Management Accounting Report - Finance, Semester 2, 2024

This report provides a comprehensive analysis of management accounting principles, focusing on the financial performance of UCK Furniture. The report delves into various cost calculation methods, including absorption and marginal costing, comparing their impact on net income. It explores the advantages and disadvantages of different planning tools, such as forecasting and contingency tools, in the context of budgeting and financial control. The report further examines the analysis of expenses for specific periods and the creation of cash budgets. It utilizes financial ratios to determine and evaluate financial issues faced by UCK Furniture, including the use of key performance indicators (KPIs) and financial governance. The report concludes with an analysis of planning tools used in management accounting, emphasizing their importance in controlling budgets and predicting business efficiency. The report provides a detailed overview of the financial aspects of the company.

Management Accounting
PART 2

Table of Contents
INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1: Calculation of cost by using various methods.............................................................................3
1.2: Large range of management techniques......................................................................................5
1.3: Analysis of data collected from income statement......................................................................5
TASK 2.................................................................................................................................................5
2.1: Advantage and disadvantage of using planning tools.................................................................5
2.2: Analysis of the expenses for July and August.............................................................................6
2.3: Objective and cash budget..........................................................................................................7
TASK 3.................................................................................................................................................8
3.1: Use of accounting system to determine financial issues.............................................................8
3.2: Evaluating financial issues faced by UCK furniture...................................................................8
3.3: Analysis of planning tools that is used in management accounting............................................9
CONCLUSION.....................................................................................................................................9
REFERENCES....................................................................................................................................10

INTRODUCTION
Management is one of the valuable aspects for an organisation which is used by the
company to analyse their financial performance as well as growth opportunities in coming
period of time. In accordance to deal with all these issues managers are looking to use
effective accounting systems that are help them to summarise and record all their day to day
expenses or cost those are incurred during the time of production process (Amoako, 2013).
Apart from this, uses of costing methods that are help them to evaluate net profit for the
company. Along with that advantage and disadvantage of using planning tools that can help
in controlling budgets. Comparison with other organisation regarding adoption of accounting
system that can help them to resolve financial issues are covered under this report.
TASK 1
1.1: Calculation of cost by using various methods
Cost is said to be the value which is given for the purpose of getting something in
return. It is simply that are aspects which is considered while the production of products and
services within an organisation. A business would be raise as capital from different sources
such as equity and other crucial sources. The capital is more invested in different projects of
an organisation in accordance with producing sufficient amount of goods. Costing is said to
be systematic procedure of evaluating total cost of UKC furniture in investing over the
production process with the present cost of capital (Brewer, Sorensen and Stout, 2014). The
management of analysis is reliable with the amount to select the accurate option that would
be delivering more effective results for the company. Cost is either related directly or
indirectly with manufacturing process in more effective manner. There are various types of
costing that are related with UKC furniture business operations. Some of them are mentioned
below:
Absorption costing: It is said to that cost which is applicable over the period of time
in producing product for the company. It includes both variable as well as fixed cost because
of which they are known as full costing method. It has been seen that they are some many
benefits of using this costing. But at the same point of time, certain limitation of using this
cost is also affecting the net profitability position of the company (Absorption costing, 2018).
This seems to be not considered as that much effective for making crucial decision making.

Marginal costing: It refers as those cost which are applicable additional on the
production of goods and services within an organisation. It consists of certain variable while
evaluating overall contribution per units during the period of time. Because of which, it is
said to be period costing method. It is more effectively taken into account for making future
decision as chances of mistakes can be less (JOSHI and et. al., 2011).
NET INCOME AS PER ABSORPTION COSTING: January February
Sales (35per units) 315000 402500
less:
Cost of Production (12+8+5+1.82) 295020 254790
Gross Profit 19980 147710
LESS:
Fixed and variable cost:
variable sales overheads (1 per unit) 9000 11500
Fixed selling cost 2000 2000
Total costs 11000 13500
NET INCOME AS PER ABSORPTION COSTING: 8980 134210
Computing net profit by using marginal costing
PARTICULARS January February
Sales (35 per unit) 315000 402500
less:
Cost of Production (12+8+5) 275000 237500
variable selling overheads (1 per unit) 11000 9500
variable cost 286000 247000
Contribution 29000 155500
less:
fixed manufacturing overheads 20000 20000
Fixed Admin & selling cost 2000 2000

