Management Accounting Report: Cost Analysis, Planning, and Issues

This report provides a comprehensive analysis of management accounting, focusing on its application within Innocent Drinks LTD. It begins by defining management accounting (MA) and its importance, differentiating it from financial accounting, and exploring various MA systems such as cost accounting, inventory management, price optimization, and job costing. The report then delves into different MA reporting methods like aging accounts, job reports, and inventory control reports. Furthermore, it examines cost analysis techniques, specifically marginal and absorption costing, providing a financial statement analysis. The report also discusses the benefits and disadvantages of planning tools like master and flexible budgets. Finally, it compares how companies use MA frameworks to address economic challenges, offering insights into practical applications and implications. This report serves as a detailed guide for understanding and implementing effective management accounting practices.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Types of MA systems and essential need.........................................................................3
P2. Different methods used for MA reporting........................................................................5
TASK 2............................................................................................................................................6
P3: Cost analysis techniques & use of absorption and marginal costing...............................6
TASK 3..........................................................................................................................................10
P4: Benefits and disadvantage of various tools of planning.................................................10
TASK 4..........................................................................................................................................11
P5: Compare how companies are prepared to deal mostly with management accounting
framework to solve different economic difficulties and issues............................................11
Conclusion.....................................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
MA deals primarily with exchanges that are linked to finance, but there are many other
difference accounting method that emphasise all aspects of money transfers. MA is also an
accounting company that is responsible for monitoring and recording monetary and non-
monetary data (Tan, 2019). This data is used because when management teams also need
create internal reports for specific period. MA is specifically designed for critical success factors
to take additional actions relating to the use of financial and non-financial resources. A company
is called Innocent drinks LTD. is selected in this report. This business owner is an AJ client and
sons who provide accounting-related consultancy services. Under the Task 1, the report is
categorised into three parts which cover information pertaining to MA processes and reports.
While part two includes some risks are managed as well as about their practical implications on a
given dataset. The impact of forecasting methods and MA technologies was presented in the
subsequent section of the analysis in order to address the economic issues of the firms.
TASK 1
P1. Types of MA systems and essential need.
It is described as a financial reporting that is directed at collecting and evaluating key
transaction details that happened in a corporation throughout a monetary year (Hutaibat and
Alhatabat, 2019). The whole act is carried out to obtain internal financial report that managers
execute to make major decisions.
As per the chartered Institute of Management Accountants, the expense of London is
described as the quantity of both total outstanding and real government spending due primarily to
or accrued on a specific activity or something.
Distinction between MA and financial accounting:
Base for
comparison
MA Financial accounting
Users This accounting is primarily
designed for the internal customers.
This is being used by internally and
externally interested parties.
Regulations Within this financial reporting, there
have been no laws and regulations
for producing detailed reports
This accounting includes several
restrictions which accounting
professionals must recognise.

(Tekathen, 2019).
Type of
company
This can be implemented in any
enterprise. No address operating
requires such bookkeeping.
Although this bookkeeping is a
requirement for all those firms
mentioned on a renowned stock market.
The primary function of this financial reporting would be to perform a main role in
decision-making process again for key customers. This accounting leads to management teams
by supplying them with necessary time knowledge which was used as decision-
making procedures. In addition MA it also provides a mechanism for regulating firms which
leads to better performance. With respect with the above Innocent Drinks Ltd. they can
implement this accounting for their operational activities with the aim of improving performance
from both viewpoints including monetary and non-monetary viewpoints.
Cost accounting system: This structure is constituted with a procedure of monitoring and
attempting to control almost all expenditures that either takes place in a company in a financial
period. Under it the costs of each object are determined and compared to standardised costs
(Zandi, Khalid and Islam, 2019). Managers are able to find the efficiency and advancement of
various tasks throughout terms of costs. This system also gathers information regarding
expenditures associated with direct material, labour etc. in manufacturing industry. With respect
to Innocent Drinks Limited, manager can gain critical details from this financial statement
together with variability on the cost of various activities. This can lead to an acceptable phase in
aspects of financing need or elimination of such operations that are cost-consuming significantly
greater.
Essential requirement: It helps to control unpractised cost in order to increase revenues because
expense consumption is regularly tracked across each operating condition. This financial
reporting infrastructure is crucial in Innocent Drinks Ltd. to implement for the elimination of
costs of unnecessary operation. Along with leading to the preparation of successful tactics for
appropriate activities that result in far more expenditure.
Inventory management system: This is recognised as a system connected to the
management among all aspects of company stock. This is achieved by measuring regularly based
stock report which includes data on consumption of resources, able to prepare stock, etc. In a
pattern made using various approaches called FIFO, LIFO, etc. The primary function of this
financial reporting is to keep storage costs lower by trying to make production according to the

