Management Accounting Report: Techniques and Analysis for Aston Martin

This report delves into the realm of management accounting, focusing on its application within Aston Martin. It explores various facets, including management accounting systems, such as cost accounting, inventory management, and price optimization, elucidating their benefits and requirements. The report further examines different methods used for management accounting reports like budget reports, accounts receivable reports, and performance reports. It also analyzes the application of management accounting techniques, specifically marginal and absorption costing, and their role in financial reporting. Moreover, the report discusses planning tools, their advantages, and disadvantages, while also investigating how organizations adapt management accounting systems to address financial challenges, and how they integrate these systems into organizational processes. The conclusion summarizes the critical role of management accounting in organizational decision-making and success.

MANAGEMENT
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
P1 Management accounting systems...........................................................................................1
P2: Methods used form management accounting reports............................................................3
M1 Benefits of management accounting system.........................................................................4
D1 Integration of management accounting system and reporting in organisational processes...4
CONCLUSION................................................................................................................................4
TASK 2............................................................................................................................................5
P3 Calculate costs using appropriate techniques of cost analysis................................................5
......................................................................................................................................................6
M2 Application of management accounting techniques and produce appropriate financial
reporting documents ....................................................................................................................7
TASK 3............................................................................................................................................7
P4 Explain the advantages and disadvantages of different types of planning tools ...................7
M3 Analyse the use of different planning tools and their application ........................................9
TASK 4..........................................................................................................................................10
P5 Compare how organisations are adapting management accounting systems ......................10
M4 How, in responding to financial problems, management accounting can lead organisations
....................................................................................................................................................12
D3 Evaluation of planning tools that is used to solve financial problems.................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is the activity where identification, analysation, interpretation
and communication function are to be performed by manager to achieve organisational goal.
Financial information are also provided under this process to top managements so that they can
take managerial decision easily (Armitage, Webb and Glynn, 2016). The company which is
selected for this report is Aston Martin. It is a British independent manufacturer of luxury sports
cars as well as grand trousers. It was established in 1913 by Lionel Marting as well as Robert
Bamford. Various topics such as understanding of management accounting system,application of
range of management accounting techniques and use of planning tools used under accounting
management are covered under this assignment. Apart from the above topics, compare ways in
which organisation could use management accounting to respond to financial problems are also
explain in detail in the project.
PART 1
P1 Management accounting systems
Management accounting is a technique used by experts to measure and evaluate the
process to make proper control over the management of the organisation. Information and
reports related to invoices, cash flow statement, balance sheet etc. are shared by finance
department with the managers of the company which helps in decision making process. Proper
recording of transactions with the help of using supporting document is to be maintained by
managers of Aston Martin. It helps to take accurate decision to increase operational efficiency of
organisation. Deep analysation is to be performed by top management of company for taking
long term investment decision and also to evaluate the risk involved in the particular investment
(Bennett and James, 2017).
Principles of management accounting
 Integration: This principle presents that required information of administration is
integrated that can be effectively utilised at the maximum at the end of same time and
accounting services is supplied at lower cost.
 Absorption of overhead cost: These costs are absorbed by the accountant on
predetermined basis in which combined indirect materials, labour as well as expenditure.
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Therefore, through this method of absorption should carry out the expected outcomes in
effective way.
 Utilization of resources: It is required to available resources must be utilised in effective
manner. The main purpose behind of such resources are available in huge manner and
scarcity by the year. Thus, MA system should be assure about effective usage of available
resources.
Role of Management Accounting: The main role of MA supports to manager in
business in context of decision making procedure. It is defined as a systematic procedure in
which recognising, interpreting and communicating information to managers to supports their set
objectives and aims in certain period of time.
Various systems related to management accounting are also describe in detail as
underneath:
Cost accounting system: It is a system mostly used by a manufacturing company to
estimate the product costing for profitability analysis, and to control cost. Proper valuation of
inventory along with their flow and estimation of different cost is also be consider under this
system. Various costing like fixed cost, variable cost, semi variable cost, etc. are to be calculated
for a product by managers of Aston Martin to track the cost of product. Record of cost of
inventory is also maintained so it saves many cost in the organisation (Collis and Hussey, 2017).
Essential requirements: Proper allocation and apportionment of cost is to be made in
the system as it become beneficial to identify idle time, idle cost so that managers can easily
ascertain the product cost at different level.
Inventory management system: It is used to track goods to minimize inventory waste,
and it also helps to analyse trend of stock. Aston Martin use various methods like LIFO, FIFO,
weighted average etc. to manage inventory. Though there are different ways through which cost
of managing inventory can be minimized.
Essential requirement: It is beneficial to use this system in the company because it
reduces chances of stock loss. management of inventory can easily become possible (Cooper,
Ezzamel and Qu, 2017).
Price optimisation system: It defines the way customers will respond to different prices
for product. By providing best prices for each product Aston Martin attract large number of
consumers. In this way the organisation achieve their target by providing satisfaction to the
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customers (Dekker, 2016). This is essential for Aston Martin to recognize production costs and
determine the appropriate costs for their goods and services in order to draw buyers and control
the better outcome of the retail market in a dynamic business environment. This framework also
specifies how consumers can relate to varying pricing for its services and goods through using
various channels that can aid in the efficient operation of the company.
Essential requirement: By using this system buying pattern of the customer and their
preference for prizing can be easily understand by sales manager to capture market.
P2: Methods used form management accounting reports
Different type of reports are to be prepare by experts of different department so that
financial data can be analysed properly at anytime. As financial information are compiled under
the report so it helps top management of Aston Martin to take appropriate decision for the benefit
of shareholders and customer. It also shows the financial position of the business over a specific
period of time.
