Management Accounting Report: Financial Analysis of Catering Services

This report delves into the core concepts of management accounting, focusing on its application within the context of Connect Catering Services. It begins by defining management accounting and exploring its various systems, including cost accounting, inventory management, price optimization, and job order systems. The report then examines different methods of management accounting reporting, such as performance reports, budget reports, and accounts receivable reports. A significant portion of the report is dedicated to the preparation of income statements using both marginal and absorption costing methods, accompanied by a reconciliation statement. Furthermore, the report includes a detailed analysis of break-even points, margin of safety, and the impact of cost changes on these metrics. Finally, the report explores the benefits and drawbacks of budgetary control and the importance of management accounting systems (MAS) in resolving financial problems, providing a comprehensive overview of financial management in the catering industry.

Management Accounting
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Contents
Contents...........................................................................................................................................2
Introduction......................................................................................................................................3
TASK 1............................................................................................................................................3
P1. MA and its different types of system....................................................................................3
P2. Various methods of MA reporting........................................................................................3
TASK 2............................................................................................................................................3
P3. Income statement by using different costing methods..........................................................3
TASK 3............................................................................................................................................3
P4. Various planning tool of budgetary control with its advantages and disadvantages.............3
TASK 4............................................................................................................................................3
P5. Comparison of two companies using MAS to resolve financial problems...........................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4
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Introduction
The systematic process of determining, collecting, summarising, recording and analysing the
useful information into proper accounts which support the manager of internal department to
make correct decision is known as Management accounting (Anshori, 2020). This is a field of
accounting which enables meaningful decision to be made in order to increase the overall
performance and productivity in a year. In this report, pearl accounting provides accounting
services to connect catering services in order to attain competitive advantages.
The report includes, concepts and system of MA, various reports of management
accounting, costing methods to prepare income statements. In addition, report also includes
benefits and drawbacks of planning tool and the importance of MAS in resolving the different
financial issues.
TASK 1
P1. MA and its different types of system
Management accounting is an important method for putting disparate details into
something like a systematic format such that final choices can be taken. It contains both
monetary and non-monetary information in of theoretical and practical information in place to
bolster companies in achieving the short and longer objectives. This kind of accounting is done
by the accounting group to assist administrators make more use of data for performance. MA, as
just a challenging achievement, entails a variety of aspects and strategies that, in the end, aid in
the production of productive statements that aid in the judgment of continuing projects for
ultimate productivity. The below are some of the characteristics of a management accounting
framework that could be discussed:
Cost accounting system: Different costs that arise in an organization's activities are handled
through such a method in an acceptable way so that full income can be produced from those
practices. It also aids management specialists in the development of information in order to
formulate proper approaches that can provide a foundation for expansion, market survival, and
so forth. As a result, cost control accounting is claimed to be efficient for creating cost-based
decisions by an organization's managers. The focus of this scheme is on cost competitiveness,
which will assist an organization in generating full income through greater production and
reliability in its activities (Suranatthakul and et. al., 2020).
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Inventory management system: This method is used by the internal manager in order to
prepare the systematic records of total inventory which is available for producing goods and
services for a specific time frame. Inventory system also enables the manager to check the total
products and services which are totally ready for customer use, as well as the actual inventory
within the development stage and most importantly the exact figures of raw material which help
in making goods as per the market demands. In connect catering services manager may
implement this system and make a details records about their stock level which is available in the
three forms i.e. raw material, finished good and work in progress. This will lead to increase the
supply of services as the more customer are attracted towards company which directly support to
increase the profit margin.
Price optimisation system: This system is beneficial in making survey regarding customer
interest, market situation, information related to expenses and demographic changes which help
in making the proper supply and demand of company’s product to the large customer base. This
method is beneficial in making the most suitable prices of goods for the company which support
to attain the interest of customers and enables to maintain operating profit. In connect catering
services manager can implement this system to fix the prices of services to respective customers
as per their demand. This helps them to satisfy the needs of customers at reasonable prices and
also cover the costs which is included in making that particular services.
Job order system: This MA system is very much crucial in making the count of total cost
involved in different job in each department so that total expenses can be calculated in order to
make certain crucial decision. Manager with the support of this system helps in maintain a
separate record of every cost direct as well as indirect involved in making various goods.
Manager in connect catering can make individual record for similar jobs which helps to
determine the most profitable and least profitable (Tatake, 2020).
