Management Accounting Report: MSD Lighting Ltd Analysis

This report analyzes management accounting principles, focusing on MSD Lighting Ltd. It explores various management accounting systems like cost accounting, inventory management, job costing, and price optimization. The report details different types of management accounting reports such as budget reports, job costing reports, and departmental reports. It also discusses the benefits of these systems, along with critical evaluations. The report further delves into cost calculation techniques, including marginal and absorption costing, highlighting their advantages and disadvantages. Furthermore, the report examines the advantages and disadvantages of planning tools and compares how organizations can use management accounting to respond to financial problems. The report concludes with an evaluation of the planning tools and a detailed analysis of the financial strategies.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1: Management accounting systems.....................................................................................................3
P2: Management accounting reports......................................................................................................5
M1: Benefits of Management accounting systems..................................................................................5
D1: Critical evaluation of Management accounting systems and Management accounting reports.......6
TASK 2..........................................................................................................................................................6
P3: Calculation of different types of costs using various techniques.......................................................6
M2: Accurate application of the techniques............................................................................................7
D2: Producing of financial reports...........................................................................................................7
TASK 3..........................................................................................................................................................8
P4: Advantages and Disadvantages of Planning Tools.............................................................................8
M3: Analysis of planning tools.................................................................................................................9
TASK 4........................................................................................................................................................10
P5: Comparison of organizations...........................................................................................................10
M4: Analysis of response to financial problems....................................................................................11
D3: Evaluation of planning tools............................................................................................................11
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................12

INTRODUCTION
Management Accounting refers to a process of making the use of the available financial
data, facts and information in such a manner so that it can be helpful in conducting a thorough
analysis and interpretation so that the conclusions and recommendations can be derived
(Battaglia and et.al., 2020). This leads towards taking of the appropriate decisions in the future
within the organization helping in ensuring an enhancement in the overall level of profitability in
a proper manner. Thus, this makes it quite useful from the point of view of the various managers.
This report is based on MSD Lighting Ltd. It is a company which manufactures street lights and
other products and provides them to the customers who require it. In this report, a detailed
discussion will be made on Demonstration of understanding of Management accounting systems,
Application of a range of its techniques, Explanation of the use of planning tools. Additionally, a
specific analysis will be made on Comparison of the ways in which the organizations can make
the use of Management Accounting to be able to respond to financial problems as a part of this
assignment.
TASK 1
P1: Management accounting systems
It refers to the use of various types of methods and techniques in which the managers can
make sure that the use of the available information is made so that the appropriate decisions are
made and the overall financial goals and objectives within an organization can be attained in a
proper manner (Bauer and Hospodka, 2020). MSD Lighting Ltd. can make its use so that the use
of the financial information is made quite appropriately. There is various Management
accounting systems which can be used within the organizations. An explanation of these systems
is provided in the following manner-
Cost accounting system- It is a system in which an accurate assessment of the various
types of costs is made within the companies (Beasley and et.al., 2021). Therefore, the firms are
required to ensure that through making its use they are able to determine and segregate the costs
effectively and efficiently in a right manner. For an organization like MSD Lighting Ltd. it is
quite important that the use of this particular system can be made so that it is able to make sure
that the attainment of the short-term, medium-term and long-term goals and objectives can be
done.
Essential requirements-
 In this system, there should be a thorough assessment of the various types of costs in the
organizations. Therefore, in the organization this should be ensured.

 In this system, a system for segregation of costs and apportionment of overheads should
be used so that the organization is able to make sure that it can effectively and efficiently
manage out a wide variety of needs and requirements in a proper manner.
Inventory management system- It is a system in which the assessment of the stock level
within the organizations should be made thoroughly and thus this will be quite helpful in
ensuring that the management of stock items should be made in a proper manner (Blazek,
Durana and Valaskova, 2020). For an organization like MSD Lighting Ltd. it is a useful
system so that it is able to manage out its wide variety of needs and requirements in an
appropriate manner.
Essential requirements-
 In this system, the assessment of the inventory level should be made through the use of
various methods like LIFO, FIFO and Weighted Average Cost etc.
 This system should be helpful in accurate assessment of the inventory costs and ensuring
that a reduction in the inventory costs can be made so that the profitability level can be
enhanced.
Job costing system- It is a system through which the assessment of a wide variety of job
orders can be made and thus the job costs can be determined quite accurately
(Bruggeman, 2020). Therefore, it is important for the organizations that they are able to
make the use of this particular system so that they can assess the job costs appropriately
and are able to bring a reduction in these job costs in a proper manner.
Essential requirements-
 In this system, a thorough assessment of the various types of job orders can be made so
that a better track of these job orders can be kept within the organizations.
 This system should make sure that by listing out a wide variety of job orders the
organizations are able to attain a higher-level of efficiency and effectiveness in the
management of these hob orders in a proper manner.
Price optimization system- It is a system through which the determination of the
different types of prices can be made within the organizations (Cengiz, Oduncuoglu and
Koseoglu, 2020). Therefore, it is quite important for the organizations that they are able
to make sure that they use this system to forecast the trends in prices and are able to set
an appropriate price which will help them in maximizing their profits.
Essential requirements-
 In this system, a thorough assessment of the various types of price levels should be made
so that the use of the appropriate methods and techniques is made for setting the right
prices within the organizations.
 In this system the organizations should make sure that they are able to set those prices
which help them in targeting a higher-level of profitability in a proper manner.

