Management Accounting Report: UCK Furniture, Costing and Budgeting

This report provides a detailed analysis of management accounting systems and their application within UCK Furniture. It begins with an introduction to management accounting, its importance, and the various systems employed, including inventory management, job costing, and price optimization. The report then delves into practical applications, such as the preparation of cost cards using both absorption and marginal costing methods, along with a comparative analysis of their merits and demerits. Furthermore, it includes an income statement analysis and interpretation. The report also covers budgeting, including cash collection and disbursement schedules, and a cash budget. It concludes with a comparison of enterprises utilizing management accounting systems to address financial issues and a ratio analysis of UCK Furniture's divisions, assessing return on capital employed, asset turnover, and operating profit margin. The report provides a comprehensive overview of financial management accounting principles.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
Demonstrate an understanding of management accounting systems:....................................3
1.1...........................................................................................................................................3
2.1:..........................................................................................................................................5
2.2...........................................................................................................................................9
2.3.........................................................................................................................................10
(a.).........................................................................................................................................11
(b.)........................................................................................................................................12
PART 2..........................................................................................................................................13
3 Preparation of Budgets:.....................................................................................................13
4.1 Comparison of enterprises that conform to MA systems to address the financial issues:17
4.2 Ratio analysis:................................................................................................................17
4.3 Evaluation of the planning tools:....................................................................................19
REFERENCES..............................................................................................................................21

INTRODUCTION
Managerial accounting may be considered an accounting division that analyses the definition,
review, calculation, and evaluation of business-related information that management utilize to
take decisions dependent on evaluation/analysis as well as helps handle the activities of the
organization better (Bennett and James 2017).
This study evaluates multiple elements and related aspects of management accounting
with regards to UCK furniture. It also cover several practical sum related to MA techniques and
preparation of budget.
PART 1
Demonstrate an understanding of management accounting systems:
1.1
Management Accounting: This may be characterized as a collection of practices aimed at
encouraging management and allowing them to be prepared with the facts and data required to
make management decisions in support of an enterprise.
Importance of MA: It is imperative for decision-making phase of management within entity. It is
also important for political and corporate strategy formulation. It assists in
managing outputs, performance and task management which assists in making operations more
effective. It is most critical management framework because it also helps to maximize operating
performance and hence to raise revenues (Burritt and Tingey-Holyoak, 2012).
Perquisites of MA: The entire process of MA depends on raw data and details which is
converted in meaningful information for managerial decision-taking process. This require
adaption of frameworks which support in decision-making.
1.2
MA Systems: These are several specified MA systems that provide clear mechanism for the
adaptation of managerial accounting processes, as below:
Inventory management system: This deal largely with successful handling of inventories. The
system/framework includes detailed documentation pertaining to each organisation's product
object. It makes it possible for administrators to handle all product items and supplies and reduce
associated cost of production. This allocates the crucial deficiencies in inventory-related
programs to help managers define significant factors that influence total cost of inventories.

Job Costing System: This focuses primarily on defining work processes and allocating
expenditures to each given job-process. It is a common framework that includes internal process
oversight. This program needs detailed details which effectively classifies tasks and expenses
associated with these functions (Cazier, Rego, Tian and Wilson, 2015).
Price optimisation system: The most powerful and relevant structure through which different
goods / products can be priced correctly. This helps management modify or sustain a new sale
price, which often means the existing costs ought to change. This also helps managers to draw up
a marketing strategy and to implement strategies for demand determination. To evaluate most
cost-effective price for particular products, this approach requires technological and
organizational experience as well as use of certain approaches/methods.
1.3
Several crucial Benefits/advantages of discussed MA systems:
MA-Systems Core Benefits
Inventory Management This is indeed vital for the business in
which inventory movement throughout the
business is observed and positioned. This also
lets managers
use organisation's inventories/stock items
effectively.
Job Costing System It is especially beneficial in terms of achieving
efficiency and effective/efficacious allocation
of different costs to specific business processes
/ jobs (Christ, 2014).
Price Optimisation System It's effective in assessing most sustainable
prices for goods and services for development
and handling workers and also in assessing the
quality of things manufactured/produced. This
system provides basis for setting prices.

1.4 Critical examination of how MAS and MA are integrated to the processes of the
organization:
As an organizational process, multiple procedures and operations/tasks act as core basis
for various systems/frameworks of MA. The results of various organizational processes are
important considerations for the above systems. Managers perform manager procedures for
productions, accounting and financial services, such as costs details, stock levels, requirements
and several other accounting/budgetary details, as is case for UCK. All procedures with MA
frameworks therefore need to be integrated.

