planning
functions. These reports helps the managers and organisation in planning, regulation, controlling,
decision making and also helps in measuring the performance.
These reports are generally different from the financial accounting as these reports helps
the internal stakeholders by providing them useful information which helps them in adding the
decision making and it also emphasis on the planning and controlling purpose( Schaltegger and
Burritt, 2017). This reports are basically generated by collecting and tracking the data from
different departments by measuring their performances and also helps in making them present in
more understandable manner .

Different methods for management accounting reports
There are different type of management accounting reports which helps the internal
stakeholders of the Babcock International Ltd and some of them, are as follows:
Budget reports
Budge reports are considered to be the most essential reports of the organisation as it
helps the business in understanding the costs and expenses of the business and also helps them
to control the costs .this reports help in measuring the performance the company and in large
organisation, individual budget reports are made for each different departments(Otley, 2016).
Company focuses on achieving their goals and objective by matching their actual
performance by budged and through using these reports they are able to know the reasons for the
deviation so that in future they can take corrective measures in order to eliminate the deviations.
this reports help in analysing overall performance of the business for trimming cost and
improving the performance as well.
Account receivable ageing reports
This reports are considered to be the critical tool in the organisation as it helps in
managing the cash flow if they are extending the credit to the customer of the business. These
reports generally includes the maintenance of the separate columns for invoices which are 30
days late, 60 and 90 days late and by using these reports it can be helpful for the manger to find
out the problem for company' collection process( Sutheewasinnon, Hoque and Nyamori, 2016).
Through this reports, organisation can make the powerful and tighten policies for the customers
which are unable to pay their debts.
Performance reports
These reports are created by the organisation in order review the performance of the
company and its staff . In large organisation departmental performance are also generated so that
performance and activities scan be measured on the basis of departmental functions. For making
key strategic decisions mangers generally make use of these performance reports(Otley, 2016).
These reports also helps in awarding the individuals of the company on the basis of their
performance reports also helps in finding the reason foe the difference between the actual and
estimated performance in order to make further decision in context to direct the performance on
direction of the achievement of organisational goal( Muda, and et.al.,2017).

Integration of management accounting system and management accounting report sin the
organisation
Management accounting system are the system which helps the mangers in generating the most
useful information for the organisation which helps them in making the most useful and efficient
decisions(Messner, 2016). This system involves cost accounting system which is further than
helps to prepare and present the costing reports which helps the Babcock International Ltd in
monitoring and controlling the cost of the products and organisational activities. Other
management accounting system includes job costing system, price optimising, inventory
management system.
These all system helps in preparing and presenting the Individual field data through
which individual reports can be made for the different activities and useful information can be
generated which ultimately helps the business in making the most efficient decisions and also in
reviewing and controlling the activities in order to run the entire business activities in the
direction of the achievement of organisational goal and implementing effective and efficient
organisational process of planning, organising and controlling(Maskell, Baggaley. and Grasso,
2016). These all can be efficiently done through proper analysing the reports by internal
stakeholders of the company.
ANNEX A
Data: 1st period
Heads Amount in (£)
Production
Dining table(A) 5000
Chair(B) 20000
selling price
A 590
B 90
Direct material
A 215
B 20
Direct labour
A 90

B 30
Variable production overheads
A 25
B 5
Fixed cots 410000
Sales units
A 4350
B 16000
production cost
A 330
B 55
fixed cost per unit 16.4
total production cost
A 346.4
B 71.4
Income statement under marginal costing method
Particulars details Amount(£)
Sales revenue
A 2566500
B 1440000
4006500 4006500
less
Direct material 935250
A 320000
B 1255250 1255250

Direct labour 391500
A 480000
B 871500Interpretation: 871500
Variable production
overheads 108750
A 80000
B 188750 188750
2315500 2315500
Less-closing stock 214500
A 220000
B 434500 434500
Contribution 1256500
less- Fixed cots 410000
Net profit 846500
Income statement under absorption costing method
Particulars details Amount(£)
Sales revenue 2566500
A 1440000
B 4006500
less 4006500
Direct material 935250
A 320000
B 1255250 1255250

Direct labour 391500
A 480000
B 871500 871500
Variable production
overheads
A 108750
B 80000
188750 188750 2315500
less- Fixed cots 410000
Less-closing stock 410000
A 225160
B 285600 510760
510760
Net profit 770240
Interpretation:
From the above table and income statement it can be interpreted that under marginal
costing method and absorption costing method if income statement of year 1 representing
different net profits which means in marginal costing contribution is ascertained by deducting
only variables costs whereas in absorption costing technique net profit is ascertained after
deducting all costs of production that is variable and fixed costs.
Fixed cost remain constants till certain period of level than after it starts decreasing as
level of production increases and in absorption method, fixed cost is also deducted which is
reason for ,low net profit under this technique compared to marginal costing technique of income
statement of the Babcock International Ltd.
RAW DATA: 2nd period
Head Amount in (£)
Production

Dining table(A) 5200
Chair(B) 22000
selling price
A 590
B 90
Direct material
A 215
B 20
Direct labour
A 90
B 30
Variable production overheads
A 25
B 5
Fixed cots 482000
Sales units
A 1700
B 19100
production cost (variable)
A 330
B 55
fixed cost per unit 17.72
total production cost (variable+fixed)
A 347.7
B 72.7
closing stock units==opening
stock+purchases-sales
A

650
4000
opening stock
A 4150
B 6900
Income statement under marginal costing method
Particulars details Amount(£)
Sales revenue
A 1003000
B 1719000
2722000 2722000
less
Direct material
A 365500
B 382000
747500
Direct labour
A 153000
B 573000 726000
Variable production
overheads
A 42500
B 95500 138000 1611500
Less-closing stock

A 1369500
B 379500 1749000 1749000
Contribution -638500
less- Fixed cots 482000 482000
Net loss -1120500
Income statement under absorption costing method
Particulars details Amount in (£)
Sales revenue
A 1003000
B 1719000
2722000 2722000
less
Direct material
A 365500
B 382000
747500
Direct labour
A 153000
B 573000 726000
Variable production
overheads
A 42500
B 95500 138000
1611500 1611500
less- Fixed cots 482000 482000