P2: Management accounting reports
Management accounting reports are those reports which are quite useful in ensuring that
the overall analysis and interpretation of the given financial data, facts and information can be
made and thus conclusions and recommendations can be derived for the future (Cernușca and
Csorba, 2020). The different types of Management accounting reports which can be used within
the organizations are as follows-
Budget reports- In these reports, a thorough conclusion of the different types of Budgets
which are prepared in the organization is provided (Connolly, Hyndman and Liguori, 2020). This
can be helpful in ensuring that with the use of these Budgets the organizations are able to make
sure that they are able to attain a higher-level of efficiency and effectiveness in a proper manner.
For an organization like MSD Lighting Ltd. the use of these reports becomes useful because they
are required in order to make sure that the efforts can be made to enhance the overall profitability
level in a proper manner.
Job costing reports- In these reports, a thorough assessment of the various types of job
costs can be made within the organizations which can be quite useful in ensuring that the
management of the job orders can take place quite appropriately (Cordova, Zorio-Grima and
Merello, 2021). Therefore, for a company like MSD Lighting Ltd. it becomes quite important
that the use of these particular reports can be made so that the appropriate conclusions and
recommendations can be derived.
Departmental reports- These reports focus on various types of departments and their
functioning (Evana, 2020). Thus, in the context of an organization like MSD Lighting Ltd. it is
quite important that the use of these reports can be made in a proper manner so that the overall
improvement in the performance level of the organizations can be made which will be quite
helpful in ensuring that the overall goals and objectives can be attained.
Accounts Receivable Aging Reports- These reports are useful for the organizations
because through their use the assessment of the way in which the Debtors in an organization are
required to be managed can be made (Gulluscio and et.al., 2020). For a company like MSD
Lighting Ltd. it is important that the use of these reports is made so that it is able to make sure
that it is able to manage its debtors in a proper manner.
M1: Benefits of Management accounting systems
There are a wide range of benefits which are associated along with these systems. It is
quite important that these systems are considered for making sure that the attainment of the goals
and objectives within the organizations can be done. Cost accounting system can be used to
determine different costs. Also it helps in reducing these costs. Inventory management system
helps in determining the inventory level. Also it helps in reducing the inventory costs. Job
costing system is helpful in the management of the job orders. Also it helps in reducing the job
costs. Price optimization system is helpful in forecasting the wide range of prices for the goods

and services. Also it helps in ensuring that the prices can be set in a proper manner to maximize
the profitability level quite effectively and efficiently in a right manner. Thus, all of these
systems have their own benefits.
D1: Critical evaluation of Management accounting systems and Management
accounting reports
It is quite important that the use of Management accounting systems and Management
accounting reports can be made in the organizations so that the organizations are able to attain
their particular goals and objectives in the future in a right manner. For the organizations like
MSD Lighting Ltd. it is quite important that their integration can be done within the
organizational processes so that these processes can be made better and this will thus help in
ensuring that the functioning of the company can be done in a proper manner.
TASK 2
P3: Calculation of different types of costs using various techniques
Marginal costing- It is a technique through which the assessment of the profitability can
be made and also the Break-Even Point can be determined (Huber and et.al., 2020). Therefore,
for organizations like MSD Lighting Ltd. it is a useful technique because it is helpful in
determining the right results.
Advantages-
 Constant results- It is a method which helps in the determination of constant results
which can be useful for the organizations. Therefore, for an organization like MSD
Lighting Ltd. it is a useful technique.
 Effective cost control- It is a technique through which the cost control can be done
within the firms. Thus, this makes it a quite useful technique for a company like MSD
Lighting Ltd.
Disadvantages-
 Difficult to analyze the overheads- In this technique, the assessment of the overheads
becomes quite difficult for the organizations. For an organization like MSD Lighting Ltd.
it creates a problem because it will lead towards inaccurate calculation of the costs.
 Difficulty in fixation of prices- In this technique, the fixation of the various types of
prices within the organization is not easy. In a company like MSD Lighting Ltd. it creates
a particular problem because it is not easy to fix prices under this technique.
Absorption costing- It is a technique through which the overall assessment of the
various types of costs can be made within the organizations (Menezes Montenegro and
Lima Rodrigues, 2020). It is useful for the purpose of apportionment of overheads

