Management Accounting Report: Techniques, Analysis, and Evaluation

This report delves into the realm of management accounting, examining its core principles and essential requirements within organizations. It explores various management accounting reporting methods, including budget and performance reports, while also comparing and contrasting marginal ...Read More

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Management accounting and essential requirement of management accounting system................3
P2 Different methods of management accounting reporting..................................................................5
M1 Identify the benefits of management accounting system and it's application in the organisational
context....................................................................................................................................................6
D1 Critically evaluate that how management accounting system or management accounting report
linked within organisational process.......................................................................................................7
TASK 2..........................................................................................................................................................7
P3 Prepare income statement by using marginal & absorption costing techniques................................7
D2 Financial reports which applies to interpret business activities.........................................................9
TASK 3........................................................................................................................................................10
P4 Advantages and disadvantages of different type of planning tools of budgetary control................10
M3 Use of planning tools for preparation and forecasting the budgets................................................12
TASK 4........................................................................................................................................................13
P5 Comparison of organisations in which they are adopting management accounting systems to solve
financial problems.................................................................................................................................13
M4 Management accounting in response to solve financial issue that can lead to the sustainable
success...................................................................................................................................................15
D3 Planning tools to resolve the financial problems.............................................................................16
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
Management accounting, often known as management accounting, is a type of accounting in
which managers utilize historical financial data to design various methods to improve future
performance. It is an organizational strategic approach that will assist managers in identifying
their week and operating operations. Financial information managers assist in the development
of different tactics that aid in the judgment procedure and enable them to accomplish their
corporate objectives (Burritt and et.al., 2019). This research picked the Airdri firm, which makes
hand dryers in the United Kingdom, to start understanding. This report covers management
accounting as well as the system's key requirements, as well as the many methodologies
organization additionally to prepare accounting reports. In addition, the paper discusses how to
calculate revenue using absorption and marginal costing methods, as well as the benefits and
drawbacks of planning tools. It also covered how businesses deal with financial issues through
the use of a management accounting system or report.
TASK 1
P1 Management accounting and essential requirement of management accounting system
Management accounting is a managerial technique that assists managers in managing
banking details for their businesses. Managers utilize financial data to construct numerous
methods that aid in the choice procedure in managerial accounting. It is utilized for internal
purposes that benefit the organisation in achieving its organizational goals. Managers at the
Airdri firm utilize their previous client knowledge to produce more efficient loan options for
their clients.
The management accounting system aids the organisation in efficiently carrying out its
operational tasks. The Airdri Company’s managers implement some of the systems that aid in
the achievement of corporate objectives. There are several sorts of controllable accounting
systems that can assist a business in managing its company processes. The following are some of
them:
Inventory management system: It is an inventory management method in which
businesses use technology or a method to keep track of the stock. The Airdri manager uses this

method to create a customer database that allows us to find their complete client on a regular
basis. Although in the industrial sector, companies maintain track of their stock levels, including
such raw materials, while in the service industry, managers maintain track of their consumers. It
is necessary for the Airdri firm since it provides a variety of traditional lenders. As a result, they
categorize their borrowing choices and maintain track based on the numerous quality of
employees to their consumers.
Cost accounting system: This system aids the firm in determining the costs per unit of
goods. Managers can use this approach to determine whether variable costs are large and low. It
will offer the precise costs per unit of product so that the firm can determine its profit and, with
the use of this information, managers may design additional methods to aid in the achievement of
corporate objectives. This approach is used by the managers of the Airdri firm to determine the
quality of the goods they give to its clients. Consider the following scenario: - The cost of
providing a home mortgage to a person; thus, it is critical to understand what costs the company
must pay in order to offer the loan, as well as the benefits the firm receives from this service.
When information is useful, managers will make decisions based on it and build additional
methods to assist the organisation achieve its business targets. This costing methodology enables
the firm to determine the cost of their services.
Price optimization system: It is a system allows managers to determine whether variable
pricing ranges will vary in terms of supply. Following that, it will include information on cost
and inventory levels, which will assist them in calculating their profit from the products and
services they give to customers. Administrators may use this approach to assign a price range to
customers, segregated by stimulus, and then monitor how they react to price changes. Managers
at AIRDRI develop several policies in which they give financial products and differentiate them
based on duration, interest rates, or quantity. They offer a variety of standard and non-traditional
financing options, as well as a wide range of policy options to meet the needs of its customers.
The management must use this approach to reach their goals and objectives by pleasing each
client with price trading platforms.

