Unit 5: Management Accounting Report for Alpha Ltd, 2018-19

This report provides a comprehensive analysis of management accounting principles, focusing on a case study of Alpha Ltd, a UK-based pizza company. The report begins with an introduction to management accounting and its importance in today's business environment. It then delves into various aspects, including accounting systems like inventory management, cost accounting, and price optimization, along with different management accounting reports such as performance, budget, accounts receivable, and inventory management reports. The report further explores the benefits and applications of these systems and integrates them to enhance organizational performance. The report also includes an analysis of costing techniques like marginal and absorption costing, and planning tools. It concludes with an overall assessment of Alpha Ltd's financial strategies and offers insights into improving business strategies and overcoming financial challenges.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 ...........................................................................................................................................1
P2 ...........................................................................................................................................3
M1 ..........................................................................................................................................5
D1 ..........................................................................................................................................5
TASK 2............................................................................................................................................6
P3 ...........................................................................................................................................6
M3 ........................................................................................................................................13
D2 ........................................................................................................................................13
TASK 3..........................................................................................................................................14
P4..........................................................................................................................................14
M3 ........................................................................................................................................16
TASK 4..........................................................................................................................................16
P5 .........................................................................................................................................16
M4 ........................................................................................................................................18
D3 ........................................................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
In today's business environment, management accounting is a continuous procedure
which is concentrated by managers of organisation in respect to analysis actual situation of
company. The main aim of this accounting is to direct internal stakeholders like staff members,
directors etc. to evaluate the real business situation as per the marketing activities which is good
or not. In case of ignoring by an entity so it shows bad impact of producing reports and accounts
on insider activities (Bol, Kramer and Maas, 2016). The organisation which is selected for this
report Alpha Ltd which is a medium sized company. It is situated in UK and specialised into
Pizzas. This report consist of various topics like accounting systems and reports to analysis the
actual performance. Along with to analysis the profit of company apply different costing
techniques like marginal as well as absorption. Furthermore apply various planning tools that
helps to predict and forecast position of company in future and compare selected company with
other company in same sector to analysis their business strategy and system to overcome from
the financial problem which is occur in every organisation.
TASK 1
P1
Management Accounting: Management accounting is linked to rules relating to
reporting information used to make tactical decisions. This is used by executives of any company
that effectively capture, evaluate and track financial details and increase market share. Alpha Ltd
managers often pay more attention to it so that, with the aid of management documents, a greater
level of reliability can be given to inner shareholders.
Management accounting system: It is the structured examination of business
information that organizations use to evaluate and evaluate their operation for organizational
management purposes. It is utilised to react to the organization's issues such as vendors, creditors
and shareholders. Every organisation wants to take effective decisions to conduct their business
operations, for this they are applying different types of system under management accounting
(Caskey and Laux, 2016). To make business decisions, it considers different convections and
accounting rules that are accompanied by companies. In the references of Alpha Ltd, executives
are applying for different kinds of management accounting system that supports to evaluate
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efficiency of business and know actual situation of a business at the market place. There are
mentioned different types of accounting system in details:
Inventory Management system: management of inventories are a process of storing
and ordering and using companies inventory stores. It includes the different types of materials,
and finished product available at warehousing and are in process of such items. There is risk
associated with the inventory present in the warehouse.. The essential requirement of this method
to track records of inventories. Firms uses three major method to have a proper maintain of
inventory levels in the management: FIFO, LIFO and AVCO. FIFO: The first in first out is the inventory management system where goods purchased
first are sold out first. LIFO: The last in first out method is other inventory management system, where last
goods products are sold out first in the stores.
 AVCO : Under such system, inventory is maintain on average basis over a certain period
of time (Dillard, Yuthas and Baudot, 2016).
Alpha limited companies used these methods to maintain the cost and price according to
the product. Changes these method from time to time.
Cost accounting system: It is a framework used by company to evaluated the cost of
product for the inventory control, cost reduction, for profit analysis. To maintain the track of
flow of inventory through the various stages of production, this system is used in the Alpha
company. They keep the track of everything from raw material goes into processing system till
they turns into finished goods. The credit the raw material account and debit the goods in process
account. There are two main accounting system, first is job order costing and second is process
costing. Job order costing is appropriate for the unit production and special orders. They charged
cost manufacturing cost separately for each job. Whereas, under process costing each process
include separate cost for each step. It is useful for the process, where different departments are
involved (Efferin and Hartono, 2015). The essential requirement of this system to analysis cost
of manufacturing of particular product. This provide better cost association with the each of the
process in the production of product.
Job order costing system: it is used to maintain the cost involved with a specific batch
of products. This system is useful for the Alpha limited company, because they have different
batches for the different products. They make sure that costs incurred in the product are
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reasonable to its prices for the customers. They maintain a job cost sheet to have proper record of
cost incurred in the production. It is a complex process. It tracks information from various
sources such as supplier invoices, payroll records, overhead allocation. When company has a
outcomes of continuous flow of product, low-cost, then this system is more appropriate. The job
cost is serves as a subsidiary ledger or the documentation for the manufacturer. This system is
required to analysis the job role in the business of each person. To have clear idea about the cost
of production, this system is used as the indicators.