according to the expenditures made by the departments. For an organization like MSD
Lighting Ltd. it becomes a useful technique which should be used by it to accurately
determine the level of profits which are being earned by it which will be quite useful for
it.
Advantages-
 It is a highly suitable method for the purpose of preparation of the different types of
accounts. Therefore, for an organization like MSD Lighting Ltd. the use of this method is
recommended so that the accounts can be prepared in the right manner effectively and
efficiently.
 It is highly suitable method for those businesses whose demand of the products remains
constant in nature. Therefore, in this way it can be said that for an organization like MSD
Lighting Ltd. the use of this method is highly recommendable.
Disadvantages-
 Unlike Marginal costing, the use of Absorption costing technique cannot be made as an
effective monitoring tool. Therefore, in this way this creates disadvantage for an
organization like MSD Lighting Ltd.
 When the use of Absorption costing technique is made, it becomes quite difficult for the
organization to conduct a CVP analysis. This leads towards a disadvantage for an
organization like MSD Lighting Ltd.
Thus, it can be said that both the Marginal costing technique and Absorption costing
technique are highly useful for the organizations because by making their use they will be
able to make sure that they can attain their wide range of goals and objectives in a proper
manner. Therefore, MSD Lighting Ltd. is recommended to make the use of both of these
techniques which will be quite helpful for ensuring that the level of profits can be
enhanced.
M2: Accurate application of the techniques
It is quite important to make sure that the accurate application of the different types of
techniques can be carried out. In this way, this will be quite helpful for the management of MSD
Lighting Ltd. so that it can make sure that the attainment of the overall goals and objectives in
the future can be done in a proper manner. Thus, this will lead towards ensuring that the
company is able to enhance its level of overall efficiency and effectiveness and thus can make
sure that it attains its goals and objectives in the future in right manner.
D2: Producing of financial reports
It is quite important that the different types of financial reports are prepared by the
various organizations which can be quite helpful for them to carry out a proper analysis and
interpretation which can be quite useful for them in the future. For the managers of MSD
Lighting Ltd. it is thus important that its management is able to prepare these reports so that it is

able to make sure that the conclusions and recommendations derived from them are used
appropriately for getting better results in the future.
TASK 3
P4: Advantages and Disadvantages of Planning Tools
It is important that the use of planning tools is made within the organizations. This is so
because this can help a lot in ensuring that the implementation of the various types of plans can
be done in a right manner within the firms. One of these planning tools is Budget. It is a
statement in which the overall assessment of the various types of receipts and expenditures is
made and therefore the accurate results are obtained (Mohseni and Sayadi, 2020).
There are various types of Budgets which can be used in the firms (Ye and Hu, 2020).
Some of them are explained as follows-
Production Budget-
It is a Budget which can be used for the purpose of ensuring that the different types of
production requirements of the organization are pre-determined and therefore in this way can
help the companies (Richardson, 2020). This makes it quiet useful for an organization like MSD
Lighting Ltd.
Advantages-
 This budget is helpful for the organizations because it leads towards ensuring that the
attainment of the goals and objectives can be done. For MSD Lighting Ltd. this can thus
create an advantage.
 The use of this particular budget can help the firms because it can be helpful in
identifying the excessive costs. In the context of MSD Lighting Ltd. this can lead towards
an advantage.
Disadvantages-
 The use of this type of budget can create disadvantage for the organizations because it is
costly to prepare and requires a lot of time. This can create a disadvantage for MSD
Lighting Ltd.
 The preparation of this type of budget requires that the use of high-level of skills is made.
For the management of MSD Lighting Ltd. this can create a disadvantage.
Sales Budget-
In this budget, an accurate assessment of the sales within the organizations within a
particular period of time is made which can be quite useful for them. For an organization

