Management Accounting Report: Costing and Reporting at Taj Stores UK

This report provides a comprehensive overview of management accounting principles and their application within the context of Taj Stores UK. The report begins with an introduction to management accounting, emphasizing its role in cost reduction and profit maximization. It covers essential requirements of a management accounting system, including inventory management, price optimization, job costing, and cost accounting systems. The report then delves into various management accounting reporting methods, such as job cost reports, inventory management reports, budget reporting, accounts receivable aging reports, and performance reports. A key section compares marginal and absorption costing methods, including detailed calculations. Furthermore, the report examines the advantages and disadvantages of planning tools and discusses how companies can implement management accounting systems to address financial challenges. The report aims to provide practical insights into how management accounting can be used to improve business operations and decision-making within a retail context.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1 ................................................................................................................................................1
P1. Essential requirements of management accounting system ............................................1
LO 2 ................................................................................................................................................3
P2. Methods of management accounting reporting ...............................................................3
LO2..................................................................................................................................................5
P.3 Comparison between the marginal and absorption costing .............................................5
LO3..................................................................................................................................................8
P4 Advantages and disadvantages of planning tool...............................................................8
LO4................................................................................................................................................10
P5 How company is opting the management accounting system.........................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Each organization wants to increase the scale of their operations and want to enter in new
market so that they can increase profits. They have to achieve their goals and targets within
stipulated period of time (Yalcin, 2012). Management accounting is the process which reduces
the cost of operations and increases the sales through various financial and non-financial data.
Report describes about the Taj stores which provide retail items such as fresh foods and
vegetables. Project discusses about the understanding of management accounting information.
Assignment discusses about the different types of management accounts and use of planning
tools in engagement accounting. Report describes the methods in which company can use the
management accounting to response to financial problems.
LO 1
P1. Essential requirements of management accounting system
An organization have two objectives to increase the profits and to reduce the cost. So,
organization has to create various plans and policies for running the business and for competing
with different external factors such as economic and technological. These problems do not get
covered in financial problems. Management accounting is the process which helps manager in
taking relevant decisions not only related with the finance department but also with other
sections such as human resource and marketing. It focuses on the internal factors for
accomplishing the long term objectives and for proper management of cash needed in the
business for daily operations. Through use of this information, management can create reports
which help manager in taking correct decisions. Taj UK can send the relevant data from one
department to another so that relevant decisions can be taken. There are various types of
management accounting systems. They are:
MANAGEMENT ACCOUNTING SYSTEM
Inventory management
system
Price optimization Job costing system Cost accounting
system
 Inventory management system – Companies can use various new software to properly
manage the stock to earn huge profits. Taj UK can use various processes and methods to
use the inventory. Through proper inventory management, it reduces the ordering and
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carrying cost. So thus firm can effectively perform the ordering and carrying function. It
also leads to reduce the problems related to overstocking. Firm can produce the goods
according to demand of customers and hence, it reduces wastage of material in
organization. Thus it increases the efficiency of company to produce more goods.
Organization can produce good quality of products in right quantity which is required in
the stores. Thus, it helps in increasing the satisfaction of customers. Through this,
company can generate more revenues and increase the market share (Yaacob and Nahar,
2011). Firm can maintain competitive edge on other firms.
 Price optimization – Many organizations find difficulty in setting appropriate price to
both supplier and the customer. Through this proper management organization can
decide the right price of the products. Many customers feel that the company is charging
higher price for their products and are dissatisfied but the company feels that they are
charging more prices (Essentials of Management Accounting in Business, 2018).
Secondly company sells its products at low cost and customers buy goods at cheap price.
But afterwards organization feels that customers can buy the product at higher cost. So
this causes loss to the firm. So firm has to decide such price for the products so that it
satisfies to the customers and is beneficial for the company as well. So, in this, it
considers the customer's interest and can maintain the profit of company. Thus,
organization can generate huge revenues by setting the right price and can attract many
customers. Firm can also maintain a unique and distinct position in the minds of all
customers. It results in expansion and widening of the business.
 Job costing system – In this, cost is calculated for various production or the service jobs.
Cost includes the direct material labour and overheads which are the main emphasis in
the system (Albu and Albu, 2012). TAJ STORES UK is the company which sells
different products and can apply this method for determining the cost of various food
items that can be organic or other variety of eatables. Company can sell different
products at varying prices so that there is no loss to the firm. Through this, firm can
determine the costs of each order which is of shorter duration and can fulfil special
requirements of all customers. Thus, company can plan cost of each activity and
calculate profits and losses.