P2. Various methods of MA reporting.
Management accounting reports are fundamentally used to settle on best choices, recognize
progress just as to reach the business objectives in viable way. The satisfactory way of the
different MA report begins from defining specific objective or goal and furthermore create
comprehension of significant outcomes which are beneficial in long term. After objective is
being fixed, it is needed to recognize key execution pointers which are ideal reasonable for
dissecting the actual productivity in a specific timeframe. Additionally, is helps to make genuine
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correlations of at various times information for investigating the overall performance of different
department as well as entire company in present time. Using diagrams and charts such
information is being pictured to help directors for proper dynamic decision for long term growth.
Some of the important reports of MA are being discussed in the context of connect catering
services:
Performance report: This report is utilized to distinguish genuine performance of each
department as well as entire association with the use of suitable methodologies and strategies. It
is helpful in different viewpoints like to expand benefit acquiring limit of an organization, to
dispose of additional costing, to increase deals volume, etc. Subsequently, the performance for a
period is consider to be a main factor which is liable for development of an organization by
expanding performance levels for longer period of time. In connect catering the performance
report is prepared to determine the real performance of various services co0mparing with
planned report so that any gap can be fulfilled to increase the performance level. In addition, it
also lets manager to continuously focus over the operation which are performing well as these
are the main point for success of company in that respective time frame.
Budget report: It is supposed to be individual expense and income report of an association for
an important period. A spending report estimates hierarchical targets and furthermore benchmark
for estimating real outcomes from projected information. It additionally causes an association to
stay aware of the changing conditions to keep such a possibility at future date. This strategy is
extremely gainful for overall development by expanding efficiency and net revenues over the
time frame. In connect catering manager with the support of this report can make proper records
of total expenses involved in making a service good for customer demand. Furthermore, they can
compare it with budgeted expenditure figures so that any disparities can be covered or eliminated
that can impact the performance in upcoming time (Abou Taleb and Al Farooque, 2021).
Accounts receivable report: This report, help in making a detail record about the customer who
have purchased the goods but have not make the payment instantly. The date and time for each
customer are mentioned which help in making legal intimation to the them on their due date
which creates a proper payment cycle. In context of connect catering, manager can be beneficial
which this report, by making a detail record of customer transaction about their services if made
on credit basis. This reduces the chances of conflicts and also make proper flow of cash on every
due date of customer that support to increase the profit margin by good percentage.
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TASK 2
P3. Income statement by using different costing methods.
Cost alludes to each one of those resources which are uses to make an item or total sum
paid or charged for particular service or product that is denoted in money related terms. All the
operation costs are recorded Income statement as a cost during a bookkeeping year. The two
important method of costing is discussed below and different month income statement is
prepared with the help of these methods:
Marginal costing: These expenses are supposed to be the extra expenses for creating an
extra or additional unit of item (Healy, 2019). All together words, negligible expense alludes to
any diminish or expansion in serving one more client or creating one additional unit. In setting to
Associate Cooking Administrations, this expense will help them to encourages control on
expense as it separate fixed and variable expense which make it simple for the board to
successfully control peripheral expense.
Absorption costing: This cost suggests that all the assembling cost are consumed by units of
good that are created (Comiran, Fedyk and Ha, 2018). It includes direct material, work, variable
and fixed assembling overheads. They are likewise requiring annual assessment and outer
monetary announcing. This expense will help Interface Providing Food Administrations in their
developing stage as in beginning, branch of credit control may not speed with development of
volume.
