Unit 5: Management Accounting Principles for Connect Catering Services

This report provides a detailed analysis of management accounting principles, focusing on cost accounting, budgetary control, and financial problem-solving within the context of Connect Catering Services. The report begins by defining management accounting and its various systems, including cost accounting, price optimization, inventory management, and job order costing. It then explores different management accounting methods, such as budget and performance reports, and their applications. The report delves into cost definitions, including marginal and absorption costing, and their application in income statements. Furthermore, it examines planning tools like zero-based budgeting, and their benefits and limitations for budgetary control. The report also discusses how organizations respond to financial problems, analyzing how these challenges can lead to sustainable success. Throughout the report, specific examples from Connect Catering Services are used to illustrate the practical application of these concepts.

Management
Accounting
Table of Contents

INTRODUCTION.......................................................................................................................................3
PART 1.......................................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1. Define management accounting and different types of management accounting systems.................3
P2. Methods of management accounting.................................................................................................5
M1. Benefits of management accounting systems with their application................................................5
D1. Evaluate how management accounting systems and management accounting reporting..................6
TASK 2.......................................................................................................................................................6
P3. Define costs and prepare an income statement using marginal and absorption costs.........................6
M2. Apply a range of management accounting techniques......................................................................9
D2. Interpretation of data that produce financial reports.........................................................................9
PART 2:....................................................................................................................................................10
TASK 3.....................................................................................................................................................10
P4. Benefits and limitations of different types of planning tools which is used for budgetary control...10
M3.To preparing a budgets use of different planning tools and their application..................................12
TASK 4.....................................................................................................................................................12
P5. Compare how organizations respond to financial problems in management accounting systems....12
M4. Analyze how financial problems can lead organizations to sustainable success.............................15
D3. Evaluate planning tools to solving financial problems....................................................................15
CONCLUSION.........................................................................................................................................15
REFERENCES..........................................................................................................................................16

INTRODUCTION
The term management accounting is a procedure or identifying, measuring or collecting
some information which are helpful for manager to take decisions in an organization (Bassani
and Cattaneo, 2019). It consist internal team of a business enterprise and assists those
individuals who are related to costs. For this assessment, selected organization is Connect
Catering Services is a family owned business which is founded by John Herring in 1989. It has
employ over 450 staff which is highly motivated and well trained staff members. In this report,
various topics are covered such as management accounting with their different types, methods,
cost using marginal and absorption costing, different kinds of planning tools with their benefits
and limitations and compare organization which are to be respond in financial problems.
PART 1
TASK 1
P1. Define management accounting and different types of management accounting systems
This term consist that recording, measuring, identifying various tasks and projects and
manager used this system to take business decision properly and identify what type of costs are
required in business (Caglio and Ditillo, 2020). It is helpful to providing financial information
for managers so that they can do day to day transactions for maintain their short term decisions.
It consist internal procedures to evaluate and monitor their costs, sales and budgets in an
organization. Key different types of management accounting systems are as follows:
Cost accounting system: This system is a framework which is used to determine and
estimated cost of their products for profitability analysis. It is a procedure for recording,
measuring, analyzing for all firm costs which are related to production for constant and change
costs. It means that there is simplify of work to track the flow of goods and services on a
continue basis for several stages of production system. In case of Connect Catering Services,
firm must know about their products which are profitable which is not. To estimate their cost of
any products is a essential part of business operations. Essential requirement of cost accounting
system is used internally by firm to make fully takes business decisions and it will be beneficial
helps to accomplish economies of scale and decrease cost of operation in a firm.

Price optimization system: It is one of most important system which is used in
mathematical programs that helps to calculate a different price level and where demand varies to
calculate the price levels (Conrath-Hargreaves and Wüstemann, 2019). It is practice for data for
clients to find an effective price of various products or services that will maximize their
profitability levels. For Connect Catering Services, firms used this system to meet its overall
objectives and determine whether it is profit margin are increased or not and growth of
customers. Essential requirement of price optimization system are helps to manager to contribute
estimate price level or cost or production for any goods and services which helps to earn more
profit and it also help to differential different price levels of demand.
Inventory management system: This system consists that track the flow of goods and
services from one place to another. It helps to tracking goods throughout supply chain from
manufacturer to end users sales of product. For effective managing their inventory means that
they have to track their stock for right person at a right place and at a right time. With relation to
Connect Catering Systems, firm gets harder in business when they are handling so much
inventory are increasing and this tool is used for business to collected data to stock level like
how much stock are remaining or not. Essential requirement of inventory management system
are they should help managers to provide some stock details or history of any product or service
where it should take place from end users. It ensures that there is purchasing of raw materials are
increased of warehouse or not.
Job order costing system: This type of system which used to determine and identify cost
of each manufacturing goods (Gao, 2019). It is usually adopted when manufacture produces
many types of products and which is different for previous products are also need to calculate
cost of an individual job. Managers of Connect Catering Services are identifying cost of each and
every different product which will allow earning profits in a business enterprise. This system
track every item which is used in production process are involved in job records. Essential
requirement of job order costing system it determines that cost of every activity increase as per
job requirements. A manager to take decisions which includes efficiency of business decisions is
driven.

