Management Accounting Report: DSA Manufacturing Financial Analysis

This report delves into the realm of management accounting, focusing on its application within DSA Manufacturing Ltd. It commences with an introduction to management accounting, differentiating it from cost and financial accounting, and highlighting its role in decision-making and strategic planning. The report is structured into four key tasks. Task 1 explores management accounting systems, including cost accounting, inventory management, price optimization, and job costing. Task 2 focuses on cost calculations, including absorption and marginal costing, and the interpretation of financial data. Task 3 examines planning tools used for budgetary control, analyzing their application in budget preparation and forecasting. Task 4 compares organizations and evaluates how management accounting can help address financial problems and ensure sustainable success. The report provides detailed insights into various management accounting techniques, their benefits, and their practical application within a manufacturing context, offering a comprehensive overview of financial management and its impact on organizational performance.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1: Management accounting systems..........................................................................................3
P2: Management accounting reports............................................................................................6
M1: Benefits of Management Accounting Systems....................................................................7
D1: Integration of systems and reports........................................................................................8
TASK 2............................................................................................................................................8
P3: Calculation of costs...............................................................................................................8
M2 Application of range of management accounting techniques.............................................11
D2 Interpretation of data............................................................................................................11
TASK 3..........................................................................................................................................11
P4: Planning tools used for budgetary control...........................................................................11
M3 Analysis of use of different planning tools and their application for the purpose of
preparing and forecasting budgets.............................................................................................13
TASK 4..........................................................................................................................................14
P5: Comparison of the organizations.........................................................................................14
M4 The way in which management accounting can lead organisations to deal with financial
problems and sustainable success..............................................................................................15
D3 Evaluation of the way in which planning tools can help to resolve financial problems......16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is a profession that includes in management decision making,
strategic planning and performance management and provides expertise in formulation and
implementation of an organization's strategy (Arora and Panchal, 2021). It is a part of accounting
which presents financial information in front of top management. On the basis of management
information, managers take effective decisions for better planning and control. Management
accounting different from cost accounting and financial accounting. In the cost accounting focus
on cost centres and cost unit and financial accounting present information to outsider of people.
Management accounting present information to internal management to present actual picture of
company. For better understanding of the report, chosen business is DSA manufacturing Ltd that
designs and manufactures commodities such as clothes, furniture and so on. It is a medium sized
enterprise which order quantities from 100 units and bring best prices for target audiences.
The presented report focus on several kind of management accounting system and
accounting reports. Formulation of income statement with the help of absorption costing and
marginal costing methods defined with appropriate format. Along with, different planning tools
for budgetary control are also utilised and applied in effective manner. At last, different types of
management tool used to identify financial problem and management accounting system
implemented to resolve the financial problems.
TASK 1
P1: Management accounting systems
Management accounting is a continuous procedure of preparing and presenting financial
and non-financial information to the board of directors (Ates, 2021). After analysing the reports
and accounts managers take effective decision and planning for further investment. According to
The Institute of Cost and Management Accountants, London, 典 he application of professional
knowledge and skill in the preparation of accounting information in such a way as to assist
management in the formulation of policies and in the planning and control of the operation of the
undertakings.
Purpose of Management Accounting- Moreover, it is analysed that it is the procedure
that act as controlling mechanism for an organization which leads to improvement in
performance level of a company. Within DSA manufacturing Ltd, key purpose of management

