Detailed Management Accounting Report: CORUS UK Ltd Case Study

This report provides a comprehensive analysis of management accounting, using CORUS UK Ltd as a case study. It begins by defining management accounting and its importance in financial reporting and strategic planning, including the benefits of various systems such as inventory, cost, and job costing. The report explores different methods used in management accounting, like budgets, cost scheduling, and variance analysis. It delves into cost calculation techniques, comparing marginal and absorption costing, and explains how these methods are used in developing financial reporting documents. The report also discusses the advantages and disadvantages of planning tools used in budgetary control, and their application in preparing budgets and forecasts. Furthermore, it examines how management accounting systems contribute to business success and provides insights into handling financial problems. The report concludes by summarizing the key findings and emphasizing the significance of management accounting in informed decision-making and financial management.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1 Meaning of Management accounting.....................................................................................3
P2 Different methods used for managing accounting reporting.................................................5
LO 2.................................................................................................................................................6
P3 Cost calculations using costing techniques. ..........................................................................6
M2 Use of MA approaches and development of financial reporting documents.......................8
D2 Producing financial reports accurately applying and interpreting data. ...............................8
LO 3.................................................................................................................................................8
P4 Advantages and disadvantage of planning tools used in budgetary control..........................8
M3 Use of different planning tools and application for preparing budgets & forecasts...........10
LO4................................................................................................................................................11
P5 Comparing the organisations using the management accounting systems..........................11
M4 MA systems for business success ......................................................................................12
D3 Planning tools to handle the financial problems. ...............................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting refers to setting and preparing the financial report so
that accurate information is to be provided to company regarding taking risk in growing
business perspective. Usually this report is prepared by the manger regarding
examining day to day activities which is undertaking in business to make planning for
longer term growth (Malina, 2018). Present report is based upon the CORUS UK Ltd.
Which is acquired by Tata Group in April 2007. CORUS company mainly deal in steel
related products. This report will include the matter relating to understanding the
concept of management accounting and also its techniques which they are dealing in. It
also includes the factors relating to planning tool used in managing the accounting. At
last the report cover the matter relating to examining the ways which is used in resolving
the financial problems.
LO 1
P1 Meaning of Management accounting
Management accounting is the internal process which the managers adapted to
examine the day to day operation to make the financial report (Hiebl, 2018). It helps
company to deal in accurate planning and also initiate with business strategies to
overcome from the risk which is associated in future perspective. It carries various types
of management accounting as:
 Inventory management systems: In this management is to be undertaken
regarding managing the inventories regarding inflow and outflow of goods or also
the stock which is kept in warehousing (Hopper and Bui, 2016). In respect of
CORUS, this is one of the necessary systems which is to be implemented by the
managers regarding examining the raw material or the quantity of the goods
which is needed to manage the raw materials in better way.
1. In context of LIFO, the raw material which is lastly buyer are supplied first as they
are fresh and carry the importance in respect of getting better quality.
2. In relation to FIFO, the inventories which is firstly carries is to be delivered firstly
so that it helps in examining the status of inventories in market.

3. AVCO refers to the determining the cost of goods which is used in respect of
dividing the number of goods used during the particular time period.
 Cost accounting systems: Management is to be required managing the cost in
respect of estimating the actual cost incurred with the actual cost spend (Cost
Accounting Systems, 2019). In relation to CORUS, this is beneficial regarding
managing the cost through estimating the profits gained regarding pertaining for
particular operational activities.
 Job costing systems: In this system, management of accounting is initiated
regarding estimating the actual expenses incurred from the job (Scapens, 2018).
As in this the labour cost, materials cost, equipment used to produce the finished
goods and the salaries or also necessities which is to be provided to employees
is to be managed or recorded in the accounting. In case of CORUS, this is useful
regarding managing the needs of the employees through providing accurate
services and also management is undertaken regarding estimating cost.
 Price Optimistaion: Pricing reflects the changes in prices of the particular
products which the company identified regarding fluctuation in changes in prices
of the products or services. Thus, managers of CORUS had to initiate this
procedure regarding managing the pricing system in better way, so that it helps
companies to take right decisions.
M 1: Benefits of management accounting systems:
It is necessary the management accounting is to be needed in business so that
they can examine the overall performance of the company through making the accurate
budgets or also manage the inventories in right manner (Hyndman, 2016). Thus, it
carries various benefits in CORUS regarding managing the accounting as:
 Job costing systems: It helps in increasing the efficiency in business, as through
getting accurate information about the resource which is utilized by the
employees regarding attaining the particular activity. Through these aspects, it
helps company to take right decision.
 Cost accounting systems: It helps in examining the actual cost incurred in the
company regarding disclosing the profitable activities and unprofitable activities
which is attaining in business (Hasyim and Jabid, 2019).

