Management Accounting Report: Alpha Ltd, Costing and Reporting

This report examines management accounting practices within the context of Alpha Ltd, a medium-sized pizza manufacturing firm. The report begins with an introduction to management accounting, emphasizing its role in financial record-keeping, strategy formulation, and decision-making. It then explores various management accounting systems, including inventory management, cost accounting, price optimization, and job order costing, detailing their essential requirements and benefits within Alpha Ltd's operations. The report also covers different management accounting reporting methods, such as job cost reports, inventory management reports, and budget reports. The analysis includes an evaluation of the benefits of these systems, focusing on their application in an organizational context. Furthermore, the report uses marginal and absorption costing methods to prepare income statements and produce financial reporting documents. The report concludes by demonstrating how accounting reports and systems are linked with organizational processes, offering insights into financial analysis and data interpretation for business activities. The report also provides financial reports that accurately apply and interpret data for business activities.

Management
Accounting

INTRODUCTION
Management accounting refer to the various concepts which help the business and it's
operations in order to collect financial records or produce financial statements for the further
analysis (Bagautdinova, Kundakchyan and Malakhov, 2013). Management accounting used by
the managers of the company in order to formulate strategies and make effective decision to
achieve organizational goals & objectives. It include the analysis of data which is beneficial for
external parties such as inventors to make their decisions regarding investment. This report based
on Alpha Ltd which is medium size manufacturing firm and they have 50 staff members which
produce a range of Pizzas. It is the small pizza company that established in 2001. This project
report cover various topics such as management accounting, different types of accounting
systems and accounting reporting. Use costing technique to prepare income statements, evaluate
advantage or disadvantage of different planning tools and how they used to resolve their
financial issues by using management accounting systems.
MAIN BODY
TASK 1
P1. Explain the management accounting term and essential requirement of various management
accounting system
Management accounting is the process which is used by the organization in order
produce report which is beneficial for the stakeholders who make further decisions regarding
investments. With the help of management accounting, managers can collect financial
information for long term as well as short term decisions (Management Accounting, 2019). It is
also useful in measuring, analysing, communicating information in the entire organization in
order to achieve business goals & objectives.
Inventory management system: It is an system or software which is used by the
manufacturing organizations in order to manage their stock level for the production. This process
include the monitoring as well as maintenance of stored items such as raw material, company's
assets etc. Through keeping records of inventory managers able to analyse the availability of
stock for the production. In context of Alpha Ltd, managers monitor or keep track the records of
raw material which is used for to produce pizzas. It is essentially required in the organizations
because they have to manage inventory for the functioning of business operations in well manner

(Ball, Grubnic and Birchall, 2014). There are various types if inventory management systems
which are mentioned bellow:
 LIFO (Last In First Out): Inventory used for the production that recently purchased and
carry out for the operational activities.
 FIFO (First In First Out): In this method, managers uses that material first which firstly
bought by the company.
 AVCO (Average Cost): In this system, management use the inventory on average basis
for the products or goods.
On the basis of above discussed Alpha Ltd are follow the FIFO method which help the
organizations to utilise their available resources in the sequence purchase. It is essentially
required for food business to manage their inventory because it is not possible to keep vegetables
for long period.
Cost accounting system: It is the accounting framework which is used by the
organizations in order to estimate each unit cost of their products. It is essential required to
calculate the accurate cost because it further influence the profit margin of the company. In
context of Alpha Ltd, managers used this system to manage their overall product cost and it
beneficial in making future decisions. Managers try to minimise the cost of pizza which helps
them to maximise the profit margin of each product.
Price optimising system: It is the method which is used to determine the set of price
range of the product and analyse that which price of product satisfy the consumers need or meet
their objectives. Managers of Alpha Ltd determine the price of pizzas which sold to the
customers and also analyse that which price range satisfy the consumers more (Bryer, 2013).
This system essential for the company to set suitable price for pizzas or able to meet their goals
& objectives through increasing productivity as well as profitability.
Job order costing: This accounting system used when different jobs are working in the
same period such as promotions, selling, advertising and marketing. It become very difficult to
allocate the cost of each activity as per their requirement. In context of Alpha Ltd, company
produce pizzas as well as perform other operational activities. So managers use job order costing
in order to evaluate the separate cost for each job. It is essentially required by the organizations
to ensure that every activity will be performed smoothly.

