Management Accounting Systems and Techniques Report, BTEC - Unit 5

This report delves into the core concepts of management accounting, exploring its role in facilitating critical business decision-making. The report uses Capital Joinery Ltd as a case study, examining various management accounting systems, including cost accounting, stock management, job costing, and price optimization. It differentiates between absorption and marginal costing methods, providing income statements and reconciliation statements. The report also analyzes different types of budgets, such as sales budgets, cash budgets, and zero-based budgets, and their advantages and disadvantages. Furthermore, it covers material variance calculations and inventory valuation methods like LIFO and average cost methods. The report highlights the significance of management accounting reports, including account receivable reports, budgetary reports, and performance reports, for effective financial control and strategic planning.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Task 1...........................................................................................................................................3
P1.................................................................................................................................................3
P2.................................................................................................................................................5
Task 2...........................................................................................................................................6
P3.................................................................................................................................................6
Task 3...........................................................................................................................................9
P4.................................................................................................................................................9
Task 4.........................................................................................................................................12
P5...............................................................................................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

INTRODUCTION
Management accounting is a term that defines a systematic system for systematically reporting
the collection of financial statistical analysis and justification to facilitate critical business
decision-making for the internal position (Cooper, Ezzamel and Qu, 2017). The value of
Accounting Systems has been introduced to explain the need for assistance. Capital Joinery Ltd.,
it manufactures a wide range of joinery, helped make gates, frames, etc., is the business chosen
for the project. The study established the significance of the MAS and the application of steps for
the estimation or quantification of benefit prices, which also include the criteria for the
forecasting method for a theoretical framework to this judgement, as well as the preparation of
budget managers in the use of performance testing as well as other accounting practices to deal
with the fiscal challenge.
MAIN BODY
Task 1
P1
MA is a fusion of 2 concepts that describe management as a process for business activities to be
coordinated, organised, managed and supervised. Accounting, on the other hand, is regarded as a
systematic method of records management for collecting and recording accounting documents.
MA is a structured term used to present accounting information regularly to achieve the aims of
multinational organisations (Malmi, 2016). This is designed to resolve the problem of cost
increases, non-specific accounting records, the determination of the right approach, the
judgement process and the optimal utilisation of projects and providing pertaining to the
accounting industry. Often highlighted as an essential part of reporting, cost reporting is only
essential for economic transfers.
Cost accounting system- For marketing products, the overall accounting management technique
is taken into account to identify expenses incurred for running business activities, earning profit.
In order to calculate costs, the boss will use many methods: marginal, accumulation, dependent,
and standard costing. Capital Joinery Ltd uses nominal and even standard costing methods in
calculating benefit and understanding the influence of per provides expert change on profit. This

accounting method can be extended and important to them in the sense of limited capital joinery.
This is so they can categorise the costs of fixing door etc. with the aid of such a method. They
will categorise the cost of raw materials, the cost of work in progress and much more. Via this
they would be able to grasp the expense of absorbing larger costs.
Stock management system- Indeed, inventory is an important organisational product, stock
management helps expected returns misuse and reduces the cost of these stocks being controlled.
Through the use of these MAS, like EOQ, JIT, companies may manage the inventory ratio,
helping to determine the optimum amount of inventory required for storage (Otley, 2016). With
LIFO, FIFO methodology is applied in Capital Joinery Ltd., the selling stock rate can be
calculated. It also is helpful for the estimation of the average, maximum and safe framework of
the stock. In the case of the above-mentioned business, the need for additional raw materials to
manufacture more furniture pieces may be calculated on the basis of such an accounting method.
They will become informed about what types of goods are kept in warehouses and what types of
products are expected to be manufactured to fulfil consumer needs.
Job costing system- Usually, this MAS approach is used to describe the unit cost necessary for
goods that process ore. It helps to identify the necessity of customer order, log, quantity of orders
received, expense, scheduling needed for the production of goods. This methodology is used by
the applicable chosen business to calculate market demand. This accounting is important for
small capital joinery above to monitor the costs of operation that is used over a period or
reporting period of their activities to manufacture doors as well as other soft furnishings.
Price optimization system- After incorporating this structure within the enterprise, administrators
are able to select the best pricing strategy for their products. Price skimming, penetration, and
discounting are also used as a tool for determining the importance of a single well's price.
Competitive nature of the firm applies to the organisation policy they adopt, the business model
that is successful in assessing better profit margins and obtaining a reasonable price edge. Capital
Joinery Ltd uses to control its share of the market. Thus, as per the target requirement, they
decide the price of each good. Consumers are grouped into discrete units, loyal, prospective, nice
standard consumers. They use diffusion pricing strategies for the new goods and other services