P2 Different methods of management accounting reporting
The management accounting report contains different financial statements on the
company's profitability. This report serves as a foundation for development projects and includes
information on personnel and operational commitment. It also assists Airdri's organization in
achieving its objectives procedure, which aids in the achievement of corporate goals and
objectives.
Budget report: This report was created by the management of the company in relation to
the achievement of their personnel and even the business. It is essential to evaluate productivity
per sector, and this report is often prepared by each business, from big to small. Airdri, for
example, is a production facility that creates this analysis gathered from previous performance.
Managers incorporate the source of income as well as costs for each variable and attempt to fulfil
their tasks within the allocated amount. Managers strive to stick to budgets that aid the business
in fulfilling its mission or objectives. It will also assist the management in providing greater
incentives by lowering costs or raising profit margins.
Performance report: After completing any work, this report service delivery to the public in
determining the business's and each workplace environment. The AIRDRI's manager will utilize
this report to make meaningful or smart decisions for the future. Only with aid of this policy
document, managers can quickly assess prospective and discover those who deserve to be
rewarded for outstanding performance. It also assists the management in learning about its
employees' skills and prospective areas of expertise, allowing the company to meet its goals and
strategies.
Cost managerial accounting report: This report includes all costs associated with products and
services. It will provide the manager an insight of sales revenue, and if they are higher than
planned, they will strive to cut costs to enhance the profitability. This report details the dynamic,
semi-variable, and constant costs that are incurred when delivering services to consumers.
Because the Airdri provides a variety of products to its customers, they must first determine the
pricing of those services. Salary of their brokers, building rent, as well as other fixed costs is
fixed in this organisation, whereas variable costs including such travel, communication, and
stationery are expenditures that fluctuate depending on their job.

M1 Identify the benefits of management accounting system and it's application in the
organisational context
Management accounting
system
Uses Application
Cost accounting system This aids in estimating the
projected cost, which leads to
effective expenditure control,
allowing the firm to maximize
profits.
Airdri Ltd. needs this system
to assist in the implementation
of tasks that will minimize the
lot of operations and
responsibilities. This is a
beneficial device for the
business.
Inventory-management
system
This gives governance
structure over the pricing,
which is needed to control
inventories and assure efficient
delivery of products.
This system, developed by
Airdri Ltd., is beneficial in
overseeing the inventories
organizational development
and ensuring that stock does
not go to waste in the storage.
Price optimisation system This will aid in the
measurement and reporting of
the marketing system, as well
as the facilitates efficient
procedure for the cost of
production.
This technology is being used
by Airdri Ltd to manage the
entire premium pricing skills
in order to improve profits in
the firm. This might be
accomplished by the
leadership using a stronger
price strategy.

D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process
Every firm must implement a management accounting system, which will aid the
organisation in its operational operations. The Airdri firm engages in a variety of activities,
including the collection of customer information, for which an inventory management system
may assist in the administration of the user profile. As a result, managers create numerous
reports to assess their effectiveness and make decisions based on them. Managers in the
organisation utilise budgets or performance reports to measure service quality in the corporate
strategy. In addition, they must adhere to the financial statement in order to keep their
expenditure upon every element, which again will help them enhance their efficiency and
productivity. This also aids Airdri in achieving their objectives of the company.
TASK 2
P3 Prepare income statement by using marginal & absorption costing techniques
Cost: This is the sum of money spent by a business to develop or construct a products and
services in order to market it to a client. This is a crucial component in determining the cost of
goods sold which that maker will charge, that doesn't include manpower or materials. In the case
of Airdri Ltd., this aids in the analysis of the business's efficacy and is beneficial in the supply
chain such that the corporation may reduce costs and maximize profits.
Marginal costing: This costing approach entails determining the variable cost that is paid to
units of cost, as well as extra costs associated with generating more level of electricity and used
in the company’s operating operations. The evaluation and analysis of inventory, as well as the
identification of revenues and expenses, are used by Airdri Ltd. to enhance quality of the output
in the investment community.
Marginal costing technique
July August
Variable cost 40000 60000
Per unit cost 20 20

