Management Accounting: Costing, Planning, and Financial Solutions

This report provides a comprehensive analysis of management accounting principles and practices, focusing on a case study of ABC Ltd, a manufacturing company. The report explores the management accounting system, including its essential requirements and the integration of various systems such as cost accounting, inventory management, and price optimization. It evaluates different management accounting reporting methods, including budget reports, performance reports, and inventory management reports, along with the advantages of each. The report then delves into costing techniques, specifically marginal and absorption costing, providing detailed calculations and interpretations. Additionally, it examines various planning tools like budgets and master budgets, outlining their advantages and disadvantages. Finally, the report discusses how management accounting aids in solving financial problems and contributes to organizational success. The conclusion summarizes the key findings and emphasizes the importance of management accounting in improving operational efficiency and strategic decision-making. References are included for further study.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Management accounting system and essential requirements of management accounting system.......3
P2 Evaluate different methods which is used for the management accounting reporting........................4
M1.Evaluation of advantages of management accounting.......................................................................5
D1. Integration with the organizational process of management accounting system and reporting.........6
TASK 2..........................................................................................................................................................6
P3 Calculating cost by using appropriate costing techniques...................................................................6
TASK 3........................................................................................................................................................11
P4 Advantage or disadvantage of different types of planning tools.......................................................11
M2 Analysis the use of different planning tools and application for building and forecasting the budget
...............................................................................................................................................................13
TASK 4........................................................................................................................................................13
P5 How management accounting helps in solving financial problems..................................................13
Management accounting in solving financial problems that lead to organizational success..................15
Evaluation planning tools for accounting help to solve problems and support industry with sustainable
success...................................................................................................................................................16
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
Management accounting is procedures that involve the different procedures that help the
organization’s operating operations improve. This is also called strategic accounting, that lets the
director develop successful methods for the system of more making decision. Accounting
management uses the account statements that also help to improve and regulate multiple tasks
(Armitage, Webb and Glynn, 2016). Director analyzes the cost of business in this process which
helps to generate financial statements. This report based on the ABC Ltd which is a
manufacturing company and it is a medium sized organisation. This report covers the
different concepts including such accounting management and the basic features of accounting
management system. This also contains the numerous accounting reports, leadership accounting
methods, and effective treatment resources for addressing the company's monetary issues.
TASK 1
P1 Management accounting system and essential requirements of management accounting
system
Management Accounting: It is a continual way of processing numerous reports with the
assistance of financial details. It will assist the director in designing various successful plans as
well as in making decisions. Prospective buyers should follow the appropriate decisions
according to the company's financial statements
Management accounting system: Managerial accounting system is made up of the
structural components a company uses to determine and analyze its organizational management
procedures. The accounting management system, manager analyses the internal mechanism or
framework, or calculates it. It explains the main tools that help ABC Ltd handle its
organizational processes, and is described below:
Cost accounting system: This is the most accessible structure in the manufacturing industry,
since describes the actions the expense within each product or group of products with either the
assistance of all this. It is an analysis in which the cost of output is measured for revenue
recognition, productivity and cost containment. The essential requirement of this system can cut

the cost that will immediately enhance the sales or gross profit. ABC Ltd's boss uses this method
to measure or monitor the price of its service (Chenhall, 2012).
Inventory management system: It is a method of inventory management that allows the
director assesses the inventory levels in their stores. Accordingly, they may take more steps,
which reduce waste in manufacturing. The ABC Ltd is intended to maintain count of the number
of stock in the sector that avoids both the scarcity and waste production. The essential
requirement of inventory system increases the productivity or performance of management
activities.
Price optimization system: It is a mathematical method which includes multiple consumer
requirement details. With this method, manager analysis the client purchase habits. Market price
based on the requirements of multiple goods & services that the company is providing to
maximize their profitability or gross margin. It comprises multiple details that are additionally
needed for value management and stock management. This program needed different prices;
multiple techniques are used to monitor buyer activity. Essential requirement of this system by
ABC Ltd managing director appears to help chose the right brand value by increasing their
clients.
P2 Evaluate different methods which is used for the management accounting reporting
Management Accounting Report: This is the procedure that encompasses financial
consistency that allows employees produce reports that have been further needed for choice-
making. Such information is published daily, weekly, monthly or quarterly. In essence, it can be
used for investment developments by the key customers. There's many distinct variety of
financial management accounts that may be used against the company and will be mentioned
elsewhere here:
Budget report: This is an evaluation report that contains both the income and the
expenses. Company describes the difference between expected expense and money spent, using
this study. So ABC ltd's supervisor will use this summary to estimate the entity expenses or
income. It is the role of the manager to operate according to the expenditure, for this
management has to practice regularly correctly so that company aims and objectives can be