accounting is to supply all types of financial together with non-financial to experts of business
addition to other internal people that takes key decisions.
Distinction among management accounting & financial accounting:
Dimension Management Accounting Financial accounting
Users It is basically an accounting
procedure that is designed as well
as developed for all internal
stakeholders.
It is determined that financial accounting
method is used by both external and
internal stakeholders.
Regulations For preparing such sort of
accounting, it is analysed that no
rules & regulations are used.
It is determine that financial accounting
involves different forms of regulations that
is required to be undertaken by accountant
at the time of preparing reports.
Type of
company
Management accounting used and
implemented by any form of
business entity.
This form of accounting system needs
special and particular business entities that
are listed in stock exchange.
Benefits of functions related to management accounting within DSA Manufacturing
Limited is elaborated below, which proves why it should be used by managers though there is no
compulsion:
l Decision making: The basic purpose of doing management accounting is to assist
management in decision making (Beuren and Dal Vesco, 2021). In this, various
analytical charts, tables, forecasting can be done done to help managers of DSA
Manufacturing Limited to formulate their policies and strategies.
l Identification of problem areas: There may be some problems that may arise in future,
and with the aid of management accounting, managers of DSA Manufacturing Limited
can foresee those problems and will prepare their organisation accordingly.l Price setting: Various tools of management accounting provide essential information to
marketing and production managers, in order to help them to fix prices of their products.
Management accounting system – It is an internal part of an organisation which is
prepared by the manager to measuring and determining the procedure of management. It deals

with the insider people such as employees, board of directors and many others. These systems
are developed by management accountant and applied in each section to collect financial
information. There are defined different types of management accounting system to perform
their effectiveness and utilisation.
Cost accounting system – It is defined as an accounting method that is applied by the
DSA Manufacturing Limited to determine the amount of total cost of production (Cohen and
et.al., 2021). There is analysing input cost of manufacturing process at each level. This system
includes a set of forms, processes, controls and reports that are developed to collective and report
to management regarding to revenues, costs and profitability. There are determining the cost of
design of clothes. In this manner, the accountant of the company firstly evaluated and record cost
on individually basis. After the comparison of input aspects determine the financial performance.
It will help to an enterprise to get information regarding the contribution of the clothes in profit
generation of business.
Inventory management system – It is important system which is mainly utilised by the
manufacturing company in order to track the level on stock, selling quantity, purchase order and
delivery place (Crotts, Magnini and Shuai, 2021). Through this system collect information of
work order, bills of material and other manufacturing papers. It is applied by DSA manufacturing
Ltd for manufacturing of clothes. Through this system they track record of inventory and know
that how much quantity were produced and need to complete order. It covers everything from
production to retail and take better decision for the raw material availability and consumption.
There are several types of method of stock valuation such as LIFO, FIFO and AVCO. At present,
EOQ method applied by the company to determine the actual period of time when they have
make re order of raw material. Essential requirement related to inventory management system
within the manufacturing venture is to organise fulfilment centres and deal with situation of
overstock along with under-stock situations.
Price optimization system – The particular system has been utilised by the accountant of
DSA manufacturing limited to determine the behaviour of customer for price of their products
(Filusch, 2021). This system utilised to discover the sales of clothes due to increase and decrease
price. It will help to management for ascertain the value of their products. They will take reviews
from the customer regarding price structure after that change price structure. It will set in
effective manner to get maximum results in the context of sales revenues. Major requirement of

the system is that it helps in determining pricing structures for promotional pricing, initial pricing
and discount pricing.
Job Costing system – The particular system utilised by the manufacturing company for
analysis the cost of several production activities and jobs (Frecka, Mittelstaedt and Sustersic
Stevens, 2021). This system utilise by the accountant for determine and track the cost and
income create by particular job. It will further aid in find out the price of revenue which is
collected through effective performance of the job. It is applied by the DSA manufacturing Ltd
for increase the cost of particular production or service job. It is allotted different job numbers to
single items of revenues and expenditure. Through this system get an opportunity to the
management to keep track over the expenditure and take appropriate decision for improve profit
margin foe reducing in cost. Within the manufacturing venture, job costing system is required to
know profitability of particular job which assist professionals to analyse where project tasks
went right as well as where they were wrong.
P2: Management accounting reports
Management accounting report – It is a procedure to develop reports and received
information by the management accounting system. These reports are playing important for
every organisation that provides detailed information and helps to analysis the situation of the
company. DSA manufacturing Ltd developed different reports which are related to different
departments. It carries out interrelation between the functioning of departments to achieve the
desired result.
Budget report – This report developed by the management of DSA manufacturing to
predict future activities regarding revenues and expenditure (Gustiningsih, 2021). After the
preparation of the report compare the actual outcome with the estimated targets. The budget
report defined as an internal report that is used by the company for performance management
and determines the problems. It is advantageous for a company because it provides instruction to
execute all the business activities in the allotted budget. Through this report, companies can
analysing the efficiency to meet the project objectives.
Performance report – This report developed by the company to analyse the performance
of employees as well as businesses. The main purpose to prepare this report of keeping a track
record of performance. Performance report prepared by DSA manufacturing company to track
the performance of an employee in every task. It is used within a company to provide bonuses

