Management Accounting Report: Financial Issue Analysis for UCK

This report provides a comprehensive analysis of management accounting practices, focusing on the UCK Group. It begins with an introduction to management accounting and its importance, followed by an examination of costing methods, including absorption and marginal costing, used to calculate net profit. The report then delves into the advantages and disadvantages of planning tools, such as forecasting and contingency tools, and their role in budgetary control. Furthermore, it evaluates expenses for specific periods and explores the purpose and components of a cash budget. The report also assesses the use of accounting systems to examine financial issues, evaluates vital measures to overcome financial challenges, and analyzes planning tools used in management accounting. The conclusion summarizes the key findings and emphasizes the significance of management accounting for the UCK Group's financial performance and decision-making.

Management Accounting
(PART 2)

Table of Contents
INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1: Costing methods use for calculating net profit the company......................................................3
1.2: Range of management accounting techniques............................................................................5
1.3: Interpretation of collected data from incomes statement.............................................................5
TASK 2.................................................................................................................................................6
2.1: Advantage and disadvantage of using planning tools.................................................................6
2.2: Evaluation of expenses for July and August...............................................................................7
2.3: Purpose and cash budget.............................................................................................................7
TASK 3.................................................................................................................................................8
3.1: Use of accounting system to examine financial issues................................................................8
3.2: Evaluating vital measure to overcome financial issues..............................................................9
3.3: Analysing planning tools used in management accounting.........................................................9
CONCLUSION...................................................................................................................................10
REFERENCES....................................................................................................................................11

INTRODUCTION
In context to current scenario, it has been seen that organisation need to make regular
search of innovative and effective systems that can help the company to gain maximum
benefit during the time. Management accounting is essential aspects which will be consider
as more reliable and accurate tool that assist in increasing profitability for UCK group of
company. By the help of this, they can easily be able to attain their long term aims and
objectives. This particular project report is providing more valuable information about
various costing method which is use for the computing net profit for the company. In
accordance to this, advantage and disadvantage of using planning tools which are helpful in
budgetary control are mentioned under this report. Analysis of financial issues those are
arises in an organisation (Amoako, 2013).
TASK 1
1.1: Costing methods use for calculating net profit the company
Cost is an essential aspect which would be considers more effective tools for the
company. They need continuous planning to manage and control their extra costs which are
increasing profitability during the time. It has been seen that costs are affecting production of
products and services of the company either directly or indirectly. Costs is said to be value of
amount which is related with manufacture process. The primary role of managers is to make
valuable decisions to manage and control excess costs for the company. With the help of this,
overall productivity of the company can also be increase at the same point of time. There are
various types of costing methods which are useful in evaluating overall profit for UCK group
ltd. Some of them are illustrated underneath:
Absorption costing: This seems to be one of the effective methods which are
applicable with production process. It uses to consider both variable and fixed costs
simultaneously, because of this it is known as full costing approaches (Absorption costing,
2018). There are various benefits of using this method but at the same time, it is having
certain limitation. This cannot be taken as more effective tools for making future decision
making.
Marginal costing: It refers as those costs which is uses by the managers in production
of one additional unit. It only considered variable costs and fixed costs are absorbed while

calculating net profit for the company. The major part of this particular report is that a
manager uses this as one of the effective method for making future decision making (Brewer,
Sorensen and Stout, 2014).
NET INCOME AS PER ABSORPTION
COSTING: January February
Sales (35per units) 315000 402500
less:
Cost of Production (12+8+5+1.82) 295020 254790
Gross Profit 19980 147710
LESS:
Fixed and variable cost:
variable sales overheads (1 per unit) 9000 11500
Fixed selling cost 2000 2000
Total costs 11000 13500
NET INCOME AS PER ABSORPTION
COSTING: 8980 134210
Computing net profit by using marginal costing
PARTICULARS January February
Sales (35 per unit) 315000 402500
less:
Cost of Production (12+8+5) 275000 237500
variable selling overheads (1 per unit) 11000 9500
variable cost 286000 247000