 Pricing systems: Through adapting this system, it helps company to provide
choices to the customer regarding preferring the products which is affordable to
them. It also provides benefits to the producers regarding producing innovative
products to beat competitor’s strategy in market.
P2 Different methods used for managing accounting reporting
In context of managing accounting, various methods are used in respect of
managing accounting as:
 Budgets: It is mainly undertaken regarding helping company to plan for future
activities. In this, the comparison is to be undertaken regarding comparing
company past performances with the actual one happening in business (Yahaya,
2019). Budget reflects the tool which is prepared by coordinating with all the
department needs and requirement which they need in future to attain the task.
In relation to CORUS, it is useful in examining the revenues and expense which
the company incurred in the future.
 Cost scheduling: It is prepared to reflect the cost incurred in respect of producing
the goods or dealing in raw materials or equipment used to produce such goods.
Cost is also used in providing salaries to the staff and other employees which are
engaged with the business (Clemente, 2019). This is necessary regarding
managing the cost, as it helps company to prepare for future risk which may
arises regarding dealing in any activity or expanding the business in different
countries. In case of CORUS, this is useful regarding carrying adequate planning
to reduce the cost expenses through dealing in multiple direction to save cost of
the business.
 Variances in performance: In this the performances report is to be undertaken
regarding examining the actual performances with the set performances. The
performances of the employees is judged through setting the accurate goal within
the particular time limit (Shahzadi and et.al., 2018). In this, variances arises
regarding facing complexity or difficulty in attaining the task which resulting in
facing losses in undertaking particular activity by the employees. In respect of
CORUS, it is useful regarding dealing in manufacturing steel products which
resulting in requiring performance report regarding examining the capacity of

individual employees to attain the task within the set time period (Grossi and
et.al., 2019).
 Marginal costing: It refers to the variances in the actual cost which reflect the
changes in the actual cost through adding more unit in the budgets of the actual
production cost (Dierynck and Labro, 2018). It is useful for the CORUS to add
more cost in their budgets regarding adding more production benefits in their
units. The disadvantages of this tool is that it is more complex in nature and
requires more management to manage the cost as it carries for shorter time
duration.
All such points are important in the CORUS regarding managing the report so
that it reflects the actual income and expenditure regarding pertaining to particular
activity. Thus, these are the various methods which is used in managing accounting
reporting in better perspective for CORUS.
In respect of undertaking the adequate planning regarding managing the
accounting, report play the effective role as it carries with proper planning, regulating
the business polices and also adapting the changes to make the effective changes. As
company report are mainly adapted by the stakeholder such as customer, government
or other shareholder to whom company gets investment to attain business for long term
growth. Thus, the positive aspects in respect of managing the accounting system
through reports is that it helps CORUS to take right decision and also plan future
activities to retain business in market for longer way.
LO 2
P3 Cost calculations using costing techniques.
Marginal costing
It is a costing technique used for calculating the cost of product. This technique
only consider variable cost associated with product. Fixed costs are considered as
periodical costs under this technique therefore it is not added to cost of product.
Calculation of cost per unit:
Particulars Figures (in £)
Labour 5

Material 8
Variable production overhead 2
Variable selling & distribution overhead (35
* 15%)
5.25
Cost per unit 20.25
Profitability statement as per marginal costing is e numerate below:
Particulars Figures
(in £)
Figures
(in £)
Figures
(in £)
Figures
(in £)
Sales 1500 35 0 52500
Less: Variable expenses 0 0 0
Opening stock 0 0 0
Add: purchases 2000 20.25 40500
Less: closing stock 500 20.25 10125 30375
Contribution 22125
Less: Fixed expenses
Less: fixed production overhead 2000 5 10000
fixed selling & distribution
expenses 10000 20000
Net profit 2125
Absorption costing
Absorption costing is the techniques which considers both variable and fixed cost
in the production of units. Absorption costing is used to determine the profits after
carrying out the production process. It includes variable and fixed cost for calculating
the cost of product. As it includes both cost it is considered more accurate and reliable.
Absorption costing is used by the organisations for getting more accurate results.
(Järvenpää and Länsiluoto, 2016).
Calculation of cost per unit