achieved. Budgets are necessary if their balance is to be retained to address expected
eventualities (Lavia López and Hiebl, 2014).
Performance report: The report covers the characteristics of successful workers and
also the company overall. Using this aid, managers describe the difference between the planned
result as well as the real result. The assessment allows the company defines specific results that
will further assist in delivering different options or rewards. So ABC Ltd’s manager used the
document to assess the performance of the management and to provide preparation for the
required change. Identifying efficiency which also includes taking efficient strategy is useful for
the employees.
Inventory management report: Under this study, before beginning any venture, company
creates an estimation of the overall cost and budget. Company gives the rank to inventory and
monitoring according to the reliability, requirement or cost. Using this aid, administrators
classify the amount of the stock and its function according to the requirement. ABC Ltd
supervisor, are using this summary and arrange the stock levels according to
manufacturing requirement. It would further assist with strategic management and better decision
- making. This budget for ongoing missions can be planned on a weekly, quarterly or annual
basis (Maas, Schaltegger and Crutzen, 2016).
M1.Evaluation of advantages of management accounting.
Management Accounting System Benefits
Price optimisation system Assessing the company the behaviors of customers with
regard to various brands market segments. This helps to
reduce the price of goods & services according to
consumer needs. That also tends to reduce the expense
because the profitability is maximized.
Inventory management system It helps to regulate stock levels that reduce waste and
provide supply chain strategy accountability. Through this,
both productivity and customer loyalty are improved.

Cost accounting system It helps to reduce the cost for every department, saving
time and enhancing productivity. Managers also boost the
effectiveness or gross profit only with help of this
information.
D1. Integration with the organizational process of management accounting system and reporting
Both of these accounting systems are related to managerial accounting reports as the data
requested arises from accounting reports compiled by the company manager. In the absent of
such documents business could not get consistent results and business selling price. There, the
ABC Ltd director used accounting information systems with the aid of financial accounts
compiled by the administrator and describing the organization's total costs. Therefore, in
management objectives, both the management accounting information and the accounting report
are connected with one another.
TASK 2
P3 Calculating cost by using appropriate costing techniques
Marginal Costing: In this costing method, differential expenses are associated because
this technique does not take into account any extra unit production and fixed costs. It covers the
value of overhead material, labor, selling & distribution, office & distribution costs,
manufacturing & production expenditures that are appropriate in terms of the value of
development market value (Mahesha and Akash, 2013). Several of the equations set out
elsewhere:
Quarter 1
Particulars
Amoun
t
Sales 66000
Less: Cost of sales
Opening inventory 0

Production cost
(780000*0.65) 50700
Less: Closing stock
(12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed selling expenses 5200 21200
Net profit 1900
Interpretation: As per the above calculation
it has been analyzed that there are getting
results of 1900 in the quarter 1 after submit
all the items and put in the formulas and get
results.
Quarter 2
Marginal
Sales
Less: Cost of sales
Opening inventory
(12000*0.65) 7800
Production cost
(66000*0.65) 42900
Less: Closing stock
(4000*0.65) 2600
48100
Contribution 25900
Less:
Fixed overhead 16000
Fixed selling expenses 5200 21200
Net profit 4700
Reconciliation
Variable costing profit 1900 4700
opening profit 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100

Absorption costing: This technique has been used to calculate every other unit costs and
other costs the indirectly or directly costs. According to these ideas, enhanced care the entire
factor and also the fixed cost assigned for the particular time length to the manufacturing. So
here's some cost estimation with either the aid of system of absorption costing (McLellan, 2014).
Quarter 1
Particulars
Amoun
t
Sales 66000
Less: Cost of sales
Production Cost (78000*
0.65) 50700
Semi variable (78000 *
0.20) 15600
Total variable cost 66300
Less: Closing stock 10200 56100