It is mandatory for every organisation to prepare various relevant report regularly as per
their requirement some of these are as follows:
 Budget report: It is a document in which financial data are to be recorded to measure the
performance of the business by making comparison between the actual result with the
budgeted one. It is prepared by professionals in Aston Martin for investors point of view
and the percentage of risk involved are also be mentioned in the report. The budget report
is used in the organisation is to determine which expenditure is high and and the
measures needed to do reduction in the prices of commodity. Reason of deviations are
also observe and concluded in the report. It is beneficial to track variances to identify the
area that needs more attention (Gibassier, 2017).
 Accounts receivable report: This report includes all the supporting documents like
invoices, vouchers etc. on the basis of which cash and credit sales is to be determine for
different period. Aston Martin maintain Bills receivable receipts and detailed information
of debtors to create collection letters stated with overdue balance. Average collection
period is also be fix by the company so as to avoid bad debts and to recover the value on
time. The length of such credit period is fixed by the managers as per sales. The
Company adjust the term of their agreement to reduce the risk of loosing money.
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 Performance report: Performance of employees in terms of efficiency and effectiveness
over a specific period of time is recorded under it. Aston Martin check the performance
of workers on the basis of target achieved by them. The company provides additional
incentives to good employees as it motivate workers to work hard to earn more. Various
techniques are also be used by team leaders to make improvement in the performance. In
this way management will be able to achieve the goal on time by preparing performance
report in the organisation (Granlund and Lukka, 2017).
M1 Benefits of management accounting system
Application and benefits of cost accounting system: This system mainly applied for
identifying and managing the cost of organisation which occurred at the time of working. Aston
Martin is using to estimate cost and get profitability by controlling the excessive cost in relation
to organisation.
Application and benefits of inventory management system: To identify the inventory
level and stock tracking, such system is useful that can help to manage the orders of customers
and increase organisational sales. Aston Martin is applying this for filling customers requirement
and attracting them towards products and services that helps to make higher profits.
Application and benefits of price optimisation system: The uses of system is setting of
prices in relation to products which should be relevant and feasible for customers and increases
the sales. Aston Martin is using price optimisation system for setting the prices of their drinks
which they produced and attract the customers so sales will be increase effectively (Honggowati
and et.al., 2017).
D1 Integration of management accounting system and reporting in organisational processes
Different kinds of management accounting system as well as reports are inter connected
with each other that supports in organisational procedure. It come by management accounting
system that assure about different activity that profitable or not. The manager of Aston martin
apply price optimization system to set effective price structure for different cars that sell out by
the company and for this prepare cost accounting report in which mention cost of each product to
set effective price framework. These reports and systems are working together to provide all
necessary information on time and take right decision. As a result company get success for
longer period of time.
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CONCLUSION
As per the above part it has been concluded that management accounting plays essential
role in any type of entity and help to management in decision making procedure. Different types
of MA system supports to provide proper management and make effective decision. Different
reports of MA provide proper overview of different departments and helps to take right decision
in regard of price structure and investment.
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis
Marginal costing : This cost is classified in two categories variable and fixed cost. This
cost is based on cost behaviour with volume of output. This technique is uses to determine the
profits but it is difficult to state profits per unit. In this, fixed overheads are charged in total to the
profits and loss account instead of recovered in product costing.
Absorption costing: This defined as managerial accounting that capture all cost
associated with production of particular product. This involves direct and indirect cost like direct
material, direct labour, direct rent and insurance that are counted with this technique and
increases the organisational profitability (Kastberg and Siverbo, 2016).
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M2 Application of management accounting techniques and produce appropriate financial
reporting documents
Managing accounting technique are those system which uses by management to analysis
and identify the profitability. When products and services are provided by management then it is
important to use optimum technique which can help to generate higher profits and productivity.
Aston Martin is UK based organisation that have used marginal and absorption technique in their
organisation to know the profits and understand which technique is optimum in order to operate
and attain higher profits (Kumarasiri and Jubb, 2016). There are mentioned different MA
techniques such as:
 Standard costing: In this costing defined that the procedure of determining the difference
between actual and standard figures. Through this technique the manager of Aston Martin
allocate the overheads in efficient way.
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 Normal costing: In this technique most of the organisations can set reason for cost
deriving actual data for all the products. Such as, Aston Martin manage can apply this
method to allocate the overheads in effective way.
 Historical costing: As per the technique defines that all the assets as well as liabilities are
utilised by an organisation to record original cost instead of market price. Such as, Aston
Martin through this technique analysis the actual condition of business and determined by
managers.
TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools
Budgetary control is the activity which should be focused by management in order to set
the budget by considering income and expenses that increases performance and profitability.
This is important for management to use best tool and technique in their organisation for the
purpose of controlling the excessive budget which occurs in business activities and increases the
productivity. In other words, budgetary control is financial jargon which mainly uses to
managing income and expenditure. This mainly uses to compare the actual income and
expenditure to planned income and expenditure to state whether or not corrective action is
required. For management it is required to have good knowledge about marketing, planning,
strategies, tools and activities that can be use to managing all organisational performance and
improve profitability. Aston Martin is using different types of planning tools for controlling the
budget that are as explained:
Capital budget : This budget is related to income and expenses that arises in
organisation while running a business. In organisation two types of assets are available fixed and
current that are used to run the business and analysis the profitability. For management it is
important to identify the needs of capital funds that can be collected to sale fixed and long term
assets. Capital payment consider of capital expenditure on acquisition of assets like building,
land, machinery and other equipment that uses to operate and regulate the business continuously.
In context of Aston Martin, management should focus on capital budget and prepare this for the
purpose of knowing capital income and expenditure that are related to business and helps to
increase the organisational performance (Malina, ed., 2017).
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