Management Accounting Report: R.L. Maynard Financial Analysis
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This report delves into the realm of management accounting, providing a comprehensive overview of its various types and methodologies. It begins by defining management accounting and its significance in analyzing an organization's financial position, emphasizing its role in short-term decision-making. The report explores different types of management accounting systems, including financial, cost, job, batch, price optimization, contract, inventory, and performance management systems, highlighting their benefits and applications. Furthermore, it examines various management accounting reporting methods such as financial planning and budget reports, and provides an in-depth analysis of the income statement using marginal and absorption costing techniques. The report also explores the merits and demerits of budgetary control techniques and their significance in financial development, specifically in the context of R.L. Maynard. Finally, it includes illustrations to enhance understanding of key concepts like financial planning processes, income statements, and NPV/IRR calculations.

MANAGEMENT
ACCOUNTING
ACCOUNTING
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its different types....................................................................1
P.2 Different methods for management accounting reporting...................................................4
P3 Income statement of marginal and absorption costing..........................................................8
TASK 3..........................................................................................................................................12
P4 Different types of planning tools used for budgetary control with their advantages and
limitations..................................................................................................................................12
TASK 4 .........................................................................................................................................16
P5) Significance of management accounting systems in financial development of
R.L.Maynard.............................................................................................................................16
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its different types....................................................................1
P.2 Different methods for management accounting reporting...................................................4
P3 Income statement of marginal and absorption costing..........................................................8
TASK 3..........................................................................................................................................12
P4 Different types of planning tools used for budgetary control with their advantages and
limitations..................................................................................................................................12
TASK 4 .........................................................................................................................................16
P5) Significance of management accounting systems in financial development of
R.L.Maynard.............................................................................................................................16
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

ILLUSTRATION INDEX
Illustration 1: Financial Planning Process........................................................................................5
Illustration 2: Income statement using marginal costing method....................................................9
Illustration 3: Income statement using absorption costing............................................................10
Illustration 4: NPV.........................................................................................................................13
Illustration 5: IRR .........................................................................................................................14
Illustration 1: Financial Planning Process........................................................................................5
Illustration 2: Income statement using marginal costing method....................................................9
Illustration 3: Income statement using absorption costing............................................................10
Illustration 4: NPV.........................................................................................................................13
Illustration 5: IRR .........................................................................................................................14
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INTRODUCTION
Management Accounting is the process of analysing the financial position of the
organisation through the financial data available, to provide corrective short term decisions
within the organisation. It is the process of preparing various reports and accounts that provide
accurate financial information that helps the managers to make decisions regarding funding in
the new product or service or any other short term projects require ensuring the smooth running
of the enterprise (Abdel-Kader, 2011). Thus, management accounting deals with the
management of funds and optimum utilization of these funds to achieve the efficient and best
results. This report explains the various types of management accounting with their benefits and
limitations. It also explains the different methods of the management reporting with their
differences, through an income statement showing the absorption and marginal costing. This
report also signifies the merits and demerits of various budgetary control techniques. An analysis
and comparison of income statement as per absorption costing techniques and marginal costing
techniques is mentioned in this report and its detailed analysis is made to get quantity and price
variance in order to investigate the reason for such variances (Albu, and Albu, 2012).
TASK 1
P1 Management accounting and its different types
General manager
R. L. Maynard
Management accounting: It signifies the way of the efficiently utilize the funds available
of the cited company. This process utilizes various techniques like budgetary control, variance
analysis and financial statement analysis in order to address all the requirements of
organisation. It provides the detail scenario of the organisation starting from analysing market
elements which may affect the process of organisation and ends with implementation of plans
and strategies with review of such plans (Amidu, Effah, and Abor, 2011). Thus, this process
helps the organisation to find out the variances and loop holes from the standards maintained
and actual results achieved so that the effective and timely actions could be taken to eliminate
them quickly before it affects the ultimate goals of the organisation. Various types of
management accounting systems are as follows:
There are different systems of management accounting regarding decision-making and
1
Management Accounting is the process of analysing the financial position of the
organisation through the financial data available, to provide corrective short term decisions
within the organisation. It is the process of preparing various reports and accounts that provide
accurate financial information that helps the managers to make decisions regarding funding in
the new product or service or any other short term projects require ensuring the smooth running
of the enterprise (Abdel-Kader, 2011). Thus, management accounting deals with the
management of funds and optimum utilization of these funds to achieve the efficient and best
results. This report explains the various types of management accounting with their benefits and
limitations. It also explains the different methods of the management reporting with their
differences, through an income statement showing the absorption and marginal costing. This
report also signifies the merits and demerits of various budgetary control techniques. An analysis
and comparison of income statement as per absorption costing techniques and marginal costing
techniques is mentioned in this report and its detailed analysis is made to get quantity and price
variance in order to investigate the reason for such variances (Albu, and Albu, 2012).