Gross Profit 9900
Less: Expenses 400
9500
Selling and distribution as
fixed 5200
Net Profit 4300
Interpretation: As per the calculation it is getting that from the absorption costing get result of
4300 net profit and 9900 gross profit.
Quarter 2
Particular
Amoun
t
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*.20) 13200
Production cost
(66000*0.20) 42900
Total variable cost 66300
Less: Closing stock 3400 62900
Gross Profit 11100
Less: Selling expenses 2800

8300
Fixed expenses 5200
Net profit 3100
Reconciliation
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
TASK 3
P4 Advantage or disadvantage of different types of planning tools
Budget: It is the projected report that contains annual spending for the particular time
frame. It involves the various funds needed to complete the job, together with comparative
analytical. In many other sentences, expenditure is the strategy to invest the cash on their
expenditure and it is a type of economic statement. Managers use the ABC Ltd to plan annual
transactions that is further divided into different projections including such assets, liabilities,
cash flows, revenues, acquisitions, services etc.
Budgetary control: It is the budgeting process where they aim to prevent or regulate the
manufacturing costs by obeying spending plan. This requires daily monitoring so they can adjust

according to product demand if any change is needed. ABC Ltd's supervisor performs periodic
process analysis and compares total costs with normal thing (Modell, 2014).
There are different forms of budget that can be adopted by the company to fulfill its
company's operations according to the schedule. All of this was addressed with their benefit or
disadvantage following.
Operating budget: It is the expenditure that contains the expense of the single item over the
revenue. This is essentially evolving over a specified period of time which can be on a monthly,
half-yearly, or yearly basis. The ABC Ltd prepares this budget to identify the changes in certain
period of time. After that they are taking right decision in regard of business operations.
Advantage
• Allows the company accomplishes its mission within the timelines.
• It seeks to enhance communication between the different tasks.
 That provide required knowledge to assist improve individual & threats of the firm.
Disadvantage
• Precise documentation can be somewhat hard to gauge (RW Hiebl, 2013).
• It can contra-motivate workers when higher expectations are set by the company that are not
too convenient.
• leading to a shortage of interaction, confusion will create between the different departments.
• This budget takes a considerable amount of time to analyze the final results.
Master budget: This is the mixture of different accounting method that involves the
entire departmental rate this is why it is named master budget. It is the summarizing of the total
funding preparing for the yearly basis and it has some advantage or disadvantage as well. The
ABC limited company produce the master budget in order to collect all the income and expenses
summary of each department to prepare effective strategy.
Advantage

• Aiding the manager to take overall budget review.
• It provides each department with the tools according to their requirements.
Disadvantage
• It provides information about each section, which offers no details for the smaller budgets.
• Adjusting the master budget is very complicated, as it will involve years and lots of
commitment.
Cash budget: This budget contains projections of a given time figure's cash income and
expenses. Upon getting ready all the expenditures including such sales, purchase, wealth etc.,
cash budget would be formulated. It contains all the collections of sales and transactions that
enable the director build reliable cash budgets. External auditors including such their interested
parties will be established for this. All the modification can be made prior to actually publication,
since it is difficult to change after that. The ABC Ltd Company prepares this budget to keep
records all the cash transactions (Schaltegger, Burritt and Petersen, 2017).
Advantage:
• It significantly reduces or maximizes the profitability of the company.
• Helps retain both cash balance and need.
• Allows the boss to think objectively, and to foresee possible economic occurrences.
Disadvantage:
• An overview of the cash budget is quite complicated for administrators, because it does not
contain non-financial aspects.
• The estimates can effectively be skewed under that same framework for beneficial purposes.
M2 Analysis the use of different planning tools and application for building and forecasting the
budget
In each and every business sector that is being used to start preparing and estimate the
spending plan, scheduling programs are important to provide instruction on what needs to be