Income statement
Particulars July August
Sales 82500 176000
Less: marginal cost of sales 30000 64000
Variable cost 40000 60000
Closing stock 10000 6000
Opening stock 0 10000
Contribution 52500 112000
Less: fixed production cost 15000 15000
Less: selling and distribution cost 18000 18000
Net profit 19500 79000
Absorption costing: This allocates set overheads to the product regardless of when it is sold or
not during the income statement, and it is beneficial in making cost-effective decisions. This is
distinct from the complete costing technique, which assigns a set administrative overhead to
every other component. This ensures correct bookkeeping for finished goods in the framework of
the selected company and assists manager in developing internal price decisions.
Absorption costing technique
July August
Variable cost 40000 60000
Fixed production cost 10000 15000
Total cost 50000 75000
per unit cost 25 25

Income statement
Particulars July August
Sales 82500 176000
Less: cost of goods sold 37500 80000
Variable cost 40000 60000
Fixed production cost 10000 15000
Closing stock 12500 7500
Opening stock 0 12500
Gross profit 45000 96000
Add/less: Under/over absorbed fixed cost 5000 0
Less: selling and distribution cost 18000 18000
Net profit 32000 78000
D2 Financial reports which applies to interpret business activities.
Financial reports provide all types of corporate activity in a monetary format. Furthermore,
the financial status of the business is reflected in these statements. Financial reports are
necessary for a company to assess the current state of its operations. Aside from these elements,
financial reports include a link that summarizes the business operations, both monetary and non
monetary. Financial statement, balance sheets, and other financial statements are included. The
Bright Star Financial Limited firm generates a variety of financial records and accounts to assess
the productivity and competitiveness of their daily operations.

TASK 3
P4 Advantages and disadvantages of different type of planning tools of budgetary control.
Budgetary control: Budgetary control is a type of system that involves analysing actual
results and contrasting them to planned goals. Distinct kinds of budgets are produced using this
approach to manage diverse types of expenditures. The primary goal of this technique is to
govern and operate the firm in even the most appropriate and productive way possible, and to
also make better use of all existing funds, especially people, economic, and other funds. This
approach is used by Bright Star Financial Limited to effectively manage their business. They
develop a variety of forecasting methods for this aim that are listed below:
Budget: Budgets are projections of future revenue and expenditure for a particular amount
of time. In most cases, these are based on previous budgets or financial activity. This tool is quite
useful for determining a company's actual quality over a specific timeframe. Expenditures are
crucial not just for businesses, and for countries, individuals, and other entities. Budgets are
typically created for a one-year period. The tool is used by the chosen firm, Airdri Ltd, to
measure their economic health and to also estimate proper plans and strategies to meet the
projected targets. The below are some of the benefits and drawbacks of this methodology:
Zero based budget: Zero-based budgets is the one in which the budgeting process begins
from the beginning. Each activity is explained before being included in the budgeted using this
method. Finally, this budget is useful for larger companies that can afford to spend it. This
approach of budgeting process is used by Airdri Limited for operations that are critical for the
future. The below are some of its benefits and drawbacks:
Advantage:
• This budget improves the quality and robustness of potential earnings and spending forecasting.
This is used by Bright Star Financial Limited, and so it ensures that their budgets are precise and
consistent.
•It decreases the number of operations that are unnecessary for the firm, saving the firm time and
money on unproductive operations.
Disadvantage