and incentives to employees as per their performance. It is beneficial for a company as it helps to
prepare effective strategies for performance improvement.
Inventory management report – This type of report prepared by a manufacturing
company to track the record of materials at each level. To produce goods, it is required to keep
information of different types of raw material for manufacturing procedures. The report defined
detail information of material and define how much stock require to fulfil the requirement. It is
beneficial for DSA manufacturing as it helps to keep a record of material such as a warehouse,
transit and delivered to clients.
Cost managerial report – It is a type of management report where consist of all the
information about cost (Hassan, Mohammed and Omer, 2021). This report consists of different
types of costs like material cost, direct cost, operational cost, etc. Eventually, this report
developed by the manager of DSA manufacturing with the help of a cost accounting system.
Cost managerial report prepares by a company to determine different types of cost for project
activities. It is beneficial for the company because it provides the cost of different things and
helps to analysis the actual cost of project activities.
Accounts receivable report – The particular report developed by the management of
DSA manufacturing to prepare a list of the owed amount of different clients. This report
prepared by those companies which are providing goods on credit. The company developed this
report to keep a record of those clients who take goods on credit. It is advantageous for company
to identify those people who did not pay amount on time and create tighten credit policies.
M1: Benefits of Management Accounting Systems
Management accounting consist of different accounting system that was applied by DSA
manufacturing company to analysis the benefits.
l Cost accounting system – The cost accounting system is applied by the company to get
information about the different cost that occurs in different processes. DSA
manufacturing company required to keep a track record of different costs involved in the
business operation.
l Inventory management report - The particular accounting system useful for DSA
manufacturing companies because it tracks the record of the movement of raw materials
and finished goods. It provides instruction to the company for proper utilisation of
allocated resources and reduce wastages.

l Price optimization System – This system beneficial for a company to set an effective
price structure as per the requirement. This system helps DSA manufacturing to
determine the right price of products as well as services. It will help to collect reviews of
customers regarding their products.
l Job Costing system – This system applied by the company to analyse the cost of different
activities. It is beneficial for the DSA manufacturing company to perform activities as per
the specification of customers.
D1: Integration of systems and reports
Management accounting system and reports integrated with the organisational process
because the system effectively applied by a manager. The different types of MAS and MA
reports are consistent with the phase of the organizations leading to organisational growth.
Inventory management system applied by DSA manufacturing company to track record of
material after that inventory management report record information of material utilisation. It will
help to proper allocation of resources efficiently, as a result, the process of organisation smoothly
run. The price optimization system applied by the company to set price structures to maximize
profit and easily conduct operations of business.
TASK 2
P3: Calculation of costs
Costing – It is classifying, recording and appropriate allocation of expenditure for
analysis the costs of products as well as services (Manych, Steckel and Jakob, 2021). For
presentation of suitably organized data for the purposes of control and guidance of management.
Marginal costing – It is a accounting system in which variable costs are charged to cost
units and fixed costs of the period of written off in full against the collective part. The main aim
of this method to determine the expenses in which have take place when produce extra units of
products. In DSA manufacturing company applied this method to calculate cost of their product.
May June
Selling per unit price 50 15000 25000