P2. Different method of management accounting reporting
Management accounting Reporting: The primary object of management report is to
obtain the required information about the operating results of the organisation regularly in order
to use them for further planing and control. Another object is to secure understanding and
approval of the judgement by the people engaged in various aspects of work of enterprise . The
second object is closely related to the first one and is important in terms of efficiency, morale
and motivation (Cleary, 2015). A good reporting system is a better guide and effective tool for
efficient managerial decision making. It helps in providing better utilisation of available
resources and to have further planing and controlling. Managerial accounting provide many facts
of accounting aimed at improving the quality of information delivered to management relating to
the cost and sales revenue of goods and services.
Job cost report: Job costing is a accounting which tracks the cost and revenue by job
and enables standardized reporting of profitably by job. For an accounting system to support job
costing, it must allow job numbers to be assigned to individual items of expense and revenues.
Job costing may assess all cost involved in a construction job or in the manufacturing of goods
done in discrete batches. These cost are recorded in ledger accounts throughout the life of the
job or batch and are then summarized in the final trial balance before the preparing of the job
cost, or the batch manufacturing statement.
Inventory management reports: To improve the inventory management by accessing
inventory reports for accurate real time insights into stock movement. Start tracking the cost of
good sold, avoid overselling and underselling, even create custom reports (Endenich, 2014).
Similarly Alpha company uses inventory management report for see which items belong to a
business , industry, organisation. It provides a comprehensive account of the stock or supply of
various items .
Budget report: A budget report is prepared to compare the actual results with the pre-
standard to see how to improve performance in the organisation. The budget report is used to
determine which expenditure levels are too high, so that actions can be taken to bring
expenditure levels back down to the budgeted amount. This report is one of the most frequently
used tools for maintaining control over financial results of a business.
Account receivable report: An accounts receivable is a report that lists unpaid
customer invoices and unused credit memos by the ranges. It is a primary tool used by collection

personnel to determine which invoices overdue for payment . Likewise Alpha limited is using
such report to generates how actual output is defer from standard input. These report is used by
management to determine the effectiveness of the credit and collection functions (Fleischman
and Parker, 2017). The budget report is used to determine which expenditure levels are too high,
so that actions can be taken to bring expenditure levels back down to the budgeted amount. This
report is one of the most frequently-used tools for maintaining control over the financial results
of a business.
M1. Evaluate the benefits of management accounting systems along with it's application in
organizational context
There various accounting systems which are used by the organizations in order to
perform their operational activities. Every management accounting systems have various benefits
which mentioned below along with it's application in context of Alpha Ltd. Discussion are
mentioned below:
 Job order costing: It help the Alpha Ltd to acquire the benefits through allocating fund
for each job which applied in the organization in order to successfully complete the
operational activities.
 Price optimising system: It is beneficial in determine the price of product which meet
the customer's objectives regarding their spending. In context of Alpha Ltd, manageable
set the price of pizzas which are sold by company to attract huge customers.
 Cost accounting system: With the help of this system, manager of Alpha Ltd hey the
benefits because it helps in estimating overall expenses and project the revenue for the
period.
 Inventory management system: It provide the benefits such as maximise the efficiency
and productivity in the operations (Grabner and Moers, 2013). Management of Alpha Ltd
use this system to minimise the inventory cost or keep track the availability for the
production of pizzas.
D1. Critically evaluate that how accounting reports and accounting systems are linked with
organizational process
Every organization follow the various accounting systems or accounting reports in order
to manage their operational activities or maintain the records for the further use. Alpha Ltd also
use various systems such as inventory management, cost management etc. Along with this,