amount of inventory formulated and demand accessible. In the above-mentioned company, their
supervisors will use this bookkeeping to better exploit the amount of possible raw resources such
that storage costs could be regulated.
Essential requirements: In innocent drinks, it's really critical to handle raw materials
such as berries, sweetener for manufacturing and to produce new output according to the number
of able to prepare flavourings and beverages stored.
Price optimisation system: The purpose of this bookkeeping is to establish the price
point within each product according to increased competition. It is calculated in conjunction with
the response of the clients for the company or brand and also by evaluating the pricing stages of
competing companies. The key feature of such bookkeeping is that rates underneath it were also
established by effective alternatives such as demand analysis, market trend and competition
policy. Due to which a company could even charge a threshold within each targeted customers at
such a standard that will become appropriate.
Essential requirement: It is mandatory to implement for all those drinks for whom the
sale is smaller or for innovative technologies for innocent drinks ltd (Łada, Kozarkiewicz and
Haslam, 2020). It can be utilized to evaluate the reaction of clients over the established price
level as well as their asking value for a given product.
Job costing system: This system that focuses on monitoring task or job costs aligned
with the completion procedure. Within the sense of Innocent Drinks Ltd. this accounting method
can be created with intent of discovering job or task costs for each exercise alongside per unit
price.
Essential requirements: This accounting is critical to identifying the number of jobs
assigned to complete an activity and to evaluate the cost per unit. This accounting method can be
implemented by the management teams of innocent drinks Ltd since they have a strong product
portfolio for different drinks. Hence, it is crucial that they discover out the expense within each
drink manufactured.
P2. Different methods used for MA reporting.
MA is a core internal reporting method that manager adapt to aid individuals in making
decisions. Additionally, appropriate arranged data are presented for management supervision
objectives as well as prevention methods are laid out. Some of these reports types are mentioned
below:

Report on ageing accounts:
This report includes description of all credit transaction such that managers can make a
complete accounts receivable assessment. It is therefore effective in reducing bad debt as well as
managing the liquid assets of Innocent drinks.
Job report:
This is related to assessment and manufacturing service delivery techniques against such
an approximate standard. The goal is to identify favourable consequences and inconsistencies
throughout the type of cash values (Messner, 2016). These are modified documents used by
internal manager in order to motivate the higher performance employee and make proper plans to
increase the weak performances. It really is a document which aims to assess all the costs,
charges and gain business productivity in a reasonable time since more focus can be given to
beneficial investments. It leads to the prevention of wasting available funds and to controlling
costs.
Reports relating to inventory control:
Results on inventory checks are being used to demonstrate stock levels. This is used to
ensure value-added capital is decided to invest. There have been different aspects like inventory
book which is to track manually the stock levels in the terms of low business. Barcodes are being
used for inventory monitoring, as well as stock on hand has become inventory control software
that is used to demonstrate the amount of inventory particularly clear.
TASK 2
P3: Cost analysis techniques & use of absorption and marginal costing
Cost is really the amount economic value used during the manufacture of products
including the use of funds like raw materials, labour, funds and resources etc. This aims to guide
financial statements using marginal and absorption costs as methods (Nørreklit, 2017).
Throughout the scenario of Innocent drinks, declarations that were planned below are:
Marginal costing: It is being used to comprehend each item command's marginal cost as
well as variable cost. Variable costs, if large quantities are produced, cause changes throughout
total costs it is every extra capacity differs.