Less: Various Marginal Costs
Per unit Direct materials cost -8 -2400 -4000
Per unit Direct labour cost -5 -1500 -2500
Per unit variable production overheads cost -3 -900 -1500
Contribution 10200 17000
Less: Variable selling commission
5% of sales
revenue -750 -1250
Fixed Cost
Fixed selling expenses -4000 -4000
Fixed admin expenses -2000 -2000
Fixed Production cost -4000 -4000
Net profit -550 5750
Absorption Costing – It is defined as costing method that is applied by the manager of
company to determine the cost. It is connected with production activities of specific item. In the
context of DSA manufacturing company applied this method to assure about the costs which
have taken place at the time of manufacturing. There are absorbing units from the revenues.
Absorption Costing:
May June
Sales 50 15000 25000
Less: cost of sales 26 -9880 -13000
Gross profit 5120 12000
Under/over absobed production overhead 1000 -200

Less: S&D expenses
Fixed selling expenses -4000 -4000
Fixed admin expenses -2000 -2000
Less: Variable Sales commission
5% of sales
revenue -750 -1250
Net Profit/loss -630 4550
Per unit Direct materials cost 8
Per unit Direct labour cost 5
Per unit variable production overheads cost 3
Absorbed fixed productin cost per unit 10
Cost of sales 26

M2 Application of range of management accounting techniques
There are several types of management techniques which is applied by the manager of
DSA manufacturing in order to assess the performance level of a company and bring
improvements in the performance if the improvements are required to be made. There is
mentioned description of techniques -
Standard costing – The particular method applied by the company in order to analysis
the variation between actual and budget sales. In DSA manufacturing company find out the
reason of differences between current and standard costs.
Historical costing – This technique defines that all the assets and liabilities are recoded
on actual amount in the accounting books. The manager of DSA manufacturing company record
all the components in the financial statements on historical cost.
D2 Interpretation of data
After applying both methods get different result from marginal costing and absorption
costing. From the marginal costing get result of -550 in may and 5750 in June. As per the
calculation of absorption costing method get result of -630 in May and 4550 in June. The
company has been selected marginal costing method due to get more profit after including fixed
and variable cost. Financial statements of company includes details about detailed financial
records comprising of income and expenses, cash flows, assets and liabilities, contribution of
shareholders, etc during particular accounting period.

TASK 3
P4: Planning tools used for budgetary control
Budget – It is a written document plan which is developed by every organisation to
analysis the performance of the company in future (Ouda, 2021). Through this plan a manager
handle every business activities in suitable manner. It is beneficial for every company to analysis
actual status and predict upcoming revenues and expenditure in order to meet business objectives
and goals.
Budgetary Control – It is a procedure which is applied by the managers to set
performance objectives for the business organisation. With the help of this reduce amount of
unnecessary expenses and proper utilise resources as per the plan. There are properly utilising
monetary resources by DSA manufacturing to increase profitability as well as productivity of
company. It is also defined in most effective way to handle business activities to assure about the
utilisation of resources.
Different types of planning tools – A wide range of planning tools can be used by the
managers of DSA manufacturing to create appropriate plans for the future. A detailed discussion
of these planning tools is made in the following manner-
Zero based budget – It is an approach to developing a budget from scratch, it means to
prepare this budget cannot take the previous budget as the base (Ranasinghe, Sivaramakrishnan
and Yi, 2021). It is developed from Zero and the starting analysis of each department and collect
information. In the context of DSA manufacturing company, through this budget justify ever
expenses before adding it to the official budget. The main purpose of preparation of this budget
to deduct spending by looking at where costs can be cut.
Advantages Disadvantages
Improve performance and operating efficiency
by challenging assumption and examining
expenditures.
To prepare of this budget required qualified
and expertise with specialize training or
prepare budget.
It is reducing traditional budgeting percentage
and provide better chances of make cost
deductions.
It is time consuming and costly method that
may harm for over all culture and also for
brand image.