only as they switch into different target markets. They fixed prices for their various types of
furniture pieces as per the results received from markets and customer request in the sense of the
above business.
P2
Management accounting reports- Such reports are essential components of the management
accounting practices in which strategic actions are made by managers. Along with these records,
the monetary and non activities of the companies are generated by means of assistance (Hopper
and Bui, 2016). Like the company Capital Joinery Ltd, they compile various kinds of papers,
which are listed underneath:
Account receivable report: Receivable accounts log is a significant report and was known to be
among the most personal data of such an account business if creditor data gathering reports is
expected. This analysis was used to identify restructuring debt holders that converted the
business's poor credit reserves.
Budgetary report: It is structured to provide a structure for the development of the budget.
Managers draught this study by collecting data from all the documents they have generated. The
financial statements help include guidance for evaluating the competitive situation and strategies
of the company. With the ever retail sector, the manager of Capital Journey Ltd used the budget
document to identify future growth opportunities.
Inventory management report: This paper is written on the basis of data gathered from inventory
control. The key reason for the introduction of this study helps to determine the total required
stock production, maintenance expenses and judgement of future stock supply.
Performance report: This paper is the most critical aspect that each company needs for
formulations. It is also helpful for providing details regarding each firm's outcomes. Often on the
framework of identifying and measuring performance, managers will devise compensation
strategies and take action on organizational rewards on the basis of reviewing this paper. Capital
Journey Ltd has more than 500 employees and is a multinational company. For the chief
executive, the report card is largely focused on something that can track the level of
accomplishment within each section of employees and formulate policies for their planning and
development.

Task 2
P3
Absorption costing-Absorption costing is a method of costing strategy in which the expense of
the output is taken as fixed costs and variable costs (van Helden and Uddin, 2016).
Marginal costing- This costing approach is distinct from the costing strategy of diffusion. Under
such a, variable costs are considered as the cost of the device, while fixed costs are taken as that
of the cost of the duration.
Absorption costing:
Total cost of production:
Direct materials 60
Direct labour 40
Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement:
Particulars May June
Sales 25000 18750
Less: Cost of sales
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000

Fixed selling 1000 1000
Net profit 6500 3475
Marginal costing:
Total cost of production:
Direct materials 60
Direct labor 40
Variable production cost 20
Full production cost 120
Income statement:
Particulars May June
sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Opening stock 0 0
Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
Reconciliation statement:
Particulars May June

Net profit under absorption costing 6500 3475
Add/Less: Closing stock 0 (100)
Net profit under marginal costing 6500 3375
Calculation of material
variances
Budgeted Actual Variances
Materials cost per unit £24 £18.67 £5.33
Inventory ledger record LIFO Method
Dat
e Description Sale/Purchases Balance
Unit
s
Cos
t Total
Unit
s
Tot
al
Jun
-01
Opening
Inventory 10 £35 £350 10
£35
0
Jun
-09 Purchases 15 £38 £570 25
£92
0
Jun
-15 Issued -12 £38 -£456 13
£46
4
Jun
-20 Purchases 10 £32 £320 23
£78
4
Jun
-23 Issued -10 £32 -£320 13
£46
4
Jun
-27 Issued -3 £38 -£114 10
£35
0
Jun
-30 Issued -2 £35 -£70 8
£28
0

Average cost methods
Dat
e Purchases
Unit
s
Cos
t Total
Jun
-01
Opening
Inventory 10 £35 £350
Jun
-09 Purchases 15 £38 £570
Jun
-20 Purchases 10 £32 £320
Total 35
£1,24
0
Average cost of Inventory =
Total/Units
= 1240/35
= 35.42857143
Task 3
P4
Task introduction: The task is focused on the study of various forms of budgets used in limited
capital joinery in order to better control their finances and activities.
Budgets-The budget consists of the production of a level explanation for a fixed period of the
liquidity performance. From that stage, the budget schedule recognizes the complexities of
compensation and expectations over a defined time-frame (Maas, Schaltegger and Crutzen,
2016). The financial reports survey the analysis against the monetary structure as well as any
detrimental discontinuity may be searched at by changes; investment strategies expect promoters
to meet their targets, especially if there is some form of pay, such as success or reasons behind
achievement.
Budget committee- A plan group is an administrative body that manages the allocation of capital
instruments by a corporation and allocates funds to areas of the entity appropriately. A
corporation's strategy paper is produced and reviewed by the accounting department.