Preparation of income statements:
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Fixed Manufacturing Overhead per unit 6 5
10 9
Income statement under absorption costing
Particulars April may
Sales 16000 16000
Less: Cost of sales (2000*10) (2000*9) 20000 18000
Fixed Manufacturing Overhead 15000 15000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
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Closing stock (500*10) (1500*9) 5000 13500
Opening stock (500*9) 0 5000
Gross loss -4000 -2000
Less: Fixed Non-Manufacturing Cost -4000 -4000
Net loss -8000 -6000
Cost per unit under absorption costing-
Activity April May
Variable Manufacturing cost per unit 4 4
Particulars April May
Sales 16000 16000
Less: Marginal cost of sales 8000 8000
Variable Manufacturing cost (2500*4) (3000*4) 10000 12000
Closing stock (500*4) (1500*4) 2000 6000
Opening stock 0 2000
Contribution 8000 8000
Less: Fixed Manufacturing Overhead 15000 15000
Less: Fixed Non-Manufacturing Cost 4000 4000
Net loss -11000 -13500
Reconciliation statement:
Particulars April May
Net loss under absorption costing -8000 -6000
Less: Closing stock -3000 -7500
Net loss under marginal costing -11000 -13500
Working Notes
Marginal Cost of sales
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Particulars April may
Opening Inventory 0 500
Add: Cost of production 10000 12000
Less: Closing inventory 2000 6000
8000 8000
2 a)
1. Fixed and variable costs
Fixed costs:
Activity Amount
Manager’s Salary 5000
Rent 5000
Insurance 500
Utilities 500
Advertising cost 1000
£12000
Variable cost:
Activity Amount
Direct material costs per Pizza 3.50
Direct labour costs per Pizza 1.50
Direct overhead costs per Pizza 0.50
£5.50
2. Break-even point in units and in sales value
BEP (In units): Fixed cost/contribution per unit
Contribution per unit: Selling Price-Variable cost per unit
= 9.50-5.50
= 4.00
BEP: 12000/4
= 3000 Units
BEP (In revenues): Fixed cost/PV ratio
PV ratio: Contribution/selling price*100
= 4/9.50*100
= 42.10%
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BEP (In revenues) = 12000/42.10%
= £ 28503
4. Margin of Safety at sales of 3500 Pizzas
Margin of safety= Sales units - BEP in Units
= 3500-3000
= 500 Units
5. Effect on BEP in units and in sales value, in case of increase in manager's salary to
£6,000
If manager’s salary will increase than it will affect to fixed cost and revised fixed cost will be of
£13000.
New BEP (In units): 13000/4
3250 Units
New BEP (In revenues): 13000/42.10%
= £30878
2 b Preparation of graph:
Activity Amount
Total Costs (12000+55000) 67000
Revenues per Unit (95000-67000)/10000 2.8 Per unit
Total Fixed Cost: Companies prepare cost
budget which is used to find variance in
actual cost incurred and budgeted target. Cost
budgets shall be flexible enough to
incorporate changes in targets as and when
they arise.
12000
BEP point 28503
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TASK 3
P4. Various planning tool of budgetary control with its advantages and disadvantages.
Budgets will assist Link Catering services in setting up their goals and targets that will
inspire their staff. Companies should monitor their success in order to change in the future. It
would evaluate not only revenue and costs, but also the success of their workers in order to meet
defined goals. Various planning mechanisms that are used in the Connect Catering services
budgetary management mechanism are discussed below:
Cash budget: Cash budgets include all of the things which a project will need because the cash
resources that will be available in the current and future years. It defines whether the
expenditures of companies and many other operations produce enough money to pay their
expected cash needs. Throughout this respect, Connect Catering Services will obtain their real
capital base in order to finance its operations (Evstafyeva, Kislaya and Kruchanova, 2019).
Advantages: It displays all cash-related information, allowing businesses to keep their
transactions and obligations to a minimum. Connect Catering Services would be completely
aware about when, what, and just how much they can invest throughout their growth thanks to
such budgets.
Disadvantages: Such expenditures limit an organization's flexibility. Throughout this case,
Connect Catering Services would only be aware of money transfers, with credit data processed
being ignored.
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Cash budget: Capital strategy is a form of assisting businesses in formulating long-term
investment strategies. Companies will improve their growth rate and assets with some of
these budgets. Throughout the case of Connect Catering Services, this budget would assist
them in deciding in which they can raise their expenditure in addition to maximizing
shareholder value.
Benefits: This budget assists in the detection of adverse outcomes. In the case of Connect
Catering Services, this budget would assist them in identifying the risks associated with their
growth so that they can operate or make arrangements appropriately.
Disadvantages: This budget considers long-term actions that are likely to be permanent.
Connect Catering Services may not be going to sit back until long-term judgments have been
taken, which may or may not be favourable (Gong and Luo, 2018).
TASK 4
P5. Comparison of two companies using MAS to resolve financial problems.
Financial problems lead companies to face different issues which impact the overall
performance even sometime it is the reason of collapse or merger or acquisition. Some of the
measure monetary problems can be excess spending on productive operations, mis-management
of cash flow, uneven fluctuations of revenues in different operations. There have been different
tools which have been used by the manager of company in order determined and make resolution
of different financial problems:
Benchmarking: This is a method used by businesses to use standards to ensure their
procedures are followed in a standardized manner. This method allows for more appropriate and
reliable outcomes. Connect catering services is using this strategy in order to adapt its activities
to the current competition in the market. It is among the most powerful tools because it saves
time, resources, and encourages the continuity of operations, all of which improve operational
efficiency.