inventory management report used to produce for the information regarding inventory level
which required for operating activities. In addition, performance report used to evaluate the
individual as well as entire organization performance. With the help of these reports, managers
of Alpha Ltd able to make strategies or perform their organizational process in well manner in
order to achieve their business goals & objectives.
TASK 2
P3. Use appropriate technique of cost analysis and prepare income statement by using marginal
or absorption costing method
Marginal Costing: It is the costing method which is used to evaluate the net profit of the
company. Under this method, change in the additional production will be consider and what cost
it occur for the production (Harrison and Lock, 2017). In context of Alpha Ltd, managers
evaluate the additional cost of pizzas which are produce by them because of its high demand.
Problem 1 (1):
Profit and loss account:

Problem 1 (2):
Absorption costing: This costing method used to evaluate the cost of each unit which
help the managers to formulate future strategies. It include the fixed as well as variable cost at
the time of calculating cost (Havranek, 2017). Managers of Alpha Ltd, use this technique to
evaluate the cost of pizza at the time of manufacturing.

Problem 2/ 1 (a)

Problem 2/ 1 (b)
Problem 2/ 2 (a)

Problem 2/ 2 (b)
As per above calculation it represent that company should install machinery because it
generate profits of 104000 pounds.
M2. Apply the range of management accounting techniques and produce financial reporting
documents
There are various accounting techniques which are used by the organizations in order to
reduce their cost of maximise the profit margin. It further beneficial in achieving their business
goals & objectives and it will be possible through implementing various management accounting
techniques. Some of them mentioned below:
Standards Costing: It is the traditional cost accounting method that used to determine
the differences between actual cost as well as the cost which occur at the time of production.
This costing technique used by the managers of Alpha Ltd in order to analyse the cause of
variation between standards or actual cost of the products.
Historical Costing: It is the original nominal value of particular item where assets and
liability of the company recorded at historical cost (Holsapple, 2013). It helps the Alpha Ltd to
understand that, they have to record actual cost of assets as well as liability in the books of
accounts rather than recording current market value of goods.

D2. Produce financial report that accurately apply or interpret the data for business activities
With the help of costing method Alpha Ltd able to calculate their product cost or generate
income statement for the period. By using marginal costing method, net profit of the company is
£ 200000 for the end of period. On the other hand, by using absorption costing method company
get the results around £ 600000. For the better results , Alpha Ltd use the marginal costing
method to evaluate the net profit of the company. This costing methods ignore the losses which
impact the profit margin of the company.
TASK 3
P4. Evaluate the advantage or disadvantage of various planning tools that used in budgetary
control
Budgetary control: It is the procedure where managers make sure that they perform all
the operational activities through managing their expenses. In this context, managers have to set
their financial as well as performance goals which required to achieve for better outcomes. There
are various planning tools which help the Alpha Ltd to manage their budget or make them able to
perform accordingly. Some of the planning tools are discussed below:
Operational budgetary control: It is the budgetary control method which is used for the
purpose of managing or controlling the operational activities or build future strategies
accordingly (Kumarasiri and Jubb, 2016). In context of Alpha Ltd, they use operational
budgeting tools in order to perform their operational activities in well manner or achieve the
business goals & objectives. Some of the important elements are required to analyse for the
better budgetary control.
 Various analysis: In context of budgeting, it is the difference of standards cost and the
actual amount which they get through selling their products. It help the organization to
formulate strategies for the future in order to generate high profits. Management of Alpha
Ltd use this tool and measure the cause and that are resulting in variation.
 Forecasting: It is the process of making projections regarding future expenses and it will
be based on past and present financial information which further affect the operational
efficiency. In context of Alpha Ltd, managers analyse the costs as well as other events
which can generate the revenue for the company.