2.1:

Descript
ions
Descript
ions
Amount
(GBP)
Descript
ions
Amount
(GBP)
a)
Units
produce
d
11000 9500
b) Direct
Material
(4kilo-
gramx3p
ound/kil
o-
gramx11
000)
132000
(4kilo-
gramx3p
ound/kil
o-
gramx95
00)
114000
c) Direct
Labour
(4
hoursx
2pound/h
ours
x11000)
88000
(4
hoursx
2pound/h
ours
x9500)
76000
d)
Variable
Overhe
ad
(5GBP/d
eskx110
00)
55000
(5GBP/d
eskx950
0)
47500
e) Prime
Cost 275000 237500
f)
Producti
on
overhead
20000 20000
g)
Cost of
goods
produce
d
295000 257500
h)
Variable
revenues
cost
(1pound/
deskx11
000)
11000
(1pound/
deskx95
00)
9500
i)
fixed
selling
cost
2000 2000
j)
Cost of
Goods
sold
308000 269000
k) Profit= l-
j 77000 63500
l) Revenue
s
(35
GBP/des
kx11000
)
385000
(35
GBP/des
kx9500)
332500
Cost Card under Absorption costing:
January February

Descript
ions
Descript
ions
Amount
(GBP)
Descript
ions
Amount
(GBP)
a)
units
produce
d
11000 9500
b)
Revenue
s price
per desk
35 35
c)
Variable
cost per
desk:
Direct
material
(4kilo-
gramx3p
ound/des
k)
12
(4kilo-
gramx3p
ound/des
k)
12
Direct
Labour
(4
hoursx
2pound/h
ours
8
(4
hoursx
2pound/h
ours
8
Variable
overhead 5 5
Variable
revenues
overhead
1 1
d) Contribu
tion 9 9
Total
contribut
ion
99000 85500
e) Fixed
costs
Producti
on
overhead
NOTE1 22000 19000
Revenue
s
overhead
2000 2000
Profit (d-
e) 75000 64500
January February
NOTE1
Production overhead is considered taking into account
average production each month, i.e. 10000 units.
Hence, for January, the overhead amount=
(20000/10000)x11000
Hence, for February, the overhead amount=
(20000/10000)x9500
Cost Card under Marginal costing

Merits and Demerits of Marginal and Absorption method:
Marginal Costing:
Merits: It is used to calculate total costs and the effect on sales amount of variable costs. All
costs then divided into fixed-costs and variable-costs based on their essence of volatility. Profit
is measured as normal and contribution amount is derived because here entire cost is excluded
from profits. This effects in income as enterprise lowers overhead expenses.
Demerits: The segregation of costs as in the fixed-costs and variable elements is major critical
task or difficulty. Clearly dividing all expenses into fixed versus variable expenses is quite
complicated, because all costs are variable in long term. These grouping can also often produce
inaccurate results. In comparison, marginal costs can be prove less helpful in a business with
several different types of product-items (Fullerton, Kennedy and Widener, 2014).
Absorption Costing:
Merits: Absorption costing is consistent with concept accrual and matching accounting
principles involving the alignment of expenses with revenues for a specified accounting period.
This is preferable method as it shows more accurate results as compare to marginal costing as
herein all the factory overheads are separately shown.
Demerits: The cost of absorption doesn't provide specific details regarding fixed and variable
expenses. But it will not be appropriate for strategy and decision-making purposes for managers.
With the aid of absorption method, flexible budgets can not be planned since it doesn't allow a
difference among fixed versus variable costs.

2.2
For the period ending Februar
y
Revenue
Revenues for January 385000
Revenues for February 332500
Total revenue (A) 717500
Cost of goods sold
Cost for January 308000
Cost for February 269000
Total Cost of goods sold (B) 577000
Net income(C= A-B) 140500

Descript
ions
Descript
ions
Amount
(GBP)
Descript
ions
Amount
(GBP)
Units
produce
d
11000 9500
a) Direct
Material
(4kilo-
gramx3p
ound/kil
o-
gramx11
000)
132000
(4kilo-
gramx3p
ound/kil
o-
gramx95
00)
114000
b) Direct
Labour
(4 hours
x
2pound/h
ours
x11000)
88000
(4 hours
x
2pound/h
ours
x9500)
76000
c)
Variable
Overhea
d
(5GBP/d
eskx110
00)
55000
(5GBP/d
eskx950
0)
47500
d) Prime
Cost 275000 237500
e)
Producti
on
overhead
20000 20000
f)
Cost of
goods
produce
d
295000 257500
g)
Variable
revenues
cost
(1pound/
deskx11
000)
11000
(1pound/
deskx95
00)
9500
h)
fixed
selling
cost
2000 2000
i)
Cost of
Goods
sold
308000 269000
j)
Workings- Cost of Goods sold January February
The absorption costing technique has been applied here. This technique
recognises all costs incurred to bring the product to saleable condition, and all
the costs are absorbed by the produced units as a part of their cost.

2.3.
Interpretation: According to presented incomes statements & costing cards compiled applying
marginal and absorptions methods, This evaluated that net earnings herein marginal method are
pound 75000 and pound 64500 respectively during months Jan. month and Feb month, whereas
net-profits are pound 77000 and pound 63500 respectively in same months by absorption
process. There are variations in net profits' figures owing to above or under abortion of fixed-
costs.