Management Accounting Report: Techniques, Costs and Systems Analysis

This report provides a comprehensive overview of management accounting, focusing on its application within Ovation Systems Ltd. It begins by defining management accounting and its importance in organizational decision-making, contrasting it with financial accounting. The report then explores various management accounting systems, including price optimization, cost accounting, and inventory management, highlighting their advantages and applications. It examines different reporting methods, such as budgeting and performance reports, and evaluates the benefits of these systems. The core of the report delves into cost analysis techniques, specifically marginal and absorption costing, and their use in preparing income statements, supported by a reconciliation statement. Furthermore, the report integrates management accounting systems with organizational processes, illustrating how these systems support effective business operations and decision-making. The content covers various systems of management accounting and their application, and also covers cost analysis and the preparation of an income statement using managerial and absorption costs. The report also discusses how management accounting systems and reporting are integrated with organizational processes.

Management
Accounting

INTRODUCTION
Management accounting can be defined as demonstrating the activities of the business to
the internal people in the organisation so that they can make better decisions. By doing so best
outcomes can be achieved in the global market. Every organization perform this aspect in their
working premises so that smoothly business functions can be performed. Management
accounting is also well known by other names which are, cost accounting and managerial
accounting (Abernethy and Wallis, 2018). This is essential to perform cost accounting as it is a
link between the finance department and other departments of an organization. The organization
selected for the purpose of the report is Ovation Systems Ltd which is associated with design and
manufacture of rugged, high performance video surveillance goods for military, police etc. From
the last 20 years firm is successfully serving best services in the global market.
Company's product range mainly involves small & rugged audio/video systems and
recorders for extremely covert. Corporation also engaged in manufacturing of wider range of
supporting items like high quality microphones, low-light miniature cameras etc. Other ancillary
items includes picture-in-picture modules for displaying various video-channels on single screen
and stabilization unit for video designed to cut down camera shingle from long lens/high
zooming video-surveillance equipments or cameras.
This assignment covers meaning of management accounting and why it is required in
various accounting procedures and with that some distinguished techniques adopted in the
reporting of management accounting is also discussed in the report. However, design income
statements using managerial and absorption costs. The benefits and weaknesses of the tools used
for planning the budgetary control are discussed effectively. Additionally, comparison is done

how business associates are executing the systems of management accounting to react to the
financial problems.
LO 1
Throw-light on the concept of management accounting as well as discuss the important need of
several types of management accounting systems.
In the modern era, management and cost accounting means presenting accounting data
and information in sequence order so that it helps top level management to frame policy and day
to day operation activities effectively. This is directly related to the adoption of accounting data
gathered from numerous sources like, cost accounting and financial accounting so as to control,
planning, policy formulation and decision making process by the management. There are varied
kinds of MAS used by the organizations like job costing method, cost accounting method,
inventory management method and price optimising method. These systems help the
organizations in doing efficient planning, helps in controlling and making good decisions for the
company.
Main motto of MA is to develop and establish framework for providing assistance to
management in different key managerial personnels. Various systems of MA supports
managerial planning, controlling of operations and management decision-making.
Difference between Financial Accounting and MA:
Management Accounting Financial Accounting
It mainly support managerial functions within
entity.
It generate information for finalisation of
accounts.
No specific time-frame specified for reports of
MA.
Mostly reports under Financial Accounting is
prepared at year end.
Adoption of MA systems is not compulsory for
entities.
Financial Accounting is compulsory task for an
organisation.
Following is a discussion on different systems as follows:

Price Optimising System: In this case, Ovation Systems Ltd will be able to measure the
right cost so that huge revenue can be maximized in the cut throat competitive world. Along with
this it helps firm to better understand how demand of the consumers keeps on changing with the
slight differences among the price structure of goods as well as services. Additionally, this kind
of optimizing technique assert administration in considering all the elements which are, prices of
their goods, rivalry pricing tactics and product life cycle so as to discover the best cost. By doing
so business associates is able to decide effective prices for their goods and services in the
competitive market place (Ax and Greve, 2017). It also covers pricing strategies to resolve any
particular issues related to pricing and its effect on company's revenue.
Cost Accounting Systems: It is an essential requirement for Ovation Systems Ltd as this
method helps in finding out the cost of it's goods to control the cost of inventory, doing valuation
as well as analysis related to profitability aspect of the business. Cost accounting systems aid in
calculating efficiency so that set goals and objectives can be achieved in the world with full of
competition. Cost accounting includes two methods i.e. costing for job order and for process.
However, job order costing directly helps business associates accumulate manufacturing
expenses for each and every process in the working premises. While, process costing assist aid
enterprise to figure out the cost of each process. Ovation Systems Ltd study this aspect before
deciding the prices of the goods in order to maximize huge profit. Here, this particular system
render authentic information to the firm that is useful to ascertain the variable and fixed cost of
the products and services. With the help of this optimum prices can be set for the goods as well
as services in the global market (Azudin and Mansor, 2018.). Mainly two methods are adopted
by companies under this system named: Job and Process Costing Methods. The first method
helps the organisation in assigning the overall costs to different jobs while in process costing
costs are systematically assigned to different key organisational processes.
Inventory management systems: Ovation Systems Ltd adopts this method in their
company so that they can easily track the supply of its goods from their office itself. It is
essential for the business administration because it includes all the activities that helps company
to keep sufficient raw material and finished products in stock. By doing so administration can
fulfil the ever increasing demands of the consumers. Those business who are dealing in retail
sector for them inventory management system turned out to be more profitable in nature.
Ovation Systems Ltd by effectively implementing this system raises overall productivity and