Absorption costs: This method consists of costs which have both the variable costs and
fixed costs cost elements. Product costs are associated with cumulative costs (Alsharari, & Al-
Shboul, 2019). As per the numbers provided, Financial Statements are prepared as shown below:

TASK 3
P4: Benefits and disadvantage of various tools of planning
This can be known as a systematic of method involved in the preparation of different
incomes also for coming periods in order to track results by evaluating actual results with
calculated value (Bhimani, 2020). This method seems to have a relation to any and all aspects of
business organisations to manage financial performance by discovering various types of
deviations. It really is a declaration that consists of estimating the sales, costs and operating
liabilities over a given period of time. It assists an enterprise to evaluate progress in the internal
control procedure. It has been used as per the numbers budgeted to determine the exact sales.
Within the sense of Innocent Drinks Ltd budgetary control techniques may be attention to the
following scheduling. Below are among the techniques which are component of budgeting
process:
Master Budgets: It is really the accumulation of most of the various kinds of lower-level
budgets generated by human responsive aspects of the organization (Suryaputra, 2019). It is
composed of budgeted financial reports, better payment as well as cash flow preparation. There
have been various varieties of forecasting methods which include the primary goal of personal
finance are to evaluate a company organisation's current cash postilion. Innocent drinks could
even implement this master budget to obtain an overview of almost all of the different incomes
in a singular budget. Manage the data system as part of the management techniques is also used
to gain the information and using that to carry out duties as well as improve product decisions. It
means avoiding any kind of inefficiency and increase efficiency when all of the features.
Benefits: Master budget assists in identifying problems and plans as well as captures the
statements budged further than department. It could be used for having complex agency's
expected expenses and total revenues. This budget is appropriate for all kinds of businesses as it
would not have to be changed over a specific accounting period. In addition, it helps companies
to assess specific goals for the company with related to specific elements.
Limitation: Timely updating of the spending plan and making minor changes might be
challenging, since there are a number of hurdles associated and need to be carried to cope to the
whole spending plan.

Flexible budget: This is used as a budgetary control planning process, where stimulation
and quantity modify as per regulations. Innocent drinks could even implement this spending plan
to alter the level of sales, the amount of manufacturing process in accordance with changes in
functional areas (Erawati and Krisnadewi, 2018). It helps in proper attempting to control &
planning.
Benefits: It assists in measure the extent of manufacturing such that the rate of production
could be changed easily. Total amount of innocent drinks may be adapted to achieve a
satisfactory degree of profit margins.
Limitation: Competent and skilled personnel are required to accommodate immediately
informed. Flexible budgets are more expensive and not always accurate which can cause the
company to be ambiguous.
Zero-based budgeting: This is really a method which can be implemented in the event
that perhaps the total revenue is comparable to proportion of the wealth estimates, this distinction
is usually zero. If there would be any percentage in surplus that needs to be adjusted, this
technique is useful in measuring the amount spent each year. This spending plan is also modelled
as a set budget that mostly, before an accounting period, is from a nature to stay unchanged. The
actions of this spending plan cannot really be altered according to the will of the corporation.
This budget has no adverse effect to volatility in specific cost numbers. The overall budget goal
is to achieve an income, cost etc. target. Innocent drinks management team ltd can use this
spending plan for such operations that are anticipated to stay unchanged like portfolio analysis,
insurance.
Benefits: Flexible budgets are used at cheaper price. More oriented processes are available
which assist in motivated execution.
Disadvantages: It consists of the potential of advanced resource utilisation, misinformed
towards short-term planning as well as deception by knowledgeable managers which can impact
the genuineness of zero-based budgeting.

TASK 4
P5: Compare how companies are prepared to deal mostly with management accounting
framework to solve different economic difficulties and issues.
Financial problems are really the ones that take place whenever the supply and demand vary
greatly. There have been some prevalent problems that may arise when there is no careful
management in the institution. These appear leading to defaults, small error on the aspect of
economic accountants and company departments. Some prevalent Financial Management
problems are raised below:
High promotional expenses: large amount of expenses are needed when Innocent drinks
are building a different launch date. Only for specified subset of consumers, there is a necessity
to establish a strategy that helps increase awareness.
Inconsistency in sales revenue: This is a component of accounting problem regarding
sales revenue fluctuations due to some internal vulnerability or intense demand (Le, Tran and
Nguyen, 2020). This money problem tends to result in such a downgrade of a company'
development graph. For example, they confronted this money problems lead to inadequate
pricing sequence in Innocent drinks.