• Budgetary control is not a one-person job; it necessitates the use of people to accomplish the
budget.
Capital budget: This budget is primarily designed to compute the total expenditure as
contrasted to the income statement. This sort of budgeting is critical for understanding the
organization's capital expenditures and for making good decisions. This aids in the assessment of
potential in the selected company, as well as the promotion of chances for improved
implementation.
 Advantages- This form of budget is beneficial in generating lengthy budgets that help to
increase competitiveness and provide optimal value to shareholders. This is important in
analyzing the risk connected with investing possibilities in the situation of Airdri Ltd.
This provides help that is beneficial in gaining a better understanding of the subject.
 Disadvantages- This sort of choice made by financial analysis is irrevocable since it takes
a long time to create this sort of budget. In the case of Airdri Ltd., this presents a
difficulty for the corporation as well as a hazardous alternative for attaining excellence.
Operating budget: This budget is utilized for daily activities and aids in the evaluation of
business operations. According to this budgeting, the reporting period will be beneficial in
forecasting the income and costs of prospective activities and services. This type can be used by
management on an everyday to assess the business's costs and profits. In the case of Airdri Ltd.,
this aids in increasing the business's usefulness. This is beneficial in terms of enhancing the
service quality by delivering the greatest outcomes.
 Advantage: This emphasizes on all actions and functions that govern and administer the
corporation's daily operations, as well as the operation that manages the company's
revenues and expenditure. This budgeting is beneficial to some organisations since it aids
in the management of selling and transactions operations. Whenever the firm is capable
of keeping all costs and income in the Airdri Ltd, it achieves the greatest results.
 Disadvantages- This sort of tool is extremely complicated when it comes to determining
the efficacy of operating functions and responsibilities, which makes it difficult to
evaluate different roles. In the case of Airdri Ltd., this budget is feasible in small

businesses but not in large corporations since there are several operations that cause
managers to become confused while making decisions.
Actual cost: this pricing takes into account the materials, labour, and administrative expenses
associated with the actual output generated throughout a manufacturing process. The main
feature of real costing is that it concludes cots regarding cost distribution.
Normal cost: The distinction among normal and actual overheads may be determined using the
normal cost approach. Analyzing the usual manufacturing costs and manufacture is also
beneficial to a manager.
Standard costing: This accountancy approach is frequently used to list the difference between
actual and ordinary expenditures. Because obtaining paperwork for all processes inside large
companies is difficult, ordinary costs are employed and save labor.
Costs fluctuate mostly owing to a substantial task section, where job costing is defined as a
unique costing approach utilized solely for consumer goods and services. Costing method is a
type of job pricing in which mass manufacturing is thought to be more efficient in terms of
calculating costs in a more structured manner. Similar to contractual costing, which is used to
determine the exact long and short - term costs of materials for the construction, building, and
civil engineering. It's how various overhead costs in cost accounting systems remain distinct.
M3 Use of planning tools for preparation and forecasting the budgets.
Some planning tools are extremely beneficial in the respective company for boosting the
general effectiveness of the project. The different budgeting strategies that were effective in
giving specific impact to the companies are investigated. Operating budgets, zero based budgets,
and capital budgets all aid in achieving the corporation's aims and targets, as well as increase
efficiency at Airdri Ltd. This sort of technology is beneficial to a manager's perception in
forecasting processes and goals in start building monitoring tools (Turner and et.al., 2017).

TASK 4
P5 Comparison of organisations in which they are adopting management accounting systems to
solve financial problems.
Accounting systems for administration play an essential role in resolving financial
problems. Financial problems can occur for a variety of factors, but putting in place the proper
management accounting system could enable the organization get out of it. This method is used
to address difficulties by Airdri Limited Company.
PEST analysis
Political Economic
Highly polarized situations can have an
influence on Airdri, resulting in major reforms
and the inability of groups to adjust their
strategies as a result.
Because it has no effect on consumer money
supply, Airdri may be influenced by job and
price changes.
Social Technological
Consumer tastes, shopping habits, and other
factors vary throughout time. Overlooking
such considerations might result in a drop in
Airdri's income.
The latest approaches, such as auto-healing air
dryers, smart, close to zero, and control
hairdryers, are appearing on the marketplace. It
is critical for Airdri to focus on everyone of
them in order to advance.
SWOT analysis:
Strengths Weaknesses
It's a fantastic marketplace scenario that can
help you increase your profits.
Minimal sums of wealth are spent on R&D,
leading in a misinterpretation of client
demands.
Opportunities Threats
Growing economy is a fantastic chance for a
strategy to ensure development.
Various rivals in the industry, including such
Asseal Architecture, are attempting to take