P2. Methods of management accounting
Budget report: This report helps to compare actual performance with planned budget
performances and help firm to understand to control their costs which are associated in business
enterprise (Garanina, Hussinki and Dumay, 2021). It is very critical to measure some reports
and determine which expense is high range and what type of action can be taken to decrease that
expenditure. Firm tries to reduce those expenses which are unnecessary to finish their goals and
objectives so that can create list of sources.
Performance report: This report checks overall performance of employee or an
organization and it would be summarize of all these reports which is used to measure whether
employee can perform well or not. To assist their managers and identify which worker is
working in an efficient manner and manage all these things in a proper manner. Managers used
this reports also to take business decisions according to their performance or organization.
Cost managerial reports: This report consists that will allow all raw materials, direct
overheads, labors or any other extra costs are taken into consideration. Cost report in
organization realizes that sum information of prices is compare to selling prices and profit
margins are also calculated. This type of procedure should provide proper information related to
costs and enabling management to control future costs. This report is helpful for manager to
identify those cost which are related to firm and determine how much cost are included in project
or not.
M1. Benefits of management accounting systems with their application
Management Accounting
System
Benefits and application
Cost accounting system This system is beneficial for Connect Catering Service for cost
control like it reduces cost because new and improving method is
followed and improves their profitability level of enterprise.
Price optimization system It is one of best system to identify their price level whether
demand varies or not (Guilding, 2019).
Inventory management
system
Managers of Connect Catering Services are tracking their goods
from one place to another and identify wastage of goods as

purchasing of raw material to increase their cost of warehouse or
purchasing raw materials.
Job order costing system Job costing system helps to decide estimated of each product or
every job and identifies which job of best or profitable or not.
D1. Evaluate how management accounting systems and management accounting reporting
These system and reporting methods is integrated because it should be determine how
they can reduce their cost and increase their profitability level in a business enterprise
(Kurniawan and Azmi, 2019). It will be helpful instrument where comparison of actual
performance with standard performance and control their operational activities in an
organization. For managers it will be beneficial because it helps to ensure and evaluate their
activities and increase overall performance of enterprise.
TASK 2
P3. Define costs and prepare an income statement using marginal and absorption costs
Costs: It is defined that through cost firm has produce something for creation of
production of any goods and services and it do not include profit. It is an amount which is
recorded by book keeping system as expenditure. It should be include two types of costs are
involved such as variable costs and direct costs.
Marginal costing: It is that cost accounting system which is implied to extra costs is
involved for producing an extra unit of output. This cost consists of variable costs which are
changeable and fixed cost which is constant for a certain period. It is also helpful for decision
making technique and it allows management to focus on changes some decisions which are
under reflection.
Absorption costing: This costing method that capture all costs which are associated with
manufacturing for a specific product (Larrinaga, Luque-Vilchez and Fernández, 2018). It has
included direct and indirect costs where variable costs are changeable either it is increased or
decreases for a particular output should be produces. It should be determine that absorption

costing is those costs which are inventory at the end of accounting period. It also increases the
profit valuation of business enterprise.

M2. Apply a range of management accounting techniques
To apply a technique of management accounting reporting are marginal and absorption
costing should be determined where many tools are applied like variable cost and fixed costs.
Variable costs are changes with the change per unit of output and fixed cost which remain
constant for entire period (Machado and Gomes, 2018). Absorption costing determines that
production cost is associated of direct and indirect costs which include inventory are full of cost
for unit of product.
D2. Interpretation of data that produce financial reports
As per above mentioned report, it can be understood or interpret that opening stock of
marginal costing is quarter 2 is less than absorption costing (Ouda, 2021). There is also
difference between in net profit of entity are quarter 1 is 1900 and quarter 2 is 4700 pounds.