Income statement according to absorption costing method is as follows:
Particulars Figures
(in £)
Figures
(in £)
Figures
(in £)
Figures
(in £)
Sales 1500 35 52500
Less: COGS
Opening stock 0 0 0
Add: purchases 2000 20 40000
Less: closing stock 500 20 10000 30000
GP 22500
Less: selling & distribution
expenses
Fixed 10000
Variable 7875 17875
Net profit 4625
Interpretation: The above depicted table shows that, in the case of absorption
costing method, production cost per unit implies for £20 respectively. On the other side,
at the time of determining cost per unit marginal costing method emphasizes on
considering only variable expenses. Accordingly, CPU, under variable costing method
accounts for 5.25 significantly. It has been assessed from the evaluation that company
should focus on undertaking absorption costing method over marginal. Moreover,
absorption costing method presents suitable view of pe\r unit cost and profitability by
taking into accoumnt fixed and variable production expenses.
M2 Use of MA approaches and development of financial reporting documents.
Techniques of MA is beneficial for the company as same help manager to
formulate documents of the financial reports as well as maintain the products and
services cost within business concern. Techniques like marginal and absorption states

whole cost of company and then ascertain net profits into company. It is the
accountability to accomplish many data connected to accounting as well as maximise
productivity. Both techniques are useful for Corus Ltd. Like their accountant can prepare
appropriate management reports through evaluating revenues as well as expenditures
which aids in making decisions. Also, this assists in enhancing production and sales in
respective organisation.
D2 Producing financial reports accurately applying and interpreting data.
Financial reports is defined as the annual report that is formulated through
manager when year comes to end for to provide information about profitability and
losses from respective enterprises. Major objective of this is to utilise appropriate
system of management accounting as well as develop financial reports which aids in
performing the activities efficaciously.
LO 3
P4 Advantages and disadvantage of planning tools used in budgetary control.
Budgets are defined as spending plans of enterprise. The budgets provide
direction to the company to follow for achieving its desired goals & objectives. Budgets
helps company to keep its expenditures within control. This prevents company from
overspending and effective allocation of resources. There are various planning tools in
budgetary control.
Operating budget
Operating budgets can be defined as forecast for expenses and revenues which
are expected for specified periods. Operating budgets are formulated typically by
management before the year begins and shows the budgeted activity levels for the
period budget is supported by various subsidiary schedules containing more detailed
information. Chorus lts may prepare separately budgets for COGS, payroll and the
inventory. Variances are calculated by comparing the actual results with budgeted level
(Van der Stede, 2017). Operating budgets are required to be updated regularly for
business efficiency. These budgets are prepared by the top level management.
Advantages

 It helps the business in managing its current expenditures for the year and to
plan for its future expenditures within the budgeted level.
 Forecasting about the costs and expenditures help in effective allocation of
resources to different activities. Operational budget provides flexibility in preparing the budgets and for spending
over unanticipated costs
Disadvantage
 Extensive research is required for long term budgets and updates are to be made
for the efficiency.
 Proper allocation of resources is a difficult task in operating budget.
Cash Budget
All the details about the cash inflow and outflow are detailed in cash budget for
specified period. Cash budgets are prepared for allocating the funds to all the activities
and operation of business. Cash budget ensures that sufficient funds are available with
company for carrying out the operations. Chorus may prepare short term or long term
cash budget as per its requirement (Alawattage and et.al., 2017). Cash budget keeps
the costs within control, so that company can achieve its desired goals and objectives.
Advantages
 It helps the company to prepare for the financial fluctuations that can occur over
time.
 Cash budget helps to arrange for sufficient funds if enough funds are not
available within the company.
 It enables company to allocate funds to different departments and activities. Financial forecasts helps the company to keep its expenditures within control.
Disadvantage
 Cash budget is time consuming and may prove accurate many of times.
 Cash budgets helps in preventing excessive spending. Inaccuracy in cash budgets may cause the company to go out of cash in
between the activities.