Sales budget: A strategic plan outlining how to allocate revenue to meet projected sales is the
sales budget. Preparing for efficient resource utilisation and production schedules is the main
priority of the sales budget. The details required for a budget statement to be prepared come in
several different ways. This budget tends to control a firm's net revenue over a given time span.
Benefit:
This budget aims to provide accurate forecasting of sales income over a period of time.
It helps to meet the goal of revenue in the control of total capital.
Disadvantage:
This is not helpful in situations where corporations have a wide portfolio of goods.
For small businesses, it is not beneficial.
Cash budget: A cash budget is a spending plan or plan with cash receipts and payments arranged
over time. These earnings and expenditures cover taxes paid, expenditures paid, revenues and
loan payments (McLaren, Appleyard and Mitchell, 2016). In other words, a cash estimate is an
estimated assumption of the firm's success in the future. They are planning this budget for
improved financial reporting in the sense of Capital Ltd above.
Benefit:
In order to predict correct cash receipts and transfers, this method is useful for businesses.
It essentially reduces liquidity risks for firms.
Disadvantage:
For businesses, this is not acceptable for largest range.
It needs too much time and expense to plan the budget.
Zero-based budget: It is a tool used in financial planning that is supposed to explain spending for
a given amount of time. This enables the boss to start anew this year and as a beginning year, not
to use estimates in any particular year. The use of Capital Joinery Ltd. is very valuable in
maintaining a substantial degree of service and efficiency can be reached by the firm.
Benefit:
This helps to reduce cost for them because found in industries. This thereby defines and rewards
Capital Joinery Ltd. management.

Its use will ensure proper preparation within companies is taken out. In this way, the
management of Capital Joinery Ltd. may also be supported with a return.
Disadvantage:
Scheduling a Zero-Based Budget requires a lot of operational time. A drawback can also be
developed for the administration of Capital Joinery Ltd in this manner.
Implementing a zero-based budget will create a lot of challenges and complications with
operational strategy and teamwork.
Production budget- A production budget is a budget timetable that specifies the number of units
to be generated over a long period (Ax and Greve, 2017). In other words, this is a research that
measures the number of units a plant can produce from time to time. In the sense of the above-
mentioned sector, they plan such a spending in order to efficiently control their total output of
joinery. Some strengths and drawbacks as mentioned below—
Benefits-
Plants and machinery should be used to the best capacity.
It helps to lower manufacturing costs when there are standardized manufactured goods.
The total stock of items has to be maintained.
Drawbacks-
The planning of this budget is a lengthy process. That will thus, take a lot of time. If estimates
went wrong, that will result in the depletion of limited workdays.
This budget relies entirely on the estimated rates for sales. Managing inventory is arbitrary and
with the chance of a tonne of uncertainty.
Labour budget- The direct labour plan is used to quantify the number of work time that will be
required to produce the elements of the development budget (Wagenhofer, 2016). Not only can a
more comprehensive direct labour budget specify the total number of hours required, but this
data will also be decomposed by division of labour. They plan the workforce expenditure in the
above-mentioned Capital Joinery Restricted element, which contributes to better labour relations.
It includes the benefits and pitfalls listed below—
Benefits-