total fixed costs 22000 22000
NET INCOME AS PER MARGINAL COST 7000 133500
1.2: Large range of management techniques
In accordance with the growth and financial stability of the company, it is essential
for UKC business to make effective use of tools and techniques that are held responsible for
presenting more strong results for an organisation. This has been examine that company
cannot achieve their valuable outcomes in case they are not using profitable accounting
techniques in regulating their business operations. Some of them are particularly useful to
measure the present financial position of UCK furniture like marginal as well as absorption
costing. With the help of marginal costing chances of getting more valuable outcomes can be
more easily attain before the set time limits (Klemstine and Maher, 2014). Apart from this,
historical costing techniques are also so effective for the current business operations. Through
this, additional cost that are incurred on the production process can be controlled during the
time of manufacturing process.
1.3: Analysis of data collected from income statement
It is vital for UCK group of company to choose right kind of techniques which are
useful in incurring more reliable outcomes in accordance with net profit during the period of
time. In relation of UCK furniture business they are having various options for calculating net
profitability of the company. There are various outcomes can be different from either of the
costing method such as absorption and marginal costing. It has been determine that with the
use of marginal costing 133500 and by using absorption they are getting 134210. It means
that company need to go with marginal costing method as the profitability is much more
higher from the absorption costing.
TASK 2
2.1: Advantage and disadvantage of using planning tools
Budget is said to be an estimation of overall expenses and cost which a company is
going to plan in accordance with increase profitability of the company. There are various
types of budgets such as sales, production and flexible budgets that can assist in overall
strategic formulation of the company. In order to control the impacts of budget certain
planning tools are needed to be taken into account. Some of them are mentioned below:

Forecasting tool: According to these particular tools and techniques which can be more
reliable through an individual to predict upcoming profits and loss for UCK furniture that is
going to generated with the present resources. It would be done through using data from the
past and early to make planning of future losses.
 Advantage: It is primarily beneficial of using these specific tool that are valuable for
estimating total cost and expenses in more reliable manner. It seems to be more
reliable in making upcoming decision those are made for the purpose of earning
maximum revenue during the period of time (Lim, 2011).
 Disadvantage: It has been found that estimation of future business risk cannot be
predicated accurately because of qualitative nature of business operations.
Contingency tools: It is said to be particular planning tools which is used by the
company in evaluating all kind of business risk those are un-identical for the company. This
has been examining that there are various crucial aspects by which local government as well
as company can control their operational risks.
 Advantage: According to these particular tools which a company is able to examine
the total loss they are going to get after the formulation of budgets. This planning
tools control all the associated risks those are affecting the business (Tessier and
Otley, 2012).
 Disadvantage: There are certain demerits of using these particular tools, in case of
any urgency kind of situation, it get failed to overcome the issues. It is more time
taking activity that required prior permission from the top level management.
2.2: Analysis of the expenses for July and August
In accordance with calculating all the essential variable cost per units various types of
methods are taken into account. It is vital for the manager to examine high and low activity
process.
(Total expenditure of high activity – Expenditure from low activity)
Total cost=
(Highest activity per hour spend – Lower hour spend)
Total expenditure (Per units): (9820-7410) / 795-505)=8.31
Total expenses for July:

= 650*8.31= 5401.5
For August:
= 750*8.31= 6232.5
2.3: Objective and cash budget
In accordance to make valuable budgets that are prepared by UCK furniture, it is
essential to make use of data more effectively so that plenty of growth opportunity can get
enhance in stronger manner. By the help of cash budget company can easily able to analyse
total investment they are made on the various activities such as operating, investing and
financing. It is basically related with forecasting of gains and loss statements which is
considered as primary tool for the company. The basic motive of preparing budgets is to
examine productivity as well as plan to control the additional cost they are going to pay
during the period of time. This seems to be calculated as sum total amount which is taken into
account for a specific motive as per the decision made by the company (Van der Stede,
2015).
Cash budget Amount
Particulars September
Opening balance 9000
Cash sales 39000
Sale on account 5648
Total Cash collected 53648
Less:
Purchase -16800
Selling and administration expenses -13000
Equipment cost -18000
Dividend paid -4000
1848
Add: minimum cash balance 5000
Expected cash at the end of
September month 6848