Contribution 29000 155500
less:
fixed manufacturing overheads 20000 20000
Fixed Admin & selling cost 2000 2000
total fixed costs 22000 22000
NET INCOME AS PER MARGINAL COST 7000 133500
1.2: Range of management accounting techniques
It has been seen that without having proper accounting tools a company cannot be
able to generate more effective outcomes for the company. In order to deal with any kind of
critical situation, managers need to make use of financial techniques. Some of them are more
specifically; use to measure the performance of UCK furniture such as marginal costing
which is considered more effective in terms of analysing overall profitability of an
organisation. As it is consider more reliable for the account officers to make future decision
making. Whereas a historical costing system is also an effective method by which it assists an
organisation to manage their resources in order increase maximum profitability for the
company. The overall growth and stability for the company can only be attaining if resources
are utilised in more effective manner (JOSHI and et. al., 2011). The primary objective of any
business organisation is to increase maximum profit as they can from the available resources.
Apart from mentioned tools there are other crucial tools such as cash flow analysis, financial
statements evaluation and so on. Every tools and techniques which are being used by the
company in their performance evaluation to identify analyse and control extra wastages that
are done during the production process.
1.3: Interpretation of collected data from incomes statement
During the time of calculation of net profit for the company, it has been found that
two of the most crucial methods are being taken into consideration. Such as absorption as
well as marginal costing (Klemstine and Maher, 2014). The results are fluctuating from
either of the method. The one which is providing more valuable and maximum benefits to
UCK Group is taken into consideration. According to the above project report, it has been

seen that company wants to increase their productivity by using best techniques for
calculating net profit during the time. With the use of these methods chances of getting
maximum results can be taken from using marginal costing because they are considering only
variable costs.
TASK 2
2.1: Advantage and disadvantage of using planning tools
It has been observed that company can control their additional costs and expenses so
that to increase maximum growth and stability of UCK Group Ltd. The primary purpose of
doing so is to generate more valuable and reliable outcomes for the company. In accordance
with this, managers need to make use of budgets prior making any crucial decision making. It
is required to recalculate on continuous basis to make effective standard to enhance overall
growth for the employees (Lim, 2011). It is effectively associated with internal techniques
that are useful in order to control overall risk factors those are present in an organisation.
Budgets are said to be an estimation of future costs and expenditure that are incur by the
company. In order to control the budgets company is using certain kind of planning tools.
Some of them are discuss underneath:
Forecasting tools: According to these particular tools, one can easily be able to
determine future activities on continuous basis. It can be done by using past and present data
more the purpose of analysing performance of the company.
 Advantages: One of the primary benefits of using these particular tools is to examine
early estimation of costs and expense that are going to be done by the UCK Group Ltd
during the time. It is consider more accurate for decision making (Tessier and Otley,
2012).
 Disadvantage: It has been seen that sometime, it is very difficult to predict future in
more accurate manner because of qualitative aspects.
Contingency tools: This seems to be an effective planning which is done by the company
to control overall risk that is present in an organisation. These are more devising through
domestic government as well as large business organisation in case of any urgency.

Advantage: According to this particular tools company can reorganise there total
limitation and preparing perfect deal with other associated aspects. It is valuable for UCK
Group Company to make plan ready in case of any contingency kind of situation.
Disadvantage: It is very hard to face any crucial situation without having appropriate plan. It
has been done so because risks are more ascertain in plenty of situation (Van der Stede,
2015).
2.2: Evaluation of expenses for July and August
In order to calculate variable cost per units in order to determine high and low activity
stage.
(Total expenditure of high activity – Expenditure from low activity)
Total cost=
(Highest activity per hour spend – Lower hour spend)
Total expenditure (Per units): (9820-7410) / 795-505)=8.31
Total expenses for July:
= 650*8.31= 5401.5
For August:
= 750*8.31= 6232.5
2.3: Purpose and cash budget
In accordance to make use of budgets, managers need to make use of information
accurate so that maximum chances of getting positive results can be attain in more quick
time. It is mainly related with forecasting of income and expenses as primary tool for the
company (Zoni, Dossi and Morelli, 2012). The main objective of doing so is to increase
productivity as well as control additional expense that is affecting the performance of an
organisation. It is sum of amount which is uses as allocation of particular objectives that are
being set by the company for near future.
Cash budget Amount
Particulars September