profitability ratio of the firm which is a positive mark for the enterprise (Bedford and Speklé,
2018). By performing this system company will not face stock deficiency at the time of
manufacturing and production process. Here three major methods are applied by business
enterprises named: FIFO, LIFO and Average cost method. FIFO method allow to make
assumption that oldest or first purchased inventories are sold at first place. The LIFO technique
in managing the inventory means the last items which are bought will be sold out first. While
LIFO method assumes that latest bought inventory items are sold first. While in average cost
method a simple mean rate is used to value closing inventory.
Study numerous methods used for management accounting reporting.
Reporting of Management accounting means providing relevant information to
distinguished levels of administration so as to become a base for taking correct decision. This aid
in planning, decision making, regulating and measuring performance activities which leads in
fulfilling the demands of the consumers. As per the necessities these reports are regularly
modified throughout accounting and bookkeeping period.
Budgeting report: Organization adopts this in the working premises as it helps them to
measure overall performance of enterprise. By designing budgeting report company manage cash
amount of every single activity. It helps in making comparisons among the actual and forecasted
budget so that proper monitoring and control can be done on various outcomes. Better incentives
and benefits are given to the staff members in order to reduce the cost which provides complete
satisfaction to workers (Bui and De Villiers, 2017).
Performance reports: Ovation System Ltd is executing performance report so as to
examine the performance of the business administration and their staff members. This directly or
indirectly aid enterprise to take the quick and smart decisions in order to upgrade workforce
productivity and profitability ratio. By appropriately scanning this report Ovation Systems
determine the efficiency of their tactics towards stated aims and objectives. The effectiveness
motivates workers to work day and night in order to attain the companies set standards
Job costs reports: Organization by taking job costs report within the enterprise is able to
investigate the cost of each individual project. It leads in providing benefit to Ovation Systems
Ltd as they are capable enough to find higher earning areas. Moreover, by using this
progression and succession of the project areas can be determined. This helps in measuring and

monitoring the wastage of precious time and money in the low margin areas in the global market
(Busco and Quattrone, 2018).
Inventory Valuation Report: This reports primarily concerned with inventories like
RM, WIP, packaging materials, finished goods etc. This report hep to determine how much
materials have been consumed and how much quantity of RM required for further production
with aims to minimise inventory costs. In respective corporation production and inventory
managers are using this report to tack the actual movement of stock and optimise normal and
abnormal costs.
M1. Evaluation of benefits of management accounting's systems and their application:
List of systems Advantages
Price Optimisation: By appropriately using this in the company,
management can make best decisions related to
the prices. Optimum prices can be set for the
goods as well as services. It leads in raising
productivity and profitability volume at a large
scale.
Cost Accounting: Cost accounting helps in measurement of
predicted costs that will be incurring in the
near future. By this act extra amount will be
deducted and ratio of revenue maximization
will be uplifted.
Inventory management systems: Firm by adopting inventory management
system effectively they are able to full-fill the
emerging demand of the clients as they manage
and handle their stock properly.
D1. Examine how management accounting systems and management accounting reporting are
integrated with organisational processes:
Management accounting systems and management accounting reporting are very much
related to one another in this huge competitive world. Both the aspects assist them in effectively

handling administration operation activities in systematic order. In Ovation System inventory
reporting system and inventory report are interconnected with each other due to which sufficient
stock is maintained. By doing so emerging preferences of the consumers are accomplished.
However, it consume more time in reporting inventory data which sometime leads to
dissatisfaction among the consumers.
LO 2
Compute costs using appropriate techniques of cost analysis to prepare an income statement
CVP analysis: This states the sum of money that has been invested so as to produce a
goods and services as well as to receive product and services (Cooper and Qu, 2017). With the
increasing expenses on buying plant and machinery, raw material, labour and so on. However,
there are two common techniques to find out the estimated costs i.e. marginal or variable and
absorption costing. Here in this context an analysis with regards to cost, volume and profit is
applied to measure the fluctuations in the costs and volume of production and its impact on
corporation's net and operational income. They are explained as under:
Absorption costing: It is globally adopted by the business administration as it covers
each and every aspect of fixed as well as variable costs to find out the estimated prices of goods
as well as services. Moreover, Ovation systems use this method as it assure that incurred cost
will be taken back by selling the goods as well as services in the huge competitive environment.
By this act, administration is able to achieve the set standards in this ever changing competitive
era.
Marginal costing: It is a best and the most appropriate method for computing the costs
and under this method the variable costs whether related to manufacturing or not are treated as
product costs and is applied to calculate the unit costs. On the other hand, fixed costs are treated
as period costs and are treated separately. Moreover, marginal costing is very significant for
short time duration as in this method only expenses are covered which are in variable nature
(Englund and Gerdin, 2018).