PART 2:
TASK 3
P4. Benefits and limitations of different types of planning tools which is used for budgetary
control
Budgetary control: It is a procedure where budget re to be prepared for upcoming year
and compared actual performance with standard budgets to accomplish their maximum
profitability level of business enterprise (Ozdil and Hoque, 2019). It includes preparation of
cost control and establishing roles and responsibilities to find out taking corrective action is also
necessary. Managers of Connect Catering Services should be ensure that there is properly
budgeted for future period and control over organizational activities are to be followed. Key
planning tools of budgetary control wit context to connect catering services which are described
below:
Zero based budgeting: It is a procedure where stars from zero and involve preparation
of budgets for re evaluating of items in cash flow statement where expenditure are calculated on
the basis of actual expenses. It involves that each and every function in an organization which
are need to be analyzed by costs and budgets. It is important for Connect Catering Services
managers where they can justify expenditure before applying them in official budget. To assist
managers for access their funding ways for firm and helps to prioritize their funds on basis of
cost and profitability. Key benefits and limitation of zero based budgeting is as follows:
Advantages of zero based budgeting: It should provide a systematic way to evaluate
operations and many activities that allow management to allocate their resources (Patten and
Shin, 2019). It improves profitability level which should generate direct or indirect profits. In
case of Connect Catering Services, managers are required to evaluate need of every course and
consider all different levels of time and effort which requires alternative ways of operations. To
create more funds to be generated more income and profits.
Disadvantage of zero based budgeting: It is a time consuming procedure for firm where
government fund every year to increase their budgets which is easier method of budgeting.
Various implementation problems are supported by management which may not be readily

available. Managers should be continue the same decision if they are transferred to various
another departments which may lead to waste time and resources for develop their managers.
Variance analysis: It is a procedure where difference between actual and planned
behavior are compared and indicated how firms have been impacted through this analysis. It is
also consisting that causes of variation which include revenue and expenditure of current year
not compare of previous year from budgeted values (Qian, Hörisch and Schaltegger, 2018). It
usually affected and associated with manufacturer product and services costs. It is important for
manager because they should identify how much costs and performance of business are impacted
and allow prepare for many strategies of firm to improve these performances.
Advantages of variance analysis: Variance analysis is an effective tool which is draws
attention and identify where actual performances is measured from different planned activities. It
is helpful for identify those areas where assets are effectively utilize and which places adjustment
must be essential. Mangers of Connect Catering Services helps firm to be accomplishing those
targets which helps to identifying and mitigation of risks which ultimately to build their trust
among team members in an business enterprise.
Disadvantage of variance analysis: It is a detailed analysis in management accounting
where activities are performed to be considering each and every factor that budgeting process
would be done by actual numbers. It takes long time to effect the variance and moreover taking
corrective actions are also to be delayed. Managers of Connect Catering Services are considering
about performance which determine variation of output should be concluded. Management
requires time to getting feedback to be proper done so it will be rely on measurement which is
generated.
Operating budget: These budgets describe revenue and expenditure is to be generated
on daily basis to perform various function of business enterprise (Suhayati and Riandani, 2019).
It should be prepared advance of reporting period and main focus is on business which include
cost of goods sold which is directly linked with production procedure. It is helpful for manager
because they wanted to take their future period budgets.
Advantages of operating budget: This helps firm to long term needs to find put an
allocation of resources in a very short span of time. This will allows firm to predict it costs and

manage their expenditure in short term to meet its all obligations of long term. Managers of
Connect Catering Services review all financial needs which is required by extensive research
which generate long term view of firm financial need and helps provide correct information.
Disadvantage of operating budget: It should be build budget flexibility to allocate their
resources in operating budget and it do not makes firm very flexible when it comes to spending
things. It provides more freedom of financial because they can build some amount of money to
meet it unanticipated costs for their new opportunities which include new consumer product. For
Connect Catering Services, it is not suitable for this firm because it do not allow managers to be
more flexible changes in budget.
M3.To preparing a budgets use of different planning tools and their application
Firms used different planning tools to control their business transactions and compare
actual versus planned activities (Szychta, 2018). It should include zero based budgeting,
variance analysis and operating budget all of these which helps to decreasing the difference
between actual and planned performance of business enterprise. Zero based budgeting helps
firm to ensure that there is a control level of business are to be maintained. Whereas, operating
budget are those which may be focus on decrease cost of operation and producing maximum
results to improve their profitability and productivity in an organization.
TASK 4
P5. Compare how organizations respond to financial problems in management accounting
systems
Financial problem: It is that problem where firm cannot pay its short term liabilities as
well as long term debts also (Wang, Qiong and Wang, 2020). Having financial problems in
business means debts are complicated and firm has limited purchasing power they can’t purchase
excess assets if they are having a limited debts. When financial problems are arises it occur
personal and professional problems also. Many difficulties have faced which are out of control
and there s time to find out solution. They are facing various problems in an organization which
includes unnecessary debts, insufficient working capital, income problems and many more.