Opening balance 9000
Cash sales 39000
Sale on account 5648
Total Cash collected 53648
Less:
Purchase -16800
Selling and administration
expenses -13000
Equipment cost -18000
Dividend paid -4000
1848
Add: minimum cash balance 5000
Expected cash at the end of
September month 6848
TASK 3
3.1: Use of accounting system to examine financial issues
Ratios Formula UCK furniture’s UCK woodworks
ROCE (Return on
capital employed):
Operating profit/Capital
employed*100
5890+3600/23100+31
930*100
=9490/55030*100
=17.24%
6955/81230*100
=8.56%
Operating profit
margin
Operating profit / sales
*100
9490/13000+24900*1
00
=25.03%
6955/81230*100
=8.56%
Assets turnover Revenue / Net assets 13000+24900/23106+ 8150/81230

31930
=0.68 times
=0.100 times
UCK Furniture’s UCK WOODWORKDS
This company is related with production of
Desks.
According to this particular company which is
responsible for providing raw material to the
Furniture company.
ROCE ratio is providing 17.24% of return to
their total investments.
Only 8.6% of total return is being collected by
the company during the time.
In accordance with taken assets turnover as
important tool to evaluate the performance, it
has been found that the total stock of the
company is rotating 0.68 times in an
accounting year.
In respect to this particular company, there
total asserts turnover is moving with 0.10 time
out of their total sales done during the time.
3.2: Evaluating vital measure to overcome financial issues
In respect to make proper analysis, it is necessary to determine financial condition of
UCK Group can needed to be identified. There are certain tools which are helpful to
overcome financial issues. Such as
 KPI (Key performance indicators): It is one of the main tools which used to analyse
the performance of company by using past and present data.
 Financial governance: This particular tool is useful in resolving key issues that are
affecting the overall performance of UCK Group Ltd. For rectify them, certain rules
and regulation is required to be implemented.
 Benchmarking: This seems to be an effective technique which is used to operate
their work according to the set standards which are fixed by the company. it is used to
make comparison of performances with various competitors those are working with
the same motive.
3.3: Analysing planning tools used in management accounting
According to the above mentioned planning tool which are helpful in control budgets
for the company. By proper utilisation of forecasted costs and expenditure they can be able to
resolve them in more quick time. Forecasting tools are used to predict future costs UCK

group is going to be beard. While contingencies is responsible for evaluating total risk factors
that are associated with the company.
CONCLUSION
From the above project report, it has been concluded that management accounting is
utmost crucial aspects for UCK Group Company to control their day to day business
operations. This can assist managers to make use of valuable costing methods to calculate
total profit generated by the company during the time. Further, this report is entirely based on
analysing overall performance of UCK Furniture by using various planning tools to control
their budgets that are prepared by the company. Financial data is use to analyse current
performance of company by calculating ratios. All those financial issues which are present in
an organisation are determined and valuable measures are provided to the company. This can
be done to increase better sustainability in near future.

REFERENCES
Books and Journals:
Amoako, G.K., 2013. Accounting practices of SMEs: A case study of Kumasi Metropolis in
Ghana. International Journal of Business and Management. 8(24). p.73.
Brewer, P. C., Sorensen, J. E. and Stout, D. E., 2014. The future of accounting education:
Addressing the competency crisis. Strategic Finance. 96(2). pp.29-38.
JOSHI, P.L. and et. al., 2011. Diffusion of management accounting practices in gulf
cooperation council countries. Accounting Perspectives. 10(1). pp.23-53.
Klemstine, C. F. and Maher, M., 2014. Management Accounting Research (RLE
Accounting): A Review and Annotated Bibliography. Routledge.
Lim, M., 2011. Full cost accounting in solid waste management: the gap in the literature on
newly industrialised countries. Journal of Applied Management Accounting
Research. 9(1). p.21.
Tessier, S. and Otley, D., 2012. A conceptual development of Simons’ Levers of Control
framework. Management Accounting Research. 23(3). pp.171-185.
Van der Stede, W. A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research. 27(1). pp.171-176.
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change:
field evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.
Online
Absorption costing. 2018.[Online]. Available through:
<http://www.businessdictionary.com/definition/absorption-costing.html>.