TASK 1
P1 Management accounting and its different types
General manager
R. L. Maynard
Management accounting: It signifies the way of the efficiently utilize the funds available
of the cited company. This process utilizes various techniques like budgetary control, variance
analysis and financial statement analysis in order to address all the requirements of
organisation. It provides the detail scenario of the organisation starting from analysing market
elements which may affect the process of organisation and ends with implementation of plans
and strategies with review of such plans (Amidu, Effah, and Abor, 2011). Thus, this process
helps the organisation to find out the variances and loop holes from the standards maintained
and actual results achieved so that the effective and timely actions could be taken to eliminate
them quickly before it affects the ultimate goals of the organisation. Various types of
management accounting systems are as follows:
There are different systems of management accounting regarding decision-making and
1
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forecasting for further business operations. It includes systems like; financial, cost accounring,
performance management etc. However, some essential management accounting systems for
R.L.Maynard can be understood as below:
Financial accounting systems: For identifying monetary position of R.L.Maynard,
financial statements are analysed such as; profit and loss account, balance sheet, income
statement and so on (Amidu, Effah and Abor, 2011). Therefore, economic position of
entity is identified on the basis of which further ideas are generated for reducing
occurred financial problems and improving them as well.
Cost accounting system: Through analysing incurred expenses and gained revenue on
business operations, cost effectiveness can be gained. On behalf of this analysis, further
business operations are set that affect productivity and profitability of R.L.Maynard
effectively. Thus, under management accounting approach, costing on product and
services are determined efficiently (Fleischman, Walker and Johnson, 2010).
Job Costing: It is the method in which expenses and cost can easily be tracked as it is
charged to the job but not on process. As in job costing there is a job worker who
produces goods and services on behalf of the entity. This method is used by the large
manufacturing companies with high demand and have the time limit to complete their
orders on time otherwise the order could be replaced by the other competitor in the
market. This method is also use by the organisation who cannot invest high in the
expensive machines and equipments to produce high quality products as per the
demands of its customers in the market, so they join hands with the other job providers
who have the effective machines to produce the quality products. Thus, this method is
mainly adopted by the organisations need to produce the goods in bulk. This method is
mainly used for the jobs where Quotations need to be submitted. Here, profitability is
analysed job wise (Bebbington, and Thomson, 2013). Example: R. L. Maynard has to
perform job costing operation for estimating the costs which are involved with materials
and labourers. Furthermore, the specific job requirements are correctly estimated
through this operation.
Batch Costing: It is used by an entity when cost is charged specifically on a particular
product. Usually this type of cost accounting technique is used by pharmaceutical
2
performance management etc. However, some essential management accounting systems for
R.L.Maynard can be understood as below:
Financial accounting systems: For identifying monetary position of R.L.Maynard,
financial statements are analysed such as; profit and loss account, balance sheet, income
statement and so on (Amidu, Effah and Abor, 2011). Therefore, economic position of
entity is identified on the basis of which further ideas are generated for reducing
occurred financial problems and improving them as well.
Cost accounting system: Through analysing incurred expenses and gained revenue on
business operations, cost effectiveness can be gained. On behalf of this analysis, further
business operations are set that affect productivity and profitability of R.L.Maynard
effectively. Thus, under management accounting approach, costing on product and
services are determined efficiently (Fleischman, Walker and Johnson, 2010).
Job Costing: It is the method in which expenses and cost can easily be tracked as it is
charged to the job but not on process. As in job costing there is a job worker who
produces goods and services on behalf of the entity. This method is used by the large
manufacturing companies with high demand and have the time limit to complete their
orders on time otherwise the order could be replaced by the other competitor in the
market. This method is also use by the organisation who cannot invest high in the
expensive machines and equipments to produce high quality products as per the
demands of its customers in the market, so they join hands with the other job providers
who have the effective machines to produce the quality products. Thus, this method is
mainly adopted by the organisations need to produce the goods in bulk. This method is
mainly used for the jobs where Quotations need to be submitted. Here, profitability is
analysed job wise (Bebbington, and Thomson, 2013). Example: R. L. Maynard has to
perform job costing operation for estimating the costs which are involved with materials
and labourers. Furthermore, the specific job requirements are correctly estimated
through this operation.