done so when it needs to be done to enhance an organization profit levels (Senftlechner and
Hiebl, 2015). Optimization techniques are the strategies for cutting costs and rising productivity
in the potential. Through applying the aforementioned preparation methods such as
operational budget, cash budget, and master budget structure, budget prediction and income
maximization can be achieved through managing excess costs. Without such planning tools, an
organization cannot regulate the spending plan and costs incurred in the organization.
TASK 4
P5 How management accounting helps in solving financial problems
Accounting management allows the company to address financial problems which also
affect efficiency and productivity. It is because it is made up of various kinds of skills and
equipment that allow the companies resolve money difficulties.
Financial problems: This problem has to do with the financing where the company faces
different financial issues. Supervisors will also use different methods and strategies to
significantly lower these issues. Several financial problems ABC ltd faces are listed elsewhere
here:
Expenses more than revenues: Manufacturing prices would go up in the company,
which reduces the profit margin. Therefore, company cannot reduce its losses and it is expensive
for the company.
Improper cash flow management: Matching their capital outflows or inflows is very
beneficial for the company. Unless that doesn't occur otherwise financial problems will occur for
the company.
Methods of solving financial problems
Key performance indicator: This is the methodologies that rely mainly on certain profit-
producing practices. And they remove such unprofitable practices. By using this strategy, ABC
Ltd can deal more with the financial difficulties of spending than with receiving
Benchmarking: Under these methods, administrators equate the rules, practices and
expectations of their organizations with other corporations. This will allow the employer

recognize their problem-developing ongoing problems. It also impacts the organization’s
competitiveness or competitiveness (Soin and Collier, 2013).
Financial governance: This is the governing body that regulates, collects, supervises and
oversees the money transfers. This plays a significant role in addressing the company controls
issues within the company. In fact, it is function as operational process that aims the enable
entrepreneur’s financial difficulties.
Differences between both companies
Basis Nero Ltd TPG processing
Financial Problems Business invested as much as it
receives because there is a very
strong result of building products
that cannot recover costs. That
reduces the value of
manufacturing products is very
high. But they do not get adequate
profit.
Business experienced the
unequal cash flow within the
organization that develops the
money difficulties.
Management accounting
system
Company has to implement
management accounting solutions
to address their financial
difficulties that allows rectifying
this problem. The cost accounting
system tends to protect process
allows of those things belonging
to the marketing campaign and to
decrease the unworthy activities
that reduce costs. This helps
managers improve their
operational productivity or
performance, creating more
This corporation's
management needs the
inventory management system
to solve that problem which
allows the companies retain its
quantity of stock. They will
surmount unequal cash flow
with the aid of this. This
accounting method, therefore,
allows the company overcome
this problem and improves
efficiency or competitiveness.
It is also helping them meet

income that enables the
organization accomplishes its
tasks and goals (Usenko and et.al,
2018).
their financial goals &
priorities.
Management accounting in solving financial problems that lead to organizational success
Nearly all the companies are facing financial challenges and ABC Ltd is no different. The
entity is currently facing countless problems such as unsure expenditures, impoverished financial
accounting, decreasing profitability and interest charges to the customers. Such accounting
methods are being used to contend with many of these issues. The strategies concern KPI,
costing based on operation, benchmarking, ratio analysis and financial management. By financial
KPI, the problem of unknown spending is addressed as the approach guides in understanding the
reasons for unknown spending that help to overcome challenges and achieve effective result.
Evaluation planning tools for accounting help to solve problems and support industry with
sustainable success
There are benefits where companies struggle to make effective use of funds resulting in
financial problems such as unpredictable expenditures and much more. Methods such as master
budget planning, cash budget attachment to operating budget have been used to support the
business strategy. These expenditures enhance awareness on the issues that are the cause of the
failure. All the preparation methods aid in predicting circumstances and budget overruns so that
they can be organized for viable strategy to react to all of them and find greatness (Youssef,
2013).
CONCLUSION
It has been established from the previous discussion whether management accounting is
helping the company improve its productivity or usefulness. It also allows the company makes
effective decisions or creates strategies to reach corporate objectives & aspirations. Management
accounting system aims to strengthen their operating processes that minimize costs and can boost
efficiency or efficiency specifically. Additionally, showing significant the efficiency of

individuals and teams with the aid of statistical findings. Along with this, various strategic plans
allows the management to solve its funding difficulties.

REFERENCES
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