KPI: A methodology used to define an organization's success in terms of its activities is
regarded as key performance metrics. Companies commonly use this approach in order to
improve results by using such a strategy in order to assess long-term organizational growth and
productivity. This approach aids in determining an organization's performance in terms of
current activities within Connect catering services. It is regarded as the most accurate method for
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determining if a company will achieve absolute or predicted performance or whether further
refinements are needed (Hamamura, 2019).
Financial Governance: Finance governance encompasses all of the methods by which
organizations handle, capture, oversee, and report their financial data. It provides reports on
transactions, accounting procedures, and enforcement which are implemented in the institutions
so that they should formulate schedules, manage budgets, and produce financial statements. It is
commonly used by companies to support administrators in making decisions, which would aid
the organization's long-term survival. This approach seeks to handle the financial operations of a
company in a sustainable way such that full income can be derived.
Basis Connect Catering Services Mazola
Financial Problems Connect Catering Services is a
company headquartered in the
United Kingdom. This firm is
experiencing cash flow
problems as a result of its
plans to expand into the retail
market. They will have a
diverse variety of goods that
will make them stand out, but
this will put a strain on the
firm's earnings growth.
Another catering company in
the UK, Mazola, is
experiencing financial
difficulties as they prepare to
start a new line of food. This
financial challenge is
impacting their brand, and
they are losing consumers as a
result.
Identification Managers use performance test
software to equate their results
to those of other businesses,
which helps in the
development of a strategic
strategy and budget.
The top executives have
adopted a KPI tool. This
instrument would assist them
in determining their degree of
success, as well as ensuring
funds for business activities.
Systems that are used in
solving financial problem
The enterprise uses a pricing
management strategy to fix
The firm's administrators
consider a cost management
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prices based on consumer
willingness, resulting in more
buyers, benefit, and sales.
method when monitoring
unnecessary costs. This
information will benefit them
in expanding their operations
and improving their company
(Hamamura, 2019).
CONCLUSION
From all of the above, this can be inferred that management accounting assists
administrators in making proper decisions and working in accordance with them because that
businesses can accomplish their objectives. There are several types of costs that can be used to
determine a product's exact price. Company can easily assess their financial situation with the aid
of different types of management accounting records. Furthermore, various fiscal management
methods assist in assessing current results by comparing actual statistics to budgeted figures.
Furthermore, financial difficulties have been identified as a significant uncertain block for
businesses. This financial issues have an effect on businesses, consumers, and their reputation,
making it difficult for any of them to stay in business a long time.
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REFERENCES
Books and Journals
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Environmental Management Accounting Health Institutions in Indonesia. Indian
Journal of Public Health Research & Development, 11(4).
Suranatthakul, K. and et. al., 2020. Modern Management Accounting Practices for Large
Manufacturing Enterprise in Lower Northern Provinces Group I Thailand. Journal of
Accounting, Business and Finance Research, 8(3), pp.120-124.
Tatake, V.V., 2020. Natural Resource Accounting: The Way Ahead. The Management
Accountant Journal, 55(7), pp.89-92.
Abou Taleb, M. and Al Farooque, O., 2021. Towards a circular economy for sustainable
development: an application of full cost accounting to municipal waste
recyclables. Journal of Cleaner Production, 280, p.124047.
Comiran, F., Fedyk, T. and Ha, J., 2018. Accounting quality and media attention around
seasoned equity offerings. International Journal of Accounting & Information
Management.
Evstafyeva, E., Kislaya, I. and Kruchanova, I., 2019, October. Advanced accounting
perspectives in the light of leading economic digitalisation processes. In 4th International
Conference on Social, Business, and Academic Leadership (ICSBAL 2019) (pp. 146-152).
Atlantis Press.
Gong, G. and Luo, S., 2018. Lenders' experience with borrowers' major customers and the debt
contracting demand for accounting conservatism. The Accounting Review. 93(5). pp.187-
222.
Hamamura, J., 2019. Unobservable transfer price exceeds marginal cost when the manager is
evaluated using a balanced scorecard. Advances in accounting. 44. pp.22-28.
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