Batch Costing: It is used by an entity when cost is charged specifically on a particular
product. Usually this type of cost accounting technique is used by pharmaceutical
2

industry. Such batches contains identical units but their prices are different. If each
batch and its cost is easily ascertainable only in that case batch costing technique can be
used by a firm. In this method every batch has the fixed price thus these batches could
easily be traced through the batch number. To calculate the cost the products produced
are averaged and thus thus in this method cost per product is generally low as it deals
with the large scale production like medicines. This method consists of mainly two type
of cost i.e. preparation cost and carrying cost. Set up cost is the cost involved in the
setting up of machines and the equipments require for the production and carrying cost
includes manufacturing cost, storage cost, depreciation etc (Brandau, and 2013).
Price optimization system: Through this management accounting system, price
optimization for production and distribution of goods and services. However, it is able
for cost effectiveness and proper management of entire business operations affect
further implementation. In this regard, appropriate cost is set on the basis of incurred
cost on expenditures regarding business operations (Douglas and CFM, 2012).
Therefore, price optimization system is essential for effective decision making and
forecasting on management of further business operations of R.L.Maynard.
Contract costing: In this type of cost accounting or management accounting
techniques cost is tracked on the basis of specific order. It simply means that cost related
with a contract is charged exclusively on that particular contract. The contract means the
legal agreement between the two parties to carry out the specific work within the time
limit. Contract costing signifies the method to calculate the cost of the long term
contract like construction of the bridges and dams which took about two or three years
to complete but the cost is pre decided in the agreement having an escalation clause that
signifies the hike in the contract price at fixed percentage due to hike in the material,
labour and other raw materials necessary for the contract to be completed. The payment
in this contract is made to the contractee on the basis of the work certified by the
engineer of the contractee (Callahan, Stetz, and Brooks, 2011).
Inventory management system: This management accounting system is able to
manage inventories of R.L.Maynard that affect its productivity and profitability. In
addition to this, inventory management system is essential to be identified for adequacy
of resources and fund systematically (Ihantolaand Kihn, 2011). Therefore, inventory
3
batch and its cost is easily ascertainable only in that case batch costing technique can be
used by a firm. In this method every batch has the fixed price thus these batches could
easily be traced through the batch number. To calculate the cost the products produced
are averaged and thus thus in this method cost per product is generally low as it deals
with the large scale production like medicines. This method consists of mainly two type
of cost i.e. preparation cost and carrying cost. Set up cost is the cost involved in the
setting up of machines and the equipments require for the production and carrying cost
includes manufacturing cost, storage cost, depreciation etc (Brandau, and 2013).
Price optimization system: Through this management accounting system, price
optimization for production and distribution of goods and services. However, it is able
for cost effectiveness and proper management of entire business operations affect
further implementation. In this regard, appropriate cost is set on the basis of incurred
cost on expenditures regarding business operations (Douglas and CFM, 2012).
Therefore, price optimization system is essential for effective decision making and
forecasting on management of further business operations of R.L.Maynard.
Contract costing: In this type of cost accounting or management accounting
techniques cost is tracked on the basis of specific order. It simply means that cost related
with a contract is charged exclusively on that particular contract. The contract means the
legal agreement between the two parties to carry out the specific work within the time
limit. Contract costing signifies the method to calculate the cost of the long term
contract like construction of the bridges and dams which took about two or three years
to complete but the cost is pre decided in the agreement having an escalation clause that
signifies the hike in the contract price at fixed percentage due to hike in the material,
labour and other raw materials necessary for the contract to be completed. The payment
in this contract is made to the contractee on the basis of the work certified by the
engineer of the contractee (Callahan, Stetz, and Brooks, 2011).
Inventory management system: This management accounting system is able to
manage inventories of R.L.Maynard that affect its productivity and profitability. In
addition to this, inventory management system is essential to be identified for adequacy
of resources and fund systematically (Ihantolaand Kihn, 2011). Therefore, inventory
3
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management is vital approach of accounting system affect balancing production and
distribution of goods efficiently.
Performance management system: As management accounting is multidisciplinary
approach also remains able to manage its employees' performance (Harris and Durden,
2012). In this regard, their performances are identified and further decisions are made to
improve them through conducting training and development programs efficiently.
