Financial Analysis Report: Bestway Ltd. Costing and Income Statements

This report provides a management accounting analysis of Bestway Ltd. It begins with an introduction to management accounting and its role in managerial decision-making, followed by the preparation of income statements. The core of the report focuses on calculating costs using both marginal costing and absorption costing methods. It details the specifics of each method, including the calculation of cost per unit, and presents income statements under both approaches. The report then explores the components of financial reporting documents and financial reports, highlighting their significance in portraying a company's financial performance. It concludes with a summary of the key findings, emphasizing the application of marginal and absorption costing in the context of Bestway Ltd. The report references relevant academic sources to support its analysis.

Topic
Management accounting
(Task 2)

Table of content
Introduction
Preparation of income statement
Calculation (Under marginal costing)
Calculation (Under absorption costing)
Financial reporting document
Financial reports
Conclusion
References

Introduction
Management accounting include accounting
information that helps manager in decision
making (Maas, Schaltegger and Crutzen, 2016).
For better understanding of this presentation,
company has been chosen which is Bestway
Ltd.

Preparation of income statement
Cost: In business cost is involved in buying raw material,
using machinery and equipment to produce goods,
packaging, delivering goods to customer. Two methods to
calculate cost are as follows:
•Absorption costing
•Marginal costing

Calculation (Under marginal costing)
Marginal costing
Particulars Amount
Direct material per unit 10
Direct wages per hour 8
Variable manufacturing cost 2
Variable selling expenses 4
Cost per unit 24
Particulars Amount
Direct material cost 400000
Direct wages per cost 160000
Variable manufacturing cost 80000
Variable selling expenses 160000
Total cost 800000

Continue
Income statement under marginal costing
sales 1000000
Less: marginal cost of sales 800000
Direct material cost 400000
Direct wages per cost 160000
Variable manufacturing cost 80000
Variable selling expenses 160000
Contribution 200000
Less: Fixed manufacturing cost 150000
Less: Fixed administration and distribution cost 50000
Net profit 0

Calculation (Under absorption costing)
Absorption costing:
Particulars Amount
Direct material per unit 10
Direct wages per hour 8
Variable manufacturing cost 2
Fixed manufacturing cost 3.75
Cost per unit 23.75
Particulars Amount
Direct material cost 400000
Direct wages per cost 160000
Variable manufacturing cost 80000
Fixed manufacturing cost 150000
Total cost 790000

Continue
Income statement under absorption costing
sales 1000000
Less: cost of sales 790000
Direct material cost 400000
Direct wages per cost 160000
Variable manufacturing cost 80000
Fixed manufacturing cost 150000
Gross profit 210000
Less: Variable selling expenses 160000
Less: Fixed administration and distribution cost 50000
Net profit 0

Financial reporting document
Financial reporting document include
financial statement like balance sheet,
cash flow statement, income
statement which provide information
of financial performance of company
(Hiebl, 2018).

Financial Reports
Financial reports is a description of business activities in an organisation.
Bestway include different financial activity like hiring of employees, paying
salary to employees and paying for expenses etc

Conclusion
From above mentioned presentation this can be concluded that managerial
accounting include accounting information used by manager in decision
making in enterprise. To measure cost of business operation there are two
methods which are marginal costing and absorption costing and by help of
such methods two income statements are produced of given scenario.

Reference
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate
sustainability assessment, management accounting, control, and
reporting. Journal of Cleaner Production. 136. pp.237-248.
Bedford, D.S. and Speklé, R.F., 2018. Construct validity in survey-based
management accounting and control research. Journal of Management
Accounting Research. 30(2). pp.23-58.
Hiebl, M.R., 2018. Management accounting as a political resource for
enabling embedded agency. Management Accounting Research. 38. pp.22-
38.