TASK 3
3.1: Use of accounting system to determine financial issues
Ratios Formula UCK furniture’s UCK woodworks
ROCE (Return on
capital employed):
Operating profit/Capital
employed*100
5890+3600/23100+31
930*100
=9490/55030*100
=17.24%
6955/81230*100
=8.56%
Operating profit
margin
Operating profit / sales
*100
9490/13000+24900*1
00
=25.03%
6955/81230*100
=8.56%
Assets turnover Revenue / Net assets 13000+24900/23106+
31930
=0.68 times
8150/81230
=0.100 times
UCK Furniture’s UCK WOODWORKDS
This particular company is associated with the
production of DESK.
The major purpose of this group is to supply all
the essential raw material to UCK furniture
which is used in production of goods.
ROCE ratio is 17.24%, it means that company
is getting more reliable outcome as return from
the overall capital investments.
In this, only 8.6% is generating this much
returns as collected in the year 2017.
The Assets turnover ratio is 0.68 time rotating
in the given year. It has been calculated with
the motive of analysing performance of the
company.
Only 0.10 time inventory of UCK furniture is
rotating during the period of time.
3.2: Evaluating financial issues faced by UCK furniture
It is essential for every company to make analysing of various financial issues those
are associated with the company. It cans directly impacts on the profitability position of an
organisation. In order to resolve all those issues, managers would need to make use of below
mentioned tools. Some of them are mentioned below:

KPI (Key performance indicator): It is one of the crucial financial tools which will
be use by the company to determine financial position of the company. It can evaluate by
taking financial information from last year statements.
Financial governance: It is basically more effective financial tools that will be
considered for evaluating financial position of the company. It is based on certain rules and
regulations that are planned by legal bodies to regular their business more effectively in near
future time (Zoni, Dossi and Morelli, 2012).
3.3: Analysis of planning tools that is used in management accounting
In respect to analyse the overall profitability level of the company planning tools are
taken into account. The budgets are need to evaluated before ordering any kind of production
related plan so that they can earn maximum profit for the company. In accordance with
controlling budgets more of the company is needed to make use of planning tools.
Forecasting tools that are said to be effective tool that is used to predict total efficiency
position of the company. Contingency tools are more effective planning tools that is used in
controlling business related risks.
CONCLUSION
From the above project report, it has been concluded that management accounting is
primary aspect for evaluating the overall growth of the company. In relation to attain more
profitability in near future time, company need to analyse total cost they are getting in to use
while production process. Advantage and disadvantage of using planning tools to control
budgets are done accordingly. This will help the company in attaining future growth and
sustainability in coming period of time.

REFERENCES
Books and journals:
Amoako, G.K., 2013. Accounting practices of SMEs: A case study of Kumasi Metropolis in
Ghana. International Journal of Business and Management. 8(24). p.73.
Brewer, P. C., Sorensen, J. E. and Stout, D. E., 2014. The future of accounting education:
Addressing the competency crisis. Strategic Finance. 96(2). pp.29-38.
JOSHI, P.L. and et. al., 2011. Diffusion of management accounting practices in gulf
cooperation council countries. Accounting Perspectives. 10(1). pp.23-53.
Klemstine, C. F. and Maher, M., 2014. Management Accounting Research (RLE
Accounting): A Review and Annotated Bibliography. Routledge.
Lim, M., 2011. Full cost accounting in solid waste management: the gap in the literature on
newly industrialised countries. Journal of Applied Management Accounting
Research. 9(1). p.21.
Tessier, S. and Otley, D., 2012. A conceptual development of Simons’ Levers of Control
framework. Management Accounting Research. 23(3). pp.171-185.
Van der Stede, W. A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research. 27(1). pp.171-176.
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change:
field evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.
Online
Absorption costing. 2018.[Online]. Available through:
<http://www.businessdictionary.com/definition/absorption-costing.html>.