Some indirect cost costs vary to a certain extent with the number of employees working, because
the amount of wages paid, which is proportional to the amount of workers, is related to the
production fee.
The basic data available to measure this rate is easy available from the wage survey declaration
and there are no increased labour associated costs.
Disadvantages-
As higher minimum rates are compensated for extra jobs, as workers are paid extra wages, the
scheme delivers deceptive results. Overhead prices will though, increase to the same degree.
This is not sufficient for businesses working at a low level or with a lower product range.
Task 4
P5
Introduction to Mission-The task is focused on the study of the effectiveness of various aspects
of financial processes in order to solve multiple types of financial problems. Two firms have
been contrasted to one another in order to do so.
Comparison of financial challenges solved by Tesco and Sainsbury-
Financial crisis-A situation in which the management would be unable to make available funds
to effectively regulate its corporation's programmes and running, regarded as an expense issue.
As Capital Joinery Ltd. is a production firm, it has to face budget constraints as well. The
financial problems that the company faces are as follows:
Inventory management challenge- The inventory is normally given from either a warehouse if
required by the production processes. Issue served the task of removing a commodity from a
factory. The problem is addressed by the issue materials or used removed (Alsharari and
Youssef, 2017). Because of this problem, businesses can encounter a number of other problems
such as higher storage expense, inadequate inventory control cost controls, and much more. The
above Tesco plc manufacturing department experiences a very issue.
Cash flow management challenge- The process of tracking, evaluating and optimising the net
amount of financial expenditures minus cash costs can be described as business cash
management. Because of higher cash spending levels, firms can face financial management

problems. They face this dilemma of inadequate cash flow control, as in the example of
Sainsbury plc above.
Benchmarking: It is the method that selects the target to be accomplished by the organisation for
the year relative to the funds offered. Three reasons may be selected for benchmark tests; the
affiliation's schedule of expenditures, the financial summary of previous years and the
implementation of inquirers; such as Tesco ltd., for instance, also set performance tests for
reaching 25 percent of the pay of past agreements. Of course, on the basis of cost and variable
costs, Starbucks has set benchmarks. This focuses on eliminating duplication and continuously
reducing variable costs by 10 per cent.
KPI: often referred to as a primary execution indicator; ratio tests are every association's vital
KPIs. It reasonably considers the arbitrator liable to two years of budgetary reports and the
normal extent of the competition of any role and transfers a clarification on whether the
association works well (Tucker and Schaltegger, 2016). Tesco ltd., for instance, retains the
existing 2:1 scale as an optimal scale; beyond that within the partnership, there is a budgetary
problem. Likewise, the association has set an earnings edge of 25 percent. Underneath this norm
is a budgetary challenge. Sainsbury, but at the other side, supports the return on appreciation,
which would be 9% chosen by the association; beneath this valuation there is a profit problem.
Basis Tesco Sainsbury’s
Financial problem This firm faces the dilemma
of inadequate stock
controls, which adds to
expenses for other practises,
such as higher
manufacturing costs and
much more. The business
encountered a dilemma of
poor cash balance control
due to increased cash costs
rather than cash revenue.
The business encountered a
dilemma of poor cash
balance control due to
higher cash costs rather than
cash revenue.

Use of Management
accounting system
With the assistance of the
stock control scheme, they
resolved their economic
dilemma. That is because,
by this, it has become
simpler for them to decide
the stock contributes to
inefficient elements (Phan,
Baird and Su, 2017). Those
operations were minimised
and the financial crisis was
fixed.
The manager of this
business used the cost
accounting system to
decrease cash prices in
order to increase cash
profits. Thus, they resolved
the financial dilemma with
the help of such an
accounting method.
Advice to Capital joinery limited- This should be proposed to Capital joinery limited on the
grounds of the aforementioned analogy that they can always use an efficient accounting method
in which they can efficiently control their financial implications and can avoid financial
problems.
Conclusion
It can be inferred after reviewing the whole article that the standard of managerial accounting is
not made and it never was. Many companies have flawed systems to experience the actual show
of cash - if they didn't, then all in all they would have a starting point, as opposed to being
unlikely it is often detached. For example, a realtor with professions in three urban areas - the
two owners had no data when asked whatever the worth place was among the workplaces. They
were supposed to zero in on the case. Actual definitive documents were absolutely ignored at the
perfect moment, but were used as extreme directors.
Budget management is used to design and deal with the relationship of variety or offer of
products or entities as a shift device, to encourage cooperation and communication between
departments, to motivate pioneers and to conduct assessment. Budget management is a secured
plan for all aspects of the company of the affiliate to ensure that the affiliation meets its aims at a
later time; an alliance and pioneers must be provided by the various departments on the goals

assigned.

References
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