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 Cost accounting system – Cost accounting is the method to determine cost of goods and
services in the organization. By this, firm can determine the cost of their products to
calculate the profits. Company can create different plans and procedures to determine the
cost of all the products and operational tasks such as valuation of inventory. Organization can
also determine selling price of products and can take marketing decisions related to selling of
product. Company can estimate the profits and thus, organization can give a strong competition
to other firms (Chenhall and Moers, 2015). By using cost accounting systems company can have
detailed records of costs of all items of products and can create plan for the future. This helps the
company to generate huge profits. It results in increasing of market share and company can
easily expand the operations. It leads to growth and success of the firm.
LO 2
P2. Methods of management accounting reporting
Management reports collect data about the financial and non-financial information.
Through this information, managers can take decisions related to various operational activities in
the business. Thus, management can have knowledge about characteristics of business and can
take relevant decisions which can impact on organization. Types of management accounting
information used by Taj Stores U.K company are-
Job cost reports – Through this report, company can calculate the cost of a particular project.
Company is performing important tasks which increase the profits and also doing less important
activities in business. Through this technique, organization can put more emphasis on the crucial
activities so that firm can generate more revenues in business. Manager can easily take decision
that which task can contribute more to the profits of company. Management can also solve the
problem of employees who are performing important projects so that activities can be completed
on time. This helps in improving the performance of employees and firm can generate huge
revenues. Company does not have to waste the time and money on less important activities in
business and can focus on crucial tasks. Thus, activities and tasks run successfully in the
organization. Taj Stores U.K can use this report and determine the costs.
 Inventory management report – This is the report which gives the information related to
the levels of stock and can control the stock level (Albu and Albu,2012). Through this
the company can determine the quantity of stock to be maintained in the warehouses. It
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also give details that the quantity of order the company can order. Report also gives
information related to the waste of the inventory, per unit overhead costs and the hourly
labour costs. Managing inventory is very important for the company and firm can use
EOQ model. EOQ model firm can determine the optimum quantity of stock to be ordered
in the store. Report shows the information related to the overstocking which increases
the cost of the company. Secondly is the under-stocking problem through which goods
are not delivered to the customer in appropriate time. So it gives the defects and
organization can reduce the ordering and carrying cost in the company.
 Budget reporting – These reports gives the information of the expenditures and incomes
related to various operations in the business. Report shows the variations between the
standard and actual performance. Through this report management can find and control
the cost of various operations and can evaluate the performance of every departments.
Managers of Taj U.K company allocate various expenses in different activities so through
this report manager can utilize funds in an appropriate manner. They can also find the
mistakes in allocating finds in various tasks. Managers can also use this report in
providing incentives to various employees in the company. It shows the previous years
performance of the company and hence firm can actually measures the performance.
Thorough this company can create the budget for the current year and for future.
 Account receivable ageing reporting – In this report company can determine the time and
amount of money received from the creditors. This report is made monthly,weekly and
quarterly. So company has full information about the creditors which have not paid the
money to the company. Through this reporting firm can determine the amount received
from the creditors and can have knowledge of the bad debts. Through this reports
company can check the accounts of those customers who have taken huge money
(Burritt,Schaltegge and Zvezdov,2011). So company can make strict rules of those
creditors which have not given the money to the firm. This system helps the organization
to easily recover the money from the defaulters. So hence company can reduce the
amount of bad debts and thus firm can increase their profits. So hence it gives advantage
to the company as well as to the debtor.
 Performance reports – This report shows the performance of the products,
services ,departments and segments where the business is operating. So hence company
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can compare the performance of departments, products according to he standards and can
find the deviations (Chenhall and Moers,2011). Management can give corrective actions
to improve those deviations . Thus helps the company to control and reduce the costs of
the products. It increases the efficiency of the company to produce goods. This also
improves the performance of the departments. Thus activities and tasks runs successfully
in the business. This leads to increasing of the profits and market share of the company.
It leads to expansion of the business operations. It results in growth and success of the
firm.