P.2 Different methods for management accounting reporting
Management accounting reporting signifies the way to present the process, productivity
and profitability of the R.L. Maynard which is the small business venture that has the business to
hold the management activities of the large corporation in Gerrards Cross in UK. Management
accounting differs from the financial accounting as financial accounting is based on the double
entry system and have some specific standards to be followed whereas management accounting
do not have any prescribed standards to be followed. These report could be maintained by the
organisations as per their necessity and preferences (Fleischman, Walker, and Johnson, 2010).
These reports are not legally prescribed by the income tax department to be presented in the
annual returns. Thus, these reports are maintained by the corporates for their own analysis and
evaluation to know exact position of the company in the market to take the long term and short
term decisions regarding the finance or other related services delivered by the company
R.L.Maynard. For example, Budgeting techniques are available in management accounting for
the forecasting of future projects but on the other side there is no any such forecasting technique
which is available in financial accounting (Gates, Nicolas, and Walker,2012).
Various methods of management accounting reporting is mentioned below :
Financial Planning: Financial planning is the continuous process that direct the
organisation to make the effective decisions regarding money, that how and where the funds
present could be effectively utilize to meet the ultimate goals of the organisation. Financial plan
of the R.L.Maynard could effectively be used to have clear view of the objectives to be achieved
as following:
4
distribution of goods efficiently.
Performance management system: As management accounting is multidisciplinary
approach also remains able to manage its employees' performance (Harris and Durden,
2012). In this regard, their performances are identified and further decisions are made to
improve them through conducting training and development programs efficiently.
P.2 Different methods for management accounting reporting
Management accounting reporting signifies the way to present the process, productivity
and profitability of the R.L. Maynard which is the small business venture that has the business to
hold the management activities of the large corporation in Gerrards Cross in UK. Management
accounting differs from the financial accounting as financial accounting is based on the double
entry system and have some specific standards to be followed whereas management accounting
do not have any prescribed standards to be followed. These report could be maintained by the
organisations as per their necessity and preferences (Fleischman, Walker, and Johnson, 2010).
These reports are not legally prescribed by the income tax department to be presented in the
annual returns. Thus, these reports are maintained by the corporates for their own analysis and
evaluation to know exact position of the company in the market to take the long term and short
term decisions regarding the finance or other related services delivered by the company
R.L.Maynard. For example, Budgeting techniques are available in management accounting for
the forecasting of future projects but on the other side there is no any such forecasting technique
which is available in financial accounting (Gates, Nicolas, and Walker,2012).
Various methods of management accounting reporting is mentioned below :
Financial Planning: Financial planning is the continuous process that direct the
organisation to make the effective decisions regarding money, that how and where the funds
present could be effectively utilize to meet the ultimate goals of the organisation. Financial plan
of the R.L.Maynard could effectively be used to have clear view of the objectives to be achieved
as following:
4
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First stage of the financial planning is to gather the client information and then the goals
are set as per the specific goals and objectives for the organisation as per the current scenario of
the market. Second stage to analyse the present financial situation of the organisation through the
other management accounting reports till the date such as budgetary control statement, inventory
and manufacturing report, job cost report etc. This helps the organisation to underline the basic
fund requirement and the company's position to utilize its internal resources (Harris, and Durden,
2012). After the financial analysis, the management need to develop the effective plan about how
the available funds will be utilize effectively. If the corporate requires the external funds it need
to also plan its sources in this stage. This plan also give the clear view of how the plan is
implemented and what is the outcome of the implementation. Thus, financial planning is also
helps in reporting management accounting system.
Budget Report :
5
Illustration 1: Financial Planning Process
Source: (Financial Planning Process, 2017)
are set as per the specific goals and objectives for the organisation as per the current scenario of
the market. Second stage to analyse the present financial situation of the organisation through the
other management accounting reports till the date such as budgetary control statement, inventory
and manufacturing report, job cost report etc. This helps the organisation to underline the basic
fund requirement and the company's position to utilize its internal resources (Harris, and Durden,
2012). After the financial analysis, the management need to develop the effective plan about how
the available funds will be utilize effectively. If the corporate requires the external funds it need
to also plan its sources in this stage. This plan also give the clear view of how the plan is
implemented and what is the outcome of the implementation. Thus, financial planning is also
helps in reporting management accounting system.