like MSD Lighting Ltd. this can be very helpful so that the accurate results can be
determined.
Advantages-
 This budget is helpful in ensuring that a proper determination of the sales can be carried
out within the organizations which can be quite helpful for the purpose of preparing a
right strategy. For MSD Lighting Ltd. this can create an advantage.
 The use of this budget can be made for the purpose of carrying out the required
comparisons. In the context of MSD Lighting Ltd. this can lead towards an advantage.
Disadvantages-
 It may not effectively forecast the future sales within an organization. For an organization
like MSD Lighting Ltd. this can create a disadvantage.
 It may not be easily accepted by all the people within the organizations. Therefore, for a
company like MSD Lighting Ltd. this can lead towards a disadvantage.
Master Budget-
It is a Budget which can be prepared by the organizations because by preparing it they
can get a comprehensive overview of the overall picture in the right manner effectively
and efficiently (Scarpellini and et.al., 2020). For an organization like MSD Lighting Ltd.
it is thus required because it will be helpful in ensuring that the goals and objectives can
be attained in a proper manner.
Advantages-
 The use of this budget is helpful in ensuring that the overall overview of the entire
organization can be created. This can be helpful for an organization like MSD Lighting
Ltd.
 Using this budget is helpful in raising the overall efficiency and effectiveness. This can
be quite helpful for an organization like MSD Lighting Ltd.
Disadvantages-
 Preparing this budget leads to lack of specialization. This can create an impact on
organizations like MSD Lighting Ltd.
 This type of budget requires application of higher-level skills. Therefore, this impacts
firms like MSD Lighting Ltd.
M3: Analysis of planning tools
The planning tools are quite useful for the organizations and therefore it is quite essential
for them to make their use. MSD Lighting Ltd. therefore has to make sure that through the use of
these tools it is able to make sure that it creates a lot of appropriate plans in a right manner. This
will help it to be able to attain its goals and objectives in the future.

TASK 4
P5: Comparison of organizations
Financial problem- It refers to a particular situation where the organizations face a lot of
difficulties related to their financial status (Shakeel, 2020). Like other organizations, MSD
Lighting Ltd. also faces financial problems. The financial problems which it is facing are as
follows-
Excessive costs- MSD Lighting Ltd. is facing a financial problem related with excessive
costs and this is creating a particular level of impact on the organization. This is increasing the
overall level of expenditures and thus this is impacting the profitability level of the
organizations.
Mismanagement of stock items- MSD Lighting Ltd. is facing a financial problem of
mismanagement of the stock items which is creating a particular level of impact on the
organization. This is leading towards an increase in the overall level of expenditures and is
impacting its overall profitability level.
Techniques to solve financial problems-
 Balanced scorecard- It is a particular technique through which the assessment of the
overall level of performance of the employees within an organization is made (Veledar
and Gadžo, 2020). Therefore, it is quite important that the management of MSD Lighting
Ltd. is able to make sure that it can use it to be able to determine the right results
effectively and efficiently. The problem of excessive costs can be solved by it as it will
be able to identify the deviations and variations from the workers in cost calculation
easily.
 Financial Governance- It is a technique which is applied in order to make sure that the
organizations are able to manage the financial data, facts and information in an
appropriate manner (Zhang and et.al., 2020). For the management of MSD Lighting Ltd.
it is therefore very important that they make its use for the purpose of attainment of
financial goals and objectives. It also helps in solving financial problems. The problem of
inventory can be solved but as it can help in determining the way in which the
management of stock item has to be done.
Comparison of organizations
Basis Asda Aldi
Financial problem Asda is facing a financial
problem of mismanagement
of job orders.
Aldi is facing a financial
problem of low profits due
to lack of setting of
appropriate prices.
Use of Management
accounting system
Asda is making the use of
Management accounting
Aldi is making the use of
Management accounting

system of Job costing
system to solve this
financial problem.
system of Price
optimization system to
solve this financial
problem.
Application of the system Asda can make the use of
this system by ensuring that
the management of job
orders is done in a proper
manner effectively and
efficiently.
Aldi can make the use of
this system by ensuring that
the right prices are set in
the company through the
use of this method.
From the above discussion, it can be stated that learning from the examples of Asda and
Aldi the management of MSD Lighting Ltd. can make sure that the use of Management
accounting systems is made to solve financial problems. The use of Cost accounting
system can be made for solving the problem related with costs and the use of Inventory
management system can be made for solving the problem related with inventory.
M4: Analysis of response to financial problems
It is quite important for the organizations to make sure that they are able to respond to
financial problems. For the managers of MSD Lighting Ltd. it is therefore quite crucial that they
are able to ensure that they assess the financial problems quite quickly and are able to solve them
in the right manner. This will help them to be able to deal with these problems effectively and
efficiently in a right way in the future.
D3: Evaluation of planning tools
The planning tools should be used by the organizations in a right way for the purpose of
creating short-term, medium-term and long-term plans effectively and efficiently. In an
organization like MSD Lighting Ltd. they can be highly helpful because by using them the
company will be able to make sure that the attainment of the goals and objectives can be done
properly.
CONCLUSION
From the above report, it can be concluded that Management Accounting refers to the use
of methods and techniques through which the appropriate conclusions and recommendations can
be derived which can be useful for the organizations. It is thus important for the managers of a
particular company that they make its use so that the financial decisions can be taken
appropriately which will be helpful in ensuring that the funds are managed in a proper manner in
the company. This will be quite useful in helping in the attainment of the overall financial goals
and objectives in the future by the organizations.

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Appendix-