Price optimisation system: It is a process of pricing the product where companies can
have price maximising and customer are will to pay. Companies like Alpha limited, gives right
amount if time for the companies to decide the price of the product and to attract customer from
time to time. It is a process to determine the price of product so that company can make profit in
the long run. It is essential require to understand the relationship between the pricing strategy,
that the competitors and customer willing to pay for the prices in the market. It is place where
price optimization is more more important then the reducing the competitors. It is most important
system that helps to set effective price stature of different products.
P2
Management accounting reporting: A document that produced by executives through
including scheduling, legislation, quality assessment and company choice-making processes
known as management accounting reports. It supports to keep both money and non-cash data
documents and then turn them into valuable business data. This report represents statistics, facts
and information about operations within organization. The main objective for this report is to
analyse the efficiency of the organisation and enhance the profit margins. Alpha Ltd's director
produces accounting documents that support the company community to make better rational
decisions.
Performance Report: This report is mainly produced by the organization to analysis the
performance of overall activities that occur in the organization. In this report track the
performance of each worker as well as organization. On the basis of this report apply appropriate
modification in organization to improve performance of company and staff members achieve
good position and monetary and non monetary benefits. These awards encourage them to make
more effort to achieve organisation objectives and aims in certain period of time. Such as, Alpha
Ltd produce this report to awarded individual for their commitment and completing target.
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Additionally, it is vital document for business in order to analysis business strategy for company
and according to that take appropriately steps (Friis, Hansen and Vámosi, 2015). Through this
report analysing the performance effectively and according to that prepare different strategies
for the business.
Budget Report: It is defining as most important report which is prepared by every
organisation to know actual position in present time and what will be in future. Budget report is
part of the internal report where organisation utilised this to compare budgeted projects with
actual report to track the profitability of an organisation. In this report analysis all the
departments after that set income and expenses for future activities to calculate actual cost. In the
context of Alpha Ltd can set budget that supports to states how much organization need to spend
more. Furthermore, through this report set which employee generate more incentive and maintain
profitability. The main purpose of budget is to provide a model how management should
performance their duties to make best use of available resource and to plan for further process.
Accounts Receivable Report: Every business is relies on credit, so it is important for
them to prepare account receivable report. The particular report support to manage all the
information regarding to creditors and credit period in which they return amount. This report
break down the left over balance in to particular period of time enables managers to recognise
the all the bad debts who did not pay amount with interest in credit period. After that identify
issues regarding to collection and sort out on the time to collect all due amounts. Such as Alpha
Ltd can prepare this report in order to prepare list of the creditors and their credit time. It helps to
collect amount on time and provide more time for collection. The credit time period classified as
30 days, 60 days and 90 days (Gimbar, Hansen and Ozlanski, 2016).
Inventory management Report: The particular report is utilised by the organisation to
collect the information about stock or finished goods which is known as inventory management
report. Through inventory report supervisor can analysis the level of stock and their usage at
every step. As a result they are continuing manufacturing activities and order for more stock for
further activities. Such as, manager of Alpha Ltd can produce this report to understand the stock
level at warehouse. Along with know how many types of ingredients uses for make Pizzas at
different procedure of manufacturing. It helps to track cost of goods sold, avoid overselling and
underselling and create custom reports. Alpha Ltd, use inventory management reports to see how
much cost in involved to produces a single set of product.
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M1
Management
accounting systems
Benefit and application
Price optimisation
system
It is most important system which is utilised by the company to set
effective price structure and know the reviews of customers regarding
to their products and services. If customer did not satisfy with the price
so apply appropriate modification to attract customer regarding to
product. For Alpha Ltd essential require of this system to apply
effective price strategy as per the market requirement.
Inventory
management system
It is beneficial system which is applied by all the systems in order to
track the stock level from warehouse to production sites. If at any stage
require to more material so it helps to supplied on time. Alpha Ltd
through this system arrange raw material on time and continue the
procedure of manufacturing pizzas (Leitner and Wall, 2015).
Job order costing This system provides different advantages to compute profit generated
on particular job role and supports to allocate manager for particular
job. The implementation of this system described by manager of Alpha
Ltd to categorise cost for the particular department in the
manufacturing procedure to continue work efficiently.
Cost accounting
system
Through this system measure the cost and efficiency of the business to
increase in effective manner. This system can help to maintain cost and
applied by the manager of the Alpha Ltd in order to deduct cost of
material and allocate in different departments as per the requirement.
D1
Management accounting system as well as reports are integrated with each other in the
organisational procedure due to increase profit, market share. Accounting system can applied by
the organisation to recognise the efficiency and reports are utilised to track the records of
different departments. Such as, Alpha Ltd apply accounting system and prepare the reports to
increase performance and smoothly run organisational procedure. When company prepare the
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inventory management report so for this apply inventory management system that helps to
collect every information regarding to raw material that record in the report and present in front
of management. Through cost accounting system set the actual cost of the product that helps to
prepare cost accounting reports and calculate the amount of each material that utilise in the
manufacturing procedure (Manyaeva, Piskunov and Fomin, 2016).
TASK 2
P3
Marginal Costing: It is type of the costing system where organisation analysis the cost of
extra units which is manufactured as per the demand of customers. Through this technique easily
analysis the cost of extra pizzas in the Alpha Ltd.
Absorption Costing: The particular technique applied by the business to calculate actual
cost regarding to production at time. In the context of Alpha Ltd manager utilise it to make sure
about the related pizzas that recover through revenues.
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2b If machine is installed:
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