Budget Report :
5
Illustration 1: Financial Planning Process
Source: (Financial Planning Process, 2017)

Budget reports helps the small business organisations like R.L.Maynard to analyse their
department's performance taking into account the standards prescribed and the actual results
achieved. This method help the organisation to calculate the variances and take effective steps to
eliminate these variances and achieve the desired standards. Here, the estimated budget is based
on the actual expenses of prior years thus any changes in the cost in the current year leads to the
variances (Hyndman, and Connolly, 2011) . This report can also be used by the managers to
provide incentives as per the targets achieved so it is the effective method to motivate the
employees as this report gives the clear picture of what need to be achieve. This is the effective
method to plan the effective allocation and utilization of the available resources in the
organisation. Thus, this method facilitate the continuous control on the operations performed in
the organisation. These budgets are the warning signs for the organisation that appropriate
actions are required. But, since the budgets are based on the future prospects and it is not
possible to predict the future accurately thus errors and inaccuracies are possible (Ihantola, and
Kihn, 2011).
Inventory And Manufacturing:
Companies with physical inventory maintains this report to analyse the right position of
the inventory waste, hourly labour costs and per unit overhead cost. Manufacturing companies
could sustain in the market for the long run only when they keep their product's cost competitive
low as compare to the other competitors . Thus, they need to achieve an competitive advantage
over the cost of the product which could be only possible through effective utilization of the
resources available and thus effective planning is required on the same. The managers through
this report can even improve the working of their departments and can also motivate the same on
its improvements through the monitory and non monitory incentives ( Mat, Smith, and
Djajadikerta, 2010).
Financial Statements Analysis :
Financials or financial statements is analysed in order to understand the current financial
position of business enterprise(Fleischman, Walker and Johnson, 2010). The facts which are
extracted through such analysis can be shown in the financial reporting of R.L.Maynard.
Cost Accounting :
It is a method through which reporting can be done as it includes various techniques of
budgetary control and variance analysis through which better presentations can be made and
6
department's performance taking into account the standards prescribed and the actual results
achieved. This method help the organisation to calculate the variances and take effective steps to
eliminate these variances and achieve the desired standards. Here, the estimated budget is based
on the actual expenses of prior years thus any changes in the cost in the current year leads to the
variances (Hyndman, and Connolly, 2011) . This report can also be used by the managers to
provide incentives as per the targets achieved so it is the effective method to motivate the
employees as this report gives the clear picture of what need to be achieve. This is the effective
method to plan the effective allocation and utilization of the available resources in the
organisation. Thus, this method facilitate the continuous control on the operations performed in
the organisation. These budgets are the warning signs for the organisation that appropriate
actions are required. But, since the budgets are based on the future prospects and it is not
possible to predict the future accurately thus errors and inaccuracies are possible (Ihantola, and
Kihn, 2011).
Inventory And Manufacturing:
Companies with physical inventory maintains this report to analyse the right position of
the inventory waste, hourly labour costs and per unit overhead cost. Manufacturing companies
could sustain in the market for the long run only when they keep their product's cost competitive
low as compare to the other competitors . Thus, they need to achieve an competitive advantage
over the cost of the product which could be only possible through effective utilization of the
resources available and thus effective planning is required on the same. The managers through
this report can even improve the working of their departments and can also motivate the same on
its improvements through the monitory and non monitory incentives ( Mat, Smith, and
Djajadikerta, 2010).
Financial Statements Analysis :
Financials or financial statements is analysed in order to understand the current financial
position of business enterprise(Fleischman, Walker and Johnson, 2010). The facts which are
extracted through such analysis can be shown in the financial reporting of R.L.Maynard.
Cost Accounting :
It is a method through which reporting can be done as it includes various techniques of
budgetary control and variance analysis through which better presentations can be made and
6
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comparison between estimation, expectation and real output can be made. Cost can be controlled
as well as it can be reduced up to a certain level at which cited entity can attain the aim of
profitability.
Cost Reports
Cost reports can be prepared by the management accountant in four steps(Hyndman and
Connolly,2011). These steps are mentioned below which needs to be followed by cited
entity to prepare production cost report :
Computation of physical units
Computation of equivalent units in respect of production
Cost per unit
Preparation of cost reconciliation statements.
By following the above mentioned steps management can prepare cost report in respect
of its products. Financial or cost reporting assist an entity to find the core areas in which the
corporate requires to improvise itself. Further they can strengthen such areas so that they can
attain a major share in targeted market. There are some cost drivers which needs to be manage so
that company can get a cracking profit margin. There are some performance indicators or key
performance indicators which are nothing but the objectives of entity which acts as a
measurement of performance as if entity has achieved those objectives then its means it is
performing good in the market and vice-versa(Ihantola and Kihn,2011). These key performance
indicators (KPI) are mainly customer satisfaction, profitability, cost and customer retention.