Flexible Budget
Flexible budget refers to budget that can be adjusted with the change in activity
or volume. Flexible budgets are more useful and sophisticated than the static budget. It
is flexible as it include variable cost of units. The budget helps the management to make
adjustments without changing the whole budget and other expenses. Flexible budgets
are useful in measuring the efficiency of management.
Advantages
 Flexible budget helps company in preparing budgets for seasonal expenses.
 It helps in comparing the actual and budgeted outputs and costs (Oboh and
Ajibolade, 2017).
 It is very useful tool in adverse situations as instant changes can be made to it. It helps the company to prepare for irregular earnings for the year.
Disadvantages
 Flexible budgets are confusing as amendments may be made by the
management at times.
 The forecasts for this budgets requires detailed planning so that variances are
least.
M3 Use of different planning tools and application for preparing budgets & forecasts
Planning tools helps the management in keeping the cost of product within
control and to maintain profitability by reducing the variances to minimum. Management
of the company can evaluate the performance by comparing the actual and budgeted
outcomes. Company through these budgets makes proper allocation of resources
among activities and departments. Planning tools help in controlling the cost and
effective utilisation of resources. Multiple planning tools that are used to prepare budget
are given below. Monthly cash flow forecast: Monthly cash flow forecast that is estimated can
be taken into account to prepare budget. In order to actually obtain budget cash
flows, one need to make use of sufficient resources and to make available them
in the business it is very important to prepare budget and determine value of the
variables. Thus, by considering cash flow values resources requirement is
accessed and accordingly values are determined in the budget.

 Detailed spending plan: Detailed spending plan is another one that is needed
to prepare budget. In this plan varied sort of expenditures values are determined
along with time when spend will be made. Accordingly, allocation of cash is made
in the budget by the managers. Money management plan: Cash management is the one of the main factor that
need to be taken in to account while making expenses in the business. Managers
by considering cash management determine expenditure limit across months in
the budget.
LO4
P5 Comparing the organisations using the management accounting systems.
Financial issues are problems affecting the business performance and are
required to be resolved using appropriate planning tools. There are various tools that
can be used by enterprise for resolving the financial problems.
Financial Issues
Scarcity of funds – CORUS lts is facing the issues of scarce resources in the
organisation.
Wastage of Resources – Oshodi plc is facing the issues of wastage of resources.
CORUS UK Ltd Oshodi plc
Benchmarking – Benchmarking refers to
setting targets and goals for the business
which are required to be achieved within
specified time.
Financial Governance – It sets
frameworks for the policies and guidelines.
Financial governance ensure that the
processes are going in systematic manner.
 CORUS uses benchmarking to
identify whether determined cash is
utilized in performance of task in
systematic way. For each month
benchmark level of expenditure is
determined. If actual expenses are
nearby to benchmark level at
middle of the month corrective
 Company can overcome the
problem by implementing financial
governance for monitoring its
operations as it will avoid wastage
of resources. In the organization
policy of passing of bill for
expenditure is clearly determined
which is inked by multiple senior

actions are taken to control
expenses. In this way, issue is
solved at workplace.
officers. Such kind of policy ensured
that with tight control entire
expenditures are made in the
business which lead to prevention
of wastage of resources in the
business.
 Company can prevent the problems
of variances between actual and
budget by ensuring that all the
resources are being utilised
efficaciously and there is no
wastage of resources in the
productions (Alawattage and
Wickramasinghe, 2018). In many
firms there is policy under financial
governance under which on monthly
basis budget are evaluated and
corrective actions are taken on time.
All the activities are performed
according to the set frameworks.
M4 MA systems for business success
Different accounting systems are used for dealing with problems of company.
Management are using these tools for identifying the business issues, examining and
controlling business activities within company. Business can achieve success by
analysing the issues and reducing them using effective planning tools through variance
analysis. By using management accounting tools like budget and costing systems close
eye can be kept on cost and on time it can be controlled which will lead to elevation in
business profit and if same thing will remain consistent then sustainability will be
observed in the business.

D3 Planning tools to handle the financial problems.
Planning tools are very essential for preparing the budgets. They help the
management of company to overcome the problem faced by taking corrective steps for
issues identified in variance analysis. It helps the company to focus over specific issues
that are causing the problem. Company takes effective corrective steps for achieving
the goals of company by identifying the issues as their initial stage.
CONCLUSION
From the above report, the report conclude the matter related to management
accounting which is helping the organisations to achieve the goals and objectives.
Companies through the various management accounting systems like inventory
management systems, cost accounting systems, job costing systems and many more
are managing its operations. Planning tools helps companies to keep the expenditures
within control and to achieve profitability.

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