LO2
P.3 Comparison between the marginal and absorption costing
Calculation according to the absorption costing-
Working notes-
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
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Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
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Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
21000
(7800)
13200
3900
9300
Interpretation
Through analysing the report it can be concluded that Taj U.K can adopt the absorption
costing which is the appropriate method as it shows the more profit. Thus approach gives the
correct calculation and it gives different advantages to the Taj U.K. Company (Chenhall and
Smith, 2011). Net profits is more through this method as compared to the marginal costing. Due
to different treatment in fixed cost there is difference in fixed cost. Fixed expenses is not
allocated to every unit and reason of less profits are due to the total amount of fixed cost. Next
reason is the calculation of opening and closing stock .The stock which is not used in the current
year is treated in the next year. In marginal costing the cost of production is calculated in the
current year so it put load on contribution. In absorption costing all expenses in closing stock are
treated in next year hence it puts less pressure on the fixed,variable and overhead costs of the
present year (Chenhall and Smith,2011). So hence it can be concluded that Taj U.K can adopt the
marginal costing.
In accounting system there is a income statement which help company to include the various
things like document of company and it is required to manage the accounting system for the
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report and it is also needed to have a concept with small business like Taj store. Moreover such
thing is that which make various things like revenues and expenses and thus it also include things
like the operating and non -operating activities. Marginal and absorption cost is as follows:
Absorption Cost: This method is such which is generally used to have selling and
administration expenses which also make them to require although it is such which also include
the income statement as well. Absorption cost is that which also include the finished goods and it
also consider the direct labour and material with the the variable, fixed cost too. This is
something which is very much significant for firms and thus it makes to have a adequate decision
in better manner as well, because this help in minimising the wastage of various resources in
even in efficient manner too.
Marginal costing: This is that which is being done in normal ways and it also include
the cost which is occurred due to additional production and made in correct way as well.
Although this is that which is being included in production and the manufacturing product and
service as well over this has to be considered into income statement. Therefore the cost is that
which relates to labour and raw material as well and such thing is used to make a additional part
of product as well.
The difference in between the Marginal and Absorption Cost is as follows:
Basis of difference Marginal Cost Absorption CostMeaning This is such which is used to
identify the total cost of production in marginal cost. This is such which allocate the total cost
and it is used to discover the manufacturing cost and it is known as absorption cost of company.
Overheads. This cost is variable and the fixed cost as well. Administration, distribution and
selling is such which is included in this only(Cooper,Ezzame and Qu,2017). Cost data Moreover,
this is such which is being presented in total contribution and it is made on every product as well.
This is used to show the conventional way of doing as well.
LO3
P4 Advantages and disadvantages of planning tool
Generally it is like, in which it is like a impressive document which can consist of the
detailed working and having various information and it is that which also include the actual facts
and data which is gathered from the research (Hiebl,2014). Although this is such which also
consider various thing like investing the various different qualitative product and services as
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well. Although this is something which make them to have a operational department and it also
make them to produce a plan for making a capital investment as well. Normally, the thing is that
they have to make it change in working and thus in manufacturing the cost, expenses etc. too,
and this is such which also include the Cost, expense etc. in which all the things are being
involved and the these things are such which also makes them to provide goods and services in
better manner as well.
Budget Control: This is among the most Indispensable thing and method which make
them is being management and to carry out the different operation of business and like(Planning,
cooperation and somewhere the assessment as well) although, it is been seen that they have
number of business parts and thus it is also being classified and this is done into the various
section as Budget centre. Most appropriate process is being followed by them is as:
Suggestion for concern managers: It is quite required to have a managing data and head
like making them to have information in better manner and thus also made at specific data and
this is that which is required to handle the cost in right context. Implement effective suggestion:
Gathering the feedback is that which is like managerial and this is something has to make
responsible to being designed and has to create and accurate and this also make them to prevent
firm in better manner from the various instant losses as well.
Planning Tool : This is something that help to determine the aim of company and this
make organisation to attain their working in better manner which make them to have goals and
objectives as well.
Forecasting tool: This is that which is being based on the practical scenario like
assumption and they are also being encouraged by the management skills, learning with the
effective decision in better manner as well (Hilton and Platt,2013).
Advantages: Moreover, it is like to manage the working of company according to their goals
and objectives too. It is like managing the team in better manner and predicting is being done
with actual amount of losses and different sales and this is that which is being also done in
coming out the time period as well.
Disadvantages: Absence and the estimation of various estimation and this is such which is
being used to incurred the thing and thus it is upcoming for time period as well. Although if
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