Ryder's customer base.
Financial problem- A financial problem is a scenario in which an organisation is unable to
operate due to a lack of funds. Other information systems are affected as a result of this problem.
Companies have built a management accounting system to address these challenges. The
aforementioned financial concerns confront Airdri Limited:
 Reduced profitability- The Company is experiencing negative impact on the profitability
as a result of a lack of consumers.
 Issue of right price determination: The Company is having difficulty accurately allocating
prices to various financial services, and as a result, they are unable to grow their
consumer base. This has resulted in a financial issue.
The following is a relationship between two businesses: Bright star financial limited and
Merlin financial consultants, with regard to resolving financial issues through effective
management accounting procedures.
Basis Bright star financial limited Merlin financial consultants
Financial
issue
The aforementioned firm is
experiencing money troubles due to a
lack of profitability and price
allocation. This issue arises as a result
of incorrect pricing of different
financial goods and services, but also
dissatisfied clients. The company's
revenue is steadily declining. The
problem was discovered thanks to the
monetary KPI.
Merlin Financial Consultants is a type
of business that offers consumers a
variety of payment options, such as
financial counselling. The organization
is offering financial difficulties
determining the total cost of various
financial items & services, and as a
result, they will be unable to determine
what goods and services are helpful to
business and what are not. Management
will be able to determine the cause of
economic damage after using
benchmarking. Furthermore, as a result
of this problem, their consumers as well

as other businesses' consumers are
migrating to other consulting firms.
Accounting
technique
Based on the aforementioned financial
issue, the firm must employ the proper
management accounting approach,
which is the "Price optimisation
accounting system." It is a way for
determining a pricing level that is
acceptable to both customers and the
firm. Furthermore, it helps to define
consumer behaviour at various pricing
levels. This technique can assist Bright
Star Limited Company address its
financial problems since it will give a
framework for setting the price of
financial products at a reasonable
level.
Merlin financial experts require a type
of accounting approach to get the firm
out of this mess once they understand
the financial situation. This issue
necessitates the use of a "cost
accounting system." This is a tool that
calculates the total cost of delivering
banking goods and services. It is critical
in determining the cost of any service.
If the aforementioned firm uses this
tool, then will be adequate to discuss
their financial problems since they will
be able to compare the values of various
economic services and products. As a
result, they will be able to eliminate
services that are not helpful to them.
M4 Management accounting in response to solve financial issue that can lead to the sustainable
success.
When a company has a problem that needs to be addressed, there are several techniques
that may assist them improve their efficiency and productivity to a higher level. Certain tools,
like as KPIs and comparison, are useful in preventing problems and other conditions and
bringing the right answer to leadership. Financial problems have reduced inefficiencies and
created specific issues in administration in the respective company, and implementing this could
aid the firm in improving the capabilities of Airdri Ltd (Speckbacher, 2017).
D3 Planning tools to resolve the financial problems.
The use of planning tools is critical in resolving financial difficulties. It's because these
strategic plans operate in conjunction with financial accounting, and this relationship tends to

protect financial difficulties at bay. Airdri limited, the above-mentioned firm, employs a variety
of project planning and accountancy approaches to address its financial difficulties. They employ
budgetary management planning strategies such as zero-based budgeting, fixed budgeting, and
accountancy approaches to address financial difficulties.
CONCLUSION
From the foregoing analysis, it can be stated that management accounting assists
organisations in doing their duties efficiently, which in turn aids in the achievement of their
corporate aims and objectives. The management accounting system or various accounting reports
assist the supervisor in identifying team players and enabling good result. Additionally, many
planning tools assist the organisation in resolving its financial problems. When used by a
company management to reach their organizational goals, each management tool has its own set
of benefits and drawbacks. It will also assist the firm in increasing performance and productivity.

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