These can be classified as performance measurements as if management can achieve the targets
which are set the by them .
Performance reports:
When business organisations develop reports on the performance of their enterprise or
employees or any other subject then such reports are considered as performance reports. Often
such kind of publications are produced by respective authoritative government. The objectives
which are developed by businesses for getting a directional flow have to be accomplished. The
attributes that contribute to this accomplishment depict the performance.
Segmental/Departmental Reports:
There are different functioning departments, divisions or subsidiaries associated with a
business. These are considered as departments or segments. The allocation of resources, income,
7
as well as it can be reduced up to a certain level at which cited entity can attain the aim of
profitability.
Cost Reports
Cost reports can be prepared by the management accountant in four steps(Hyndman and
Connolly,2011). These steps are mentioned below which needs to be followed by cited
entity to prepare production cost report :
Computation of physical units
Computation of equivalent units in respect of production
Cost per unit
Preparation of cost reconciliation statements.
By following the above mentioned steps management can prepare cost report in respect
of its products. Financial or cost reporting assist an entity to find the core areas in which the
corporate requires to improvise itself. Further they can strengthen such areas so that they can
attain a major share in targeted market. There are some cost drivers which needs to be manage so
that company can get a cracking profit margin. There are some performance indicators or key
performance indicators which are nothing but the objectives of entity which acts as a
measurement of performance as if entity has achieved those objectives then its means it is
performing good in the market and vice-versa(Ihantola and Kihn,2011). These key performance
indicators (KPI) are mainly customer satisfaction, profitability, cost and customer retention.
These can be classified as performance measurements as if management can achieve the targets
which are set the by them .
Performance reports:
When business organisations develop reports on the performance of their enterprise or
employees or any other subject then such reports are considered as performance reports. Often
such kind of publications are produced by respective authoritative government. The objectives
which are developed by businesses for getting a directional flow have to be accomplished. The
attributes that contribute to this accomplishment depict the performance.
Segmental/Departmental Reports:
There are different functioning departments, divisions or subsidiaries associated with a
business. These are considered as departments or segments. The allocation of resources, income,
7
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expenditures, assets and liabilities, etc. are some of the elements of these segmental or
departmental reports.
Product/Service profitability Reports:
Profitability is an attribute which depicts the amount of benefits which can be procured
by a particular product or service. The nature of product or service that is provided by the
company and its impact over the target audience is estimated in these kinds of profitability
reports. It is important to understand the profit levels which will be reached by the company after
launching or introducing a product in the strategic markets.
Inventory management Reports:
Inventory management reports are completely based on the analysed and managed
information about the inventory that is the goods which are acquired by company currently. The
current status of the inventory, analysis and integrity reports are an integral inventory
management reports.
P3 Income statement of marginal and absorption costing
The type of financial statement that projects the profitability of an organisation at the end
of a specific time frame is known as income statement. It is prepared on the basis of performance
which is evaluated by analysing the expenditures incurred and the revenues generated due to
operating and non-operating activities undertaken by an organisation (Schaltegger, Gibassier and
Zvezdov, 2013). Income statement can be prepared on the basis of marginal costing or
absorption costing as mentioned below :
Income statement under marginal costing method
8
departmental reports.
Product/Service profitability Reports:
Profitability is an attribute which depicts the amount of benefits which can be procured
by a particular product or service. The nature of product or service that is provided by the
company and its impact over the target audience is estimated in these kinds of profitability
reports. It is important to understand the profit levels which will be reached by the company after
launching or introducing a product in the strategic markets.
Inventory management Reports:
Inventory management reports are completely based on the analysed and managed
information about the inventory that is the goods which are acquired by company currently. The
current status of the inventory, analysis and integrity reports are an integral inventory
management reports.
P3 Income statement of marginal and absorption costing
The type of financial statement that projects the profitability of an organisation at the end
of a specific time frame is known as income statement. It is prepared on the basis of performance
which is evaluated by analysing the expenditures incurred and the revenues generated due to
operating and non-operating activities undertaken by an organisation (Schaltegger, Gibassier and
Zvezdov, 2013). Income statement can be prepared on the basis of marginal costing or
absorption costing as mentioned below :
Income statement under marginal costing method
8

Income statement on the basis of absorption costing method
9
Illustration 2: Income statement using marginal costing method
9
Illustration 2: Income statement using marginal costing method
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